TIDMSOI
RNS Number : 1369I
Schroder Oriental Income Fund Ltd
22 November 2018
22 November 2018
ANNUAL REPORT AND ACCOUNTS
Schroder Oriental Income Fund Limited (the "Company") hereby
submits its annual results for the year ended 31 August 2018.
The information set out in this announcement is the content in
the Company's annual financial report (audited) for the year ended
31 August 2018 (the "AFR") required to be communicated to the media
in unedited full text pursuant to DTR 6.3.5 R (2). The AFR is
expected to be printed and posted to all shareholders in November
2018 and the Company will make a further announcement once the AFR
has been uploaded to the Company's webpages and to the National
Storage Mechanism.
Enquiries:
Louise Richard
Schroder Investment Management Limited
Tel: 020 7658 6501
Chairman's Statement
Dear Shareholder
It is 13 years since the launch of the Company and this will be
my final report to you as chairman. As I noted in my half year
statement, I will not be standing for re-election at the
forthcoming annual general meeting. I discuss board succession in
more detail below but, before discussing this and other matters
from the last financial year, I wanted to spend a moment reflecting
on the Company's progress since I became chairman.
In those 13 years the Company's NAV total return to shareholders
has been 333%, an annualised return of 13%. By comparison, the
broad Asia ex Japan equity markets (as measured by the MSCI AC
Pacific ex Japan Total Return Index in sterling terms) have
returned 260%. It is, of course, gratifying that the Company has
outperformed the equity markets of the region. This demonstrates
the value that Schroders has added as investment manager and
validates the income-orientated approach taken by the Company. More
startling, however, is the sheer quantum of total return. Further,
this period spans the financial crisis of 2008/2009 and subsequent
smaller tremors in 2013 and 2015. So it is through a period of bull
markets and bear markets alike.
The success of the Company's strategy has been replicated in its
own growth in shareholder equity. Through C share issuance and tap
issuance, the Company has grown from a market capitalisation of
GBP161 million at launch to GBP600 million at the time of
writing.
The final key attribute that the Company has demonstrated since
its launch in 2005 has been consistent dividend growth, with the
dividend having grown year on year. Indeed, this track record has
led to the Company being named a 'Next Generation Dividend Hero' by
the Association of Investment Companies this year.
The point of these observations is not to suggest hubris or
complacency. Rather it is to demonstrate that, if ever evidence
were needed that Asia is the economic powerhouse of the world and
that patience and a long-term perspective are key attributes of
successful investment, they are all contained here.
Investment markets and sentiment wax and wane; economies ebb and
flow. Some years will, inevitably, will be more successful than
others for the Company. But it seems clear that investment in
companies in Asia with strong governance and good, sustainable
dividends should continue to enable you, as our shareholders, to
reap attractive returns in the long-term.
Returning now to the shorter term and the last financial year,
performance has, indeed, been more muted. The NAV total return for
the financial year to 31 August 2018 was 1.5%, in contrast to the
prior year in excess of 20%. Two factors account for this lower
return. Firstly, the weakness of sterling against Asian currencies
following the Brexit referendum result was staunched and, indeed,
so far in 2018 sterling has strengthened. Secondly, Asian equity
markets have been less buoyant, mostly reflecting fears over the
mounting trade rhetoric between the US and China, the imposition of
tariffs and the impact of rising US interest rates.
Despite this, dividend growth from our underlying investments
has remained robust and this has allowed the Company to grow its
own dividend once again. During the financial year, the Company
paid total dividends of 9.40 pence (2017: 8.80 pence) per share
representing a yield of 3.8% on the share price as at 31 August
2018. Further, once again, as in previous years, the dividend was
more than fully covered from income and so we added once again to
the revenue reserve, which is available to supplement distributions
in future years.
