Annual Financial Report

RNS Number : 5607T

Asian Total Return Invest Co PLC

30 March 2016

 

30 March 2016

ANNUAL REPORT AND ACCOUNTS

Asian Total Return Investment Company plc (the "Company") hereby submits its annual financial report for the year ended 31 December 2015 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 2015 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:

Andrea Davidson

Schroder Investment Management Limited                

Tel: [phone]

Chairman's Statement

This is my first annual report to shareholders having been appointed as Chairman at the AGM in April 2015 in succession to David Robins who retired after chairing the Board for 11 years. David led the Company through some challenging times and the difficult process of changing our investment manager and strategy. It is gratifying therefore to report on the excellent performance achieved by our managers in 2015 in difficult markets and over the three years since we moved to Schroders. Since Schroders took full responsibility for managing the portfolio on 31 March 2013, the NAV has significantly out-performed the Reference Index, producing a total return of 6.3%, compared to a return of -2.6% from the Index.

At the AGM shareholders will be asked to vote on the continuation of the Company. The Board feels that the performance of the Company over the past three years will give shareholders the confidence to support the motion which it unanimously supports.

Performance

During the year ended 31 December 2015, the Company produced a net asset value ("NAV") total return of 2.9%, compared to a total return of -4.1% by the Reference Index and a total return of -1.8% from the average peer group NAV.

As you are aware, the strategy of the Company is to focus on total return and to add value primarily from stock selection with the use of derivatives to provide some capital protection. The performance of the portfolio has benefited from both these elements during the year. The Board believes that the strategy remains very attractive to private investors and this has been reflected in the discount to NAV which has been at a consistent premium to its peer group. Further comment on performance and investment policy may be found in the Portfolio Managers' Review.

Promotion and discount management

The thorny issue for investment trusts is the discount to NAV which most suffer and the Board spends much time considering it, focusing on the promotion of the Company and direct discount management.

It is only by creating long term, consistent demand for the Company's shares that the discount can be permanently narrowed. Clearly good long term performance is the key, along with active and effective marketing. The Company has continued to be promoted through marketing to discretionary wealth managers, private investors, financial advisers and institutions. The Board, Manager and Corporate Broker have been in regular contact with current and potential shareholders and 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 promotional work remains focused on the Company's distinctive characteristics and differentiators from its peer group, including the focus on total return, with a bias towards small and medium sized companies, and a degree of downside protection through derivatives.

The promotional activity is supported by a discount management policy, which continues to target a discount to net asset value of no more than 5% in normal market conditions, through the use of the Company's share buyback authorities. Meeting the target was difficult in 2015, and a total of 250,000 shares were purchased by the Company to be held in Treasury in support of the discount policy. However, we would not view the year under review as a normal market, with the volatility in August arising from the crisis in China exacerbating poor general sentiment towards Asian investments. Rather than defend a 5% discount at all costs in these markets, the Board takes into account overall sector discounts and our position relative to our peers. Our discount, both in this context and when viewed alongside our wider peer group, has been encouraging. The average discount during the year at 7.9% was significantly narrower than the peer group average of 9.7%.

Furthermore any decision to buy back shares has to balance the market conditions and targeted discount against the overall liquidity of the Company. The Board is conscious that maintaining a market capitalisation sufficient to provide ongoing liquidity for investors is a very important consideration.

The Board has discussed whether the 5% target should be changed and has decided that it should remain at that level subject to market conditions.

Dividend

The revenue return from the portfolio for the year increased when compared to the previous year, from 3.07p per share in 2014 to 4.43p per share for the year under review.

The Board has declared a final dividend of 3.80p per share for the year ended 31 December 2015, an increase of 16.9% over the final dividend of 3.25p per share paid in respect of the previous financial year.

In order to provide shareholders with the opportunity to vote on the quantum of the dividend, the Board is again proposing that the dividend will be payable as a final dividend on 4 May 2016, subject to shareholder approval at the Annual General Meeting on 29 April 2016, to shareholders on the register on 8 April 2016.

