Schroder AsiaPacific Fund plc Half Year Report and Accounts For the six months ended 31 March 2020 Investment objective Schroder AsiaPacific Fund plc’s (the “Company”) principal investment objective is to achieve capital growth through investment primarily in equities of companies located in the continent of Asia (excluding the Middle East and Japan), together with the Far Eastern countries bordering the Pacific Ocean. It aims to achieve growth in excess of the MSCI All Countries Asia excluding Japan Index (with net income reinvested) in sterling terms (Benchmark index) over the longer term. Investment policy The Company principally invests in a diversified portfolio of companies located in the continent of Asia (excluding the Middle East and Japan) (for the purposes of this paragraph the “region”). Such countries include Hong Kong/China, Singapore, Taiwan, Malaysia, South Korea, Thailand, India, The Philippines, Indonesia, Pakistan, Vietnam and Sri Lanka and may include other countries in the region that permit foreign investors to participate in investing in equities, such as in their stock markets or other such investments in the future. 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 portfolio is predominantly invested in equities, but may also be invested in other financial instruments such as put options on indices and equities in the region. The Company does not use derivative contracts for speculative purposes. The Company may invest up to 5% of its assets in securities which are not listed on any stock exchange but would normally not make such an investment except where the Manager expects that the securities will shortly become listed on a stock exchange. In order to maximise potential returns, gearing may be employed by the Company from time to time. Where appropriate the Directors may authorise the hedging of the Company’s currency exposure. Contents Financial Highlights 2 Chairman’s Statement 3 Manager’s Review 4 Half Year Report 7 Investment Portfolio 8 Income Statement 10 Statement of Changes in Equity 11 Statement of Financial Position 12 Notes to the Accounts 13 Half Year Report and Accounts 1 for the six months ended 31 March 2020 Financial Highlights Total returns for the six months ended 31 March 20201 -10.8% -9.4% -9.3% Net asset value Share price Benchmark (“NAV”) per share total return2 total return3 total return2 1Total returns measure 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). 2Source: Morningstar. 3Source: Thomson Reuters. The Company’s benchmark is the MSCI All Countries Asia excluding Japan Index (with net income reinvested), sterling adjusted. Other financial information 31 March 30 September 2020 2019 % Change Shareholders’ funds (£’000) 720,310 822,182 -12.4 Ordinary shares in issue 167,470,716 167,470,716 – NAV per share (pence) 430.11 490.94 -12.4 Share price (pence) 386.00 435.00 -11.3 Share price discount to NAV per share (%) 10.3 11.4 Net cash (%)1 0.7 2.4 1Cash net of borrowing. Schroder AsiaPacific Fund plc 2 Chairman’s Statement Performance Outlook During the six month Your Company has faced a number of different period ended 31 March challenges over its life, and COVID-19 is the biggest. In 2020, the Company’s net recent months, most of the portfolio holdings have faced asset value (“NAV”) and severe dislocation in both their operations and demand share price produced total for their products, and few have much visibility on when returns of -10.8% and they will return to normal. -9.4%, respectively, compared to a total return There are, however, grounds for some optimism. Asia of -9.3% for the was the first affected by the virus, and parts of the region Benchmark. are among the first to unwind the lockdowns. Secondly, Asia has a history of reacting well to shocks: it is what In March, markets dropped strong competent governments and flexible corporate very sharply due to sectors do. This may be why share prices have so far held concerns about the impact up better than some Western markets. Helped by of the COVID-19 pandemic. This created a period of sterling’s fall, the Company’s share price as at 13 May uncertainty in the market and volatility in the share price. 2020 is down just 5.4% since the end of the last financial Since the end of the period to 13 May 2020, there has year. been a recovery in the NAV and share price of 10.5% and 6.6% respectively. Full economic recovery is some time away however, and parts of the corporate sector will come out of this much Further analysis of performance may be found in the changed. The long trend of the West outsourcing its low- Manager’s Review. cost manufacturing to Asia was already under challenge, for example. As your Manager notes, recent events may Discount management also accelerate the move to e-commerce, flexible working patterns, digital working patterns, social media use and The discount narrowed slightly from 11.4% at the start of more factory automation. Asia’s future lies with higher the period to 10.3% as at 31 March 2020. The discount value-added products and its own internal growth remained in a similar range in April. In May discounts potential, and we want the portfolio to continue to invest widened throughout the sector and the Company’s was in companies that benefit from these. Markets will 13.5% as at 13 May 2020. continue to be volatile as they react to COVID-19 developments, and there may be more bad news to Gearing come. The Company came out of both the 1997 – 98 Asian crisis and the 2008 – 09 global financial crisis The Company held 2.4% net cash at the beginning of the strongly, and, in our twenty fifth anniversary year, we period and, as at 31 March 2020, held 0.7% net cash. As want to repeat that. at 13 May 2020 the Company was 0.7% geared. The level of gearing continues to operate within pre-agreed levels Nicholas Smith so that net gearing does not represent more than 20% of Chairman shareholders’ funds. 15 May 2020 After the period end, on 21 April 2020, the Company extended its revolving credit facility for a further two months. The board intends to renew it for a year in June. The committed amount is £100 million. The Company also has access to a £30 million overdraft with HSBC Bank. Half Year Report and Accounts 3 for the six months ended 31 March 2020 Manager’s Review The net asset value per share of the Company recorded a Country returns – 30 September 2019 total return of -10.8% over the six months to end March 2020. This was behind the performance of the to 31 March 2020 Benchmark, which was down -9.3% over the same period. -40% -35% -30% -25% -20% -15% -10% -5% 0% 5% (Source: Morningstar, net of fees). China 5% Taiwan Benchmark performance – 30 September MSCI AC Asia ex JP 2019 to 31 March 2020 Hong Kong Korea 120 Malaysia Singapore 115 Pakistan 110 India 105 Philippines 100 Thailand 95 Indonesia 90 Returns in GBP Returns in local currency 85 Source: Factset. 80 Sept 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 Mar 20 Already facing a number of longer-term structural issues, MSCI AC Asia ex Japan NDR USD MSCI AC Asia ex Japan NDR GBP and in some cases (Indonesia, the Philippines, Thailand, Source: Thomson Datastream as at 31 March 2020. Malaysia) a fair measure of domestic political turmoil, the approach to the virus outbreak did not help emerging As the chart above illustrates, in the seemingly now ASEAN markets, which have been notable distant pre COVID-19 months of the fiscal year, regional underperformers over the period. Relative illiquidity has markets made steady, if unspectacular, upward progress. also undoubtedly been a factor, as even Vietnam (which Although consensus earnings expectations for 2019 has so far shown a degree of competence in addressing continued to fall, relatively loose global monetary the COVID–19 challenges) has been equally hard hit. conditions and some, admittedly fragmentary, signs of a stabilisation in economic indicators provided support to In India, an already slowing economy and some credit regional equities. More specifically, there seemed some quality issues in the non bank financial sector weighed on genuinely valid grounds for a recovery in the crucial the market, along with expensive valuations. A period of information technology sector based on a recovery in laissez faire in the face of the virus has been followed by demand for data centres and Chinese ramping up of somewhat arbitrary lock down measures which has investment in 5G mobile infrastructure. further undermined rather than helped sentiment. It took a while for investors, us included, to register the true implications of the COVID-19 virus that emerged Performance and portfolio activity from the wet markets of Wuhan. A measure of complacency (partly engendered by the brevity of the far The Company’s negative total return of 10.8% was slightly more lethal but less contagious example of SARS in 2003) behind the Benchmark which fell 9.3%.