Despite this robust dividend flow, the share price produced a
negative total return of -0.6%. This reflects the fact that, as at
the financial year end, the shares were trading at a small discount
to NAV of 1.2% versus a small premium of 0.9% at the same point
last year. However, the shares have traded at a small premium
during most of the year and close to NAV at all times, which is a
characteristic upon which the board appreciates that shareholders
place considerable value. This has enabled further issuance of
8,395,000 ordinary shares during the year under review, always on
terms accretive to existing shareholders. This issuance is
beneficial more generally because it improves the liquidity of
shares and modestly reduces ongoing charges per share.
As I noted earlier, I will not be standing for re-election at
the forthcoming AGM, to be held on 20 December 2018. This is as a
part of an ongoing, orderly succession plan that commenced several
years ago. In managing succession, the board has been mindful of
maintaining the right mix and diversity of skills, experience and
independence of thought whilst balancing fresh perspectives with
corporate memory. The process to appoint a new director is well
underway and I am confident that, by the end of 2018, we will be
able to announce the appointment of a director who greatly
complements the existing board, bringing fresh perspectives and
broadening its diversity.
Following consultation with a number of shareholders, I am
pleased to announce that my successor as chairman will be Peter
Rigg, to facilitate effective succession planning in accordance
with the provisions of the 2018 UK Corporate Governance Code. Peter
has also served on the board since the inception of the Company and
brings huge ability and experience to bear. Peter will seek to
serve as chairman for the next two to three years before he too
retires from the board.
So I finish my final report to you where I started it. The
short-term outlook for investment markets, Asia included, is
uncertain as geo-political rhetoric rises and headwinds are felt
from rising US interest rates and the potential currency effects of
Brexit. However, the long-term outlook for Asia remains as strong
as ever: it is one of the most innovative and vibrant regions of
the world and equity valuations are not demanding. The companies in
which we invest are strong and well managed.
So, as in the past, whatever the short-term lumps and bumps,
patience seems likely to be rewarded.
It has been my pleasure to serve you as chairman. I know that I
leave you in capable hands. I will continue to watch the Company's
progress with great interest, though in future from afar as a
shareholder, like you.
Robert Sinclair
Chairman
21 November 2018
Manager's Review
The net asset value per share of the Company recorded a total
return of 1.5% over the 12 months to end August 2018.
Echoing the Chinese curse, it has been an interesting time in
Asian markets over the year. Minimal overall progress in both
sterling and local currency terms for the reference index, the MSCI
All Countries Pacific ex Japan Index, disguised considerable
volatility over the period, not least in the value of sterling. A
recovery in the pound on Brexit optimism in late-2017 largely
cancelled out local currency strength in regional markets;
conversely in the second half of the fiscal year sterling's
retracement masked significant weakness in underlying indices in
2018.
The reasons for the second half weakness will be familiar to
many shareholders. Foremost was the rapid deterioration in Sino-US
relations, with initial assumptions that this represented a mere
trade dispute giving way to realisation of much more fundamental
differences. Rising US interest rates, a stronger dollar and
tightening credit conditions also contributed to downbeat sentiment
across the whole region, allied to signs of economic slowdown in
developed markets outside the US, emerging market volatility
(Turkey, Argentina), and fading momentum in global trade. The
slowing of economic activity in China has been a particular focus.
To an extent, this is a result of a deliberate policy on the part
of the Beijing authorities to rein in credit growth and instil
greater investment discipline, partly through a shift towards the
private sector and away from government led infrastructure
spending. However, a more hostile global environment has injected
an unwelcome degree of uncertainty surrounding a soft landing in
the region's most important economy.
Unsurprisingly, amongst the major regional markets China has
underperformed, while others such as Hong Kong, Singapore and Korea
have clustered near the average. The striking outliers have been
among the more emerging ASEAN markets. Both the Philippines and
Indonesia experienced considerable currency weakness. In
Indonesia's case, the chronic current account deficit and heavy
liquidation of bonds by overseas investors were the key factors,
while the Philippine peso reflected an over-heating economy and
insufficient policy tightening from the central bank, the BSP. In
contrast, investors welcomed the return of Mahathir Mohammed (aged
93) as Malaysian prime minister, ending over 60 years of UMNO-led
coalition government, while Thailand benefitted from a strong
energy sector and its defensive nature given a sizeable current
account surplus.
