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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Schroder Glbl R | LSE:SGRE | London | Ordinary Share | GB00B132SB63 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 135.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Schroder Global Real Estate Securities Limited
Annual Results Announcement
Schroder Global Real Estate Securities Limited (formerly Investors in Global
Real Estate Limited) ("the Company") hereby submits its Annual Report and
Accounts for the year ended 31 December 2015 as required by the UK Listing
Authority's Disclosure and Transparency Rule 6.3.5.
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
www.schroderglobalrealestatesecurities.com
The Company has submitted its Annual Report and Accounts to the National
Storage Mechanism and it will shortly be available for inspection at
www.morningstar.co.uk/uk/NSM.
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the year ended 31 December 2015. All figures
are based on the audited financial statements for the year ended
31 December 2015.
The financial information for the year ended 31 December 2015 is derived from
the financial statements delivered to the UK Listing Authority. The Auditors
reported on those accounts, their report was unqualified and did not contain a
statement under Section 263(2) and 263(3) of the Companies (Guernsey) Law,
2008.
The announcement is prepared on the same basis as will be set out in the Report
and Accounts for the year ended
31 December 2015.
Investment Objective, Directors and Alternative Investment Fund Managers
("AIFM") Directive
Investment Objective
Schroder Global Real Estate Securities Limited's (the "Company") investment
objective is to provide investors with an attractive total return, through
investing in listed global real estate securities with strong fundamentals,
offering sustainable income and a progressive dividend potential. For
additional information refer to the Strategic Report.
Directors
Crispian Collins (Chairman), aged 68
Mr. Collins was formerly Vice Chairman, UBS Global Asset Management and a
member of the Group Managing Board of UBS AG. On leaving Oxford University in
1969, Mr. Collins joined Phillips & Drew, London, which culminated in his
appointment as Chief Executive in 1998 and Executive Chairman in 1999. He was a
founding sponsor of the Phillips & Drew property team. Mr Collins was appointed
to the Board on 25 April 2006.
Christopher Legge, aged 60*
Mr. Legge is Guernsey resident and has over 25 years' experience in the
financial services industry. Mr. Legge was appointed as an independent
non-executive director of the Company and Chairman of the Audit Committee with
effect from 1 January 2015. He qualified as a Chartered Accountant in London in
1980 with Pannell Kerr Forster and subsequently moved to Guernsey in 1983 to
work for Ernst & Young, progressing from Audit Manager to Managing Partner in
the Channel Islands. Mr. Legge retired from Ernst & Young in 2003 and currently
holds a number of directorships in the financial sector. Mr. Legge is a Fellow
of the Institute of Chartered Accountants in England and Wales and holds a BA
(Hons) in Economics from the University of Manchester.
Richard Sutton, aged 80
Mr. Sutton is formerly a partner of the Delaware law firm Morris, Nichols,
Arsht & Tunnell. He is a member of the bar of the US Supreme Court and of the
American Law Institute. He is an independent trustee of the CBRE Clarion Global
Real Estate Income Fund and the Unidel Foundation. He is a graduate of the
University of Delaware and of Yale Law School. Mr Sutton was appointed to the
Board on 25 April 2006.
Robert Houston, aged 65**
Mr. Houston is a chartered surveyor and has been active in the institutional
property investment management industry for over 40 years. In 1980, he founded
Rowe & Pitman Property Services which four years later, became Baring, Houston
& Saunders. The firm became part of the ING Group in 1995. In 2008 he was
appointed the Global Chairman and Chief Executive of ING Real Estate Investment
Management, one of the world's largest property investment managers with more
than $80 billion of assets worldwide and operating in 22 countries. In 2009, he
established the St. Bride's Business Alliance, a network of real estate
businesses which now has offices in London, Madrid, Sydney and the US. He has
written / edited over 250 published research bulletins and articles on the real
estate market.
Richard Saunders, aged 61***
Mr. Saunders is a Member of Core Plus Properties LLC, a private real estate
investment company which currently owns and manages property in the North East
and Mid-Atlantic regions of the United States. Mr. Saunders focuses on the
Company's capital markets activities with responsibility for acquisitions and
finance. From 1980 to 1995, Mr. Saunders was with Baring, Houston & Saunders,
now ING Real Estate Investment Management. He moved to the United States of
America in 1993 and his subsequent roles have included working for ING Realty
Partners LLC and as Chief Investment Officer of Healey & Baker Investment
Advisors. Mr. Saunders has significant international experience having advised
investors and companies across Europe, North America, South America and Asia.
Mr Saunders was appointed to the Board on 25 April 2006.
* Mr. Legge was appointed as a Director on 1 January 2015 and is Chairman of
the Audit Committee.
** Mr. Houston was appointed as a Director on 1 July 2015.
*** Mr. Saunders retired on 30 September 2015.
Alternative Investment Fund Managers ("AIFM") Directive
Certain pre-sale, regular and periodic disclosures required by the Directive
may be found either in this Annual Report and Accounts (the "Financial
Statements") or on the website at www.schroders.co.uk/its.
Financial Highlights
2015 2014
Total returns (including dividends reinvested) for the year
ended 31 December
Net asset value ("NAV") per share total return1 7.3 % 21.8 %
Share price total return 1 11.6 % 14.5 %
% Change
Shareholders' funds, NAV per share, share price and share
price
discount at 31 December
Shareholders' funds (GBP'000) 65,481 62,143 +5.4
Shares in issue excluding Treasury Shares 48,785,327 48,785,327 +0.0
NAV per share 134.22 p 127.38 p +5.4
Share price 127.00 p 115.25 p +10.2
Share price discount to NAV per share 5.4 % 9.5 %
Profit, earnings per share and dividends for the year ended
31 December
Profit after taxation including the movement in
realised
and unrealised gains and losses on investments 4,070 11,380 (64.2)
(GBP'000)
Earnings per share 8.35 p 22.62 p (63.1)
Dividends per share 1.50 p 2.85 p (47.4)
Net cash 2 (1.7) % (0.6) %
Ongoing Charges 3 1.46 % 2.10 %
1 Source: Morningstar.
2 Borrowings used for investment purposes, less cash, expressed as a percentage
of net assets. At the current and comparative year end, cash exceeded
borrowings (the Company had no borrowings) and this is shown as a negative "Net
Cash" position. If borrowings were to exceed cash, this would be shown as
"Gearing".
3 Ongoing Charges represents the management fee and all other operating
expenses excluding finance costs, expressed as a percentage of the average
daily net asset values during the year. Ongoing Charges is calculated in
accordance with the recommended methodology issued by the Association of
Investment Companies.
Financial Record Since Launch
At
launch
on 31
May
At 31 December 2006 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Shareholders funds 97,500 113,208 105,813 71,981 88,315 103,303 97,079 86,504 60,373 62,143 65,481
(GBP'000)
NAV per share 97.50 113.21 105.87 72.16 88.54 103.56 101.92 111.40 107.92 127.38 134.22
(pence)
Share price (pence) 100.00 116.75 83.00 31.75 69.75 85.75 81.50 107.00 104.00 115.25 127.00
Share price premium/ 2.6 3.1 (21.6) (56.0) (21.2) (17.2) (20.0) (3.9) (3.6) (9.5) (5.4)
(discount) to NAV
per share (%)
Gearing/(net cash) - 20.7 5.6 (14.2) (0.7) (0.8) 7.2 1.1 10.2 (0.6) (1.7)
(%)1
Earnings, dividends 20062 2007 2008 2009 2010 2011 2012 2013 2014 2015
and ongoing charges
for the year ended
31 December
Profit/(loss) after 17,765 (2,680) (31,454) 17,716 18,217 1,282 10,810 1,199 11,380 4,070
taxation including
the movement in
realised and
unrealised gains (GBP
'000)
Earnings/(loss) per 17.76 (2.68) (31.48) 17.76 18.26 1.33 12.02 1.84 22.62 8.35
share (pence)
Dividends per share 2.63 4.50 4.16 3.15 3.33 3.85 4.20 4.20 2.85 1.50
(pence)
Ongoing Charges (%)3 2.01 1.63 1.77 1.63 1.46 1.58 1.60 1.72 2.10 1.46
At
launch
on 31
May
Performance4 2006 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
NAV total return 5 100.0 116.5 109.7 94.9 104.0 125.9 128.5 146.0 146.6 178.5 191.5
Share price total 100.0 118.3 87.7 35.9 84.0 107.9 107.1 146.9 148.1 169.5 189.2
return
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1 Borrowings used for investment purposes, less cash, expressed as a percentage
of net assets. If the amount so calculated is negative, this is shown as "Net
cash".
2 Represents the period from 31 May 2006, which is the date the Company began
investing, to 31 December 2006.
3 Ongoing Charges represents the management fee and all other operating
expenses excluding finance costs, transaction costs and any performance fee
payable, expressed as a percentage of the average daily net asset values during
the year. The figures for 2011 and prior years represent the expenses
calculated as above, expressed as a percentage of the average asset values at
the beginning and end the year. The figure for 2006 has been adjusted to an
annualised basis.
4 Source: Morningstar. Rebased to 100 at 31 May 2006.
5 Calculated using capital net asset values plus income reinvested for the
period to 31 December 2008 and cum income net asset values plus income
reinvested for the period thereafter.
Chairman's Statement
Future of the Company
During 2015, the Board continued to seek ways of growing the Company. To this
end, the Company appointed a new broker and further investigated ways of
building the shareholder base. Despite good investment performance and a number
of initiatives to identify potential new long-term holders for the Company, our
best efforts were not successful and we therefore concluded that a longer-term
appraisal of the Company's future was appropriate.
Thus, at the end of 2015, the Directors reviewed both the strategy and
long-term future of the Company. Since the appointment of Schroder Real Estate
Investment Management Limited ("SREIM") as the Company's Investment Manager and
the adoption of a new investment strategy in September 2014, the Company had
performed well both in absolute and relative terms and we continued to believe
in the investment proposition. However, we also recognise the difficulties of
attracting long term demand for a closed-ended vehicle which is perceived to
lack sufficient critical mass, which impacts liquidity in the Company's shares
and the discount at which they trade. Notwithstanding extensive marketing
efforts, we concluded that our aspirations to grow the Company significantly
were not realisable in prevailing conditions.
Accordingly, a scheme for liquidation was put forward for the approval of
shareholders and was approved. The scheme provides an opportunity for
shareholders to retain their exposure to the same asset class through one or
more open-ended vehicles managed by SREIM, or to receive cash.
A circular was published in the first quarter of 2016 which gave details of the
proposed scheme, including the proposed roll-over vehicle or vehicles, and
convened a general meeting at which shareholders voted in favour of all the
proposals.
Appointment of New Broker
Panmure Gordon was appointed as the Company's Corporate Broker with effect from
28 May 2015. The appointment was made after an extensive review process and was
undertaken to bring a fresh approach and heightened activity levels.
Edison Research
In an effort to provide improved clarity on the Company and its investment
objective, we commissioned Edison Research to prepare a detailed report on the
Company, management team, investment strategy and performance. Edison is an
investment intelligence firm and is authorised and regulated by the Financial
Conduct Authority. The first market research paper was issued on 22 June 2015
and was circulated amongst the investor community in the UK and
internationally.
Board Changes
During 2015, Trevor Ash and Richard Saunders retired as directors of the
Company. The Board greatly appreciates the experience and support Trevor and
Richard have contributed to the development of the Company.
Christopher Legge joined the Board as an independent non-executive director of
the Company with effect from 1 January 2015. Christopher also took on the role
of Chairman of the Audit Committee. Christopher is Guernsey resident and has
over 25 years experience in the financial services industry.
Robert Houston was appointed as an independent non-executive director of the
Company with effect from 1 July 2015. Robert also joined the Audit Committee.
Robert is a chartered surveyor and has been active in the institutional
property investment management industry for over 40 years. He has written/
edited over 250 published research bulletins and articles on the real estate
market. Robert is resident in the UK.
Performance
The Company delivered a strong performance during the year, providing a net
asset value total return of 7.3% (2014: 21.8%) and a share price total return
of 11.6% (2014: 14.5%). The Investment Manager's Review provides a more
detailed analysis of performance, market background and investment outlook for
the Company.
Dividends
Following the change in strategy in October 2014, following the appointment of
Schroder Real Estate Investment Management Limited ("SREIM"), the quarterly
dividend level was set at 0.375 pence per share (previously 1.05 pence per
share) and this rate has been maintained throughout 2015. However, the Board
announced on 16 February 2016 that in light of the proposed scheme for
liquidation announced by the Company in December 2015, the fourth interim
dividend of 0.375 pence per share for the year ended 31 December 2015
ordinarily payable in the first quarter of 2016 would not be paid.
Annual General Meeting
As shareholders approved the scheme for liquidation referred to earlier in this
Statement, no Annual General Meeting ("AGM") will be required.
Crispian Collins
Chairman
28 April 2016
Investment Manager's Review
The Company continued to perform strongly with a NAV total return of 7.3% over
the course of the year.
We are wedded to the view that the prototype real estate company must exhibit
three characteristics - an ability to grow revenue, a strong balance sheet and
a strong management team.
The analogy of a reliable sports car is a good one. We have exposure to real
estate markets with exceptionally high barriers where rental growth is evident.
This acts as a powerful driver of growth. Ally an ability to grow revenues with
low financial leverage, a management team with a quantifiable track record and
we see the probability of strong financial returns to shareholders markedly
increasing. The reliability of balance sheet and management is paramount.
Over-levered balance sheets cause huge instability and can be value
destructive. Similarly, management teams that move away from their area of
expertise or operate in conflicted structures can also weigh on long-term
performance.
A persistently volatile economic backdrop was the overriding theme for 2015. We
always communicate to shareholders that the decision making process is not
influenced by macro factors. Volatile markets can provide opportunity. When
prices of securities become sufficiently disconnected from fundamentals, we
find better entry points into companies for Shareholder's capital.
