REG - Schroder Orientl Inc - Final Results
07/11/2025 07:00
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RNS Number : 5843G Schroder Oriental Income Fund Ltd 07 November 2025
LONDON STOCK EXCHANGE ANNOUNCEMENT
SCHRODER ORIENTAL INCOME FUND LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2025
Schroder Oriental Income Fund Limited ("the Company") hereby submits its
annual report and financial statements for the year ended 31 August 2025 as
required by the Financial Conduct Authority's Disclosure Guidance and
Transparency Rule 4.1.
The Company's Annual Report and Financial Statements for the year ended 31
August 2025 is being published in hard copy format and an electronic copy will
shortly be available to view and download from the Company's website:
www.schroders.com/orientalincome
Key highlights
* The Company has achieved another year of double-digit share price and NAV
returns.
* While performance was behind the Reference Index, this reflects the Company's
disciplined income approach and selective positioning, particularly in China,
where market leadership was concentrated in low-yielding growth stocks.
* The Company's NAV has outperformed its benchmark over three, five, ten years
and since inception. Absolute returns were approximately 10% per annum.
* The Company is on track to achieve AIC dividend hero status on the completion
of twenty years of consecutive dividend growth next year.
* The Board has negotiated the removal of the performance fee, with effect from
31(st) August 2026.
Investor presentation
RICHARD SENNITT will be giving a presentation at an investor webinar at 9:00am
on Wednesday, 19 November 2025 (which can be signed up to via the following
link: https://www.schroders.events/SOI25 (https://www.schroders.events/SOI25)
).
NICK WINSOR, Chair of Schroder Oriental Income Fund Limited, commented:
"Your Company is well positioned to capture opportunities across the region
through its focus on high quality businesses offering growing dividend
income".
The Company has submitted a copy of its Annual Report and Financial Statements
to the National Storage Mechanism and it will shortly be available for
inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
Enquiries:
Schroder Investment Management Limited
Kirsty Preston (PR) 020 7658 6000
Natalia de Sousa 020 7658 6000
Chair's Statement
This is my first Annual Report as Chair, and I would like to begin by thanking
Paul Meader again for his significant contribution and leadership during his
tenure. This year also marks the Company's 20th anniversary - a milestone that
highlights our resilience, adaptability, and consistent delivery of value for
shareholders. I look forward to building on this strong foundation as we enter
the next phase of the Company's development. Having grown its dividend every
year since launch, the Company is classed in the Association of Investment
Companies (AIC's) next generation of dividend heroes and it remains the
Board's aim to achieve full dividend hero status on the completion of twenty
years of consecutive dividend growth next year.
PERFORMANCE
As I mentioned in the interim report, this year's financial markets have been
heavily influenced by global political events, especially the recent
introduction of broad trade tariffs by US President Trump. Given that the Asia
Pacific region faced some of the highest tariffs, it was somewhat unexpected
to see its stock markets deliver such strong results - a total return of over
20% during the year.
China stood out, with returns above 40%, despite having some of the highest
tariff threats and still dealing with the overhang effects of the Covid
pandemic. This goes to show that headlines about global economics and politics
do not always reflect what actually drives investment markets.
The Company delivered a net asset value (NAV) total return of 14.9% for the
year. Although this was a positive result, it was behind the 21.1% return from
our Reference Index, the MSCI AC Pacific ex Japan Index, Net of Dividends
Reinvested (measured in sterling). Once again, our returns came in the second
half of the year, as markets recovered from earlier weakness and benefited
from a fall in the US dollar, which tends to help Asian markets. The Company's
share price total return was 17.9%, as the difference between the share price
and the underlying value narrowed.
Our underperformance compared to the Reference Index was largely due to not
investing in a few very large Chinese internet and e-commerce companies, which
performed exceptionally well and make up a large part of the index. However,
these companies pay little or no dividends, which does not fit with the
Company's focus on providing rising income to shareholders. The Portfolio
Manager's disciplined approach to prioritising income means the Company does
not invest in these stocks, even if it impacts performance relative to the
Reference Index. Not owning them has actually helped us in previous years and
the long-term performance of the Company speaks for itself. Many of the
companies we do own also performed well, both in terms of growth and income.
You can find more detail in the Portfolio Manager's review.
REVENUE AND DIVIDEND
The Company's objective is to provide a total return for investors primarily
through investments in equities and equity-related investments, of companies
which are based in, or which derive a significant proportion of their revenues
from, the Asia Pacific region and which offer attractive yields. This year the
Company's revenue return increased to 11.59 pence per share (2024: 11.29p).
Having already paid interim dividends amounting to six pence per share, the
Board has declared a fourth interim dividend of 6.20 pence per share for the
year ended 31 August 2025, which is payable on 5 December 2025 to shareholders
on the register on 21 November 2025. The Board recognises that the timing of
dividends is important to shareholders that rely on these payments for income.
Therefore, we are actively considering ways to smooth payments through the
year.
Dividends play an important role in supporting investment returns during
uncertain times. To pay reliable dividends, companies need to be financially
healthy and able to deliver steady earnings - qualities that also help them
weather tough periods. Across global markets, Asia stands out for offering
attractive income opportunities, with companies generally paying good
dividends while still keeping enough profits to reinvest in their businesses.
Ongoing improvements in corporate governance across the region are also
encouraging more companies to focus on rewarding shareholders, which bodes
well for both current and future dividend growth.
COST SAVINGS - INCREASING SHAREHOLDER VALUE
Following a thorough review of the potential advantages of changing the
Company's depositary and custodian service provider, the Board determined that
appointing J.P. Morgan Europe Limited would be in the best interests of the
Company. This transition was approved to take place after the end of the
financial year, with the migration of depositary and custodian services
beginning on 3 October 2025. From the same date, J.P. Morgan Administration
Services (Guernsey) also assumed the role of designated administrator.
The transition to J.P. Morgan is expected to play an important role in
maintaining the Company's ongoing charges figure (OCF) at a competitive level,
particularly amid an environment of rising cost pressures across the industry.
By partnering with a large, well-resourced administrator such as J.P. Morgan,
the Company can benefit from greater efficiencies of scale, access to broader
infrastructure. These advantages should help to contain or even reduce the
ongoing cost base, ensuring that the Company remains attractive to existing
and prospective shareholders. In turn, this commitment to cost discipline
supports the Company's focus on delivering value to investors without
compromising on the quality of its investment management or governance.
PERFORMANCE FEE
The Board has negotiated a simplified investment management fee structure with
Schroders, including removal of the performance fee, which should provide
significant cost savings for shareholders, based on historical performance,
and greater transparency for investors. Details of the new arrangements, which
will come into effect on 31 August 2026, can be found in the Annual Report,
together with a breakdown of the fees payable for the period covered by the
Annual Report and Accounts. Despite the reduction in fees, shareholders will
continue to benefit from Schroder's proven investment capability, underpinned
by extensive resource in key Asian markets.
GEARING
During the year, the Company amended and renewed its one-year multicurrency
revolving credit facility with The Bank of Nova Scotia, London Branch, on a
secured basis. The facility was reduced from £100 million to £75 million. On
31 August 2025, the Company's net gearing position was 3.9% taking into
account cash balances, compared to 4.4% at 31 August 2024.
DISCOUNT MANAGEMENT
The Company continued to be active in buying back its shares during the year.
A total of 12,641,616 shares were bought back into treasury. This represented
5.2% of issued share capital and delivered a modest uplift to NAV. Since the
year end, a further 1,768,750 shares have been bought back into treasury.
The discount at the end of August 2025 was 5.0% compared to 7.1% at the
previous financial year end. The average discount during the year under review
was 5.6%. Your Board remains focused on managing discounts and helping to
provide liquidity in the Company's shares. As such, we believe that adopting a
rigid discount control mechanism that seeks to target a defined maximum
discount level regardless of market conditions is not in the best interests of
shareholders. Our policy on share buy backs takes account of the level of
discount at which the Company's peer group trades, prevailing market
conditions and activity within our sector. At the Company's last AGM,
authority was given to purchase up to 14.99% of the issued share capital. We
propose that the share buyback authority be renewed at the forthcoming AGM and
that any shares so purchased be cancelled or held in treasury for potential
reissue.
BOARD SUCCESSION
Board succession has been considered carefully during the year to ensure that
we effectively plan for Board changes in the coming years. Paul Meader retired
at the conclusion of the Annual General Meeting last year and Alexa Coates
will reach the end of her nine-year tenure in February 2027. Consequently, in
accordance with the Board's succession planning the Board, through its
Nomination and Remuneration Committee, is undertaking a search process to
identify a new non-executive director using a third-party recruitment firm.
BIENNIAL DUE DILIGENCE TRIP TO ASIA
During the year, the Board made its biennial trip to the Asia Pacific region,
visiting Singapore, Malaysia and Indonesia to meet the Investment Manager's
team and visit several portfolio holdings. These meetings helped deepen our
understanding of regional markets and gave us direct insight into local
economic and policy developments. The Board was also able to review ESG
practices on site, observing environmental initiatives, workforce conditions
and governance frameworks, and discuss key matters directly with senior
management.
ANNUAL GENERAL MEETING ("AGM")
The AGM will be held at 12.30pm on Wednesday, 3 December 2025 at the offices
of Schroders at 1 London Wall Place, London EC2Y 5AU. A presentation from
Portfolio Manager, Richard Sennitt, will be given at the AGM, and attendees
will also be able to ask questions in person and meet the directors. Details
of the formal business of the meeting are set out in the Notice of Meeting.
All shareholders who are unable to attend in person are recommended to vote by
proxy in advance of the AGM and to appoint the Chair of the meeting. If
shareholders have any questions for the Board, please write, or email using
the details below. The questions and answers will be published on the
Company's web pages before the AGM. To email, please use:
amcompanysecretary@schroders.com (mailto:amcompanysecretary@schroders.com) or
write to us at the Company's registered office address: Company Secretary,
Schroder Oriental Income Fund Limited, 1 London Wall Place, London, EC2Y 5AU.