Positioning and performance
Similarly to the reference index, which produced a total return
of 1.8% in GBP terms, the Company's NAV total return ended the year
fractionally in positive territory. Relative performance recovered
somewhat in the second half as highly priced/low yielding sectors
such as heavyweight internet stocks reversed their first half
strength. In country terms, stock selection was strong in China,
Taiwan and Thailand, offset by weakness in Hong Kong, Korea and New
Zealand. Country positioning was helpful thanks to the underweight
in China and Indonesia and overweights in Thailand and Singapore.
In sector terms, selection was strong in information technology,
telecoms, real estate and consumer discretionary, partly offset by
selection in materials and a nil weight in health care.
Hong Kong, Australia and Taiwan remain significant exposures,
with a wealth of good quality companies offering attractive yields.
Over the year, we added to both China and Korea, which have become
appreciable portfolio exposures comprising over a fifth of the
Company's assets on a combined basis. We also added to Japan and
Thailand.
Investment outlook
Arguably all purely financial forecasts and considerations are
trumped (pardon the pun) by major, and by their nature
unpredictable, political considerations. The most prominent
surrounds the current poor relations between the US and China,
which go far beyond mere trade considerations. However, other
imponderables include whether Italy will ever have the political
will to do what it takes to create a competitive economy (rather
than muddle through), Brexit, and, most critically, whether the
Chinese leadership holds the line accepting lower trend growth as
the price for long-term financial sustainability.
Some or all of these issues may be amenable to at least
short-term outcomes that are better than the consensus would
suggest. However, the global economic and financial fundamentals
are troubling, namely an unbalanced growth picture between the US
and the rest, tightening liquidity, and the rising risk of more
systemic financial shocks resulting from mis-priced risk eg loan
funds, peer-to-peer lending, ETFs, remarkably low spreads in the
high yield market, and multi-layered "risk free" infrastructure
funds.
A stronger dollar, rising interest rates, trade tariff pressure
from the biggest bilateral trade partner, and related faltering in
investor and corporate confidence are not a great combination for
the relatively trade-dependent and open economies of Asia. In
general, the vulnerability to external financial shocks is lower
across the region, certainly when compared with the 1997/98 crisis,
and with 2013 during the "Taper Tantrum".
We have made little change to our positioning based on pure
tariff considerations, not least because we have never been keen on
low-margin labour cost arbitrage business models which will be most
disrupted by tariffs. Our focus will remain on value-added players
in what are complex supply chains that are unlikely to be easily
substitutable, particularly in the US where labour constraints and
skills shortages are becoming increasingly apparent.
Of greater concern are the prospects or otherwise for a smooth
transition to a lower, but more sustainable, growth model for
China. Our central view remains that the authorities can manage a
soft landing consistent with its desire for a less credit intensive
growth model. Attacks from Washington are certainly not making the
process any easier. However, it is also being made more complicated
by less favourable country-specific factors including a shift
towards a current account deficit, elevated levels of domestic
credit, and increasing vulnerability to capital flight.
Combinations of marginal credit loosening, modest rise in spending
and a gradual depreciation of the Renminbi accompanied by
discouragement of capital outflows may still do the trick, but in
our opinion scope for a more marked stimulus package looks
limited.
Having said all that, regional markets are within a few per cent
of the valuation lows seen in late 2015/early 2016, suggesting that
investor caution is already elevated. A destabilising event in
China remains a possibility rather than an imminent likelihood, and
some progress on US/China relations is not out of the question.
Consequently, the Company remains modestly geared, while the
region's underlying attractiveness as a diversified source of
income remains. We also take comfort from the fact that, at least
across the companies held in the Company's portfolio, cash flows
are robust and balance sheets are generally in good shape.