Gearing and the use of derivatives

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 to increase market exposure, based on a number of valuation indicators. Gearing may also be used in other circumstances and as reported in my half year statement, the Portfolio Managers began to use gearing at the start of the year and at the year end, net gearing stood at 1%. This has increased to 6.8% since the end of the year (as at 18 March 2016). The gearing was put on with the aim of purchasing attractive stocks while simultaneously hedging out underlying market exposure through the sale of futures. The portfolio would thus benefit from the anticipated performance of the stocks while overall market exposure is not increased.

Fees and expenses

Ongoing charges represented 1.0% of net assets in 2015, in line with the average for the Company's peer group. This is a decrease of 0.1% compared with 2014.

Despite the good relative 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, in light of evolving trends in the fee structures of investment trusts.

The Board

The Board has been substantially refreshed following the retirement of the Chairman and two longstanding directors in the past two years. The Board has an active succession plan and annually reviews the performance of the Board. In 2016, it is intended that an external performance review will be carried out.

Annual General Meeting

The Annual General Meeting will be held at 12.00 noon on Friday 29 April 2016 at 31 Gresham Street, London EC2V 7QA, the offices of Schroders, and shareholders are encouraged to attend. One of the Portfolio Managers will attend to give a presentation on the Company's investment strategy and prospects for Asia. The Annual General Meeting will be followed by a buffet lunch.

Outlook

2016 has begun with the sharpest January fall in equity markets for many years. The small rise in US interest rates, slowing growth in China and elsewhere, the sharp fall in commodity prices, particularly oil, coupled to the historically elevated valuations in most developed markets has led to a loss of confidence among investors. This is especially true in emerging markets which are dependent on commodities and those in Asia which are seen as impacted by China's problems. Falling markets also mean that valuations and hence future returns have become more attractive. We have no crystal ball and cannot predict when the Asian markets will finally bottom but valuations in Asia are reaching levels which our managers believe will represent a major long term buying opportunity.

David Brief

Chairman

29 March 2016

Portfolio Managers' Review

Market Background

2015 was a challenging year for Asian equities as worries over slowing global and emerging market growth, particularly in China, and uncertainty over the Federal Reserve's interest rate hike had weighed on investor sentiment towards the region. The Chinese stock market enjoyed a strong rally at the start of the year on expectations of government policy easing and hopes of state-owned enterprise reforms. The buoyant sentiment initially overflowed into Hong Kong and other North Asian markets, dragging most indices higher as global investors rushed to chase momentum.

However after peaking in mid-June, the subsequent collapse in the onshore China A-share market, triggered by the unwinding of margin financing and waning confidence in the authorities' ability to prop up the stock market, sparked a sell-off across regional equities. The surprise devaluation in the Chinese Yuan in August saw further panic selling, with Asian stock markets coming under increased pressure amidst accelerating foreign capital outflow.

In contrast to the volatility in the Greater China markets, ASEAN markets were lacklustre for most of the year, underperforming the region as local economic data disappointed and the corporate earnings outlook continued to deteriorate. The Indian market also saw sluggish returns in marked contrast to its stellar performance in 2014, as excessive post-election hype quickly dissipated amidst increased scepticism over the likelihood of meaningful reforms from its new Government.

Overall, macro headwinds continued to dominate events for most of 2015, with falling commodity prices and concerns over tighter liquidity against the backdrop of a stronger US dollar weighing on investor risk appetite towards emerging market asset classes. Asian equities (as represented by the Reference Index) ended the year down -4.1% in sterling terms.

Performance Analysis

The NAV gained 2.9% over the year and performance was driven largely by the positive contribution from holdings in China, India and Hong Kong, with exposure to some small to mid-cap companies adding to gains. Thailand stocks were the laggards, as were resources names which remained under pressure due to falling commodity prices.