RESULTS WEBINAR
Shareholders are invited to join Richard for a webinar reporting on the year
ended 31 August 2025 and to discuss the outlook for the Company's portfolio.
The presentation will be followed by a live Q&A session.
The webinar will take place at 09.00am on Wednesday, 19 November 2025.
Registration is available at https://www.schroders.events/SOI25
(https://www.schroders.events/SOI25)
OUTLOOK
After two years of strong double-digit returns for shareholders, it is
understandable to approach the future with some caution. As Richard mentions
in his report, markets have remained steady so far, choosing not to panic in
response to higher US tariffs. However, we may start to feel the true impact
of these new trade barriers later in the year, once the short-term boost from
increased exports has faded.
It is worth noting that the US no longer has the same influence on global
trade as it once did, and there are real opportunities for trade growth within
Asia and with places like Europe and other emerging markets. The region
continues to lead in innovation and plays a vital role in global supply
chains, especially in technology. While we expect some challenges in the
months ahead, we remain confident that Asia Pacific will continue to find ways
to adapt and succeed over the long-term. Your Company is well positioned to
capture opportunities across the region through its focus on high quality
businesses offering growing dividend income.
NICK WINSOR
Chair
6 November 2025
Investment Manager's Review
"We remain confident in our diversified portfolio of Asian companies'
potential to deliver attractive returns and growing dividends to shareholders
over the long term"
INTRODUCTION
I'm pleased to report another year of double-digit share price and NAV total
returns for the Company. In a year shaped by geopolitical developments - most
notably the wave of tariffs introduced by President Trump - Asian equity
markets have continued to deliver robust returns. While performance was behind
the Reference Index, this reflects our disciplined income approach and
selective positioning, particularly in China, where market leadership was
concentrated in low-yielding growth stocks. Importantly, our strategy
continues to deliver strong long-term results, with NAV returns ahead of the
benchmark over three, five and ten years and since inception.
The net asset value per share of the Company recorded a total return of +14.9%
over the period, compared with a total return of +21.1% for the MSCI AC
Pacific ex-Japan index, the Reference Index. This relative underperformance
was in large part due to our underweight positioning in China. It should also
be said that it was a difficult relative period for many income-orientated
investors, as growth outperformed value and the lowest yielding 25% of
companies in the Reference Index saw a total return of more than 30% versus
the 21.1% increase in the index as a whole. Our income discipline therefore
meant that we had little exposure to those outperforming, low-yielding names,
a number of which were to be found in China.
Although the 1 year performance has lagged the Reference Index it should be
noted that the Company's NAV has outperformed its Reference Index by a
significant margin over both 3 and 5 years to end of August whilst delivering
c.10% p.a. total returns.
PERFORMANCE SINCE INCEPTION(1) TO 31 AUGUST 2025
Source: Morningstar, Schroders, Refinitiv Datastream. NAV Total Return (since
inception Total Return NAV), net income reinvested, net of ongoing charges and
portfolio costs and where applicable, performance fees, GBP (1)28 July 2005.
Any reference to regions/countries/sectors/stocks/securities is for
illustrative purposes only and not a recommendation to buy or sell.
This report drills down further into the drivers of both absolute and relative
performance, as well as factors influencing the current investment landscape
and the potential implications for investors.
PERFORMANCE OF THE MSCI AC PACIFIC EX JAPAN NET DIVIDENDS REINVESTED INDEX IN
GBP AND USD - 31 AUGUST 2024 TO 31 AUGUST 2025
Source: Thompson Datastream as at 31 August 2025.
Past performance is not a guide to future performance and may not be repeated.
The value of investments and the income from them may go down as well as up
and investors may not get back the amounts originally invested. The return may
increase or decrease as a result of currency fluctuations.
In our view, there are four key factors underlying the outperformance of Asian
stock markets versus global indices in the 12 months to end-August 2025.
Firstly, given that many Asian countries are major exporters to the US, Asian
markets had already lagged on President Trump's election and while his initial
"liberation day" tariff announcements caused a sharp sell-off in equity
markets globally - including the US itself - this proved short-lived, as
row-backs and some deals suggested that final tariff levels would not be as
severe as first thought. This greater certainty arguably benefited the region
more than others. Secondly, US dollar weakness is usually positive for Asian
equities from a liquidity standpoint, which has acted as an additional
tailwind for markets during 2025. Thirdly, there is growing comfort that
China's economy is stabilising, or at the very least is no longer getting
worse. As the region's major power, even patchy and underwhelming stimulus
measures can play an important role in supporting sentiment, which had been
particularly fragile at the start of the review period. Finally, the
artificial intelligence (AI) juggernaut righted itself after a brief wobble
early in 2025, caused by the release of the Chinese-developed DeepSeek
chatbot. While initial concerns centred around the possibility that lower-cost
large-language models (LLMs) would mean less need for advanced new hardware,
the US hyperscalers (e.g. Google or Microsoft) have since reaffirmed their
capital spending plans, which is positive for the many Asian companies that
play a vital role in the AI supply chain.
The more positive view around China meant it was the best performing market in
the region over the year in review. However, market leadership was narrow,
with the bulk of the return coming from a handful of large internet platform
or information technology companies, including Tencent, Alibaba and Xiaomi,
which are not just among the biggest stocks in China, but also occupy top 10
positions in regional Asian indices. With the biggest Asian companies making
up ever more of the index, and with these stocks also among the best
performers, it was a more difficult backdrop for any active fund manager to
achieve outperformance. In our case, the Company's investment strategy means
there needs to be an income rationale for any stock to be included in the
portfolio, and we are therefore unlikely to own these low-yielding Chinese
giants unless they radically change their distribution policies.
NARROW MARKETS
Market has become more concentrated(1)
Percentage of stocks outperforming the index(2
) Past Performance is not a guide to future performance and may not be
repeated. The value of investments and the income from them may go down as
well as up and investors may not get back the amounts originally invested. The
return may increase or decrease as a result of currency fluctuations.
Source: (1)Factset, MSCI, Schroders. 31 August 2025. (2)Factset, MSCI,
Schroders. 31 August 2025. Based on MSCI AC Asia Pacific ex Japan. Countries
and regions shown are for illustrative purposes only and should not be viewed
as a recommendation to buy or sell.
The other major markets to outperform the Reference Index during the year were
Hong Kong and Singapore. Hong Kong did well as interest rate expectations came
down, thus easing liquidity, as well as benefiting from better sentiment
towards China and the consequent recovery in the Chinese stock market, which
led to a number of mainland companies seeking H share listings on the Hong
Kong exchange. Strong GDP growth in Singapore and its increasing importance as
a regional hub - particularly in financial services - has led to increased
investor confidence, backed up by regulatory initiatives to enhance the equity
market. As a result, the aggregate price/earnings valuation of the Singapore
market is now somewhat above historical averages, although not to the extent
seen in Australia or India. Taiwan, Korea and Australia all performed
positively, but lagged the index return.
Underperforming markets were concentrated in the Association of Southeast
Asian Nations (ASEAN) group (excluding Singapore), with Indonesia the worst
performer as investors focused on the potential negative ramifications of the
new government's fiscal strategy, leading to a large exodus of foreign money
from the stock market. Vietnam, Thailand, Malaysia and the Philippines also
lagged, albeit to a lesser extent. In the longer term, the ASEAN nations
should be beneficiaries of the diversification of Asian manufacturing away
from a reliance on China, but US trade policy has cast a cloud over the
markets recently, given high headline tariff rates and a delay in negotiating
deals.
Initiatives to boost shareholder value and reform capital markets continue to
be a theme across the region - as mentioned above, in Singapore, as well as in
China and Korea. While Korea performed well in the second half of the review
period - in part because of the "value up" programme, which has the potential
over the longer term to result in a much greater corporate focus on dividends
- the early part of the year was overshadowed by the imposition of martial
law, leading to the impeachment of the president. The fact that investors have
swiftly been able to refocus on the fundamentals for the market gives us
confidence that the stabilisation we have seen in recent months can endure.
In sector terms, the best returns in the Reference Index came from
communication services (a group that includes many internet companies),
industrials, consumer discretionary, financials and IT stocks. Laggards
included healthcare, materials and energy companies, with the latter two
affected by low oil prices and the stalling property market in China, which
has reduced demand for commodities such as steel.
MARKET RETURNS
Country returns in GBP
Sector returns in GBP
Past Performance is not a guide to future performance and may not be repeated.
The value of investments and the income from them may go down as well as up
and investors may not get back the amounts originally invested. The return may
increase or decrease as a result of currency fluctuations.
Source: Schroders, FactSet, in GBP, as at 31 August 2025. Based on MSCI AC
Pacific ex Japan. Countries and sectors shown are for illustrative purposes
only and should not be viewed as a recommendation to buy or sell.
POSITIONING AND PERFORMANCE
While absolute returns for the year were strong (a NAV total return of +14.9%,
building on last year's +18.2% return), our underweight positioning in China
was the main factor behind the Company's underperformance relative to the
reference index, which returned +21.1%. It was also a period that saw growth,
as a style, outperform value which typically is a headwind for income given
income is a value factor.
While China is by far the region's biggest market, there are two important
reasons why our portfolio exposure tends to be well below the index weight.
The first is the preponderance of state-owned enterprises (SOEs), particularly
banks, where alignment with the interests of minority (and especially
overseas) shareholders is questionable, given their propensity to be used as
policy tools by the government. That said, the ramifications of state action
are not confined to the SOE sector. In recent years, the Chinese government's
focus on the supply side from a policy perspective has meant that even in
growth areas dominated by private companies, such as renewable energy
equipment and electric vehicles, oversupply and an ultra-competitive
environment have led to poor returns. The second factor underlying our
below-index exposure to China, as mentioned above, is the high weighting of
internet platform and IT companies such as Tencent, Alibaba and Xiaomi.