We remain convinced that focusing on a select group of companies that conform
to our view of excellence, provides a far happier hunting ground. Our detailed
understanding of a group of companies that we are happy to own means we can
then use our valuation overlay to identify which companies are disconnected
from their intrinsic value. This method requires a degree of honesty. We are
certain to miss share prices that are over-sold but not of sufficient quality.
That does not concern us. Over a long-term time horizon, the companies we like
consistently provide returns to shareholders over their cost of debt and equity
finance (cost of capital). This yardstick is imperative; it shows if a company
is making a return over its financing costs.
Our methodology ties in other facets of investing that have a positive impact
on shareholders. In backing these identified companies, the added benefit is
the avoidance of high turnover which is a malignant - but under-discussed -
drag on shareholders returns.
As we move closer to the date for liquidation of the Company it is important to
make one important statement. The investment philosophy of the two funds,
which shareholders can transfer into, is exactly the same as this Company. Our
strategy remains the same today as it was yesterday and we believe that this
will benefit investors over the long term.
Conclusion
We retain the view that our expertise is in identifying companies that, on a
long-term basis, will provide stable and growing cash flow to shareholders.
Market gyrations can cause irrational behavior and slavishly following
newsfeeds does not, in our view, result in constructive decisions.
Our intent is to own high quality businesses at the right price. As markets
continue to see-saw from China concerns, oil price falls and suspected bank
instability, we stick to our process and philosophy.
Schroder Real Estate Investment Management Limited
28 April 2016
Investment Portfolio
Fair % of total
value equity
of shareholders'
holding funds
Company Country Real estate sub GBP'000
sector
Simon Property Group United States Shopping malls 4,543 6.94
Public Storage United States Storage 2,974 4.54
Equity Residential United States Apartments 2,952 4.51
Prologis United States Warehouse and 2,401 3.67
industrial
Welltower United States Healthcare 2,243 3.43
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April 29, 2016 02:00 ET (06:00 GMT)
Boston Properties United States Offices 2,220 3.39
Westfield Australia Shopping malls 2,171 3.32
Mitsubishi Estate Japan Diversified 2,092 3.20
Land Securities Group United Kingdom Diversified 2,077 3.17
Essex Property Trust United States Apartments 2,068 3.16
Mitsui Fudosan Japan Diversified 2,051 3.13
Link Real Estate Investment Hong Kong Shopping malls 2,006 3.06
Trust
AvalonBay Communities United States Apartments 1,757 2.68
General Growth Properties United States Shopping malls 1,756 2.68
Unibail-Rodamco France Shopping malls 1,641 2.51
Federal Realty Investment United States Shopping malls 1,570 2.40
Trust
Sun Hung Kai Properties Hong Kong Diversified 1,459 2.23
UNITE Group United Kingdom Student 1,436 2.19
accommodation
Vornado Realty Trust United States Diversified 1,403 2.14
Macerich United States Shopping malls 1,310 2.00
Twenty largest investments 42,130 64.35
Mirvac Group Australia Diversified 1,255 1.92
Hufvudstaden Sweden Offices 1,227 1.87
Deutsche Wohnen Germany Residential 1,189 1.82
DDR United States Shopping malls 1,164 1.78
Stockland Australia Diversified 1,074 1.64
Empire State Realty Trust United States Offices 1,061 1.62
RioCan Real Estate Canada Shopping malls 1,050 1.60
Investment Trust
Douglas Emmett United States Offices 1,017 1.55
Pebblebrook Hotel United States Hotels 1,008 1.54
Hammerson United Kingdom Shopping malls 956 1.46
DCT Industrial Trust United States Warehouse and 933 1.43
industrial
Hysan Development Hong Kong Diversified 910 1.39
Great Portland Estates United Kingdom Offices 899 1.37
Hulic Co Japan Diversified 888 1.36
Rexford Industrial Realty United States Warehouse and 867 1.32
industrial
Derwent London United Kingdom Offices 859 1.31
LaSalle Hotel Properties United States Hotels 854 1.30
Workspace Group United Kingdom Offices 809 1.24
Big Yellow Group United Kingdom Storage 804 1.23
Kerry Properties Hong Kong Diversified 713 1.09
CapitaLand Singapore Diversified 700 1.07
CubeSmart United States Storage 636 0.97
Equity LifeStyle Properties United States Home communities 604 0.92
Swire Properties Hong Kong Diversified 585 0.89
Sunstone Hotel Investors United States Hotels 579 0.88
Total investments 64,771 98.92
Net current assets 710 1.08
Total equity shareholders' 65,481 100.00
funds
At 31 December 2014, the twenty largest investments represented 58.91% of
shareholders' funds.
Strategic Report
Company Structure
Schroder Global Real Estate Securities Limited (the "Company") was incorporated
on 25 April 2006 and is registered in Guernsey as an Authorised Closed-Ended
Investment Company. The Company is listed on the London Stock Exchange. The
Company carries on the business of an investment company and invests in global
real estate securities.
Key performance indicators
The Board measures the development and success of the Company's business
through achievement of the Company's investment objective which is considered
to be the most significant key performance indicator of the Company.
The Board continues to review the Company's Ongoing Charges to ensure that the
total costs incurred by shareholders in the running of the Company remain
competitive. An analysis of the Company's costs, including the investment
management fee, Director's fees and other administrative expenses, is submitted
to each Board meeting and the investment management fee is reviewed at least
annually. The Board will continue to review the Company's Ongoing Charges up to
the date of the Company's liquidation.
Role and Composition of the Board
The Board is the Company's governing body and has overall responsibility for
maximising the Company's success by directing and supervising the affairs of
the business and meeting the appropriate interests of shareholders and relevant
stakeholders, while enhancing the value of the Company and also ensuring
protection of investors. A summary of the Board's responsibilities is as
follows:
* statutory obligations and public disclosure;
* strategic matters and financial reporting;
* risk assessment and management including reporting compliance, governance,
monitoring and control; and
* other matters having a material effect on the Company.
The Board's responsibilities for the Annual Report are set out in the Statement
of Directors' Responsibilities.
As at 31 December 2015, the Board comprised four Directors all of whom the
Company considers to be independent. All Directors are non-executive and all
Directors are independent as prescribed by the Listing Rules. Mr Sutton was not
considered to be independent prior to 2 July 2014 as he is an independent
trustee of the CBRE Clarion Global Real Estate Income Fund, a vehicle managed
by CBRE Clarion Securities LLC, the Investment Manager until 2 July 2014. The
Board's approach to diversity is that candidates for Board vacancies are
selected based on their skills and experience, which are matched against the
balance of skills and experience of the overall Board, taking into account the
specific criteria for the role being offered. Candidates are not specifically
selected on the grounds of their gender but this is taken into account when the
Board examines its overall balance, skill set and experience. The Board is
currently considering its composition and refreshment. For additional
information refer to the Chairman's Statement.
Mr Ash retired as a Director and Mr Legge was appointed as a Director on 1
January 2015.
Mr Houston was appointed as a Director on 1 July 2015.
Mr Saunders retired as a Director on 30 September 2015.
Management
The Investment Manager is authorised and regulated by the Financial Conduct
Authority ("FCA") and provides portfolio management and risk management
services to the Company under the terms of an Alternative Investment Fund
Managers agreement. The Investment Manager also provides general marketing
support for the Company and manages relationships with key investors, in
conjunction with the Chairman, other Board members or the corporate broker as
appropriate. Northern Trust International Fund Administration Services
(Guernsey) Limited provides company secretarial, administration and accounting
services, and Northern Trust (Guernsey) Limited provide depositary services.
The Investment Manager has in place appropriate professional indemnity cover.
The Schroders Group manages GBP313 billion as at 31 December 2015 (2014: GBP300
billion) on behalf of institutional and retail investors, financial
institutions and high net worth clients from around the world, invested in a
broad range of asset classes across equities, fixed income, multi-asset and
alternatives.
Investment Objective
The Company's investment objective is to provide investors with an attractive
total return, through investing in listed global real estate securities with
strong fundamentals, offering sustainable income and a progressive dividend
potential.
Investment Strategy
The Board has delegated management of the Company's portfolio to the Investment
Manager. The Investment Manager manages the portfolio with the aim of helping
the Company to achieve its investment objective. Details of the Investment
Manager's strategy, and other factors that have affected performance during the
year, are set out in the Investment Manager's Review.
Investment Policy
The Company's investment policy is flexible enabling it to invest in a wide
variety of listed securities including equities, preference shares, debt,
convertible securities, warrants, interests in collective investment schemes
(including limited partnerships and unit trusts) and other securities issued by
companies which derive a significant proportion of their revenues or profits
from real estate.
There will be no material change to the investment objective or policy
described above unless previously sanctioned by shareholders in a general
meeting.
The Investment Manager seeks to reduce portfolio risk by limiting investment
concentration in any individual security, having exposure to many different
property sectors, and also many different geographic regions. In addition, the
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Investment Manager undertakes a listed securities portfolio liquidity screen to
ensure relatively liquid positions in the Company's portfolio.
Gearing
The Company has power under its Articles to borrow up to an amount equal to 25%
of its net assets at the time of the drawdown. The Board's policy is to limit
gearing to 25%. Gearing for this purpose is defined as Borrowings used for
investment purposes, less cash, expressed as a percentage of net assets. If the
figure so calculated is negative, this is described as "net cash".
At the year end the net cash position was 1.7% (2014: net cash position of
0.6%).
The Company cancelled its credit facility with Northern Trust (Guernsey)
Limited on 27 May 2015.
Leverage
The AIFM ("Alternative Investment Fund Managers") Directive requires the
Investment Manager to set maximum leverage ratio limits as defined in the AIFM
Directive. Accordingly the limits have been set at 2.25 for both the Gross and
Commitment calculation methods. At 31 December 2015, the Company's gross
leverage ratio and its Commitment leverage ratio both stood at 1.0.
Investment Philosophy and Process
The investment philosophy of the Investment Manager stems from an inescapable
truth: real estate companies in supply constrained markets with strong
management teams and low gearing, outperform. In simple terms, we like to hold
companies that own buildings that high quality tenants want to occupy. It is
equally important that these companies do not borrow too heavily against the
value of these buildings. The result is reliable and growing income from a
stable capital base. We remain unimpressed by companies that do the opposite of
this. The folly of a 'quick buck' strategy has been repeated through multiple
economic cycles: too much supply and too much debt results in wholesale value
destruction. We do not believe that investing in companies where equity capital
is put at risk, offsets the potential returns on offer.
Unsurprisingly, our investment process quantifies the risk and valuation of a
company based on this philosophy. This quantification of risk means that we
explicitly measure how good a company is. If we ally the risk score to the
valuation of that business, we can build a portfolio of companies based on
solid foundations. These companies are better able to weather broader economic
storms.
This disciplined approach means longer holding periods and better returns for
shareholders. Your Investment Manager remains committed to providing that.
Stock Research
Proprietary research is conducted by a team of analysts in Asia, North America
and Europe. This ensures breadth and depth of coverage and, importantly, it
helps identify unique opportunities.
The research process has four components. These components ensure analytical
rigour, open communication and tie the team into constructing a global
portfolio of property securities.
* Stock coverage - All analysts are expected to cover stocks in their home
markets. In addition, there is a system of secondary coverage in place. The
team is encouraged to travel to different regions in order to broaden their
knowledge of companies and markets. This increases the knowledge of the
global portfolio. It is critical that team members view the portfolio in
its global context, understanding the total return that the whole portfolio
will generate. This increases the scrutiny of each investment decision;
* Flexible process - The process relies on the local analysts appraising
opportunities using local knowledge. This is vital as global property
markets are not homogenous, with no single way of valuing companies. The
two-step process means that analysts are challenged on their assumptions;
* Team communication - The team formally communicates on a call once a week
with a fixed agenda in place. The primary reason for this call is to
consider changes to the portfolio. Analysts have the opportunity to present
their investment case to the team for questioning. In addition to the
weekly call, team members have regional meetings and communication on
secondary stocks on a frequent basis; and
* Company and market knowledge - Meeting management and understanding real
estate markets is the backbone to the research process. Analysts are
encouraged to spend time with management teams and visiting assets. This
aligns with the fundamental approach of the investment process.
Stock Selection/Portfolio Construction
The investment process and subsequent portfolio construction is team-based.
Every team member has the ability to shape the portfolio. However, the ultimate
stock selection and portfolio construction rests with the co-managers.
Consistent with our investment process the portfolio construction is largely
driven by bottom-up stock selection. We do not seek to target specific
weightings to sectors, countries or regions. The risk analysis and investment
process ensures that the team is constantly aware of excessive or unintended
concentrations.
The decision to invest in a company is primarily driven by an analyst's
conviction that a stock is fundamentally undervalued and there are catalysts
that will narrow the gap between the currently traded price and Schroders' fair
value assessment, leading to outperformance.
Investment Restrictions and Spread of Investment Risk
Risk in relation to the Company's investments is spread as a result of the
Investment Manager monitoring the Company's portfolio with a view to ensuring
that the portfolio retains an appropriate balance to meet the Company's
investment objective.
In order to comply with the Listing Rules, the Company will not invest more
than 10%, in aggregate, of the value of its total assets (calculated at the
time of any relevant investment) in other investment companies or investment
trusts which are listed on the Official List (save to the extent that those
investment companies or investment trusts have stated investment policies to
invest no more than 15% of their gross assets in other investments).
The Company's investment restrictions are as follows:
(a) distributable income will be principally derived from investment;
(b) not more than 20% of total assets to be lent to or invested in the
securities of any one company or group at the time when the investment or loan
is made; for this purpose any existing holding in the company concerned will be
aggregated with the proposed new investment;
(c) not more than 10% of total assets will be invested in any one security;
(d) the Company shall at all times have a minimum portfolio exposure to at
least four of the following listed real estate markets:
· The United States of America;
· Canada;
· Asia (including Hong Kong, Japan; Singapore;
· The United Kingdom;
· Continental Europe;
· Australia and New Zealand;
· Other
(e) not more than 65% of total assets will be invested at the time of
investment in any one of the listed real estate markets referred to in (d)
above;
(f) dividends will not be paid unless they are substantially covered by
income received from underlying investments;
(g) the Company will be a passive investor and will not seek to control, or
be actively involved in the management of any companies or businesses in which
it invests; and
(h) the Company will not be a dealer in investments.