Overall, the Company's largest holdings delivered some of the best returns, with Taiwan Semiconductor Manufacturing, Wuxi Pharmatech, Techtronic Industries and Tencent recording strong gains on the back of steady earnings growth momentum. Holdings in private-sector Chinese companies such as China Lodging, Shenzhou International and Stella International also saw robust performance driven by rising domestic consumption trends. In Hong Kong, blue-chip names held up well with AIA, HKT Trust and property stocks Hongkong Land and Swire Properties outperforming given their more resilient earnings streams.

Indian stocks held in the portfolio extended their positive performance led by private-sector banks HDFC Bank and Indusind Bank where top-line growth continued to deliver on the back of a pick-up in the credit cycle. Stock specific gains were also seen across domestic names in the healthcare and consumer sectors with Apollo Hospitals, Zee Entertainment and Godrej Consumer Products rising on expectations of a solid earnings outlook.

Across other markets, holdings in Taiwan exporters were mostly down as bicycle manufacturers Giant Manufacturing and Merida Industry, as well as technology companies, retreated on concerns over sluggish global demand. Australian stocks saw mixed returns with gains in healthcare stocks CSL and Resmed offset by losses in resources names BHP Billiton and Rio Tinto.

The largest detractors were ASEAN-centric holdings as stock markets saw broad-based declines on worries over slowing domestic growth, weak exports and depreciating currencies. Thailand's Kasikornbank came under pressure given concerns over a deteriorating macro outlook, while conglomerate Jardine Strategic was dragged down by weakness across its ASEAN subsidiaries and headwinds from currency translation losses.

Overall, the contribution from capital protection (in the form of put options on the Australian, Korean and Taiwan markets and short futures on the Hong Kong, China H-shares and Singapore indices) was flat as hedging costs were funded by positive payouts during the third quarter. In terms of currency hedges, the hedge on the portfolio's Australian dollar exposure helped mitigate significant losses as the Australian dollar recorded a second consecutive year of decline, depreciating 11% against the US dollar in 2015. On the whole, the hedging strategies worked well over the year, providing an element of capital protection against overall negative returns for the region.

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 had outperformed and reinvested into names that offer greater upside to fair value. We trimmed positions in a couple of ASEAN names, reducing our holdings in Philippine stocks GT Capital and Alliance Global as well as ASEAN-focused Jardine Matheson. Overall this resulted in a decline in our exposure to ASEAN markets as we remain cautious given high valuations and unrealistic earnings expectations for the better quality domestic names.

Proceeds were used to top up positions in the Taiwan technology sector, with new purchases in Hon Hai Precision and Largan Precision where share prices have come off and valuations offer attractive upside to fair value. There was also a notable increase in exposure to the Telecoms sector, with new positions in Hong Kong's HKT Trust and Taiwan telecom operators Taiwan Mobile and Far EasTone Telecommunications given their defensive earnings stream and good yield support.

Amongst the key sales, we sold off some of our holdings in small to mid-cap companies given strong outperformance, including Thailand healthcare stock Bumrungrad Hospital and Malaysia's info tech company Silverlake, the latter partly on corporate governance concerns. Exposure to commodity-related names was also pared after we exited our position in Singapore oil rig-builder Keppel Corporation and Australian resources stocks Oil Search and BHP Billiton, although the latter stock has been repurchased after the year end following a fall in the share price to attractive levels.

Overall, there was little change to our preferred areas of investment, with portfolio positions largely focused on blue-chip names in Hong Kong, Taiwan, India and Australia in the technology, consumer, commercial property and telecom sectors. In contrast, the portfolio holds minimal exposure to banks given concerns over rising bad debts in the region, and commodity space where we foresee more bankruptcies to surface. As at 31 December 2015, 34.2% of the portfolio was held in companies with a market capitalisation of less than US$3billion (2014: 31.6%).

Investment trends and outlook

We continue to be relatively cautious on the outlook for Asian equities as we head into 2016. Whilst we do not see a full blown financial crisis in Asia, we do expect the year to be difficult given rising risks in China of a more material slowdown and worsening financial problems.

Our caution stems from our view that deflationary forces and the sluggish global economy are headwinds for Asian stock markets. With export numbers deteriorating and domestic consumption trends showing no signs of turnaround, we expect more earnings downgrades, bankruptcies and ultimately the potential start of a bad debt cycle in Asia.