Schroder Unit Trusts Limited
21 November 2018
Principal risks and uncertainties
The board is responsible for the Company's system of risk
management and internal controls and for reviewing its
effectiveness. The board has adopted a detailed matrix of principal
risks affecting the Company's business as an investment company and
has established associated policies and processes designed to
manage and, where possible, mitigate those risks, which are
monitored by the Audit and Risk Committee on an ongoing basis. This
system assists the board in determining the nature and extent of
the risks it is willing to take in achieving the Company's
strategic objectives. Both the principal risks and the monitoring
system are subject to robust assessment at least annually. The last
review took place in November 2018.
Although the board believes that it has a robust framework of
internal controls in place, this can provide only reasonable, and
not absolute, assurance against material financial misstatement or
loss and is designed to manage, not eliminate, risk.
The principal risks and uncertainties faced by the Company have
remained unchanged throughout the year under review. Cyber risk
relating to all of the Company's key service providers is
considered an ongoing threat in light of the rising propensity and
impact of cyber attacks on businesses and institutions. To address
the risk, the board receives reporting on cyber risk mitigation and
management from its key service providers to ensure that it is
managed and mitigated appropriately.
Actions taken by the board and, where appropriate, its
committees, to manage and mitigate the Company's principal risks
and uncertainties are set out in the table below.
Risk Mitigation and management
Strategic
The Company's investment objectives The appropriateness of the Company's
may become out of line with the investment remit is periodically
requirements of investors, resulting reviewed and the success of the
in a wide discount of the share Company in meeting its stated objectives
price to underlying NAV per share. is monitored.
Share price relative to NAV per
share is monitored and the use
of buy back authorities is considered
on a regular basis.
Marketing and distribution activity
is actively reviewed.
Proactive engagement with investors.
The Company's cost base could become The ongoing competitiveness of
uncompetitive, particularly in all service provider fees is subject
light of open-ended alternatives. to periodic benchmarking against
its competitors.
Annual consideration of management
and performance fee levels is undertaken.
Investment management
The Manager's investment strategy Review of: the Manager's compliance
and levels of resourcing, if inappropriate, with agreed investment restrictions,
may result in the Company underperforming investment performance and risk
the market and/or peer group companies, against investment objectives and
leading to the Company and its strategy; relative performance;
objectives becoming unattractive the portfolio's risk profile; and
to investors. whether appropriate strategies
are employed to mitigate any negative
impact of substantial changes in
markets.
Annual review of the ongoing suitability
of the Manager, including resources
and key personnel risk.
Financial and currency
The Company is exposed to the effect The risk profile of the portfolio
of market and currency fluctuations is considered and appropriate strategies
due to the nature of its business. to mitigate any negative impact
A significant fall in regional of substantial changes in markets
equity markets could have an adverse or currency are discussed with
impact on the market value of the the Manager.
Company's underlying investments
and, as the Company invests predominantly The Company has no formal policy
in assets which are denominated of hedging currency risk but may
in a range of currencies, its exposure use foreign currency borrowings
to changes in the exchange rate or forward foreign currency contracts
between sterling and other currencies to limit exposure.
has the potential to have a significant
impact on returns and the sterling
value of dividend income from underlying
investments.
Custody
Safe custody of the Company's assets The safekeeping and cashflow monitoring
may be compromised through control agent reports on the safe custody
failures by the safekeeping and of the Company's assets, including
cashflow monitoring agent, including cash and portfolio holdings, which
cyber hacking. are independently reconciled with
the Manager's records.
Review of audited internal controls
reports covering custodial arrangements
is undertaken.
An annual report from the safekeeping
and cashflow monitoring agent on
its activities, including matters
arising from custody operations
is reviewed.
Gearing and leverage
The Company utilises credit facilities. Gearing is monitored and strict
These arrangements increase the restrictions on borrowings are
funds available for investment imposed: gearing continues to operate
through borrowing. While this has within pre-agreed limits so as
the potential to enhance investment not to exceed 25% of the Company's
returns in rising markets, in falling net assets.
markets the impact could be detrimental
to performance.
Accounting, legal and regulatory
Breaches of the UK Listing Rules, Confirmation of compliance with
The Companies (Guernsey) Law, 2008 relevant laws and regulations by
(as amended) or other regulations key service providers is reviewed.
with which the Company is required
to comply, could lead to a number Shareholder documents and announcements,
of detrimental outcomes. including the Company's published
Annual Report, are subject to stringent
review processes.