In the event of any breach of the investment restrictions applicable to the
Company, shareholders will be informed of the actions to be taken by the
Investment Manager by notice sent to the registered addresses of the
shareholders in accordance with the Articles or by an announcement issued
through a regulatory information service approved by the FCA.
No breaches of these investment restrictions took place during the year ended
31 December 2015.
The Investment Portfolio and the Investment Manager's Review demonstrate that,
as at 31 December 2015, the portfolio was invested in 10 countries and in 12
different industry sectors within such countries. There were 45 equity holdings
in the portfolio at the year end. The Board therefore believes that the
objective of spreading investment risk has been achieved in this way.
Performance
An outline of performance, market background, investment activity and portfolio
strategy during the year under review, as well as outlook, is provided in the
Chairman's Statement and the Investment Manager's Review.
Principal Risks and Uncertainties
The Board is responsible for the Company's system of internal controls and for
reviewing its effectiveness. The Board is satisfied that by using the Company's
risk matrix in establishing the Company's system of internal controls while
monitoring the Company's investment objective and policy that the Board has
carried out a robust assessment of the principal risks and uncertainties facing
the Company. These fall into the following broad categories:
* Investment Risks: The Company is exposed to the risk that its portfolio
fails to perform in line with the Company's objectives if it is
inappropriately invested or markets move adversely. The Board reviews
reports from the Investment Manager at each quarterly Board meeting, paying
particular attention to the diversification of the portfolio and to the
performance and volatility of underlying investments. Further details on
Investment Risks are discussed in the Investment Manager's Review;
* Strategic Risk: Over time investment vehicles and asset classes can become
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 net 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;
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* Operational Risks: The Company is exposed to the risks arising from any
failure of systems and controls in the operations of the Investment Manager
or the Administrator. The Board receives reports annually from the
Investment Manager and Administrator on their internal controls and reviews
pricing reports covering the valuations of underlying investments at each
quarterly Board meeting;
* Accounting, Legal and Regulatory Risks: The Company is exposed to risk if
it fails to comply with the regulations of the UK Listing Authority or if
it fails to maintain accurate accounting records. The Administrator
provides the Board with regular reports on changes in regulations and
accounting requirements; and
* Financial Risks: The financial risks faced by the Company, include market,
credit and liquidity risk. These risks and the controls in place to
mitigate them are reviewed at each quarterly Board meeting. Further details
on Financial Risks are discussed in Note 20.
Going Concern and Viability Statement
In accordance with provision C.2.2 of the UK Corporate Governance Code,
published by the Financial Reporting Council (the "FRC") in September 2014 (the
"Code"), the Directors have assessed the prospects of the Company and wish to
make the following statement:
A plan to liquidate the Company during Q2 2016 is set out in the Chairman's
Statement. Accordingly, the Financial Statements for the year ended 31 December
2015 are prepared on a basis other than going concern reflecting this
intention. The going concern basis of accounting is no longer considered to be
appropriate. The Company's investments are valued at bid market prices as at 31
December 2015, with no adjustments made as a result of the impending
liquidation. All other assets are also included in the Financial Statements at
the amounts they would expect to realise on liquidation. A provision for all
the costs of winding up the Company has been included in the Financial
Statements.
Corporate Social and Environment Policy
As an investment company, the Company has no direct social, environmental or
human rights responsibilities; its policy is focused on ensuring that its
portfolio is properly managed and invested.
Future Developments
The future of the Company is set out in the Chairman's Statement.
By Order of the Board
Crispian Collins Christopher
Legge
Chairman Director
28 April 2016
Report of the Directors
The Directors of the Company present their Annual Report and the audited
Accounts of the Company for the year ended 31 December 2015.
Dividend Policy
The Company's dividend policy is to declare dividends at levels which are
expected over the medium term to be sustainable based on the income receivable
from investments and which will all for potential growth. Dividends are paid on
a quarterly basis in February, May, September and December.
Having already paid interim dividends amounting to 1.125 pence per share, the
Board has decided, in light of the scheme for liquidation announced by the
Company in December 2015, the fourth interim dividend of 0.375 pence per share
for the year ended 31 December 2015 ordinarily payable in the first quarter of
2016 will not be paid.
Directors and their Interests
The Directors of the Company and their biographical details can be found in the
Directors section. Mr Ash retired on 1 January 2015, Mr Legge was appointed on
1 January 2015, Mr Houston was appointed on 1 July 2015 and Mr Saunders retired
on 30 September 2015. All the other Directors held office throughout the year
under review and up to the date of signing this Annual Report.
As shareholders approved the scheme to put the Company into liquidation as set
out in the Chairman's Statement, no AGM will be required, and hence the
Directors will resign upon the placement of the Company into liquidation, with
the exception of Christopher Legge who will remain as a Director of the
Company.
Each of the Directors has signed a letter of appointment with the Company
setting out the terms of their appointment.
None of the Directors had a service contract with the Company during the year
and accordingly a Director is not entitled to a minimum period of notice or
compensation in the event of their removal as a Director. Details of Directors'
remuneration are disclosed in the Directors' Remuneration Report.
The Directors' beneficial interests in the shares of the Company as at 31
December 2015 are set out below:
% of issued
Unclassified share capital
Shares
Crispian 200,000 0.41%
Collins
Christopher - -
Legge
Richard 80,000 0.16%
Sutton
Robert Houston - -
Christopher Legge was appointed as a Director on 1 January 2015 and Robert
Houston was appointed as a Director on 1 July 2015. They have no beneficial
interests in the Shares of the Company.
Prior to Mr Houston's appointment to the Board, St. Bride's Managers were paid
a fee by the Company for consultancy services provided by Mr Houston of GBP17,734
(2014: GBP23,116).
There have been no changes in the interest of the above Directors in the past
year.
Going Concern and Viability Statement
The going concern and viability statement is set out in the Strategic Report.
Share Capital
As at the date of this Annual Report, the Company had 48,785,327 ordinary
shares of no par value in issue. A total of 5,123,995 shares were held in
Treasury. Accordingly, the total number of voting rights in the Company at the
date of this Report is 48,785,327.
During the year no shares were repurchased into Treasury and no shares held in
Treasury were cancelled. Full details of changes in the Company's share
capital during the year are given in Note 13 to the accounts.
Discount control policy
The Board has renewed the authority to make share repurchases of up to 14.99%
of the Company's issued share capital during the year ended 31 December 2015.
The Board retains the option to buy back shares at their discretion, for
cancellation or to hold in Treasury, in an effort to reduce the quantum or
volatility of the share price discount to NAV per share.
Shareholders approved a resolution that shares would only be reissued from
Treasury at a price which is equal to or exceeds the prevailing NAV per share.
Substantial Share Interests
As at the date of this Report, the Company has received notifications of the
following interests in 3% or more of the voting rights attaching to the
Company's issued shares.
% of issued
Shares held share
capital
The Bank of New York (Nominees) 15,618,058 32.01%
Limited
Ferlim Nominees Limited 6,683,007 13.70%
Hero Nominees Limited 4,725,695 9.69%
Brewin Nominees Limited 3,540,298 7.26%
Nortrust Nominees 2,722,600 5.58%
Limited
Smith & Williamson Nominees 1,734,525 3.56%
Limited
Rock (Nominees) Limited 1,716,450 3.52%
Luna Nominees Limited 1,537,090 3.15%
Investment Manager
CBRE Clarion Securities LLC was the Investment Manager up to 28 July 2014 and
was entitled to an investment management fee of 1% of the Company's NAV per
annum payable quarterly in arrears.
In addition CBRE Clarion Securities LLC was entitled to receive a performance
fee payable annually based on 10% of the Company's total returns in excess of a
hurdle rate of 8% per annum.
Schroder Property Investment Management Limited was appointed as the new
Investment Manager and Alternative Investment Fund Manager on 2 July 2014,
following the shareholders' approval for the continuation of the Company in its
current form at the EGM held on 3 April 2014. On 24 November 2014, Schroder
Property Investment Management Limited changed its name to Schroder Real Estate
Investment Management Limited (the "Investment Manager"). The Investment
Manager is entitled to receive a management fee of 0.85% of the Company's NAV
per annum payable quarterly in arrears, subject to a minimum investment
management fee of GBP550,000 for the 12 month period from 2 July 2014. The
performance fee arrangement ceased on the appointment of the new Investment
Manager.
The Board has reviewed the performance of the Investment Manager during the
period since its appointment and considers that it provides the Company with
considerable investment management resource and experience, thereby enhancing
the ability of the Company to achieve its investment objective. The Board
therefore considers that the Investment Manager's continued appointment up to
the date of the liquidation under the terms of the Management Agreement, is in
the best interests of shareholders.
Administration and Secretary
The Company's Administrator is Northern Trust International Fund Administration
Services (Guernsey) Limited (the "Administrator").
Custodian
The Company's Custodian is Northern Trust (Guernsey) Limited (the
"Custodian").
Depositary
The Company entered into an agreement with Northern Trust (Guernsey) Limited
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(the "Depositary") for the provision of depository services with effect from 2
July 2014. Depositary fees are payable to Northern Trust (Guernsey) Limited
monthly in arrears at a rate of 0.03% of the Net Asset Value of the Company
below GBP100 million and 0.015% on Net Assets in excess of GBP100 million as at the
last business day of the month subject to a minimum fee of GBP30,000 per annum.
Broker
Panmure Gordon & Co was appointed as the Company's Corporate Broker with effect
from 28 May 2015, replacing Numis Securities Limited. The appointment was made
after an extensive review process and undertaken to bring a fresh approach and
heightened activity levels required to grow the Company. By increasing the
investor base, we believe we will be able to improve liquidity which, in turn,
will make the Company increasingly attractive to a wider range of investors.
Registrar
The Company has appointed Computershare Investor Services (Guernsey) Limited
(the "Registrar") to act as its Registrar. The services provided in their
capacity as Registrar include share register maintenance, including the
cancellation and allotment of shares as required, handling shareholder queries
and correspondence, arranging for the payment of dividends, maintenance and
reconciliation of associated bank accounts, meeting management for Company
meetings including registering of proxy votes and scrutineer services as and
when required, and Corporate Action services.
Greenhouse Gas Emissions
As the Company outsources its operations to third parties, it has no greenhouse
gas emissions to report.
Foreign Account Tax Compliance Act
For purposes of the US Foreign Accounts Tax Compliance Act, the Company
registered with the US Internal Revenue Service ("IRS") as a Guernsey reporting
Foreign Financial Institution ("FFI"), received a Global Intermediary
Identification Number (52F6YC.99999.SL.831), and can be found on the IRS FFI
list under the link http://apps.irs.gov/app/fatcaFfiList/flu.jsf. The
responsible officer is Christopher Legge.
The Company is subject to Guernsey regulations and guidance based on reciprocal
information sharing inter-governmental agreements which Guernsey has entered
into with the United Kingdom and the United States of America. The Board will
take the necessary actions to ensure that the Company is compliant with
Guernsey regulations and guidance in this regard.
Disclosure of Information to the Independent Auditor
Due to pending liquidation of the Company, the auditor will resign with effect
from when the Company goes into liquidation and therefore will not be
reappointed.
Each of the persons who is a Director at the date of approval of the Financial
Statements confirms that:
(1) so far as each Director is aware, there is no relevant audit information
of which the Company's auditor is unaware; and
(2) each Director has taken all steps he ought to have taken as a Director to
make himself aware of any relevant audit information and to establish that the
Company's auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the
provisions of Section 249 of The Companies (Guernsey) Law, 2008.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Financial Statements in
accordance with applicable law and regulations. The Directors believe that the
Financial Statements and all reports therein reflect a fair, balanced and
understandable statement of the Company's affairs.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors are required to prepare the
Company financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. 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 profit or loss of the Company for that period. In preparing
these financial statements, International Accounting Standard 1 requires that
directors:
* properly select and apply accounting policies;
* present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
* provide additional disclosures when compliance with the specific
requirements in IFRS are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
entity's financial position and financial performance; and
* make an assessment of the Company's ability to continue as a going concern.
As set out in Note 1, basis of preparation, the Board do not believe that
it is appropriate to prepare these Financial Statements on a going concern
basis.
The Directors are responsible for keeping proper 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 comply with The Companies
(Guernsey) Law, 2008.
The Directors 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
corporate and financial information included on the Company's website.
Legislation in Guernsey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names are set out on the inside front cover of
this report, confirms that to the best of their knowledge that:
* these Financial Statements have been prepared in conformity with IFRS as
adopted by the European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the Company as required by
DTR 4.1.12;
* the Annual Report, taken as a whole, is fair, balanced and understandable
and provide the information necessary for the shareholders to assess the
Company's performance, business model and strategy; and
* the Annual Report includes information detailed in the Chairman's
Statement, the Report of the Directors, the Investment Manager's Review and
the notes to the accounts, which includes a fair view 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,
as required by:
(a) DTR 4.1.8 of the Disclosure and Transparency Rules, being a fair review of
the Company business and a description of the principal risks and uncertainties
facing the Company; and
(b) DTR 4.1.11 of the Disclosure and Transparency Rules, being an indication of
important events that have occurred since the end of the financial year and the
likely future development of the Company.
By Order of the Board
Crispian Collins Christopher
Legge
Chairman Director
28 April 2016
Corporate Governance Report
The Board is committed to high standards of corporate governance and has
implemented a framework for corporate governance which it considers to be
appropriate for an investment company in order to comply with the principles of
the UK Corporate Governance Code (the "UK Code"). The Company is also required
to comply with the Code of Corporate Governance (the "GFSC Code") issued by the
Guernsey Financial Services Commission.