Our overweight positioning and stock selection in Hong Kong had the biggest
positive impact during the period, with strong returns coming from stocks
including Bank of China (Hong Kong), stock exchange operator Hong Kong
Exchange, and off-Reference Index positions in real estate companies Swire
Properties and Hang Lung Group.
Being overweight in Singapore also contributed to returns, with positive
performance coming from Singapore Telecom, financial services provider DBS
Group, and Singapore Exchange (SGX), another stock exchange business. However,
stock selection pared back the overall outperformance, particularly not owning
the internet firm Sea Ltd, which does not currently pay a dividend.
Australia, Taiwan and Korea are the largest markets in the Reference Index
after China. Our exposure to each of these was broadly neutral across the
period, with stock selection proving positive in Australia but lagging in
Taiwan and Korea. In Australia, banks experienced a material valuation upgrade
despite little change in the economic outlook. This leads us to regard the
sector more cautiously, particularly given the current high aggregate
valuation of the Australian stock market.
In both Taiwan and Korea, our positioning in technology-related companies was
a headwind despite our largest holding Taiwan Semiconductor Manufacturing Co
(TSMC) performing strongly during the period, rising by some 27%. TSMC is a
vital link in the AI supply chain, with a dominant market position in the
manufacturing of the most cutting-edge chips. Detractors included Samsung
Electronics in Korea, along with chipmaker United Microelectronics and power
supply specialist Delta Electronics in Taiwan.
The ASEAN markets (excluding Singapore) were a mixed bag during the review
period. Our one holding in Thailand - Kasikornbank - did well, while an
underweight position in Malaysia proved beneficial, as did stock selection in
the Philippines. Vietnam - an off-Reference Index allocation - and Indonesia,
an overweight position, both weighed on returns. Indonesian banks performed
particularly poorly given the increased uncertainty around the new
government's policies, resulting in a drag from our positions in PT Bank
Negara Indonesia and Bank Mandiri.
In sector terms, our largest allocation was to financials, where we have broad
exposure that includes stock exchanges and insurance companies, alongside the
more traditional banks.
This sector was the largest contributor to relative performance, with both
stock selection and our overweight positioning proving positive.
Positive contributions also came from stock selection in real estate (the
second largest overweight position relative to the index), and being
underweight healthcare and materials. Our lack of exposure to Chinese internet
platforms and e-commerce companies contributed to underperformance in the
communication services and consumer discretionary sectors, while positioning
in consumer staples proved a slight drag. As mentioned above stock selection
in IT was a headwind.
Across the year, our largest increases in country exposure were in China, Hong
Kong and India, while the largest reductions were in Korea, Indonesia and
Singapore. While some of these moves (particularly in China, Korea and
Indonesia) reflected market movements, we also made several changes to the
portfolio during the period.
REGIONAL BREAKDOWN OF PORTFOLIO EX GEARING*
* Gearing (net cash less loans outstanding) currently at 3.9%.
Source: Schroders as at 31 August 2025.
We added a number of positions in China, including EV battery maker CATL,
sportswear specialist Anta Sports and premium alcoholic beverage firm Kweichow
Moutai. We discussed Anta Sports and Kweichow Moutai in the half-year report,
but in brief, both are beneficiaries of the trend towards home-grown rather
than international brands, and both are quality businesses whose shares we
were able to buy at relatively attractive valuations, given lingering concerns
over China's economic recovery and its consumers' willingness to spend. CATL
is a global leader in rechargeable lithium ion batteries for electric vehicles
and energy storage systems. Its competitive advantage lies in its scale and
advanced battery technology, and it has the potential to grow its earnings at
20% p.a. over the next five years, whilst also paying an attractive dividend.
During the year we also initiated an allocation to India, a country where we
previously had no exposure and which is not included in the Reference Index.
This included Power Grid Corporation of India, which as the name suggests is a
utility company, and stands to benefit from the growth in transmission
capacity of the Indian electricity network, with renewable solar and wind
projects needing to be linked into the wider grid. While the Indian equity
market remains highly valued, we were able to buy into the position following
a market sell-off earlier in the year.
Other notable new holdings include Taiwanese IT company Largan Precision,
which makes precision optical plastic lenses for smartphones, tablets, laptops
and more, the Malaysian bank CIMB, and the Hong Kong-listed but Macau-based
casino operator Galaxy Entertainment.
We also added to existing positions across a range of countries and sectors,
including real estate (China Resources Land and two Singapore REITs under the
CapitaLand umbrella), pan-Asian insurer AIA, Taiwanese tech companies Hon Hai
Precision Industry and ASE Technology as well as Korean carmaker Kia
Corporation and Chinese clothing manufacturer Shenzhou International.
Although financials remain our largest sector weighting, we reduced our
exposure and exited several positions during the year. These included two
stock exchange operators, Singapore Exchange (sold following outperformance)
and the Australian ASX, where we felt the investment thesis had weakened.
Other exits included a trio of banks - PT Bank Negara Indonesia, the
Australian bank Westpac and Korean financial KB Financial Group. Other
reductions in financials included SMFG in Japan and UOB in Singapore.
We also reduced our exposure to the IT sector, selling out of the relatively
low-yielding Delta Electronics in Taiwan, and Singapore's Venture Corporation,
as well as trimming foundry TSMC and fabless design house Mediatek following
outperformance. As noted in the interim report, we also reduced the size of
our position in Samsung Electronics, partly reflecting concerns over delays
around new product qualification.
Other names we exited included Korea's SK Telecom and Deterra Royalties, an
Australian resources firm.
SECTOR BREAKDOWN OF PORTFOLIO EX GEARING*
* Gearing (net cash less loans outstanding) currently at 3.9%.
Source: Schroders as at 31 August 2025.
INVESTMENT OUTLOOK
While it may have been a surprise to see Asian equity markets perform so well
in the face of a US trade war primarily targeted at the region's exporters, we
would caution that the road ahead may not be so smooth. The anticipation of
higher tariffs led to a significant uptick in exports to the US from the
Pacific Rim (with the exception of China) in the early part of 2025. This
"front loading" is likely to unwind in the second half of the year now that
the higher tariffs are in effect, which could have a negative impact on the
sales and profits of some of the region's exporting companies (see chart
below).
ASIA'S EARNINGS ARE HISTORICALLY CORRELATED TO EXPORTS
NEAR TERM FRONTLOADING OF EXPORTS TO BEAT TARIFFS
Source: Left chart: Refinitiv, Factset, as at August 2025 Right chart:
Refinitiv, April 2025. Countries and regions shown are for illustrative
purposes only and should not be viewed as a recommendation to buy or sell.
However, while the US tariffs have grabbed the headlines - particularly in
regard to companies that export to the US - the increase in intra-Asian trade
as well as trade with non-Asian emerging countries in recent years could
provide a counterweight to the negative impact of US protectionism, albeit
part of this growth has come from the reorientation of supply chains. Since
China's accession to the World Trade Organisation in 2001, the map of world
trade has been transformed, and most nations of the world now do far more
business with China than with the US, which both decreases the impact of US
tariffs on many exporting countries, and makes it more difficult for the Trump
administration to do deals at China's expense.
TRUMP 2.0 - US NO LONGER THE LARGEST TRADING PARTNER FOR MOST OF THE WORLD
MAKING IT HARDER TO DO DEALS AT CHINA'S EXPENSE
Global trade dominance: US vs China
Source: Visual Capitalist, US Census, Customs of China, Morgan Stanley April
2025.
The regions and countries shown are for illustrative purposes only and should
not be viewed as a recommendation to buy or sell.
A further impact of the new US administration's policies has been a weakening
in the dollar, in part as a result of debt-funded fiscal stimulus swelling the
government balance sheet together with concerns around US exceptionalism and
declining interest rate expectations. Dollar weakness has historically been
supportive for Asian equity markets, and this can be observed in the region's
performance in 2025.
SOFTER US DOLLAR HISTORICALLY SUPPORTIVE BACKDROP FOR ASIAN MARKETS
Within the region, the Chinese economy remains weak, as consumer confidence is
still extremely low. Although the government has announced some measures to
support the economy, these remain quite small in scale and are unlikely to
drive up growth significantly in the face of a still-contracting property
market and declining private credit extension. The Chinese and Hong Kong
markets have benefited from investor hopes that the government would soon
start to address some of the structural over-supply/competition concerns
across various industrial sectors. Going by the rather confusing name of
"anti-involution" policy, the idea is that companies will be asked to rein in
excessive price discounting and moderate their capacity expansion in
industries where supply already exceeds natural demand. While in many cases
this would be welcome, it's important to bear in mind two caveats.
Firstly, it is harder for the government to control the actions of the private
sector than state-owned enterprises. Secondly, and perhaps more significantly,
the economy in China is likely to face headwinds in the second half as exports
slow down. As a result, any supply-side reforms, which inevitably cause
disruption to jobs or incomes, will be harder for the economy to absorb
without threatening the government's overall stated GDP growth target.
So with China's domestic and external sectors both facing challenges, we
remain underweight the market, though this is offset to an extent by our
overweight to Hong Kong. Our structural concerns around China's demographics
and economic model, with its overreliance on manufacturing and exports, remain
and are unlikely to be addressed by short-term stimulus.
IT remains an overweight sector for us, but one which we have moderated as
stocks there have rallied hard on the AI theme, with froth being seen in some
areas. Although earnings momentum remains strong, several Asian IT stocks look
vulnerable to a correction should there be any disruption to the narrative of
growing AI datacentre capital expenditure. For now, however, there is little
sign of such a slowdown from the US companies leading the investment, despite
limited evidence of enterprise or consumer willingness to spend significant
sums of money on AI services.