China we think is the biggest risk as policy mistakes and major policy contradictions of the last few years are coming to a head. With capital outflows accelerating and the Renminbi still falling despite significant intervention, the tightening of liquidity is raising worries about the fragile financial system and causing a sell-off in risk assets. The end game looks increasingly clear - we think further falls in the China A-share market and a weaker currency are highly likely, and we can in due course expect turmoil in the Chinese bond markets both on and offshore.

However we think a full blown crisis can be avoided given that China still controls the banks and runs a large current account surplus. The rest of Asian corporate and government balance sheets are also generally in decent shape and lower commodity prices should eventually help Asian economies. In summary we increasingly believe a pessimistic outlook is discounted in the region and we are finally nearing genuinely interesting levels for Asian markets. The caveat is we see little value in ASEAN where valuations in the main look high and earnings expectations still unrealistic. For China, we will remain on the sidelines, and are happy to wait and see if 'good' China (private sector technology, internet, service and consumer related names) comes our way as the panic spreads.

Overall we will use further falls in Asian equities as an opportunity to raise the net long exposure of the Company. Rising bad debts, collapsing markets and turmoil in China are we believe a buying opportunity as the long awaited economic cycle and creative destruction kicks in.

Robin Parbrook, King Fuei Lee

For Schroder Investment Management Limited

29 March 2016

Principal risks and uncertainties

The Board is responsible for the Company's system of risk management and internal control and for reviewing its effectiveness. The Board has adopted a detailed matrix of principal risks affecting the Company's business as an investment trust and has established associated policies and processes designed to manage and, where possible, mitigate those risks, which are monitored by the Audit Committee on an ongoing basis. This system assists the Board in determining the nature and extent of the risks it is willing to take in achieving its strategic objectives. Both the principal risks and the monitoring system are also subject to robust review at least annually. The last review took place in February 2016.

Although the Board believes that it has a robust framework of internal control in place this can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.

A summary of the principal risks and uncertainties faced by the Company which have remained unchanged throughout the year, and actions taken by the Board and, where appropriate, its Committees, to manage and mitigate these risks and uncertainties, is set out below.

Strategic risk

Risk

The Company's investment objectives may become out of line with the requirements of investors, resulting in a wide discount of the share price to underlying net asset value.

Mitigation and management

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

Share price relative to net asset value monitored and use of buy back authorities considered on a regular basis.

Marketing and distribution activity is actively reviewed.

Investment management risk

Risk

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

Mitigation and management

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

Annual review of the ongoing suitability of the Manager.

Financial and currency risk

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 fluctuation could have an adverse impact on the market value of the Company's underlying investments.

Mitigation and management

Risk profile of the portfolio considered and appropriate strategies to mitigate any negative impact of substantial changes in markets discussed with the Manager.

Capital protection strategy employed by the Manager subject to review by the Board.

Board considers overall hedging policy on a regular basis.

Risk

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

Mitigation and management

Ongoing competitiveness of all service provider fees subject to periodic benchmarking against competitors.

Annual consideration of management fee levels.

Custody risk

Risk

Safe custody of the Company's assets may be compromised through control failures by the Depositary, including cyber hacking.

Mitigation and management

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

Review of audited internal controls reports covering custodial arrangements.

Annual report from the Depositary on its activities, including matters arising from custody operations.

Gearing and leverage risk

Risk

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

Mitigation and management

Gearing monitored and strict restrictions on borrowings imposed: gearing continues to operate within pre-agreed limits so as not to exceed 30% of net asset value.

Board oversight of the Manager's use of derivatives.

Accounting, legal and regulatory risk

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.

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.

Mitigation and management

Confirmation of compliance with relevant laws and regulations by key service providers.

Shareholder documents and announcements, including the Company's published Annual Report, are subject to stringent review processes.

Procedures have been established to safeguard against disclosure of inside information.