The FRC issued a revised Code in September 2012, for reporting periods
beginning on or after 1 October 2014. The AIC updated the AIC Code of Corporate
Governance (the "AIC Code") (including the Guernsey edition) and its Guide to
Corporate Governance (the "AIC Guide") to reflect the relevant changes to the
FRC document in February 2015. The Board has adopted the revised code.
Compliance Statement
The UK Listing Authority requires all UK listed premium companies to disclose
how they have complied with the provisions of the UK Code. This Corporate
Governance Report, together with the Going Concern and Viability Statement and
the Statement of Directors' Responsibilities, indicates how the Company has
complied with the principles of good governance of the Code and its
requirements on Internal Control.
The Company is a member of the Association of Investment Companies (the "AIC")
and by complying with the AIC Code is deemed to comply with both the UK Code
and the GFSC Code.
The Board has considered the principles and recommendations of the AIC Code, by
reference to the guidance notes provided by the AIC (the "AIC Guide"),
and considers that reporting against these will provide better information to
shareholders. To ensure ongoing compliance with these principles the Board
receives a report from the Company Secretary, at each quarterly meeting,
identifying how the Company is in compliance and identifying any changes that
might be necessary.
The AIC Code and the AIC Guide are available on the AIC's website,
www.theaic.co.uk. The UK Code is available in the Financial Reporting Council's
website, www.frc.org.uk.
Throughout the year ended 31 December 2015, the Company has complied with the
recommendations of the AIC Code and thus the relevant provisions of the UK
Code, except as set out below.
The UK Code includes provisions relating to:
* the role of the Chief Executive;
* the Executive Directors' remuneration;
* the need for an internal audit function; and
* the whistle blowing policy
For the reasons set out in the AIC Guide, and as explained in the UK Code, the
Board considers that these provisions are not relevant to the position of the
Company as it is an externally managed investment company. The Company has
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therefore not reported further in respect of these provisions.
The Directors are non-executive and the Company does not have employees, hence
no Chief Executive or whistle-blowing policy is required. The Board is
satisfied that any relevant issues can be properly considered by the Board.
There have been no other instances of non-compliance, other than those noted
above. However the Directors have satisfied themselves that the Company's
service providers have appropriate whistle-blowing policies and procedures and
have received confirmation from the service providers that nothing has arisen
under those policies and procedures which should be brought to the attention of
the Board. Details of compliance are noted below. The absence of an internal
audit function is discussed in the Audit Committee Report.
Operation and Composition of the Board
Composition
The composition of the Board is set out in the Strategic Report.
The Board does not consider it appropriate to appoint a Senior Independent
Director because they are all deemed to be independent by the Company. The
Board considers it has appropriate balance of diverse skills and experience,
independence and knowledge of the Company and the wider sector, to enable it to
discharge its duties and responsibilities effectively and that no individual or
group of individuals dominates decision making. The Chairman is responsible for
leadership of the Board and ensuring its effectiveness.
There are provisions in the Company's Articles of Incorporation which requires
Directors to seek re-election on a periodic basis. There is no limit on length
of service, nor is there any upper age restriction on Directors.
The Board considers that there is significant benefit to the Company arising
from continuity and experience among directors, and accordingly does not intend
to introduce restrictions based on age or tenure. It does, however, believe
that shareholders should be given the opportunity to review membership of the
Board on a regular basis.
Chairman
The Chairman is Mr Collins. The Chairman of the Board must be independent for
the purposes of Chapter 15 of the Listing Rules. Mr Crispian Collins is
considered independent because he:
* has no current or historical employment with the Investment Manager; and
* has no current directorships in any other investment funds managed by the
Investment Manager.
Role of the Board
The role of the Board is set out in the Strategic Report.
The Board has contractually delegated responsibility for the management of its
investment portfolio, the arrangement of custodial and depositary services and
the provision of accounting and company secretarial services.
The Board needs to ensure that the Annual Report, taken as a whole, is fair,
balanced and understandable and provide the information necessary for
Shareholders to assess the Company's performance, business model and strategy.
In seeking to achieve this, the Directors have set out the Company's investment
objective and policy and have explained how the Board and its delegated
Committees operate and how the Directors review the risk environment within
which the Company operates and set appropriate risk controls. Furthermore,
throughout the Annual Report the Board has sought to provide further
information to enable Shareholders to have a fair, balanced and understandable
view.
Training and Development
On appointment, Directors receive a full, formal and tailored induction.
Directors are also provided on a regular basis with key information on the
Company's policies, regulatory and statutory requirements and internal
controls. Changes affecting Directors' responsibilities are advised to the
Board as they arise. Directors may also attend training and industry seminars
and training and development needs are included as part of the evaluation
process and are agreed with the Chairman.
Conflicts of Interest
The Board has approved a policy on Directors' conflicts of interest. Under this
policy, Directors are required to disclose all actual and potential conflicts
of interest to the Board as they arise for consideration and approval. The
Board may impose restrictions or refuse to authorise such conflicts if deemed
appropriate.
Board Evaluation
The AIC Code requires external evaluation of Board performance every three
years. The Board undertook an externally facilitated evaluation during 2013 by
Trust Associates, having commissioned the report the previous year. The report
of the evaluation confirmed that the Company observes a high standard of
Corporate Governance and, accordingly, the Board has conducted self-appraisals
in 2015.
The Directors consider how the Board functions as a whole taking balance of
skills, experience and length of service into consideration and also reviews
the individual performance of its members.
This process is conducted by the Chairman reviewing with all the Directors
their performance, contribution and commitment to the Company. The performance
of the Chairman is evaluated by the other independent Directors.
During a Board Meeting held on 21 April 2015 the Chairman and Directors
reviewed the board performance. The Chairman was satisfied that the Directors
complemented each other and worked well as a Board.
Directors' Liability Insurance and Indemnity
Directors' and Officers' liability insurance cover is maintained by the Company
on behalf of the Directors.
Election of Directors
The election of Directors is set out in the Report of the Directors.
Directors' Attendance at Meetings
The Company holds a minimum of four Board meetings per year to discuss general
management, structure, finance, corporate governance, marketing, risk
management, compliance, asset allocation and gearing, contracts and
performance. The quarterly Board meetings are the principal source of regular
information for the Board enabling it to determine policy and to monitor
performance, compliance and controls but these meetings are supplemented by
communication and discussions throughout the year.
A representative of the Investment Manager, Administrator and Depositary
attends each Board meeting either in person or by telephone thus enabling the
Board to fully discuss and review the Company's operation and performance. Each
Director has direct access to the Investment Manager and Company Secretary and
may, at the expense of the Company, seek independent professional advice on any
matter.
The table below sets out the number of Board and Audit Committee meetings held
during the year ended
31 December 2015 and, where appropriate, the number of such meetings attended
by each Director.
Number of Crispian Christopher Richard Richard Robert
Meetings Collins Legge Saunders Sutton Houston
held
Board Meetings 5 5 5 3 5 3
Audit Committee Meetings 2 2 2 2 2 1
Adhoc Meetings 2 2 2 1 2 1
Mr Ash retired as a Director and Mr Legge was appointed as a Director on 1
January 2015. Mr Houston was appointed as a Director on 1 July 2015. Mr
Saunders retired as a Director on 30 September 2015.
The Chairman's commitments have not changed during the year. Refer to the
Directors section.
Directors' interests
Directors' interests are set out in the Report of the Directors section.
Board Committees and their Activities
Terms of Reference
All Terms of Reference of Committees are available from the Company Secretary
upon request.
Audit Committee
The Company has established an Audit Committee with formal duties and
responsibilities. This Committee meets formally at least twice a year and each
meeting is attended by the independent auditor and Administrator. The Company's
Audit Committee is comprised of the entire Board. During the year ended 31
December 2015 the Audit Committee was chaired by Mr Legge.
A report of the Audit Committee detailing its responsibilities and its key
activities is presented in the Audit Committee Report.
Remuneration, Management Engagement and Nominations Committees
The Board does not have a separate remuneration, management engagement or
nomination committees because these functions are carried out as part of the
regular Board business. It was not necessary for this Company to appoint a
Remuneration Committee as there were no Executive Directors. A Remuneration
Report prepared by the Board is presented in the Directors' Remuneration
Report. Directors' remuneration is considered on an annual basis.
Relations with Shareholders
The Board welcomes shareholders' views and places great importance on
communication with its shareholders. The Board receives regular reports on the
views of its shareholders from the Company's broker, Panmure Gordon & Co. and
from the Investment Manager.
The Chairman and other Directors are available to meet shareholders if
required.
In addition, the Company maintains a website which contains comprehensive
information, including regulatory announcements, share price information,
financial reports, investment objectives and strategy, investor contracts and
information on the Board.
The Investment Manager provides a monthly newsletter which is available on the
Company's website.
Anti-Bribery Policy
The Company continues to be committed to carrying out its business fairly,
honestly and openly and continues to operate an anti-bribery policy.
Internal Control and Risk Management Systems
The Board is ultimately responsible for establishing and maintaining the
Company's system of internal controls and for maintaining and reviewing its
effectiveness. The Company's risk matrix continues to be the basis of the
Company's risk management process in establishing the Company's system of
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internal financial and reporting control. The risk matrix is prepared and
maintained by the Board which initially identifies the risks facing the Company
and then collectively assesses the likelihood of each risk, the impact of those
risks and the strength of the controls operating over each risk. The system of
internal controls is designed to manage rather than to eliminate the risk of
failure to achieve business objectives and by their nature can only provide
reasonable and not absolute assurance against misstatement and loss. These
controls aim to ensure that assets of the Company are safeguarded, proper
accounting records are maintained and the financial information for publication
is reliable. The Board uses a formal risk assessment matrix to identify and
monitor business risks. These arrangements will continue to the date of the
Company's liquidation.
The Board has delegated the management of the Company's investment portfolio
and the administration, registrar and corporate secretarial functions including
the independent calculation of the Company's NAV and the production of the
Annual Report which are independently audited. Whilst the Board delegates
responsibility, it retains accountability for the functions it delegates and is
responsible for the systems of internal control. Formal contractual agreements
have been put in place between the Company and providers of these services. On
an ongoing basis board reports are provided at each quarterly board meeting
from the Investment Manager, Administrator, Registrar and Company Secretary;
and a representative from the Investment Manager is asked to attend these
meetings. These arrangements will continue to the date of the Company's
liquidation.
In accordance with Listing Rule 15.6.2 (2) R and having formally appraised the
performance and resources of the Investment Manager, in the opinion of the
Directors their continuing appointment of the Investment Manager on their terms
agreed is in the interests of the Company and the Shareholders.
In common with most investment companies, the Company does not have an internal
audit function. All of the Company's management functions are delegated to the
Investment Manager, Administrator, Registrar and Company Secretary which have
their own internal audit and risk assessment functions.
In compliance with provision C.2.1 of the UK Corporate Governance Code, the
board confirms that it has undertaken a robust assessment of the principal
risks facing the Company, including those that would threaten its business
model, future performance, solvency or liquidity. However, in making this
statement, the Board also draws attention to the plan for the liquidation of
the Company during Q2 2016 referred to in the Chairman's Statement and in the
Strategic Report. In addition, the board regularly reviews the effectiveness
of the Company's risk management and internal control systems. The board's
monitoring covers all material controls, including financial, operational and
compliance controls. It is based principally on reviewing reports from
management to consider whether significant risks are identified, evaluated,
managed and controlled and whether any significant weaknesses are promptly
remedied and indicate a need for more extensive monitoring. The board has also
performed a specific assessment for the purpose of this annual report. This
assessment considers all significant aspects of risk management and internal
control arising during the period covered by the report including the work of
internal audit. The audit committee assists the board in discharging its
review responsibilities.
During the course of its review of the risk management and internal control
systems, the board has not identified nor been advised of any failings or
weaknesses which it has determined to be significant. Therefore a confirmation
in respect of necessary actions has not been considered appropriate.
Principal risks and uncertainties are set out in the Strategic Report.
By Order of the Board
Crispian Collins Christopher
Legge
Chairman Director
28 April 2016
Audit Committee Report
Below, we present the Audit Committee Report for 2015, setting out the
responsibilities of the Audit Committee and its key activities in 2015. As in
previous years, the Audit Committee has reviewed the Company's financial
reporting, the independence and effectiveness of the independent auditor and
the internal control and risk management systems of service providers. The
Audit Committee considered whether the Annual Report is fair, balanced and
understandable and whether they provided the necessary information for
shareholders to assess the Company's performance, business model and strategy
before recommending them to the Board for approval. In order to assist the
Audit Committee in discharging these responsibilities, regular reports are
received from the Investment Manager, Administrator and independent auditor.
The Auditor will resign upon the Company going into liquidation.
A member of the Audit Committee has been available at each AGM to respond to
any shareholder questions on the activities of the Audit Committee. However, as
shareholders approved the scheme for liquidation as set out in the Chairman's
Statement, no AGM will be required in 2016.
Responsibilities
The Audit Committee reviews and recommends to the Board, the Financial
Statements of the Company and is the forum through which the independent
auditor reports to the Board of Directors. The independent auditor and the
Audit Committee will meet together without representatives of either the
Administrator or Investment Manager being present if either considers this to
be necessary.