With much of the strong Asian market performance this year a result of
multiple re-rating, rather than improved earnings, the resultant aggregate
valuations no longer look cheap, with the market trading above long-term
averages on measures such as the price/earnings (P/E) ratio. However, the
region as a whole remains attractively valued compared to developed markets
and, as we go forward, we would expect underlying earnings to start to be a
bigger driver of share prices. This may see the market broaden out from the
narrow focus it has had so far this year, potentially resulting in some of the
frothier areas of the market taking a breather.
ASIAN AGGREGATE VALUATIONS RELATIVELY ATTRACTIVE IN A GLOBAL CONTEXT - LESS SO
AGAINST OWN HISTORY
Asia Pacific ex Japan Historic Price / Earnings (P/E) (x)(1)
Asia Pacific ex Japan versus Developed Markets relative forward 12m consensus
Price / Earnings (P/E) ratio(2
) Past Performance is not a guide to future performance and may not be
repeated. The value of investments and the income from them may go down as
well as up and investors may not get back the amounts originally invested. The
return may increase or decrease as a result of currency fluctuations.
Source: (1)Citi Investment Research, MSCI, Refinitiv Datastream as at 31
August 2025. (2)Refinitiv Eikon Datastream, MSCI, PE data based on forecast
data, to 31 August 2025. Based on MSCI AC Asia Pacific ex Japan, and MSCI AC
Asia Pacific ex Japan versus MSCI World in US$. The regions and countries
shown are for illustrative purposes only and should not be viewed as a
recommendation to buy or sell.
Turning to dividends, as the US dollar has weakened, the pound has become
stronger, which is a headwind for the Company's dividend income given our
accounting currency is sterling. However, the dividend yields of many Asian
markets remain attractive in a global context, and as a region the average
payout and gearing ratios remain low versus other markets, which should
hopefully translate into dividends being relatively resilient. The Company's
income discipline is a critical part of the investment proposition, delivering
both an attractive yield and an important source of diversification for
investors who may already be highly exposed to the domestic UK market.
Focusing on companies that are able to reward their shareholders with
dividends means prioritising balance sheet sustainability and good governance,
both features that should stand investors in good stead over time.
ASIAN YIELD IN CONTEXT
Yield by region(1)
MSCI AC Pacific ex Japan versus MSCI World relative dividend yield(2
) Past Performance is not a guide to future performance and may not be
repeated. The value of investments and the income from them may go down as
well as up and investors may not get back the amounts originally invested. The
return may increase or decrease as a result of currency fluctuations.
Source: (1)Factset, MSCI as at 31 August 2025. Pacific ex Japan is based on
MSCI AC Pacific ex Japan. (2)Factset, MSCI as at 31 August 2025.
The regions and countries shown are for illustrative purposes only and should
not be viewed as a recommendation to buy or sell.
Looking ahead, while challenges do remain - from tariff-related disruption to
structural imbalances in China - we remain confident in our diversified
portfolio of Asian companies' potential to deliver attractive returns and
growing dividends to shareholders over the long term. Whether through
enabling the AI revolution, meeting the evolving needs of consumers,
supporting the transition to a greener economy, or expanding financial
services to an increasingly affluent population, our holdings are well
positioned to benefit from the region's dynamic growth. The Company's income
discipline continues to offer investors a compelling blend of yield,
resilience and diversification - qualities that have now underpinned 19
consecutive years of dividend growth since launch.
Thank you for your continued trust in the Schroder Oriental Income Fund.
RICHARD SENNITT
Portfolio Manager
SCHRODER INVESTMENT MANAGEMENT LIMITED
6 November 2025
PRINCIPAL AND EMERGING RISKS AND UNCERTAINTIES
The Board, through its delegation to the Audit and Risk Committee, is
responsible for the Company's system of risk management and internal control
and for reviewing its effectiveness. The Board has adopted a detailed matrix
of all material risks affecting the Company's business as an investment trust
and has established associated policies and processes designed to manage and,
where possible, mitigate those risks, which are monitored by the Audit 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.
RISK ASSESSMENT AND INTERNAL CONTROLS REVIEW BY THE BOARD
Risk assessment includes consideration of the scope and quality of the systems
of internal control operating within key service providers, and ensures
regular communication of the results of monitoring by such providers to the
Audit 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.
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.
During the year, the Board discussed and monitored a number of risks which
could potentially impact the Company's ability to meet its strategic
objectives. The Board receives updates from the Investment Manager, Company
Secretary and other service providers on emerging risks that could affect the
Company. The Board was mindful of the evolving global environment during the
year and the risks posed by volatile markets and geopolitical uncertainty.
However, these are not factors which explicitly impact the Company's
performance although they could exacerbate existing risks. Where relevant
these have been incorporated in the table below. Both the principal risks and
uncertainties and the monitoring system are also subject to robust review at
least annually. The last assessment took place in November 2025.
No significant control failings or weaknesses were identified from the Audit
and Risk Committee's ongoing risk assessment throughout the financial year and
up to the date of this report. The Board is satisfied that it has undertaken a
detailed review of the risks facing the Company and that the internal control
environment continues to operate effectively. A full analysis of the financial
risks facing the Company is set out in note 20 to the financial statements.
The Board considers that the risks set out in the table below are the
principal risks currently facing the Company to deliver its strategy together
with those actions taken by the Board and, where appropriate, its committees,
to manage and mitigate those risks.
The "Change" column on the right highlights at a glance the Board's assessment
of any increases or decreases in risk during the year after mitigation and
management. The arrows in the change column show the risks as increased or
decreased or unchanged.
Risk Mitigation and management Change
Strategy and competitiveness Unchanged
Investment strategy The Board periodically reviews the appropriateness of the Company's investment
The Company's investment objectives may become out of line with the mandate and long-term strategy, monitoring progress towards the Company's
requirements of investors, resulting in a wide discount of the share price to stated objectives. Share price performance relative to NAV per share is
underlying NAV per share. tracked as a key performance indicator and regularly compared to peers. The
Board also reviews the parameters and use of buyback authorities on an ongoing
basis, and considers market feedback from the Manager and corporate broker at
each quarterly meeting. Shareholder engagement is proactively conducted
through the AGM, feedback from presentations, and ad hoc meetings with the
Board.
Investment performance Unchanged
If the Company underperforms or faces other challenges, it could become less The Board continually reviews the Investment Manager's performance, as well as
attractive to investors. the Company's net asset value (NAV) and share price, comparing results to
those of similar companies and monitoring any discount or premium. The Manager
and corporate broker keep a close watch on the discount and premium, helping
to ensure the Company remains attractive to investors. The Investment Manager
provides the Board with timely and accurate information, such as performance
data, revenue estimates, liquidity reports, and shareholder analyses, and
explains their portfolio decisions and risk assessments at every board
meeting. Gearing is managed carefully within a range set by the Board. The
Board is responsible for setting the overall investment strategy, approving
key agreements, and establishing guidelines for the use of derivatives,
gearing, and leverage, adjusting these as necessary. At every meeting, the
Board monitors performance, risk, and portfolio activity against agreed
objectives and strategy, and reviews the continued suitability of the Manager
each year. Risk and internal audit teams from the Manager also provide an
annual update to the Board.
Share price performance Increased
The Company's shares continuously trade at a wider than average discount to The discount or premium of the Company's share price relative to NAV is
the peer group and/or there is considerable discount volatility. monitored daily and compared to peers by both the corporate broker and the
Manager. The Board makes use of a discount control mechanism through an active
share buyback policy and receives regular updates from the corporate broker on
these activities.
Geopolitical Increased
Geopolitical factors and sanctions can influence the Company's investment Geopolitical risk has risen this year compared to last year due to a
strategy, objectives, and performance, particularly given the unique risks combination of increased global tensions, more frequent disruptions to
present in the region. Investing in China, for example, involves navigating international trade, and a greater incidence of policy intervention by
regulatory uncertainties and different business practices. Ongoing US-China governments. In particular, renewed disputes in key regions, heightened
tensions around tariffs, trade disputes, technology competition, and human regulatory scrutiny, and less predictable diplomatic relations have
rights concerns can give rise to issues such as intellectual property theft contributed to greater uncertainty for investors. As a result, the general
and cybersecurity threats. Additionally, escalating tensions between China and environment is more complex and volatile than in the previous year.
Taiwan may result in increased military activity and diplomatic challenges,
alongside other territorial disputes within the region. The Manager maintains regular communication with local analysts, investee
companies, and the wider market to assess the potential impact of these risks.
The Board receives frequent updates on current issues from the Manager for
discussion and regularly considers these risks, taking into account
presentations from the Manager as well as information from external sources.
Market and currency Unchanged
Because of the way the Company invests, it is naturally affected by market ups Many of the companies in the portfolio have strong balance sheets and
and downs, so a significant drop in regional stock markets could negatively sustainable business models. Gearing is kept at relatively low levels, helping
impact the value of its investments. In addition, since the Company mainly to manage risk. The Board regularly reviews the portfolio's risk profile and
invests in assets held in various currencies, movements in exchange rates - discusses strategies with the Manager to help minimise the impact of
particularly between sterling and other currencies - can have a considerable significant market or currency changes. While the Company does not have a
effect on overall returns and the value of dividend income received from those formal policy for hedging currency risk, foreign currency borrowings or
investments. forward contracts may be used when appropriate to limit exposure. The Board
also closely monitors inflation, as it can affect both market conditions and
exchange rate volatility.