Procedures are established to safeguard
against the disclosure of inside
information.
Service provider
The Company has no employees and Service providers appointed subject
has delegated certain functions to due diligence processes and
to a number of service providers. with clearly-documented contractual
Failure of controls, including arrangements detailing service
as a result of cyber hacking, and expectations.
poor performance of any service
provider, could lead to disruption, Regular reports are provided by
reputational damage or loss. key service providers and the quality
of their services is monitored.
Review of annual audited internal
controls reports from key service
providers, including confirmation
of business continuity arrangements
and IT controls, is undertaken.
Risk assessment and internal controls
Risk assessment includes consideration of the scope and quality
of the system of internal controls operating within key service
providers, and ensures regular communication of the results of
monitoring by such providers to the Audit and Risk Committee,
including the incidence of significant control failings or
weaknesses that have been identified at any time and the extent to
which they have resulted in unforeseen outcomes or contingencies
that may have a material impact on the Company's performance or
condition. No significant control failings or weaknesses were
identified from the Audit and Risk Committee's ongoing risk
assessment which has been in place throughout the financial year
and up to the date of this report.
A full analysis of the financial risks facing the Company is set
out in note 20 on pages 43 to 48 of the 2018 annual report.
Viability statement
The directors have assessed the viability of the Company over a
five year period, taking into account the Company's current
financial position, its cash flows and its liquidity, along with an
assessment of any material uncertainties and events that might cast
significant doubt upon the Company's ability to continue as a going
concern.
The board believes that a period of five years reflects a
suitable time horizon for strategic planning, taking into account
the long-term nature of the investment policy of the Company, the
inherent characteristics and volatility profile of the securities
held by it and the potential impact of economic and market
cycles.
In their assessment, the directors have considered each of the
principal risks and uncertainties detailed on pages 13 and 14 of
the 2018 annual report. In particular the directors have considered
a stress test which represents a severe but plausible scenario
based on the volatility of equity investments over the long term.
This scenario involves a fall in equity prices of 50% and a
reduction in dividend yield of 50% during the first year of the
review period with no subsequent recovery in either prices or
income during the balance of the viability period. It is assumed
that the Company continues to pay an annual dividend in line with
current levels and that the borrowing facility remains available
and remains drawn, subject to the gearing cap. Foreign exchange
rates are assumed to be stable throughout the period in this
scenario.
The Company's investments comprise highly liquid, large, listed
companies and so its assets are readily realisable securities and
could be sold to meet funding requirements or the repayment of the
gearing facility should the need arise. There is no expectation
that the nature of the investments held within the portfolio will
be materially different in the future.
The expenses of the Company are predictable and modest in
comparison with the assets and there are no capital commitments
foreseen which would alter that position. Furthermore, the Company
has no employees and consequently no redundancy or other employment
related liabilities.
Although there continue to be material regulatory changes which
could increase costs or impact revenue, the directors do not
believe that this would be sufficient to affect its viability.
The board reviews the performance of the Company's service
providers regularly, including the Manager, along with internal
controls reports to provide assurance regarding the effective
operation of internal controls as reported on by their reporting
accountants. The board also considers the business continuity
arrangements of the Company's key service providers.
The board has assumed that the business model of a closed ended
investment company, as well as the Company's investment objective,
will continue to be attractive to investors.
Based on the above, along with the limits imposed on gearing,
counterparty exposure, liquidity risk and financial controls, the
directors have concluded that there is a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period to 31 August 2023.
Going concern
Having assessed the principal risks and the other matters
discussed in connection with the viability statement set out above,
and the "Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting" published by the FRC in 2014, the
directors consider it appropriate to adopt the going concern basis
in preparing the accounts.
Statement of Directors' Responsibilities
The directors are responsible for preparing the financial
statements in accordance with applicable Guernsey law and generally
accepted accounting principles.