The role of the Audit Committee includes:
* monitoring the integrity of the Financial Statements of the Company and any
formal announcements relating to the Company's financial performance, and
reviewing significant financial reporting judgements;
* reviewing and reporting to the Board on the significant issues and
judgements made in the preparation of the Company's published Financial
Statements, (having regard to matters communicated by the independent
auditor) preliminary announcement, significant financial returns to
regulators and other financial information;
* considering the appropriateness of accounting policies and practices
including critical judgement areas;
* reviewing and considering the UK Code, AIC Code, FRC Guidance on Audit
Committees;
* monitoring and reviewing the quality and effectiveness of the independent
auditor and their independence. This includes meeting regularly with the
independent auditor to discuss the audit plan, the subsequent audit report
and considering the level of fees for both audit and non-audit work, and
monitoring and reviewing the auditor independence, objectivity, expertise,
resources and qualifications;
* considering and making recommendations to the Board on the appointment,
reappointment, replacement and remuneration to the Company's independent
auditor;
* reviewing the Company's procedures for prevention, detection and reporting
of fraud, bribery and corruption; and
* monitoring and reviewing the internal control and risk management systems
of the service providers together with the need for an Internal Audit
function.
The Audit Committee's full terms of reference can be obtained by contacting the
Company Secretary.
Financial Reporting
The Audit Committee's review of the Half Yearly Financial Report and Audited
Annual focused on the valuation and ownership of investments.
Valuation of Investments
The Company's investments had a fair value of GBP64,771,000 as at 31 December
2015 (2014: GBP61,859,000) and represented the majority of the net assets of the
Company. The investments are all listed and the valuation of the investments is
in accordance with the requirements of IFRS as adopted by the European Union.
The Audit Committee considered the fair value of the investments held by the
Company as at 31 December 2015 to be reasonable based on information provided
by the Investment Manager and Administrator. All prices are confirmed to
independent pricing sources as at 31 December 2015 by the Administrator and are
subject to review process by the Administrator and oversight by the Investment
Manager.
Ownership of Investments
The Company's investment holdings are reconciled to independent reports from
the Custodian by the Administrator with any discrepancies being fully
investigated and reconciled by the Administrator. The Audit Committee therefore
consider the ownership of the investments held by the Company as at 31 December
2015 to be reasonable based on a review of information provided by the
Investment Manager, Custodian and Administrator.
The Independent Auditor has confirmed to the Audit Committee that no material
misstatements were found in the course of its work. Furthermore, the Investment
Manager and Administrator confirmed to the Committee that they were not aware
of any material misstatements including matters relating to presentation.
The Audit Committee confirms that it is satisfied that the independent auditor
has fulfilled its responsibilities with diligence and professional scepticism.
The Audit Committee advised the Board that, to the best of their knowledge,
this Financial Statements, taken as a whole, is fair, balanced and
understandable.
The Audit Committee has assessed the appropriateness of the accounting policies
and practices adopted by the Company together with the clarity of disclosures
included in the Financial Statements. Following a review of the presentations
and reports from the Administrator and consulting where necessary with the
independent auditor, the Audit Committee is satisfied that the Financial
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Statements appropriately address the critical judgements and key estimates
(both in respect to the amounts reported and the disclosures). The Audit
Committee is also satisfied that the significant assumptions used for
determining the value of assets and liabilities have been appropriately
scrutinised, challenged and are sufficiently robust.
Risk Management
The Audit Committee continued to consider the process for managing the risk of
the Company and its service providers. Risk management procedures for the
Company, as detailed in the Company's risk assessment matrix, were reviewed and
approved by the Audit Committee. Regular reports are received from the
Investment Manager and Administrator on the Company's risk evaluation process
and reviews.
Fraud, Bribery and Corruption
The Audit Committee continues to monitor the fraud, bribery and corruption
policies of the Company. The Board receives a confirmation from all service
providers that there have been no instances of fraud, bribery or corruption.
The Independent Auditor
Deloitte LLP has been the Independent Auditor from the date of the initial
listing on the London Stock Exchange. The recent revisions to the UK Code
introduced a recommendation that the external audit be put out to tender every
ten years. However, this will not be applicable due the approved proposal to
liquidate the Company.
Independence, Objectivity and Fees
The independence and objectivity of the independent auditor is reviewed by the
Audit Committee which also reviews the terms under which the independent
auditor is appointed to perform non-audit services. The Audit Committee has
established pre-approval policies and procedures for the engagement of Deloitte
LLP to provide audit, assurance and tax services. These are that the
independent auditor may not provide a service which:
* places them in a position to audit their own work;
* creates a mutuality of interest;
* results in the independent auditor developing close relationships with
service providers of the Company;
* results in the independent auditor functioning as a manager or employee of
the Company; or
* puts the independent auditor in the role of advocate of the Company.
As a general rule, the Company does not utilise independent auditors for
internal audit purposes, secondments or valuation advice. Services which are in
the nature of audit, such as tax compliance, tax structuring, private letter
rulings, accounting advice, quarterly reviews and disclosure advice are
normally permitted but must be pre-approved where fees are likely to be above GBP
25,000.
The following table summarises the remuneration paid to Deloitte LLP for audit
and non-audit services during the years ended 31 December 2015 and 31 December
2014:
2015 2014
GBP000's GBP000's
Statutory Audit 28 30
Total audit fees 28 30
Interim review 14 14
Foreign Account Tax Compliance - 3
Act
Total non-audit related fees 14 17
Total fees 42 47
In line with the policies and procedures above, the Audit Committee does not
consider that the provision of these non-audit services, which comprised of
independent review of the Half Yearly Financial Report, Foreign Account Tax
Compliance Act ("FATCA") advice, and withholding tax claims to be a threat to
the objectivity and independence of the independent auditor.
Deloitte LLP also have safeguards in place to ensure objectivity and
independence. These include:
* Tax work is carried out by teams independent of the audit team and ethical
walls ensure that no employee works in both teams; and
* Review and challenge of key decisions by the Engagement Quality Review
Partner and engagement quality control review by a member of the
Independent Professional Standards Review Team.
When considering the effectiveness and independence of the Independent Auditor,
the Audit Committee also takes account of factors such as:
* The audit plan presented to them before each audit;
* The post audit report including variations from the original plan;
* Changes in audit personnel;
* The Independent Auditor's own internal procedures to identify threats to
independence; and
* Feedback from both the Investment Manager and Administrator evaluating the
performance of the team.
The Audit Committee has examined the scope and results of the audit, its cost
effectiveness and the independence and objectivity of the independent auditor,
with particular regard to non-audit fees, and is satisfied that an effective
audit has been completed, that the scope of the audit was appropriate and
significant judgements have been challenged robustly. It also considers
Deloitte LLP, as independent auditor, to be independent of the Company.
Reappointment of the Independent Auditor
Due to pending liquidation of the Company, the auditor will resign with effect
from when the Company goes into liquidation and therefore will not be
reappointed.
Internal Control and Risk Management Systems
The Audit Committee, after consultation with the Investment Manager and
independent auditor, considers the key risk of misstatement in its Financial
Statements to be the override of controls by its service providers, the
Investment Manager or the Administrator.
The Audit Committee reviews and examines externally prepared assessments of the
control environment in place at the Investment Manager and the Administrator.
No significant failings or weaknesses were identified in these reports.
The Audit Committee has also reviewed the need for an internal audit function.
The Audit Committee has decided that the systems and procedures employed by the
Investment Manager and the Administrator, including their internal audit
functions, provide sufficient assurance that a sound system of internal
control, which safeguards the Company's assets, is maintained. An internal
audit function specific to the Company is therefore considered unnecessary.
For any questions on the activities of the Audit Committee not addressed in the
foregoing, a member of the Audit Committee remains available to attend each AGM
to respond to such questions. However, as shareholders approved the scheme for
liquidation as set out in the Chairman's Statement, no AGM will be required.
Christopher Legge
Chairman, Audit Committee
28 April 2016
Directors' Remuneration Report
Introduction
As shareholders approved the scheme for liquidation as set out in the
Chairman's Statement, there will be no AGM and therefore no ordinary resolution
for the approval of the annual remuneration report will be put to the
shareholders.
Policy on Remuneration of Directors
All Directors are non-executive and a Remuneration Committee has not been
established. The Board as a whole considers matters relating to the Directors'
remuneration. No advice or services were provided by any external person in
respect of its consideration of the Directors' remuneration.
The Company's policy is that the fees payable to the Directors should reflect
the time spent by the Directors on the Company's affairs and the
responsibilities borne by the Directors and be sufficient to attract, retain
and motivate directors of a quality required to run the Company successfully.
The Chairman of the Board is paid a higher fee in recognition of his additional
responsibilities, as is the Chairman of the Audit Committee. The policy is to
review fee rates periodically, although such a review will not necessarily
result in any changes to the rates, and account is taken of fees paid to
directors of comparable companies.
There are no long term incentive schemes provided by the Company and no
performance fees are paid to Directors.
No Director has a service contract with the Company but each Director is
appointed by a letter of appointment which sets out the main terms of their
appointment. Directors hold office until they retire by rotation or cease to be
a director in accordance with the Articles of Incorporation, by operation of
law or until they resign.
Component Parts of the Directors' Remuneration
The Directors of the Company are remunerated for their services at such a rate
as the Directors determine provided that the aggregate amount of such fees does
not exceed GBP150,000 (31 December 2014: GBP150,000) per annum.
Directors are remunerated in the form of fees, payable quarterly in arrears, to
the Director personally. No Directors have been paid additional remuneration
outside their normal Directors' fees and expenses. Directors fees have not
increased during the year (2014: no increase during the year).
Fees Paid to Directors
For the years ended 31 December 2015 and 31 December 2014 Directors' fees paid
were:
2015 2014
Crispian GBP35,000 GBP35,000
Collins
Chris Legge GBP30,000 GBP0
Richard Sutton GBP27,500 GBP27,500
Richard Saunders GBP20,625 GBP27,500
Robert Houston GBP13,750 GBP0
Trevor Ash GBP0 GBP30,000
Mr Ash retired as a Director on 1 January 2015.
Mr Legge was appointed as a Director on 1 January 2015 and receives GBP30,000 per
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annum as a Director and Chairman of the Audit Committee.
Mr Houston was appointed as a Director on 1 July 2015 and receives GBP27,500 per
annum as a Director.
Mr Saunders retired as a Director on 30 September 2015.
By Order of the Board
Crispian Collins Christopher
Legge
Chairman Director
28 April 2016
Report of the Depositary to the Members of Schroder Global Real Estate
Securities Limited
Northern Trust (Guernsey) Limited has been appointed as Depositary to Schroder
Global Real Estate Securities Limited (the "Company") in accordance with the
requirements of Article 36 and Articles 21(7), (8) and (9) of the Directive
2011/61/EU of the European Parliament and of the Council of 8 June 2011 on
Alternative Investment Fund Managers and amending Directives 2003/41/EC and
2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (the "AIFM
Directive").
We have enquired into the conduct of Schroder Real Estate Investment Management
Ltd (the "AIFM") and the Company for the financial year ending 31 December
2015, in our capacity as Depositary to the Company.
This report including the review provided below has been prepared for and
solely for the Shareholders in the Company. We do not, in giving this report,
accept or assume responsibility for any other purpose or to any other person to
whom this report is shown.
Our obligations as Depositary are stipulated in the relevant provisions of the
AIFM Directive and the relevant sections of Commission Delegated Regulation
(EU) No 231/2013 (collectively the "AIFMD legislation").
Amongst these obligations is the requirement to enquire into the conduct of the
AIFM and the Company and their delegates in each annual accounting period. We
have therefore enquired into the conduct of the AIFM for the period ending 31
December 2015 in our capacity as Depositary to the Company.
Our report shall state whether, in our view, the Company has been managed in
that period in accordance with the AIFMD legislation. It is the overall
responsibility of the AIFM and the Company to comply with these provisions. If
the AIFM, the Company or their delegates have not so complied, we as the
Depositary will state why this is the case and outline the steps which we have
taken to rectify the situation.
Basis of Depositary Review
The Depositary conducts such reviews as it, in its reasonable discretion,
considers necessary in order to comply with its obligations and to ensure that,
in all material respects, the Company has been managed (i) in accordance with
the limitations imposed on its investment and borrowing powers by the
provisions of its constitutional documentation and the appropriate regulations
and (ii) otherwise in accordance with the constitutional documentation and the
appropriate regulations. Such reviews vary based on the type of the Company,
the assets in which the Company invests and the processes used, or experts
required, in order to value such assets.
Review
In our view, the Company has been managed during the period, in all material
respects:
(i) in accordance with the limitations imposed on the investment and
borrowing powers of the Company by the constitutional document; and by the
AIFMD legislation; and
(ii) otherwise in accordance with the provisions of the
constitutional document; and the AIFMD legislation.
For and on behalf of
Northern Trust (Guernsey) Limited
28 April 2016
Independent Auditor's Report to the Members of Schroder Global Real Estate
Securities Limited
Opinion on In our opinion the Financial Statements:
Financial · give a true and fair view of the state of the
Statements of Company's affairs as at 31 December 2015 and of its profit
Schroder Global for the year then ended;
Real Estate
Securities Limited · have been properly prepared in accordance with
(the "Company") International Financial Reporting Standards (IFRSs) as
adopted by the European Union; and
· have been prepared in accordance with the requirements
of the Companies (Guernsey) Law, 2008.
The Financial Statements comprise the Statement of
Comprehensive Income, the Statement of Financial Position,
the Cash Flow Statement, the Statement of Changes in Equity
and the related Notes 1 to 22. The financial reporting
framework that has been applied in their preparation is
applicable law and IFRSs as adopted by the European Union.
Emphasis of matter We have considered the adequacy of the disclosure made in
- Financial Note 1 to the financial statements, which explains that the
statements financial statements have been prepared on a basis other than
prepared other that of a going concern. As described in Note 1 to the
than on a going financial statements, the shareholders have approved the
concern basis scheme for liquidation. Our opinion is not modified in
respect of this matter.