Cyber and AI Increased
The growing use of Artificial Intelligence (AI) and digital investment AI and cyber risks have increased this year compared to last year, reflecting
platforms may present challenges to the ongoing relevance of investment the rapid advancement and broader adoption of artificial intelligence
trusts, as well as the risk of certain roles being replaced by AI technologies. While these developments offer significant opportunities, they
technologies. In addition, the Company's service providers face the risk of also introduce new vulnerabilities. There has also been a marked rise in both
cyber attacks, which could result in the loss of personal or confidential the frequency and sophistication of cyber-attacks on organisations globally,
information, unauthorised transactions, or disruptions to essential including several highly publicised cases. These trends, together with
operations. evolving regulatory requirements and heightened data protection standards,
mean that AI and cyber risks are now more pronounced and require strengthened
management and oversight.
The Company works with outsourced service providers who report at least
annually on how they manage and reduce cyber risk, including their plans to
maintain operations in the event of a cyber attack. A custodian or depositary
is also appointed to safeguard the Company's assets. Each year, the Board
receives presentations from the Manager, Registrar, and Depositary that cover
key risks, including cyber security and business continuity.
Climate Change Unchanged
The Company's investments and the returns to shareholders could be impacted by The Manager has fully integrated environmental, social, and governance (ESG)
climate change. There is growing interest from both investors and regulators considerations - including climate change - into the investment process and
in understanding how the Company's investments and performance might be provides regular updates on ESG engagement at board meetings. A comprehensive
affected by climate change, as well as wider environmental, social, and ESG policy is in place, details of which can be found in the annual report.
governance (ESG) considerations. The Investment Manager carefully assesses how portfolio companies address and
manage climate change risks, and the Board reviews the portfolio at every
meeting, receiving updates on any significant ESG or climate-related issues
and the Manager's engagement with investee companies.
Emerging Unchanged
Inadequate procedures for identifying emerging risks could result in the During the financial year ended 31 August 2025, the Board conducted regular
Company responding reactively rather than proactively, potentially affecting and systematic reviews of the Company's risk profile, with particular
its long-term sustainability and performance. attention to emerging risks. These reviews incorporated guidance from the AIC,
input from the Company's advisers, directors' market expertise, and ongoing
monitoring of industry and regulatory developments. For the year under review,
no new emerging risks were identified.
RISK ASSESSMENT AND INTERNAL CONTROLS REVIEW BY THE BOARD
Risk assessment includes consideration of the scope and quality of the systems
of internal control operating within key service providers, and ensures
regular communication of the results of monitoring by such providers to the
Audit 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. The Board is
satisfied that it has undertaken a detailed review of the risks facing the
Company and that the internal control environment continues to operate
effectively.
A full analysis of the financial risks facing the Company is set out in note
20 to the accounts.
VIABILITY STATEMENT
The directors have assessed the viability of the Company over a five year
period, taking into account the Company's position at 31 August 2025 and 6
November 2025 and the potential impact of the principal risks and
uncertainties it faces for the review period. The directors have assessed the
Company's operational resilience and they are satisfied that the Company's
outsourced service providers will continue to operate effectively, following
the implementation of their business continuity plans.
A period of five years has been chosen as the Board believes that this
reflects a suitable time horizon for strategic planning, taking into account
the investment policy, liquidity of investments, potential impact of economic
cycles, nature of operating costs, dividends and availability of funding. This
time period also reflects the average holding period of an investment.
In its assessment of the viability of the Company, the directors have
considered each of the Company's principal risks and uncertainties detailed in
the Annual Report and Accounts and in particular the impact of a significant
fall in regional equity markets on the value of the Company's investment
portfolio. The directors have also considered the Company's income and
expenditure projections and the fact that the Company's investments comprise
readily realisable securities which can be sold to meet funding requirements
if necessary.
The directors have also considered a stress test which represents a severe but
plausible scenario along with movement in foreign exchange rates. This
scenario assumes a severe stock market collapse and/or exchange rate movements
at the beginning of the five year period, resulting in a 50% fall in the value
of the Company's investments and investment income and no subsequent recovery
in either prices or income in the following five years. 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 limit.
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 operating costs 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 has no redundancy or other employment related liabilities.
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 monitors the portfolio risk profile, limits imposed on gearing,
counterparty exposure, liquidity risk and financial controls at its quarterly
meetings.
Although there continue to be regulatory changes which could increase costs or
impact revenue, the directors do not believe that this could be sufficient to
affect its viability. The Board also notes that certain geopolitical risks, if
they materialise, would have a serious effect on the viability of the Company,
but that it was not appropriate to conclude that the Company was not viable on
the basis of these.
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. The directors also considered the beneficial tax
treatment the Company is eligible for as an investment trust. If changes to
these taxation arrangements were to be made it would affect the viability of
the Company to act as an effective investment vehicle.
Based on the above 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 five year period of their
assessment.
GOING CONCERN
The directors have assessed the principal risks, the impact of the emerging
risks and uncertainties and the matters referred to in the viability
statement. The directors have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast
significant doubt on the Company's ability to continue as a going concern for
the period assessed by the directors, being the period to 30 November 2026
which is at least 12 months from the date the financial statements were
authorised for issue.
BY ORDER OF THE BOARD
SCHRODER INVESTMENT MANAGEMENT LIMITED
Company Secretary
6 November 2025
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
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") as
adopted by the European Union 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 as adopted by the
European Union, 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.
DIRECTORS' STATEMENT
Each of the directors, whose names and functions are listed in the Annual
Report and Accounts, confirm that to the best of their knowledge:
· the financial statements, which have been prepared in accordance
with IFRS as adopted by the European Union and with The Companies (Guernsey)
Law, 2008 (as amended) and in accordance with the requirements set out above,
give a true and fair view of the assets, liabilities, financial position and
the net return of the Company;
· the Strategic Review 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.
So far as each of the directors are aware, there is no relevant audit
information of which the Company's auditors are unaware, and each director has
taken all the steps that he or she ought to have taken as a director in order
to make himself or herself aware of any relevant audit information and to
establish that the Company's auditors are aware of that information.
On behalf of the Board
Nick Winsor
Chair
6 November 2025
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 AUGUST 2025
2025 2024
Note Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Gains on investments held at fair value through profit or loss 2 - 74,935 74,935 - 89,708 89,708
Net foreign currency gains - 803 803 - 1,266 1,266
Income from investments 3 32,920 725 33,645 33,824 510 34,334
Other income 3 117 - 117 161 - 161
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Total income 33,037 76,463 109,500 33,985 91,484 125,469
========= ========= ========= ========= ========= =========
Management fee 4 (1,950) (2,925) (4,875) (1,905) (2,858) (4,763)
Performance fee 4 - (4,759) (4,759) - (4,552) (4,552)
Other administrative expenses 5 (1,277) (8) (1,285) (1,170) (3) (1,173)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Net return before finance costs and taxation 29,810 68,771 98,581 30,910 84,071 114,981
Finance costs 6 (859) (1,290) (2,149) (1,075) (1,611) (2,686)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Net return before taxation 28,951 67,481 96,432 29,835 82,460 112,295
Taxation 7 (1,936) - (1,936) (1,899) - (1,899)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Net return after taxation 27,015 67,481 94,496 27,936 82,460 110,396
========= ========= ========= ========= ========= =========
Return per share - basic and diluted (pence) 9 11.59 28.94 40.53 11.29 33.34 44.63
========= ========= ========= ========= ========= =========
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
set out in the statement of recommended practice for investment trust
companies (the "SORP") issued by the Association of Investment Companies in
July 2022.
The Company does not have any income or expense that is not included in net
return for the year. Accordingly the "Net return" 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.
The notes form an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 AUGUST 2025
Note Share Treasury Capital Special Capital Revenue Total
capital
share
redemption
reserve
reserve
reserve
£'000
£'000
reserve
reserve
£'000
£'000
£'000
£'000
£'000
At 31 August 2023 234,347 (46,118) 39 150,374 272,701 36,865 648,208
Repurchase of ordinary shares into treasury - (29,007) - - - - (29,007)
Net return after taxation - - - - 82,460 27,936 110,396
Dividends paid in the year 8 - - - - - (29,282) (29,282)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 2024 234,347 (75,125) 39 150,374 355,161 35,519 700,315
Repurchase of ordinary shares into treasury - (34,693) - - - - (34,693)
Net return after taxation - - - - 67,481 27,015 94,496
Dividends paid in the year 8 - - - - - (28,023) (28,023)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 2025 234,347 (109,818) 39 150,374 422,642 34,511 732,095
========= ========= ========= ========= ========= ========= =========
The notes form an integral part of these financial statements.
Statement of Financial Position at 31 August 2025
Note 2025 2024
£'000
£'000
Non-current assets
Investments at fair value through profit or loss 10 763,811 735,607
--------------- ---------------
Current assets 11
Receivables 4,179 215
Cash and cash equivalents 8,527 10,433
--------------- ---------------
12,706 10,648
========= =========
Total assets 776,517 308,155
========= =========
Current liabilities
Payables 12 (44,422) (3,063)
--------------- ---------------
Net assets 732,095 700,315
========= =========
Equity attributable to shareholders
Share capital 13 234,347 234,347
Treasury share reserve 14 (109,818) (75,125)
Capital redemption reserve 14 39 39
Special reserve 14 150,374 150,374
Capital reserves 14 422,642 355,161
Revenue reserve 14 34,511 35,519
--------------- ---------------
Total equity shareholders' funds 732,095 700,315
========= =========
Net asset value per share (pence) 15 319.47 289.63
========= =========
The financial statements were approved by the Board of directors on 6 November
2025 and signed on its behalf by:
Director
The notes form an integral part of these financial statements.
Registered in England and Wales as a public company limited by shares.
Company registration number: 43298.