Service provider risk

Risk

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

Mitigation and management

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

Regular reporting by key service providers and monitoring of the quality of services provided.

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

Risk assessment and internal controls

Risk assessment includes consideration of the scope and quality of the systems of internal control operating within key service providers, and ensures regular communication of the results of monitoring by such providers to the Audit Committee, including the incidence of significant control failings or weaknesses that have been identified at any time and the extent to which they have resulted in unforeseen outcomes or contingencies that may have a material impact on the Company's performance or condition. No significant control failings or weaknesses were identified from the Audit Committee's ongoing risk assessment which has been in place throughout the financial year and up to the date of this Report.

A full analysis of the financial risks facing the Company is set out in note 19 on pages 49 to 53 of the 2015 Annual Report.

Going concern

Having assessed the principal risks and the other matters discussed in connection with the viability statement set out on pages 18 and 19 of the 2015 Annual Report, and the "Guidance on Risk Management, Internal Control and Related Financial and Business Reporting" published by the FRC in 2014, the Directors consider it appropriate to adopt the going concern basis in preparing the accounts.

Statement of Directors' Responsibilities

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards 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 Manager is responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed on pages 21 and 22 of the 2015 Annual Report, confirm that to the best of their knowledge:

-          the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and net return of the Company;

-          the Strategic Report contained in the Report and Accounts includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces; and

-          the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Income Statement

for the year ended 31 December 2015

	Revenue	2015 Capital	Total	Revenue	2014 Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at
fair value through profit or loss	-	2,704	2,704	-	20,491	20,491
Net gains/(losses) on derivative contracts	-	596	596	-	(718)	(718)
Net foreign currency losses	-	(940)	(940)	-	(78)	(78)
Income from investments	4,117	-	4,117	3,141	440	3,581
Other interest receivable and similar income	96	-	96	150	-	150
Gross return	4,213	2,360	6,573	3,291	20,135	23,426
Investment management fee	(259)	(777)	(1,036)	(229)	(686)	(915)
Administrative expenses	(520)	-	(520)	(604)	-	(604)
Net return before finance costs
and taxation	3,434	1,583	5,017	2,458	19,449	21,907
Finance costs	(33)	(100)	(133)	-	-	-
Net return on ordinary activities
before taxation	3,401	1,483	4,884	2,458	19,449	21,907
Taxation on ordinary activities	(165)	-	(165)	(186)	(28)	(214)
Net return on ordinary activities
after taxation	3,236	1,483	4,719	2,272	19,421	21,693
Return per share	4.43p	2.03p	6.46p	3.07p	26.28p	29.35p

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 Income Statement and Statement of Changes in Equity.

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

Statement of Changes in Equity

for the year ended 31 December 2015

	Called-up		Capital
	share	Share	redemption	Special	Capital	Revenue
	capital	premium	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
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
Repurchase of the Company's own shares into Treasury	-	-	-	-	(496)	-	(496)
Net return on ordinary activities	-	-	-	-	1,483	3,236	4,719
Dividend paid in the year	-	-	-	-	-	(2,379)	(2,379)
At 31 December 2015	4,260	5	11,646	29,182	98,120	10,973	154,186

Statement of Financial Position

at 31 December 2015

	2015	2014
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	155,403	150,260
Current assets
Debtors	409	440
Cash at bank and in hand	6,101	1,983
Derivative financial instruments held at fair value through profit or loss	403	191
	6,913	2,614
Current liabilities
Creditors: amounts falling due within one year	(8,055)	(478)
Derivative financial instruments held at fair value through profit or loss	(75)	(54)
	(8,130)	(532)
Net current (liabilities)/assets	(1,217)	2,082
Total assets less current liabilities	154,186	152,342
Net assets	154,186	152,342
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	98,120	97,133
Revenue reserve	10,973	10,116
Total equity shareholders' funds	154,186	152,342
Net asset value per share	211.36p	208.12p

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 November 2014 and which superseded the SORP issued in January 2009. All of the companies operations are of a continuing nature.

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

The accounts are presented in sterling and amounts have been rounded to the nearest thousand.