Guernsey company law requires the directors to prepare financial
statements for each financial year which 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, the directors should:
- select suitable accounting policies, and apply them consistently;
- 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 International Financial Reporting
Standards ("IFRS") is insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the entity's financial position and financial performance;
- state that the Company has complied with IFRS, subject to any
material departures disclosed and explained in the financial
statements;
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
- make judgements and estimates that are reasonable and prudent.
The directors are responsible for keeping proper accounting
records that 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 (as amended). They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Each of the directors, whose names and functions are listed on
pages 16 and 17 of the 2018 annual report, confirms that, to the
best of their knowledge:
- the financial statements, which have been prepared in
accordance with IFRS as adopted in the EU and with The Companies
(Guernsey) Law, 2008 (as amended), give a true and fair view of the
assets, liabilities, financial position and the net return of the
Company;
- the Strategic Report includes a fair review of the development
and performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces; and
- the annual report and accounts, taken as a whole, are fair,
balanced and understandable and provide the information necessary
for shareholders to assess the Company's position and performance,
business model and strategy.
Statement of Comprehensive Income
for the year ended 31 August 2018
2018 2017
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains on investments
at fair value through
profit or loss - (13,193) (13,193) - 94,537 94,537
Net foreign currency losses - (895) (895) - (963) (963)
Income from investments 31,257 1,033 32,290 28,197 446 28,643
Other income 22 - 22 11 - 11
------------------------------- -------- --------- --------- -------- -------- --------
Total income/(loss) 31,279 (13,055) 18,224 28,208 94,020 122,228
Management fee (1,365) (3,184) (4,549) (1,258) (2,935) (4,193)
Performance fee - - - - (6,355) (6,355)
Other administrative expenses (813) (4) (817) (775) (5) (780)
------------------------------- -------- --------- --------- -------- -------- --------
Profit/(loss) before finance
costs and taxation 29,101 (16,243) 12,858 26,175 84,725 110,900
Finance costs (334) (777) (1,111) (223) (518) (741)
------------------------------- -------- --------- --------- -------- -------- --------
Profit/(loss) before taxation 28,767 (17,020) 11,747 25,952 84,207 110,159
Taxation (2,346) (29) (2,375) (2,013) (36) (2,049)
------------------------------- -------- --------- --------- -------- -------- --------
Net profit/(loss) and
total comprehensive income 26,421 (17,049) 9,372 23,939 84,171 108,110
------------------------------- -------- --------- --------- -------- -------- --------
Earnings/(losses) per
share 10.52p (6.79)p 3.73p 9.94p 34.97p 44.91p
The "Total" column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with
IFRS. The "Revenue" and "Capital" columns represent supplementary
information prepared under guidance issued by the Association of
Investment Companies.
The Company does not have any income or expense that is not
included in net profit for the year. Accordingly the "Net profit"
for the year is also the "Total comprehensive income" for the
year.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the year.