Going concern and We have reviewed the directors' statement regarding the
the directors' appropriateness of the going concern basis of accounting
assessment of the contained within Note 1 to the Financial Statements.
principal risks
that would Aside from the matter disclosed in the emphasis of matter
threaten the paragraph above, we have nothing material to add or draw
solvency or attention to in relation to:
liquidity of the
Company * the directors' confirmation in the Strategic
Report that they have carried out a robust assessment of the
principal risks facing the Company, including those that
would threaten its business model, future performance,
solvency or liquidity;
* the disclosures in the Corporate Governance
Report that describe those risks and explain how they are
being managed or mitigated;
* the directors' statement in note 1 to the
financial statements about whether they considered
appropriate to adopt the going concern basis of accounting in
preparing them.
Independence We are required to comply with the Financial Reporting
Council's Ethical Standards for Auditors and we confirm that
we are independent of the company and we have fulfilled our
other ethical responsibilities in accordance with those
standards. We also confirm we have not provided any of the
prohibited non-audit services referred to in those standards.
Our assessment of The assessed risks of material misstatement described below
risks of material are those that had the greatest effect on our audit strategy,
misstatement the allocation of resources in the audit and directing the
efforts of the engagement team:
Risk How the scope of our audit responded to
the risk
Valuation of the Company's investments
Investments of GBP64.8 million (2014: GBP We evaluated the design and
61.9 million) are classified as Level implementation of controls around the
1 investments at year end as disclosed valuation of investments.
in Note 19. There is a risk that the
Company's pricing methodology does not We tested 100% of the year-end prices to
accurately reflect the potential exit prices obtained independently from
price at the year-end date. This risk reliable third party sources. In
is heightened when current market addition, the liquidity of the portfolio
conditions may impair the liquidity of was considered as at the year-end date to
the investment portfolio as an element assess whether any adjustment was
of judgment may need to be required to the valuation for illiquid or
incorporated into the valuation. otherwise suspended from trading
equities.
Further, we considered whether the
impending liquidation of the Company had
any material impact on the valuation of
the investments as at the statement of
financial position date.
Ownership of the Company's investments
There is a risk that the Company has We evaluated the design and
not retained the rights and implementation of controls around the
obligations of its investment ownership of investments.
portfolio, or that the investment
portfolio is not recognised on a trade We tested ownership by confirming all
date basis which may result in gains positions with the custodian on both a
and losses on investments being trade date and settlement date basis, and
recognised in the incorrect period. reconciled the trade date basis to the
Company's records in order to test for
the recognition of gains and losses in
the correct period.
The description of risks above should be read in conjunction with the
significant issues considered by the Audit Committee discussed in the Audit
Committee Report.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Our application of We define materiality as the magnitude of misstatement in the
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materiality financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality both in planning
the scope of our audit work and in evaluating the results of
our work.
We determined materiality for the Company to be GBP0.66 million
(2014: GBP0.62 million), which is approximately 1% (2014: 1%)
of equity. As the investment objective of the Company is
primarily to invest for capital appreciation, we consider the
net asset value of the Company to be a key performance
indicator for shareholders.
We agreed with the Audit Committee that we would report to
the Committee all audit differences in excess of GBP13,100
(2014: GBP12,400), as well as differences below that threshold
that, in our view, warranted reporting on qualitative
grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall
presentation of the financial statements.
An overview of the Our audit was scoped by obtaining an understanding of the
scope of our audit Company and its environment, including internal control, and
assessing the risks of material misstatement. Audit work to
respond to the risks of material misstatement was performed
directly by the audit engagement team.
The administrator maintains the books and records of the
Company including accounting and financial reporting
services. Our audit therefore included obtaining an
understanding of this service organisation and its
relationship with the Company.
Matters on which
we are required to
report by
exception
Adequacy of Under the Companies (Guernsey) Law, 2008 we are required to
explanations report to you if, in our opinion:
received and
accounting records · we have not received all the information and
explanations we require for our audit; or
· proper accounting records have not been kept; or
· the financial statements are not in agreement with the
accounting records.
We have nothing to report in respect of these matters.
Corporate Under the Listing Rules we are also required to review the
Governance part of the Corporate Governance Statement relating to the
Statement Company's compliance with certain provisions of the UK
Corporate Governance Code. We have nothing to report arising
from our review.
Our duty to read Under International Standards on Auditing (UK and Ireland),
other information we are required to report to you if, in our opinion,
in the Annual information in the annual report is:
Report
· materially inconsistent with the information in the
audited financial statements; or
· apparently materially incorrect based on, or
materially inconsistent with, our knowledge of the Company
acquired in the course of performing our audit; or
· otherwise misleading.
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired
during the audit and the directors' statement that they
consider the annual report is fair, balanced and
understandable and whether the annual report appropriately
discloses those matters that we communicated to the audit
committee which we consider should have been disclosed. We
confirm that we have not identified any such inconsistencies
or misleading statements.
Respective As explained more fully in the Statement of Directors'
responsibilities Responsibilities, the directors are responsible for the
of directors and preparation of the financial statements and for being
auditor satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). We also
comply with International Standard on Quality Control 1 (UK
and Ireland). Our audit methodology and tools aim to ensure
that our quality control procedures are effective, understood
and applied. Our quality controls and systems include our
dedicated professional standards review team and independent
partner reviews.
This report is made solely to the Company's members, as a
body, in accordance with Section 262 of the Companies
(Guernsey) Law, 2008. Our audit work has been undertaken so
that we might state to the Company's members those matters we
are required to state to them in an auditor's report and/or
those further matters we have expressly agreed to report to
them on in our engagement letter and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and
the Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Scope of the audit An audit involves obtaining evidence about the amounts and
of the financial disclosures in the financial statements sufficient to give
statements reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the
accounting policies are appropriate to the Company's
circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we
read all the financial and non-financial information in the
annual report to identify material inconsistencies with the
audited financial statements and to identify any information
that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in
the course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies we
consider the implications for our report.
Nicola Sarah Paul FCA
for and on behalf of Deloitte LLP
Chartered Accountants and Recognised Auditor
Guernsey
28 April, 2016
Statement of Comprehensive Income
For the year ended 31 December 2015
2015 2014
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments 2 - 3,978 3,978 - 11,903 11,903
designated at fair value
through profit or loss
Net foreign currency gains/ - 3 3 - (679) (679)
(losses)
Income from investments 3 2,110 - 2,110 2,412 - 2,412
Total income 2,110 3,981 6,091 2,412 11,224 13,636
Investment management fee 4 (166) (387) (553) (182) (426) (608)
Other administrative 5 (1,032) - (1,026) -
expenses (1,032) (1,026)
Profit before finance costs
and taxation 912 3,594 4,506 1,204 10,798 12,002
Finance costs 6 - - - (11) (25) (36)
Profit before taxation 912 3,594 4,506 1,193 10,773 11,966
Taxation 7 (436) - (436) (586) - (586)
Net profit and total 476 3,594 4,070 607 10,773 11,380
comprehensive income
Earnings per share 9 0.98p 7.37p 8.35p 1.21p 21.41p 22.62p
The "Total" column of this statement represents the Company's Statement of
Comprehensive Income, prepared in accordance with IFRS as adopted by the
European Union. The "Revenue and Capital" columns represent supplementary
information prepared under guidance issued by the Association of Investment
Companies.
All income is attributable to equity holders of the Company. There are no
minority interests.
All revenue and capital items in the above statement derive from discontinuing
operations.
The Notes form an integral part of these Financial Statements.
Statement of Changes in Equity
For the year ended 31 December 2015
Share Other Capital Revenue
capital reserve reserves reserve Total
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Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2013 - 64,155 (7,043) 3,261 60,373
Repurchase and cancellation of 14 - (7,819) - - (7,819)
ordinary shares
Net (loss)/profit - (1,130) 11,903 607 11,380
Dividends paid in the year 8 - - - (1,791) (1,791)
At 31 December 2014 - 55,206 4,860 2,077 62,143
Net (loss)/profit - (384) 3,978 476 4,070
Dividends paid in the year 8 - - - (732) (732)
At 31 December 2015 - 54,822 8,838 1,821 65,481
Under The Companies (Guernsey) Law, 2008, the Company may pay dividends out of
capital and revenue reserves, subject to a solvency test.
The Notes form an integral part of these Financial Statements.
Statement of Financial Position
As at 31 December 2015
2015 2014
Notes GBP'000 GBP'000
Non current assets
Investments at fair value through profit or 10 - 61,859
loss
Current assets
Investments 10 64,771 -
Receivables 12 285 247
Cash and cash equivalents 1,144 379
66,200 626
Total assets 66,200 62,485
Current liabilities
Payables 13 (719) (342)
Total current liabilities (719) (342)
Total assets less current 65,481 62,143
liabilities
Net assets 65,481 62,143
Equity attributable to
equity holders
Share capital 14 - -
Other reserve 15 54,822 55,206
Capital reserves 15 8,838 4,860
Revenue reserve 15 1,821 2,077
Total equity shareholders' 65,481 62,143
funds
Net asset value per share 16 134.22p 127.38p
These Financial Statements were approved and authorised for issue by the Board
of Directors on 28 April 2016 and signed on its behalf by:
Crispian
Collins
Christopher Legge
Chairman
Director
The Notes form an integral part of these Financial Statements.
Registered in Guernsey
Company registration number: 44714
Cash Flow Statement
For the year ended 31 December 2015
2015 2014
GBP'000 GBP'000
Operating
activities
Profit before finance costs and taxation 4,506 12,002
Gains on investments at fair value through (3,981) (11,224)
profit or loss
Net sales of investments at fair value through 1,109 15,755
profit or loss
(Increase)/decrease in receivables (84) 228
Increase in 383 3
payables
Overseas taxation paid (436) (586)
Net cash inflow from operating activities before 1,497 16,178
interest
Interest paid - (36)
Net cash inflow from operating activities 1,497 16,142
Financing
activities
Repurchase of shares into Treasury - (7,819)
Dividends paid (732) (1,791)
Net cash outflow from financing (732) (9,610)
activities
Increase in cash and cash equivalents 765 6,532
Cash and cash equivalents at the start of 379 (6,153)
the year
Cash and cash equivalents at the end of the 1,144 379
year
The Notes form an integral part of these Financial Statements.
Notes to the Accounts
1. Accounting Policies
(a) Basis of accounting
The Financial Statements have been prepared in accordance with the Companies
(Guernsey) Law 2008 and International Financial Reporting Standards ("IFRS") as
adopted by the European Union, which comprise standards and interpretations
approved by the International Accounting Standards Board ("IASB"), together
with interpretations of the International Accounting Standards and Standing
Interpretations Committee approved by the International Accounting Standards
Committee ("IASC"), that remain in effect and to the extent that they have been
adopted by the European Union.
Where consistent with the requirements of IFRS, the Directors have sought to
prepare the Financial Statements on a basis compliant with presentational
guidance set out in the Statement of Recommended Practice for investment trust
companies (the "SORP") issued by the Association of Investment Companies in
November 2014.
A scheme to liquidate the Company is set out in the Chairman's Statement.
Accordingly, the Financial Statements for the year ended 31 December 2015 have
been prepared on a basis other than going concern reflecting this intention.
The going concern basis of accounting is no longer considered to be
appropriate. The Company's investments are valued at bid market prices at the
statement of financial position date, with no adjustments made as a result of
the impending liquidation. All other assets are also included in the Financial
Statements at the amounts they would expect to realise on liquidation. The
Financial Statements include an accrual for the expected costs of liquidation.
The Company's share capital is denominated in sterling and this is the currency
in which its shareholders operate and expenses are generally paid. The Board
has therefore determined that sterling is the functional currency and the
currency in which the Financial Statements are presented.
The principal accounting policies adopted are set out below.
No critical accounting judgements have been made in the process of applying the
Company's accounting policies.
(b) Presentation of the Statement of Comprehensive Income
In order better to reflect the activities of an investment company and in
accordance with the recommendations of the SORP, supplementary information has
been presented which analyses items in the Statement of Comprehensive Income
between those which are income in nature and those which are capital in nature.
(c) Presentation of the Cash Flow Statement
The Cash Flow Statement has been presented in accordance with the "indirect
method" detailed in IAS 7: "Statement of cash flows". Cash payments and
receipts from purchases and sales of investments have been reclassified from
investment activities to operating activities in the comparative statement. The
Directors are of the opinion that this presentation is more relevant and better
reflects the activities of an investment trust.
(d) Valuation of Investments
All of the Company's investments continue to be designated as "Investments at
fair value through profit or loss" and are included at bid market prices in
active markets at the statement of financial position date. In light of the
scheme to liquidate the Company, the Directors are of the opinion that if all
the investments were sold, they would realise the amounts shown in the
Statement of Financial Position.
(e) Reserves
Gains and losses on sales of investments, including the related foreign
exchange gains and losses, are included in the Statement of Comprehensive
Income and in capital reserves within "Gains and losses on sales of
investments". Increases and decreases in the valuation of investments held at
the year end, including the related foreign exchange gains and losses, are
included in the Statement of Comprehensive Income and in capital reserves
within "Holding gains and losses on investments".
Management fee and finance costs allocated to capital and foreign currency
gains and losses are included in the Statement of Comprehensive Income and in
"Other reserve".
The consideration payable for the repurchase of shares for cancellation or to
hold in Treasury is charged to "Other reserve".
(f) Income
Dividends receivable from equity shares are included in revenue on an
ex-dividend basis except where, in the opinion of the Board, the dividend is
capital in nature, in which case it is included in capital.
Deposit interest outstanding at the year end is calculated and accrued on a
time apportionment basis using market rates of interest.
(g) Expenses
An accrual for liquidation costs has been included, and allocated wholly to
revenue.
All expenses are accounted for on an accruals basis. Expenses are allocated
wholly to revenue with the following exceptions:
The management fee is allocated 30% to revenue and 70% to capital in line with
the Board's expected long term split of revenue and capital return from the
Company's investment portfolio.
(h) Finance costs
Finance costs, including any premiums payable on settlement or redemption and
direct issue costs, are accounted for on an accruals basis in profit or loss
using the effective interest method.
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Finance costs are allocated 30% to revenue and 70% to capital in line with the
Board's expected long term split of revenue and capital return from the
Company's investment portfolio.