The Company has adopted Financial Reporting Standard (FRS) 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the amended SORP, both of which became effective for periods beginning on or after 1 January 2015. FRS 102 replaces all extant standards applicable to the Company's accounts. As a result there are some presentational changes to the accounts but no change to the measurement of numbers.

The changes to these accounts required by FRS 102 and the amended SORP may be summarised briefly as follows:

•           the reconciliation of movements in shareholders' funds has been renamed "Statement of changes in equity";

•           the balance sheet has been renamed "Statement of financial position";

•           the Company no longer presents a statement of cash flows or the two related notes, as it is no longer required for an investment company which meets certain specified conditions; and

•           footnotes have been added to note 14, indicating which of the Company's reserves are regarded as distributable.

Other than these changes, the accounting policies applied to these accounts are consistent with those applied in the accounts for the year ended 31 December 2014.

The Company has early adopted an amendment to paragraph 34.22 of FRS 102, issued by the Financial Reporting Council in March 2016 regarding the categorisation of financial instruments into the fair value hierarchy in note 18. As a result of this amendment, the criteria used to allocate financial instruments into the three levels remain unchanged from prior years.

2.         Income

	2015	2014
	£'000	£'000
Income from investments:
Overseas dividends	4,101	3,136
Stock dividends	16	5
	4,117	3,141
Other interest receivable and similar income
Stock lending fees	73	149
Deposit interest	5	1
Other income	18	-
	96	150
Total included in revenue	4,213	3,291
Capital:
Special dividend allocated to capital	-	440

3.         Investment management fee

		2015			2014
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment management fee	259	777	1,036	229	686	915

No performance fee is payable for the year and no provision is required (2014: nil).

The bases for calculating the investment management and performance fees are set out in the Report of the Directors on page 24 of the 2015 Annual Report and details of all amounts payable to the Manager are given in note 16 on page 48 of the 2015 Annual Report.

4.         Dividends

Dividends paid and declared	2015	2014
	£'000	£'000
2014 final dividend of 3.25p (2013: 3.25p), paid out of revenue profits	2,379	2,409
	2015	2014
	£'000	£'000
2015 final dividend proposed of 3.80p (2014: 3.25p), to be paid out of revenue profits1	2,772	2,379

¹The proposed final dividend amounting to £2,772,000 (2014: £2,379,000) 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 £3,236,000 (2014: £2,272,000).

Payment of dividends out of capital reserves is prohibited by the Company's Articles of Association.

5.         Return per share

	2015	2014
	£'000	£'000
Revenue return	3,236	2,272
Capital return	1,483	19,421
Total return	4,719	21,693
Weighted average number of shares in issue during the year	73,104,209	73,888,645
Revenue return per share	4.43p	3.07p
Capital return per share	2.03p	26.28p
Total return per share	6.46p	29.35p

6.         Net asset value per share

	2015	2014
Total equity shareholders' funds (£'000)	154,186	152,342
Shares in issue at the year end	72,949,141	73,199,141
Net asset value per share	211.36p	208.12p

7.         Transactions with the Manager

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

Details of the basis of these calculations are given in the Report of the Directors on page 24 of the 2015 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 2015 amounted to £1,036,000 (2014: £915,000) of which £247,000 (2014: £242,000) was outstanding at the year end.

The secretarial fee payable for the year amounted to £75,000 (2014: £75,000) of which £19,000 (2014: £75,000) was outstanding at the year end.

No performance fee is payable for the year and no provision is required (2014: same).

No Director of the Company served as a director of any member of the Schroder Group at any time during the year.

8.       Status of announcement

2014 Financial Information

The figures and financial information for 2014 are extracted from the published Annual Report and Accounts for the year ended 31 December 2014 and do not constitute the statutory accounts for that year. The 2014 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.

2015 Financial Information

The figures and financial information for 2015 are extracted from the Annual Report and Accounts for the year ended 31 December 2015 and do not constitute the statutory accounts for the year. The 2015 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 2015 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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