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 AUGUST 2025
2025 2024
£'000
£'000
Operating activities
Net return before finance costs and taxation 98,581 114,981
Adjustments for:
Net foreign currency gains (803) (1,266)
Gains on investments held at fair value through profit or loss (74,935) (89,708)
Net sales of investments at fair value through profit or loss 45,752 29,282
Decrease in receivables 189 1,144
Increase in payables 226 4,559
Overseas taxation paid (1,926) (1,972)
--------------- ---------------
Net cash inflow from operating activities before interest 67,084 57,020
Interest paid (2,145) (2,679)
--------------- ---------------
Net cash inflow from operating activities 64,939 54,341
========= =========
Financing activities
Repurchase of ordinary shares into treasury (35,098) (28,969)
Dividends paid (28,023) (29,282)
--------------- ---------------
Net cash outflow from financing activities (63,121) (58,251)
========= =========
Increase/(decrease) in cash and cash equivalents 1,818 (3,910)
Cash and cash equivalents at the start of the year 6,942 11,000
Effect of foreign exchange rates on cash and cash equivalents (233) (148)
--------------- ---------------
Cash and cash equivalents at the end of the year 8,527 6,942
========= =========
The notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2025
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"),
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
July 2022.
The policies applied in these financial statements are consistent with those
applied in the preceding year.
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. Amounts have
been rounded to the nearest thousand.
The financial statements have been prepared on a going concern basis under the
historical cost convention, as modified by the revaluation of investments held
at fair value through profit or loss. The directors believe that the Company
has adequate resources to continue operating to 30 November 2026, which is at
least 12 months from the date of approval of these financial statements. In
forming this opinion, the directors have taken into consideration: the
controls and monitoring processes in place; the Company's level of debt and
other payables; the low level of operating expenses, comprising largely
variable costs which would reduce pro rata in the event of a market downturn;
and that the Company's assets comprise cash and readily realisable securities
quoted in active markets. In forming this opinion, the directors have also
considered any potential impact of climate change, inflation, high interest
rates and the energy crisis on the viability of the Company.
Further details of directors' considerations regarding this are given in the
Chair's Statement, Portfolio Managers' Review, Going Concern Statement,
Viability Statement and under the Principal and Emerging Risks heading in the
Annual Report and Accounts.
The material accounting policies adopted are set out below.
(b) Presentation of the Statement of Comprehensive Income
In order to better 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) Investments at fair value through profit or loss
The Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital growth.
This portfolio of financial assets is managed and its performance evaluated on
a fair value basis, in accordance with a documented investment objective and
information is provided internally on that basis to the Company's board of
directors. Accordingly, investments are designated upon initial recognition as
investments at fair value through profit or loss, and are measured at
subsequent reporting dates at fair value, which are quoted bid market prices
for investments traded in active markets.
Investments that are unlisted or not actively traded are valued using a
variety of techniques to determine their fair value; all such valuations are
reviewed by both the AIFM's fair value pricing committee and by the directors.
Investments are recognised and derecognised on the trade date where a purchase
or sale is made under a contract whose terms require delivery within a
timeframe established by the market concerned.
(d) Accounting for 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".
Foreign exchange gains and losses on cash and deposit balances are included in
the Statement of Comprehensive Income and in capital reserves within "Holdings
gains and losses on investments". Unrealised exchange gains and losses on
foreign currency loans are included in the Statement of Comprehensive Income
and dealt with in capital reserves within "Holdings gains and losses on
investments".
(e) Repurchases of shares into treasury and subsequent reissues
The cost of repurchasing shares into treasury is debited to "treasury share
reserve". The sales proceeds of treasury shares reissued are credited back to
treasury share reserve until the debit balance on that reserve is extinguished
and thereafter to capital reserves.
(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.
Income from fixed interest debt securities is recognised using the effective
interest method.
Deposit interest outstanding at the year end is calculated and accrued on a
time apportionment basis using market rates of interest.
(g) Expenses
All expenses are accounted for on an accruals basis. Expenses are allocated
wholly to revenue with the following exceptions:
· The management fee is allocated 40% to revenue and 60% to
capital in line with the Board's expected long-term split of revenue and
capital return from the Company's investment portfolio.
· Any performance fee is allocated 100% to capital.
· Expenses incidental to the purchase or sale of investments
are charged to capital. These expenses are commonly referred to as transaction
costs and mainly comprise brokerage commission. Details of transaction costs
are given in note 10.
(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.
Finance costs are allocated 40% to revenue and 60% to capital in line with the
Board's expected long-term split of revenue and capital return from the
Company's investment portfolio.
(i) Other financial assets and liabilities
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.
Interest-bearing bank loans are initially recognised at cost, being the
proceeds received net of direct issue costs, and subsequently at amortised
cost.
(j) Taxation
The taxation charge in the Statement of Comprehensive Income comprises
irrecoverable overseas withholding tax deducted from dividends receivable.
Current taxation comprises of the tax withheld at the source on foreign
income, with adjustments for any amounts recoverable under tax treaties. The
taxation is recorded in the revenue section of the Statement of Comprehensive
Income, except when it pertains to capital-related items where it will be
accounted for in the capital section of the statement.
Deferred taxation represents the taxation liability or asset arising from
anticipated variations in the treatment of items for accounting purposes
compared to tax purposes. The calculation is based on tax rates that have been
officially approved or are highly likely for the period when the tax becomes
payable. Deferred tax assets are recognised when there is an expectation of
having future taxable profits.
(k) Foreign currency
The results and financial position are expressed in sterling. Transactions in
currencies other than sterling are recorded at the rates of exchange
prevailing on the dates of the transaction. At each balance sheet date,
monetary items and non monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing at 1600 hours on
the balance sheet date. Gains or losses arising on translation are included in
net profit or loss for the year and presented as revenue or capital as
appropriate.
(l) New and amended accounting standards
At the date of authorisation of these financial statements there are no new or
revised Standards or Interpretations, which are in issue but which are not yet
effective, which the Board expects to have any significant effect on the
Company's financial statements.
(m) Significant accounting judgements, estimates and assumptions
Other than the directors' assessment of going concern, no significant
judgements, estimates or assumptions have been required in the preparation of
these financial statements in accordance with IFRS.
(n) Dividends payable to shareholders
Interim dividends to shareholders are recorded in the financial statements
when paid.
2. Gains on investments held at fair value through profit or loss
2025 2024
£'000
£'000
Gains on sales of investments based on historic cost 30,853 14,373
Amounts recognised in investment holding gains and losses in the previous year (30,098) (4,657)
in respect of investments sold in the year
--------------- ---------------
Gains on sales of investments based on the carrying value at the previous 755 9,716
balance sheet date
Net movement in investment holding gains 74,180 79,992
--------------- ---------------
Gains on investments held at fair value through profit or loss 74,935 89,708
========= =========
3. Income
2025 2024
£'000
£'000
Income from investments:
Overseas dividends 32,920 33,824
Other income:
Deposit interest 117 161
--------------- ---------------
Total income 33,037 33,985
========= =========
Capital:
Special dividend allocated to capital 725 510
========= =========
4. Management and performance fees
2025 2024
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Management fee 1,950 2,925 4,875 1,905 2,858 4,763
Performance fee - 4,759 4,759 - 4,552 4,552
--------------- --------------- --------------- --------------- --------------- ---------------
1,950 7,684 9,634 1,905 7,410 9,315
========= ========= ========= ========= ========= =========
The basis for calculating the investment management fee and any performance
fee is set out in the Directors' Report.
5. Other administrative expenses
2025 2024
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Administration expenses 870 8 878 764 3 767
Directors' fees 192 - 192 192 - 192
Secretarial fee 150 - 150 150 - 150
Auditors' remuneration for audit services(1) 65 - 65 64 - 64
--------------- --------------- --------------- --------------- --------------- ---------------
1,277 8 1,285 1,170 3 1,173
========= ========= ========= ========= ========= =========
1 No amounts are payable to the auditor for non-audit services.
6. Finance costs
2025 2024
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Interest on bank loans and overdrafts 859 1,290 2,149 1,075 1,611 2,686
========= ========= ========= ========= ========= =========
The Board has determined that the finance costs will be allocated 40% to
revenue and 60% to capital in line with the Board's expected long-term split
of revenue and capital return from the Company's investment portfolio.
7. Taxation
(a) Analysis of tax charge for the year
2025 2024
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Irrecoverable overseas tax 1,936 - 1,936 1,899 - 1,899
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation for the year 1,936 - 1,936 1,899 - 1,899
========= ========= ========= ========= ========= =========
The Company became resident in the United Kingdom for tax purposes with effect
from 1 September 2020. The Company has no corporation tax liability for the
year ended 31 August 2025 (2024: the same).
(b) Factors affecting tax charge for the year
The tax assessed for the year ended 31 August 2025 is lower (2024: lower) than
the Company's applicable rate of corporation tax for that year of 25% (2024:
25%).
The factors affecting the tax charge for the year are as follows:
2025 2024
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Net return before taxation 28,951 67,481 96,432 29,835 82,460 112,295
Net return before taxation multiplied by the Company's applicable rate of 7,238 16,871 24,109 7,459 20,615 28,074
corporation tax for the year of 25% (2024: 25%)
Effects of:
(Gains) on investments not taxable/capital losses on investments not - (18,933) (18,933) - (22,743) (22,743)
deductible
Income not chargeable to corporation tax (7,593) (181) (7,774) (7,672) (127) (7,799)
Expenses disallowed - (2) (2) - (1) (1)
Unrelieved expenses 384 2,245 2,629 236 2,256 2,492
Tax relief on overseas tax suffered (29) - (29) (23) - (23)
Irrecoverable overseas tax 1,936 - 1,936 1,899 - 1,899
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation for the year 1,936 - 1,936 1,899 - 1,899
========= ========= ========= ========= ========= =========
(c) Deferred taxation
The Company has an unrecognised deferred tax asset of £8,833,000 (2024:
£6,205,000) based on a main rate of corporation tax of 25%. In its 2020
budget, the UK government announced that the main rate of corporation tax
would increase to 25% for the fiscal year beginning on 1 April 2023.