Statement of Changes in Equity
for the year ended 31 August 2018
Capital
Share redemption Special Capital Revenue
capital reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 August 2016 150,251 39 150,374 203,837 24,161 528,662
Issue of ordinary shares 19,825 - - - - 19,825
Net profit and total comprehensive
income - - - 84,171 23,939 108,110
Dividends paid in the
year - - - - (21,131) (21,131)
------------------------------------ -------- ---------- -------- --------- --------- ---------
At 31 August 2017 170,076 39 150,374 288,008 26,969 635,466
Issue of ordinary shares 21,462 - - - - 21,462
Net (loss)/profit and
total comprehensive income - - - (17,049) 26,421 9,372
Dividends paid in the
year - - - - (23,589) (23,589)
------------------------------------ -------- ---------- -------- --------- --------- ---------
At 31 August 2018 191,538 39 150,374 270,959 29,801 642,711
------------------------------------ -------- ---------- -------- --------- --------- ---------
Balance Sheet
at 31 August 2018
2018 2017
GBP'000 GBP'000
Non current assets
Investments at fair value through profit or loss 668,985 654,213
Current assets
Receivables 3,794 2,908
Cash and cash equivalents 39,165 29,881
-------------------------------------------------- --------- ---------
42,959 32,789
-------------------------------------------------- --------- ---------
Total assets 711,944 687,002
Current liabilities
Payables (69,233) (51,536)
-------------------------------------------------- --------- ---------
Net assets 642,711 635,466
-------------------------------------------------- --------- ---------
Equity attributable to equity holders
Share capital 191,538 170,076
Capital redemption reserve 39 39
Special reserve 150,374 150,374
Capital reserves 270,959 288,008
Revenue reserve 29,801 26,969
-------------------------------------------------- --------- ---------
Total equity shareholders' funds 642,711 635,466
-------------------------------------------------- --------- ---------
Net asset value per share 252.94p 258.63p
Cash Flow Statement
for the year ended 31 August 2018
2018 2017
GBP'000 GBP'000
Operating activities
Profit before finance costs and taxation 12,858 110,900
Add back net foreign currency losses 895 963
Losses/(gains) on investments at fair value through profit
or loss 13,193 (94,537)
Net purchases of investments at fair value through profit
or loss (29,608) (25,219)
Less amortisation of discount on fixed interest securities (27) -
Decrease in receivables 571 296
(Decrease)/increase in payables (7,431) 2,341
Overseas taxation paid (2,527) (2,074)
--------------------------------------------------------------- --------- ---------
Net cash outflow from operating activities before interest (12,076) (7,330)
--------------------------------------------------------------- --------- ---------
Interest paid (1,104) (739)
--------------------------------------------------------------- --------- ---------
Net cash outflow from operating activities (13,180) (8,069)
--------------------------------------------------------------- --------- ---------
Financing activities
Bank loans drawn down 46,415 44,254
Bank loans repaid (21,275) (38,192)
Issue of ordinary shares 21,462 19,825
Dividends paid (23,589) (21,131)
--------------------------------------------------------------- --------- ---------
Net cash inflow from financing activities 23,013 4,756
--------------------------------------------------------------- --------- ---------
Increase/(decrease) in cash and cash equivalents 9,833 (3,313)
Cash and cash equivalents at the start of the year 29,881 33,859
Effect of foreign exchange rates on cash and cash equivalents (549) (665)
--------------------------------------------------------------- --------- ---------
Cash and cash equivalents at the end of the year 39,165 29,881
--------------------------------------------------------------- --------- ---------
Dividends received during the year amounted to GBP32,614,000
(2017: GBP27,608,000) and bond and deposit interest receipts
amounted to GBP234,000 (2017: GBP1,005,000).
Notes to the Accounts
for the year ended 31 August 2018
1. Accounting Policies
Basis of accounting
The accounts have been prepared in accordance with The Companies
(Guernsey) Law, 2008 (as amended) and International Financial
Reporting Standards ("IFRS"), 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 accounts 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 and updated in
February 2018.
The policies applied in these accounts are consistent with those
applied in the preceding year.
2. Taxation
The Company has been granted an exemption from Guernsey
taxation, under the Income Tax (Exempt Bodies) Guernsey Ordinance
1989, for which it is charged an annual exemption fee of GBP1,200
(2017: GBP1,200).
3. Dividends
Dividends paid and declared
2018 2017
GBP'000 GBP'000
2017 fourth interim dividend of 4.20p (2016: 3.80p) 10,477 9,068
First interim dividend of 1.70p (2017: 1.60p) 4,254 3,818
Second interim dividend of 1.70p (2017: 1.70p) 4,284 4,074
Third interim dividend of 1.80p (2017: 1.70p) 4,574 4,171
--------------------------------------------------------- ------- -------
Total dividends paid in the year 23,589 21,131
--------------------------------------------------------- ------- -------
2018 2017
GBP'000 GBP'000
Fourth interim dividend declared of 4.50p (2017: 4.20p) 11,434 10,320
--------------------------------------------------------- ------- -------
Under The Companies (Guernsey) Law 2008 (as amended), the
Company may pay dividends out of both capital and revenue reserves,
subject to passing a solvency test. However all dividends paid and
declared to date have been paid, or will be paid, out of revenue
profits. The Company has passed the solvency test for all dividends
paid to date.