(i) Financial Instruments
Investments are designated as "Investments at fair value through profit or
loss" as detailed in part (d) above. Cash and cash equivalents may comprise
cash and demand deposits which are readily convertible to a known amount of
cash and are subject to insignificant risk of changes in value. Other
receivables are non interest bearing, short term in nature and are accordingly
stated at nominal value as reduced by appropriate allowances for estimated
irrecoverable amounts.
(j) Taxation
The taxation charge in the Statement of Comprehensive Income comprises
irrecoverable overseas tax deducted from dividends receivable.
(k) Foreign currency
The results and financial position are expressed in sterling which is the
Company's functional currency and presentational currency. Transactions in
currencies other than sterling are recorded at the rates of exchange prevailing
on the dates of the transactions. Monetary assets, liabilities and equity
investments held at fair value denominated in foreign currencies are translated
at the rates of exchange prevailing at the year end. Foreign exchange
differences arising on conversion of the monetary items are recognised in the
Statement of Comprehensive Income.
(l) Adoption of new and revised Standards
During the year, the Company has adopted all relevant standards which became
effective from both 1 July 2014 and 1 January 2015. These standards have had no
material impact on the financial statements. The Directors are aware that there
are a number of standards which become effective on or after 1 January 2016,
however, given the impending liquidation these will have no impact on the
Company and no further disclosures are provided in this respect.
(m) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business, being investment in real estate securities.
2. Gains on investments at fair value through profit or loss
2015 2014
GBP'000 GBP'000
Realised gains on sales of investments 3,566 12,974
based on historic cost
Realised losses on sales of investments (895) (3,662)
based on historic cost
Movement in unrealised investment holding 4,928 8,526
gains
Movement in unrealised investment holding (3,621) (5,935)
losses
Gains on investments held at fair value 3,978 11,903
through profit or loss
3. Income
2015 2014
GBP'000 GBP'000
Income from investments:
Dividends from investments at fair value 2,110 2,412
through profit or loss
Total income 2,110 2,412
4. Investment Management Fee
2015 2014
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Management fee 166 387 553 182 426 608
The basis for calculating the investment management fee is set out in the
Director's Report.
5. Other administrative expenses
2015 2015 2014
GBP'000 GBP'000 GBP'000
Provision for reconstruction and
winding-up costs:
Broker fees 160 -
Legal fees 120 -
Liquidator fees 30 -
Manager's notice period of 4 45 -
weeks
Other costs 95 -
450 -
Directors' fees 127 120
Sundry expenses 108 300
Administration Fees 100 100
Transaction costs on purchase and sale of 84 205
investments
Broker Fees 40 35
Professional fees 37 191
Depositary Fees 30 13
Auditor's remuneration for audit 28 30
services
Auditor's remuneration for other 14 17
services1
Custodian Fees 12 12
Foreign exchange loss on income 2 3
1,032 1,026
1 Comprises GBP14,400 payable to the auditor in respect of the interim review
(2014: GBP14,000 in respect of the interim review and GBP3,000 in respect of
Foreign Account Tax Compliance Act advice).
6. Finance Costs
2015 2014
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Interest on bank - - - 11 25 36
overdraft
7. Taxation
2015 2014
GBP'000 GBP'000
Irrecoverable withholding tax deducted from dividends 436 586
receivable
The Company has been granted an exemption from Guernsey taxation, under the
Income Tax (Exempt Bodies) Guernsey Ordinance 1989 for which it was charged an
annual exemption fee of GBP1,200 (2014: GBP600).
8. Dividends
The Company paid and declared the following dividends 2015 2014
during the year:
GBP'000 GBP'000
2014 Fourth interim dividend of 0.375p (2013: 183 584
1.05p)
2015 First interim dividend of 0.375p (2014: 183 512
1.05p)
2015 Second interim dividend of 0.375p (2014: 1.05p) 183 512
2015 Third interim dividend of 0.375p (2014: 183 183
0.375p)
Total dividends paid in the year 732 1,791
The Board has decided, in light of the proposed scheme for liquidation
announced by the Company in December 2015, the fourth interim dividend of
0.375p per share for the year ended 31 December 2015 ordinarily payable in the
first quarter of 2016 will not be paid.
9. Earnings per share
2015 2014
GBP'000 GBP'000
Net revenue profit 476 607
Net capital profit 3,594 10,773
Net total profit 4,070 11,380
Weighted average number of Ordinary shares in issue during the 48,785,327 50,311,643
year
Revenue earnings per share 0.98p 1.21p
Capital earnings per 7.37p 21.41p
share
Total earnings per 8.35p 22.62p
share
10. Investments at fair value through profit or loss
2015 2014
GBP'000 GBP'000
Opening valuation 61,859 66,274
Opening investment holding gains (7,769) (5,178)
Opening book cost 54,090 61,096
Purchases at cost 24,245 61,876
Sales at cost (22,640) (68,882)
Closing book cost 55,695 54,090
Closing investment holding gains 9,076 7,769
Total investments at fair value through profit or loss 64,771 61,859
On the Statement of Financial Position, the investments at fair value through
profit or loss have been reclassified in 2015 from non-current assets to
current assets as a result of the decision to wind up the Company within the
next twelve months.
11. Receivables
2015 2014
GBP'000 GBP'000
Dividends and interest 246 152
receivable
Securities sold awaiting 22 68
settlement
Other debtors 17 27
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285 247
The Directors consider that the carrying amount of receivables approximated to
their fair value.
12. Payables
2015 2014
GBP'000 GBP'000
Provision for reconstruction and winding-up 450 -
costs (Note 5)
Other creditors and accruals 269 342
719 342
The Directors consider that the carrying amount of payables approximates to
their fair value.
13. Share Capital
2015 2014
Unclassified shares of no par
value:
Opening balance excluding shares held in 48,785,327 55,943,548
Treasury
Repurchase of shares into - (7,158,221)
Treasury
Closing balance excluding shares held in 48,785,327 48,785,327
Treasury
Shares held in 5,123,995 5,123,995
Treasury
Closing balance including shares held in 53,909,322 53,909,322
Treasury
Unclassified shares of no par value
The Company has a single class of shares which were issued by means of an
initial public offering on 31 May 2006, at 100p per share. The shares carry the
right to vote at general meetings of the Company and to receive dividends and,
in a winding-up will participate in any surplus assets remaining after
settlement of any outstanding liabilities of the Company.
During the year, zero (2014: 7,158,221) shares of no par value were repurchased
into Treasury for a total consideration of GBPNil (2014: GBP7,819,000). The reason
for the share repurchases was to seek to reduce the volatility of the discount
of the share price to net asset value per share.
There were no (2014: 8,245,000) shares held in Treasury cancelled during the
year.
Details of the Company's discount control policy are given in the Report of the
Directors.
14. Reserves
Capital reserves
Gains and Investment
losses on holding
sales of gains and Revenue
Other investments losses reserve
reserve
GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2013 64,155 (12,221) 5,178 3,261
Gains on sales of investments - 9,312 - -
Movement in investment holding gains and - - 2,591 -
losses
Realised exchange losses on cash and cash (679) - - -
equivalents
Repurchase of shares for (7,819) - - -
cancellation
Management fee and finance costs charged (451) - - -
to capital
Dividends paid in the - - - (1,791)
year
Net revenue profit for the year - - - 607
At 31 December 2014 55,206 (2,909) 7,769 2,077
Capital reserves
Gains and Investment
losses on holding
sales of gains and Revenue
Other investments losses reserve
reserve
GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2014 55,206 (2,909) 7,769 2,077
Gains on sales of investments - 2,671 - -
Movement in investment holding gains and - - 1,307 -
losses
Realised exchange gains on cash and cash 3 - - -
equivalents
Management fee and finance costs charged (387) - - -
to capital
Dividends paid in the - - - (732)
year
Net revenue profit for the year - - - 476
At 31 December 2015 54,822 (238) 9,076 1,821
15. Net asset value per share
2015 2014
Net assets attributable to shareholders 65,481 62,143
(GBP'000)
Shares in issue at the year end excluding shares 48,785,327 48,785,327
held in Treasury
Net asset value per 134.22p 127.38p
share
16. Transactions with the Investment Manager
During the period to 28 July 2014, investment management services were provided
by CBRE Clarion Securities LLC. The Management fee payable in respect of the
period 1 January to 28 July 2014 amounted to GBP332,000. Under the terms of the
agreement there was also a performance fee arrangement in place. However, no
performance fee was payable for the period 1 January 2014 to 28 July 2014.
On 2 July 2014, the Company appointed Schroder Property Investment Management
Limited (the "Investment Manager"), a wholly owned subsidiary of Schroders plc
to provide investment management services. On 24 November 2014, the Investment
Manager changed its name to Schroder Real Estate Investment Management
Limited. Details of the AIFM Agreement are given in the Report of the
Directors. Only with the prior consent of the Board may the Company invest in
funds managed or advised by the Investment Manager or any of its associated
companies, and the Investment Manager is entitled to receive its fee on these
investments. There have been no such investments since the Investment Manager's
appointment. The management fee payable in respect of the year amounted to GBP
553,000 (2014: GBP276,000) of which GBP152,000 (2014: GBP157,000) was outstanding at
the year end. There is no performance fee arrangement in place.
17. Related party transactions
Details of remuneration payable to Directors are given in the Remuneration
Report and details of Directors' transactions in the Company's shares are given
in the Report of the Directors. The Company had no other transactions with
Directors.
Prior to Mr Houston's appointment to the Board, St. Bride's Managers were paid
a fee by the Company for consultancy services provided by Mr Houston of GBP17,734
(2014: GBP23,116).
18. Contingent liabilities and capital commitments
There were no contingent liabilities or capital commitments at the statement of
financial position date (2014: none).
19. Disclosures regarding financial instruments measured at fair value
The Company's financial instruments within the scope of IFRS 7 that are held at
fair value comprise its investment portfolio. The investments are categorised
into a hierarchy consisting of the following three levels:
Level 1 - valued using quoted prices in active markets.
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted market prices included within Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are not
based on observable market data.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset.
Details of the valuation techniques used by the Company are given in Note 1(d).
At 31 December 2015, the Company's investment portfolio comprised entirely
Level 1 investments (2014: same).
There have been no transfers between Levels 1, 2 or 3 during the year (2014:
Nil).
20. Financial Instruments' exposure to risk and risk management policies
The Company's investment objective is to provide investors with an attractive
total return, through investing in listed global real estate securities with
strong fundamentals, offering sustainable income and a progressive dividend
potential. The Company's investment policy will be flexible, enabling it to
invest in a wide variety of listed securities including equities, preference
shares, debt, convertible securities, warrants, interests in collective
investment schemes (including limited partnerships and unit trusts) and other
securities, issued by companies which derive a significant proportion of their
revenues or profits from real estate. In pursuing this objective, the Company
is exposed to a variety of risks which could result in a reduction in the
Company's net assets. These risks include market risk (comprising currency
risk, interest rate risk and market price risk), liquidity risk and credit
risk. The Directors' policy for managing these risks is below. The Board
coordinates the Company's risk management policy.
The objectives, policies and processes for managing the risks and the methods
used to measure the risks that are set out below, have not changed from those
applying in the comparative year.
The Company's classes of financial instruments may comprise the following:
* investments in a variety of securities issued by companies which derive a
significant proportion of their revenues or profits from real estate and
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which are held in accordance with the Company's investment objective; and
* short term cash, receivables and payables arising directly from its
operations.
(a) Market risk
The fair value of future cash flows of a financial instrument held by the
Company may fluctuate because of changes in market prices. This market risk
comprises three elements - currency risk, interest rate risk and market price
risk. Information to enable an evaluation of the nature and extent of these
three elements of market risk is given in parts (i) to (iii) of this note,
together with sensitivity analyses where appropriate. The Board reviews and
agrees policies for managing these risks and these policies have remained
unchanged from those applying in the comparative year. The Investment Manager
assesses the exposure to market risk when making each investment decision and
monitors the overall level of market risk on the whole of the investment
portfolio on an ongoing basis.
Given the investments comprise solely listed investments which are freely
tradeable, the Directors do not consider there to be any impact on the
valuation of the investments given the impending liquidation.
(i) Currency risk
Certain of the Company's assets, liabilities and income are denominated in
currencies other than sterling, which is the Company's functional currency and
the presentational currency of the Financial Statements. As a result, movements
in exchange rates will affect the sterling value of those items.
Management of currency risk
The Investment Manager monitors the Company's exposure to foreign currencies
and reports to the Board, which meets on at least four occasions each year. The
Investment Manager measures the risk to the Company of the foreign currency
exposure by considering the effect on the Company's net asset value and income
of a movement in the rates of exchange to which the Company's assets,
liabilities, income and expenses are exposed. The Company may use foreign
currency borrowings or forward foreign currency contracts to limit the exposure
to anticipated changes in exchange rates which might otherwise adversely affect
the value of the portfolio of investments. Income denominated in foreign
currencies is converted into sterling on receipt.
Foreign currency exposure
The fair value of the Company's monetary items that have foreign currency
exposure at 31 December are shown below. The Company's investments (which are
not monetary items) have been included separately in the analysis so as to show
the overall level of exposure.
2015
AUD CAD EUR CHF HKD JPY SEK SGD USD Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current assets 47 4 - - - 6 - - 222 279
Current - - - - - - - - - -
liabilities
Foreign currency 47 4 - - - 6 - - 222 279
exposure on net
monetary items
Investments at 4,500 1,050 2,830 - 5,673 5,031 1,227 700 35,920 56,931
fair value
through profit or
loss that are
equities
Total foreign 4,547 1,054 2,830 - 5,673 5,037 1,227 700 36,142 57,210
currency exposure
2014
AUD CAD EUR CHF HKD JPY SEK SGD USD Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current assets 30 3 - - - 12 - - 293 338
Current - - - - - - - - - -
liabilities
Foreign currency 30 3 - - - 12 - - 293 338
exposure on net
monetary items
Investments at 4,813 949 3,073 986 4,335 6,518 1,421 2,117 32,583 56,795
fair value
through profit or
loss that are
equities
Total foreign 4,843 952 3,073 986 4,335 6,530 1,421 2,117 32,876 57,133
currency exposure
The above year end amounts are broadly representative of the exposure to
foreign currency risk during the current and comparative year.