The deferred tax asset has arisen due to the excess of deductible expenses
over taxable income. Given the composition of the Company's portfolio, it is
not likely that this asset will be utilised in the foreseeable future and
therefore no asset has been recognised in the financial statements.
The Company was granted status as an investment trust company by HMRC
effective from 1 September 2020, and intends to continue to meet the
conditions required to retain that status. Therefore, no provision has been
made for deferred UK capital gains tax on any capital gains or losses arising
on the revaluation or disposal of investments.
8. Dividends
(a) Dividends paid and declared
2025 2024
£'000
£'000
2024 fourth interim dividend of 6.00p (2023: 5.80p) 14,160 14,547
First interim dividend of 2.00p (2024: 2.00p) 4,654 4,982
Second interim dividend of 2.00p (2024: 2.00p) 4,626 4,899
Third interim dividend of 2.00p (2024: 2.00p) 4,583 4,854
--------------- ---------------
Total dividends paid in the year 28,023 29,282
========= =========
2025 2024
£'000
£'000
Fourth interim dividend declared of 6.20p (2024: 6.00p) 14,208 14,508
========= =========
Under the Companies (Guernsey) Law 2008, 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 and revenue reserves. 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
2024 differs from the amount actually paid due to shares repurchased and
cancelled after the balance sheet date but prior to the share register record
date.
(b) Dividends for the purposes of Section 1158 of the Corporation Tax Act 2010
("Section 1158")
The Company was granted status as an investment trust company by HMRC
effective from 1 September 2020, and intends to continue to meet the minimum
distribution requirements of Section 1158, in order to retain that status.
Those requirements are considered on the basis of dividends declared in
respect of the financial year as shown below. The revenue available for
distribution by way of dividend for the year is £27,015,000 (2024:
£27,936,000).
2025 2024
£'000
£'000
First interim dividend of 2.00p (2024: 2.00p) 4,654 4,982
Second interim dividend of 2.00p (2024: 2.00p) 4,626 4,899
Third interim dividend of 2.00p (2024: 2.00p) 4,583 4,854
Fourth interim dividend of 6.20p (2024: 6.00p) 14,208 14,508
--------------- ---------------
Total dividends of 12.20p (2024: 12.00p) 28,071 29,243
========= =========
9. Return per share
2025 2024
£'000
£'000
Revenue return 27,015 27,936
Capital return 67,481 82,460
--------------- ---------------
Total return 94,496 110,396
========= =========
Weighted average number of ordinary shares in issue during the year 233,142,284 247,361,808
Revenue return per share (pence) 11.59 11.29
Capital return per share (pence) 28.94 33.34
--------------- ---------------
Total return per share (pence) 40.53 44.63
========= =========
10. Investments held at fair value through profit or loss
2025 2024
£'000
£'000
Opening book cost 608,139 624,190
Opening investment holding gains 127,468 52,133
--------------- ---------------
Opening fair value 735,607 676,323
========= =========
Analysis of transactions made during the year
Purchases at cost 136,514 136,746
Sales proceeds (183,245) (167,170)
Gains on investments held at fair value through profit or loss 74,935 89,708
--------------- ---------------
Closing fair value 763,811 735,607
========= =========
Closing book cost 592,261 608,139
Closing investment holding gains 171,550 127,468
--------------- ---------------
Closing fair value 763,811 735,607
========= =========
All investments are listed on a recognised stock exchange.
The Company received £183,245,000 (2024: £167,170,000) from disposal of
investments in the year. The book cost of these investments when they were
purchased was £152,392,000 (2024: £152,797,000). These investments have been
revalued over time and until they were sold any unrealised gains/losses were
included in the fair value of the investments.
The following transaction costs, mainly comprising brokerage commissions, were
incurred during the year:
2025 2024
£'000
£'000
On acquisitions 159 102
On disposals 308 278
--------------- ---------------
467 380
========= =========
11. Current assets
Receivables 2025 2024
£'000
£'000
Dividends and interest receivable 2,720 2,962
Securities sold awaiting settlement 1,379 3,017
Other receivables 80 38
--------------- ---------------
4,179 6,017
========= =========
The directors consider that the carrying amount of receivables approximates to
their fair value.
Cash and cash equivalents
Cash and cash equivalents comprises bank balances and cash held by the
Company, including short-term deposits. The carrying amount of these
represents their fair value. Cash balances in excess of a predetermined amount
are placed on short-term deposit at market rates of interest.
12. Current liabilities
Payables 2025 2024
£'000
£'000
Bank loan 37,008 38,045
Securities purchased awaiting settlement 1,140 3,757
Repurchase of ordinary shares into treasury awaiting settlement - 405
Other payables and accruals 6,274 6,044
--------------- ---------------
44,422 48,251
========= =========
The bank loan comprises US$50 million drawn down on the Company's £75 million
multicurrency credit facility with the Bank of Nova Scotia. The facility is
secured and drawings are subject to covenants and restrictions which are
customary for a facility of this nature and all of these have been complied
with.
Further details of the facility are given in note 20(a)ii
The bank loan at the prior year end comprised US$50 million drawn down on the
Company's £100 million multicurrency credit facility with Bank of Nova
Scotia.
13. Share capital
2025 2024
£'000
£'000
Ordinary shares of 1p each, allotted, called-up and fully paid:
Opening balance of 241,798,024 (2024: 253,193,024) shares, excluding shares 159,222 188,229
held in treasury
Repurchase of 12,641,616 (2024: 11,395,000) shares into treasury (34,693) (29,007)
Subtotal of 229,156,408 (2024: 241,798,024) shares, excluding shares held in 124,529 159,222
treasury
42,076,616 (2024: 29,435,000) shares held in treasury 109,818 75,125
--------------- ---------------
Closing balance of 271,233,024 (2024: 271,233,024) shares 234,347 234,347
========= =========
The ordinary shares rank pari passu, and each share carries one vote in the
event of a poll at a general meeting. The Company has authority to issue an
unlimited number of ordinary shares.
During the year, the Company repurchased 12,641,616 of its own shares, nominal
value £126,416 to hold in treasury for a total consideration of £34,693,000
representing 5.2% of the shares outstanding at the beginning of the year. The
reason for these share purchases was to seek to manage the share price
discount to net asset value per share.
14. Reserves
Capital reserves
Share Treasury Capital Special Gains and Investment Revenue
capital
share
redemption
reserve
losses on
holding
reserve
£'000
reserve
reserve
£'000
sales of
gains and
£'000
£'000
£'000
investments
losses
£'000
£'000
At 1 September 2024 234,347 (75,125) 39 150,374 224,688 130,473 35,519
Gains on sales of investments based on the carrying value at the previous - - - - 755 - -
balance sheet date
Movement in investment holding gains and losses - - - - - 74,180 -
Transfer on disposal of investments - - - - 30,098 (30,098) -
Realised exchange losses on cash and short-term deposits - - - - (233) - -
Exchange gains on foreign currency credit facility - - - - - 1,036 -
Repurchase of ordinary shares into treasury - (34,693) - - - - -
Management fee, finance costs and other expenses charged to capital - - - - (4,223) - -
Performance fee charged to capital - - - - (4,759) - -
Dividends allocated to capital - - - - 725 - -
Dividends paid in the year - - - - - - (28,023)
Net return after taxation - - - - - - 27,015
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 2025 234,347 (109,818) 39 150,374 247,051 175,591 34,511
========= ========= ========= ========= ========= ========= =========
Capital reserves
Share Treasury Capital Special Gains and Investment Revenue
capital
share
redemption
reserve
losses on
holding
reserve
£'000
reserve
reserve
£'000
sales of
gains and
£'000
£'000
£'000
investments
losses
£'000
£'000
At 1 September 2023 234,347 (46,118) 39 150,374 218,977 53,724 36,865
Gains on sales of investments based on the carrying value at the previous - - - - 9,716 - -
balance sheet date
Movement in investment holding gains and losses - - - - - 79,992 -
Transfer on disposal of investments - - - - 4,657 (4,657) -
Realised exchange losses on cash and short-term deposits - - - - (148) - -
Exchange gains on foreign currency credit facility - - - - - 1,414 -
Repurchase of ordinary shares into treasury - (29,007) - - - - -
Management fee, finance costs and other expenses charged to capital - - - - (4,472) - -
Performance fee charged to capital - - - - (4,552) - -
Dividends allocated to capital - - - - 510 - -
Dividends paid in the year - - - - - - (29,282)
Net return after taxation - - - - - - 27,936
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 2024 234,347 (75,125) 39 150,374 224,688 130,473 35,519
========= ========= ========= ========= ========= ========= =========
Under the Companies (Guernsey) Law 2008, the Company may buy back its own
shares, or pay dividends, out of any reserves, subject to passing a solvency
test. This test considers whether, immediately after the payment, the
Company's assets exceed its liabilities and whether it will be able to pay its
debts when they fall due.
15. Net asset value per share
2025 2024
Total equity shareholders' funds (£'000) 732,095 700,315
Shares in issue at the year end 229,156,408 241,798,024
----------------- -----------------
Net asset value per share (pence) 319.47 289.63
========== ==========
16. Contingent liabilities and capital commitments
There were no contingent liabilities or capital commitments at the balance
sheet date (2024: none).
17. Transactions with the Manager
The Company has appointed Schroder Unit Trusts Limited ("the Manager"), a
wholly owned subsidiary of Schroders plc, to provide investment management,
accounting, secretarial and administration services. Details of the management
and performance fee agreement are given in the Directors' Report.The
management fee payable in respect of the year amounted to £4,875,000 (2024:
£4,763,000), of which £1,300,000 (2024: £1,241,000) was outstanding at the
year end. The company secretarial fee payable to the Manager amounted to
£150,000 (2024: £150,000) of which £37,500 (2024: £37,500) was outstanding
at the year end. The performance fee payable in respect of the year amounted
to £4,759,000 (2024: £4,552,000) is payable in respect of the year and the
whole of this amount was outstanding at the year end.