The fourth interim dividend declared in respect of the year
ended 31 August 2017 differs from the amount actually paid due to
shares issued after the balance sheet date but prior to the share
register record date.
4. Earnings/(losses) per share
2018 2017
GBP'000 GBP'000
Net revenue profit 26,421 23,939
Net capital (loss)/profit (17,049) 84,171
-------------------------------------------- ------------ ------------
Net total profit 9,372 108,110
-------------------------------------------- ------------ ------------
Weighted average number of shares in issue
during the year 250,958,435 240,721,945
Revenue earnings per share 10.52p 9.94p
Capital (loss)/earning per share (6.79)p 34.97p
Total earnings per share 3.73p 44.91p
------------------------------------------- ------------- ------------
5. Share capital
2018 2017
GBP'000 GBP'000
Ordinary shares of 1p each, allotted, called-up and fully
paid:
Opening balance of 245,703,024 (2017: 237,541,574) shares 170,076 150,251
Issue of 8,395,000 (2017: 8,161,450) shares 21,462 19,825
----------------------------------------------------------- -------- --------
Closing balance of 254,098,024 (2017: 245,703,024) shares 191,538 170,076
----------------------------------------------------------- -------- --------
No shares were held in treasury at the year end (2017: nil).
During the year a total of 8,395,000 shares, nominal value
GBP83,950 were issued to the market to satisfy demand, at an
average price of 255.65p per share, for a total consideration
received of GBP21,462,000, net of transaction costs of
GBP54,000.
6. Net asset value per share
2018 2017
Net assets attributable to shareholders (GBP'000) 642,711 635,466
Shares in issue at the year end 254,098,024 245,703,024
--------------------------------------------------- ------------ ------------
Net asset value per share 252.94p 258.63p
--------------------------------------------------- ------------ ------------
7. Disclosures regarding financial instruments measured at fair value
The Company's portfolio of investments, which may comprise
investments in equities, equity linked securities, government bonds
and derivatives, are carried in the balance sheet at fair value.
Other financial instruments held by the Company may comprise
amounts due to or from brokers, dividends and interest receivable,
accruals, cash at bank and drawings on the credit facility.
For these instruments, the balance sheet amount is a reasonable
approximation of fair value.
The investments are categorised into a hierarchy comprising 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(c) on page 36, and note 1(i) on page 37 of the 2018
annual report.
At 31 August 2018, the Company's investment portfolio and
derivative financial instrument were categorised as follows:
2018
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments in equities and equity linked
securities 668,985 - - 668,985
------------------------------------------- -------- ------- ------- --------
Total 668,985 - - 668,985
------------------------------------------- -------- ------- ------- --------
2017
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments in equities, equity linked securities
and government bonds 654,213 - - 654,213
--------------------------------------------------- -------- ------- ------- --------
Total 654,213 - - 654,213
--------------------------------------------------- -------- ------- ------- --------
There have been no transfers between Levels 1, 2 or 3 during the
year (2017: nil).
8. Status of announcement
2017 Financial information
The figures and financial information for 2017 are extracted
from the published annual report for the year ended 31 August 2017
and do not constitute the statutory accounts for that year. The
2017 annual report included the Independent Auditor's Report, which
was unqualified.
2018 Financial information
The figures and financial information for 2018 are extracted
from the annual report for the year ended 31 August 2018 and do not
constitute the statutory accounts for the year. The 2018 annual
report includes the Independent Auditor's Report, which is
unqualified.
Neither the contents of the Company's webpages nor the contents
of any website accessible from hyperlinks on the Company's webpages
(or any other webpages or website) is incorporated into, or forms
part of, this announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FEIFAFFASEFF
(END) Dow Jones Newswires
November 22, 2018 02:00 ET (07:00 GMT)
Schroder Oriental Income (LSE:SOI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Schroder Oriental Income (LSE:SOI)
Historical Stock Chart
From Jul 2023 to Jul 2024