Foreign currency sensitivity
The following tables illustrate the sensitivity of net profit for the year and
net assets with regard to the Company's monetary financial assets and financial
liabilities and exchange rates. The sensitivity analysis is based on the
Company's monetary currency financial instruments held at each balance sheet
date and assumes a 10% (2014: 10%) appreciation or depreciation in sterling
against the currencies to which the Company is exposed, which is considered to
be a reasonable illustration based on the volatility of exchange rates during
the year.
If sterling had weakened by 10% this would have had the following effect:
2015 2014
GBP'000 GBP'000
Statement of Comprehensive Income - net
profit
Net revenue profit 167 183
Net capital profit 28 34
Net total profit and net assets 195 217
Conversely if sterling had strengthened by 10% this would have had the
following effect:
2015 2014
GBP'000 GBP'000
Statement of Comprehensive Income - net
profit
Net revenue profit (167) (183)
Net capital profit (28) (34)
Net total profit and net assets (195) (217)
In the opinion of the Directors, the above sensitivity analysis with respect to
monetary financial assets and liabilities is broadly representative of the
whole of the current and comparative year. The sensitivity of the Company's
investments to changes in foreign currency exchange rates is subsumed into
market price risk sensitivity.
(ii) Interest rate risk
Interest rate movements may affect the level of income receivable on cash
balances.
Management of interest rate risk
Liquidity is managed with the aim of increasing returns to shareholders.
Interest rate exposure
The exposure of financial assets to floating interest rates, giving cash flow
interest rate risk when rates are re-set, is shown below:
2015 2014
GBP'000 GBP'000
Exposure to floating interest
rates:
Cash and cash equivalents 1,144 379
Interest receivable on cash balances is at a margin below or above LIBOR
respectively (2014: same).
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to a 0.5% (2014: 0.5%) increase or decrease in
interest rates.
2015 2014
0.5% 0.5% 0.5% 0.5%
increase decrease increase decrease
in rate in rate in rate in rate
GBP'000 GBP'000 GBP'000 GBP'000
Statement of Comprehensive Income - net
profit
Net revenue profit 6 (6) 2 (2)
Net capital - - - -
profit
Net total profit and net assets 6 (6) 2 (2)
In the opinion of the Directors, this sensitivity analysis may not be
representative of the Company's future exposure to interest rate changes due to
fluctuations in the level of cash balances.
(iii) Market price risk
Market price risk includes changes in market prices, other than those arising
from interest rate risk, which may affect the value of equity investments.
Management of market price risk
The Board meets on at least four occasions each year to consider the asset
allocation of the portfolio and the risk associated with particular industry
sectors. The investment management team has responsibility for monitoring the
portfolio, which is selected in accordance with the Company's investment
objective and seeks to ensure that individual stocks meet an acceptable risk/
reward profile.
Market price risk exposure
The Company's total exposure to changes in market prices at 31 December
comprised the following:
2015 2014
GBP'000 GBP'000
Investments at fair value through profit or loss 64,771 61,859
The above data is broadly representative of the exposure to market price risk
during the year.
Concentration of exposure to market price risk
An analysis of the Company's investments is given. This shows that the
portfolio comprises listed securities of real estate companies in a spread of
countries and property sectors. Thus there is no concentration of exposure to
market price risk worthy of note.
Market price risk sensitivity
The following table illustrates the sensitivity of the net profit for the year
and net assets to an increase or decrease of 25% (2014: 25%) in the fair values
of the Company's equities. This level of change is considered to be a
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reasonable illustration based on observation of current market conditions. The
sensitivity analysis is based on the Company's equities, adjusting for changes
in the management fee, but with all other variables held constant.
2015 2014
25% 25% 25% 25%
increase decrease increase decrease
in fair in fair in fair in fair
value value value value
GBP'000 GBP'000 GBP'000 GBP'000
Statement of Comprehensive Income - net
profit
Net revenue profit (41) 41 (39) 39
Net capital 16,096 (16,096) 15,373 (15,373)
profit
Net total profit for the year and 16,055 (16,055) 15,334 (15,334)
net assets
(b) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting its
obligations associated with financial liabilities that are settled by
delivering cash or another financial asset.
Management of the risk
Liquidity risk is not significant as the Company's assets comprise mainly
readily realisable securities, which can be sold to meet funding requirements
if necessary.
Liquidity risk exposure
Contractual maturities of financial liabilities, based on the earliest date on
which payment can be required are as follows:
Three Three
months months
or less or less
2015 2014
GBP'000 GBP'000
Payables
Liquidation costs (Note 450 -
5)
Other creditors and accruals 269 342
719 342
(c) Credit risk
Credit risk is the risk that the failure of the counterparty to a transaction
to discharge its obligations under that transaction could result in loss to the
Company.
Management of credit risk
This risk is managed as follows:
Portfolio dealing
The Company invests in markets that operate a "Delivery Versus Payment"
settlement process which mitigates the risk of losing the principal of a trade
during settlement. The Investment Manager continuously monitors dealing
activity to ensure best execution, which involves measuring various indicators
including the quality of trade settlement and incidence of failed trades.
Counterparties must be pre-approved by the Investment Manager's credit
committee.
Exposure to the Custodian
The Company's Custodian is Northern Trust (Guernsey) Limited, a wholly owned
subsidiary of The Northern Trust Corporation which has a credit rating of A+
from Standard & Poors and A2 from Moody's. The Company's investments are held
in accounts which are segregated from the Custodian's own trading assets. If
the Custodian were to become insolvent, the Company's right of ownership is
clear and they are therefore protected. However the Company's cash balances are
all deposited with the Custodian as banker and held on the Custodian's
Statement of Financial Position. Accordingly, in accordance with usual banking
practice, the Company will rank as a general creditor to the Custodian in
respect of cash balances.
Credit risk exposure
The following amounts shown in the Statement of Financial Position represent
the maximum exposure to credit risk at the current and comparative year end.
2015 2014
Balance Maximum Balance Maximum
sheet exposure sheet exposure
GBP'000 GBP'000 GBP'000 GBP'000
Current assets
Receivables - dividends and interest
receivable, securities
sold awaiting settlement and other 285 285 247 247
debtors
Cash and cash equivalents 1,144 1,144 379 379
1,429 1,429 626 626
No items included in "Receivables" are past their due date and none have been
provided for.
(d) Fair values of financial assets and financial liabilities
All financial assets and liabilities are either carried in the Statement of
Financial Position at fair value or the carrying amount if that is a reasonable
approximation of fair value.
21. Capital management policies and procedures
The Company's capital structure comprises the following:
2015 2014
GBP'000 GBP'000
Equity
Share capital and reserves 65,481 62,143
Total debt and equity 65,481 62,143
As detailed in Note 1 (a), the Board has put forward a scheme to liquidate the
Company following approval by shareholders.
22. Material events after the Statement of Financial Position date
These Financial Statements were approved for issuance by the Board on 28 April
2016. Subsequent events have been evaluated until this date.
Since the year end, a scheme for liquidation of the Company has been approved
by shareholders. Further details are given in the Chairman's Statement.
A circular was published in the first quarter of 2016 which gave details of the
proposed scheme, including the proposed roll-over vehicle or vehicles, and
convened a general meeting at which shareholders voted in favour of all the
proposals.
The Board announced on 16 February 2016 that in light of the proposed scheme
for liquidation announced by the Company in December 2015, the fourth interim
dividend of 0.375p per share for the year ended 31 December 2015 ordinarily
payable in the first quarter of 2016 will not be paid.
Company Summary and Shareholder Information
The Company
The Company was incorporated on 25 April 2006 and is registered in Guernsey as
an Authorised Closed-Ended Investment Company. It is listed on the London Stock
Exchange. The Company carries on the business of an investment company and
invests in global real estate securities.
On 14 July 2014, the Board announced the closure of the placing programme
established in the Company's prospectus as the resolution proposed to authorise
the issue of shares on a non pre-emptive basis was not approved by shareholders
at the AGM held on 26 June 2014.
At an EGM held on 14 October 2014, shareholders resolved to amend the Company's
investment objective. The Company's new investment objective is to provide
investors with an attractive total return, through investing in listed global
real estate securities with strong fundamentals, offering sustainable income
and a progressive dividend potential.
At an EGM held on 14 October 2014, shareholders resolved to change the
Company's name to Schroder Global Real Estate Securities Limited. The "Ticker"
code for the Company's shares was also changed to "SGRE".
At an EGM held on 14 October 2014, shareholders approved the disapplication of
pre-emption rights under the Articles in respect of the issue of up to
4,829,747 Ordinary Shares, representing 9.9% of the Company's issued share
capital as at the date of the EGM Circular, together with the grant of the
authority to allot the same number of Ordinary Shares. New Ordinary Shares will
only be issued on a basis that would not be dilutive to the net asset value per
existing Ordinary Share.
On 21 December 2015, the Board announced proposals for the future of the
Company. The proposals are referred to in the Chairman's Statement.
A circular was published in the first quarter of 2016 which gave details of the
proposed scheme, including the proposed roll-over vehicle or vehicles, and
convened a general meeting at which shareholders voted in favour of all the
proposals.
As at 31 December 2015, the Company had 53,909,322 (31 December 2014:
53,909,322) shares in issue, of which 5,123,995 (31 December 2014: 5,123,995)
shares were held in Treasury. For additional information refer to Note 13 to
the accounts.
On 3 March 2016, the Company issued a circular detailing a scheme to put the
Company into liquidation, which can be found at www.londonstockexchange.com.
The Company's assets are managed by Schroder Real Estate Investment Management
Limited and it is administered by Northern Trust International Fund
Administration Services (Guernsey) Limited.
Website and Share Price Information
The Company has a dedicated web page, which may be found at
www.schroderglobalrealestatesecurities.com which contains comprehensive
information, including regulatory announcements, share price information,
financial reports, investment objectives and strategy, investor contracts and
information on the Board.
The Investment Manager provides a monthly newsletter which is available on the
Company's website.
Registrar Services
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 Computershare
Investor Services (Guernsey) Limited, 3rd Floor, Natwest House, Le Truchot, St
Peter Port, Guernsey GY1 1WD.
(MORE TO FOLLOW) Dow Jones Newswires
April 29, 2016 02:00 ET (06:00 GMT)
Dealing Codes The dealing codes for the Company's shares are as follows: ISIN: GB00B132SB63 SEDOL: B132SB6 Ticker: SGRE Alternative Investment Fund Managers Directive - Periodic Disclosure Preferential Treatment of Investors The Company's investors purchase shares on the open market and therefore the Company is not in a position to influence the treatment of investors. No investor receives preferential treatment. Liquidity Risk Management The Company's shares are traded on the London Stock Exchange through market intermediaries. There are no special rights to redemption. Periodic and Regular Disclosure under the Directive (a) none of the Company's assets are subject to special arrangements arising from their illiquid nature; (b) there are no new arrangements for managing the liquidity of the Company including, but not limited to, any material changes to the liquidity management systems and procedures employed by the Manager in place. Shareholders will be notified immediately where the issue, cancellation, sale and redemption of shares is suspended, when redemptions are suspended or where other similar special arrangements are activated; (c) the current risk profile of the Company and the risk management systems employed by the Manager to manage those risks can be found in the Strategic Report; and (d) the total amount of leverage employed by the Company may be found in the Strategic Report. Any changes to the following information will be provided through a regulatory news service without undue delay and in accordance with the Directive: (a) any changes to the maximum level of leverage which the Manager may employ on behalf of the Company; and (b) any changes to the right of re-use of collateral of any changes to any guarantee granted under any leveraging arrangement. AIFM employee remuneration disclosure The following disclosures are required under the Alternative Investment Fund Managers Directive (AIFMD). These disclosures should be read in conjunction with the Schroders Remuneration Report of the 2015 Annual Report & Accounts (available on the Group's website - www.schroders.com/ir), which provides more information on the activities of our Remuneration Committee and our remuneration principles and policies. Details of the AIFM Remuneration Code can be found at www.fca.org.uk, in the Senior Management Arrangements, Systems and Controls Sourcebook (SYSC 19B). The Remuneration Committee of Schroders plc has established an AIFM Remuneration Policy to ensure the requirements of the AIFM Remuneration Code are met proportionately for all AIFM Remuneration Code Staff. You can get details of the latest remuneration policy at www.schroders.com/ Remuneration-disclosures. The total amount of remuneration paid by SREIM to its staff is nil as SREIM has no employees. AIFM Remuneration Code Staff of SREIM are employed and paid by other Schroders group companies. Those who serve as Directors of SREIM receive no additional fees in respect of their role on the Board of SREIM. SREIM manages a total of GBP3,670 million assets under management, GBP520 million of which are in Alternative Investment Funds (AIFs). SREIM's Code Staff are individuals in roles which can materially affect the risk of SREIM or any AIF it manages. These individuals are employed by and provide services to other companies in, and clients of, the Schroders Group. As a result, only a portion of remuneration for those individuals is included in the aggregate remuneration figures that follow, based on an objective apportionment to reflect the balance of each. The aggregate total remuneration paid to the 33 AIFM Remuneration Code Staff of SREIM in respect of the financial year ending 31 December 2015, and attributed to SREIM and the AIFs it manages, is GBP832,524, of which GBP148,593 is paid to Senior Management and GBP 683,931 is paid to other AIFM Remuneration Code Staff. END
(END) Dow Jones Newswires
April 29, 2016 02:00 ET (06:00 GMT)
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