If the Company invests in funds managed or advised by the Manager or any of
its associated companies, any fee earned by the Manager from those funds is
deducted from the management fee payable by the Company. There have been no
such investments during the current or comparative year.
18. Related Party transactions
Details of the remuneration payable to directors are given in the Directors'
Remuneration Report and details of Directors' shareholdings are given in the
Directors' Remuneration Report. Details of transactions with the Manager are
given in note 17 above. There have been no other transactions with related
parties during the year (2024: nil).
19. 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 and cash at bank.
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).
At 31 August 2025, the Company's investment portfolio was categorised as
follows:
2025
Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Investments in equities and equity linked securities 750,236 13,575 - 763,811
--------------- --------------- --------------- ---------------
Total 750,236 13,575 - 763,811
========= ========= ========= =========
Level 2 investments comprise one holding in Midea Group warrants 10/07/2026.
There were no transfers between Levels 1, 2 or 3 during the year ended 31
August 2025.
2024
Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Investments in equities and equity linked securities 719,252 16,355 - 735,607
--------------- --------------- --------------- ---------------
Total 719,252 16,355 - 735,607
========= ========= ========= =========
Level 2 investments comprise one holding in Midea Group warrants 10/07/2025.
There were no transfers between Levels 1, 2 or 3 during the year ended 31
August 2024.
20. Financial instruments' exposure to risk and risk management policies
The Company's investment objective is to provide a total return for investors
primarily through investments in equities and equity-related investments, of
companies which are based in, or which derive a significant proportion of
their revenues from, the Asia Pacific region and which offer attractive
yields. In pursuing this objective, the Company is exposed to a variety of
risks that 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 set out 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 are as follows:
· investments in equities and equity-related securities of
companies in the Asia Pacific region which are held in accordance with the
Company's investment objective;
· short-term receivables, payables and cash arising directly
from its operations; and
· a multicurrency credit facility with Bank of Nova Scotia, the
purpose of which is to assist in financing the Company's operations.
(a) Market risk
The fair value or 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 analysis 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 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.
(i) Currency risk
The majority 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 foreign currency risk
The Manager monitors the Company's exposure to foreign currencies and
regularly reports to the Board. The 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.
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 August 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.
2025 Japanese Hong Kong Australian Singapore Taiwan Thai US Other Total
yen
dollars
dollars
dollars
dollars
baht
dollars
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Current assets - 380 681 422 528 - 780 1,854 4,645
Current liabilities - - - - - - (37,008) - (37,008)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Foreign currency exposure on net monetary items - 380 681 422 528 - (36,228) 1,854 (32,363)
Investments held at fair value through profit or loss(1) 2,008 176,858 102,504 106,200 174,537 8,800 13,575 150,221 734,703
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total net foreign currency exposure 2,008 177,238 103,185 106,622 175,065 8,800 (22,653) 152,075 702,340
========= ========= ========= ========= ========= ========= ========= ========= =========
2024 Japanese Hong Kong Australian Singapore Taiwan Thai US Other Total
yen
dollars
dollars
dollars
dollars
baht
dollars
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Current assets - 2,770 2,117 651 2,774 - 521 374 9,207
Current liabilities - (2,290) (1,128) - - - (38,045) (740) (42,203)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Foreign currency exposure on net monetary items - 480 989 651 2,774 - (37,524) (366) (32,996)
Investments held at fair value through profit or loss(1) 7,986 132,790 110,040 111,422 163,787 7,977 16,355 154,185 704,542
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total net foreign currency exposure 7,986 133,270 111,029 112,073 166,561 7,977 (21,169) 153,819 671,546
========= ========= ========= ========= ========= ========= ========= ========= =========
1 Excluding any stocks priced in sterling.
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% (2024: 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:
2025 2024
£'000
£'000
Statement of Comprehensive Income - return after taxation
Net revenue return 3,024 3,101
Net capital (loss) (3,293) (2,415)
--------------- ---------------
Total return after taxation (269) 686
========= =========
Conversely if sterling had strengthened by 10% this would have had the
following effect:
2025 2024
£'000
£'000
Statement of Comprehensive Income - return after taxation
Net revenue (loss) (3,024) (3,101)
Net capital return 3,293 2,415
--------------- ---------------
Total return after taxation 269 (686)
========= =========
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
deposits and the interest payable on variable rate borrowings when interest
rates are re-set.
Management of interest rate risk
Liquidity and borrowings are managed with the aim of increasing returns to
shareholders. The Company's gearing policy is to limit gearing to 25% where
gearing is defined as borrowings used for investment purposes, less cash,
expressed as a percentage of net assets.
The possible effects on cash flows that could arise as a result of changes in
interest rates are taken into account when the Company draws on the credit
facility. However, amounts drawn down on this facility are for short-term
periods and therefore exposure to interest rate risk is not significant.
Interest rate exposure
The exposure of financial assets and financial liabilities to floating
interest rates, giving cash flow interest rate risk when rates are re-set, is
shown below:
2025 2024
£'000
£'000
Exposure to floating interest rates:
Cash and cash equivalents 8,527 6,942
Other payables: drawings on the credit facility (37,008) (38,045)
--------------- ---------------
Total exposure (28,481) (31,103)
========= =========
Cash deposits at call earn interest based on the Sterling Overnight Interest
Average ("SONIA") (2024: SONIA) rates.
The Company has arranged a £75 million credit facility with The Bank of Nova
Scotia, effective from 29 July 2025. Interest is payable at the aggregate of
the compounded Risk Free Rate ("RFR") for the relevant currency and loan
period, plus a margin. Amounts are normally drawn down on the facility for a
one month period, at the end of which it may be rolled over or adjusted. At 31
August 2025, the Company had drawn down US$50.0 million (£37.0 million) for a
one month period, at an interest rate of 5.26% per annum.
The Company had in place a £100 million credit facility with The Bank of Nova
Scotia, for the period 1st September 2024 to 28th July 2025. At 31 August
2024, the Company had drawn down US$50.0 million (£38.0 million) for a one
month period, at an interest rate of 6.38% per annum.
The above year-end amounts are not representative of the exposure to interest
rates during the year as the level of cash balances and drawings on the credit
facility have fluctuated. The maximum and minimum net interest rate exposure
during the year has been as follows:
2025 2024
£'000
£'000
Maximum interest rate exposure during the year - net debt (37,867) (36,485)
Minimum interest rate exposure during the year - net debt (25,781) (22,131)
========= =========
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to a 1.0% (2024: 1.0%) increase or decrease in
interest rates in regards to the Company's monetary financial assets and
financial liabilities. This level of change is considered to be a reasonable
illustration based on observation of current market conditions. The
sensitivity analysis is based on the Company's monetary financial instruments
held at the balance sheet date with all other variables held constant.
2025 2024
Statement of Comprehensive Income - return after taxation 1.0% 1.0% 1.0% 1.0%
increase
decrease
increase
decrease
in rate
in rate
in rate
in rate
£'000
£'000
£'000
£'000
Net revenue (loss)/return (63) 63 (83) 83
Net capital (loss)/return (222) 222 (228) 228
--------------- --------------- --------------- ---------------
Net total (loss)/return (285) 285 (311) 311
========= ========= ========= =========
Net (liabilities)/assets (285) 285 (311) 311
========= ========= ========= =========
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 and drawings on the credit
facility.
(iii) Market price risk
Market price risk includes changes in market prices which may affect the value
of the Company's 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 August
comprised the following:
2025 2024
£'000
£'000
Investments at fair value through profit or loss 763,811 735,607
========= =========
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 in the Annual Report and
Accounts. This shows that the portfolio principally comprises investments
quoted on Asian stock markets. Accordingly there is a concentration of
exposure to that region. However it should be noted that an investment may not
be entirely exposed to the economic conditions in its country of domicile or
of listing.
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 20% (2024: 20%) in the fair
values of the Company's equities. This level of change is considered to be a
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.
2025 2024
Statement of Comprehensive Income - return after taxation 20% 20% 20% 20%
increase
decrease
increase
decrease
in fair value
in fair value
in fair value
in fair value
£'000
£'000
£'000
£'000
Net revenue (loss)/return (428) 428 (412) 412
Net capital return/(loss) 152,121 (152,121) 146,503 (146,503)
--------------- --------------- --------------- ---------------
Total return/(loss) after taxation 151,693 151,693) 146,091 (146,091)
========= ========= ========= =========
(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. Short-term flexibility is achieved through the use of a credit
facility.
The Board's policy is for the Company to remain fully invested in normal
market conditions and that the credit facility be used to manage working
capital requirements and to gear the Company as appropriate.
Liquidity risk exposure
Contractual maturities of financial liabilities, based on the earliest date on
which payment can be required are as follows:
2025 2024
Three
Three
months
months
or less
or less
£'000
£'000
Other payables
Bank loan - including interest 37,008 38,251
Securities purchased awaiting settlement 1,140 3,757
Other payables and accruals 6,263 6,037
--------------- ---------------
44,411 48,045
========= =========
(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 almost entirely in markets that operate a "Delivery Versus
Payment" settlement process which mitigates the risk of losing the principal
of a trade during settlement. The 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 Manager's credit committee.
The Company may sometimes invest in equity-linked securities, such as low
exercise price options, warrants, participatory notes and depositary receipts,
which provide synthetic equity exposure where the Company may otherwise find
it problematic to invest in the underlying assets directly. They have the same
economic risks as a direct investment, except that there is a counterparty
risk to the issuing investment bank. Counterparties must be approved by the
Manager's Credit Risk Team based on a list of criteria and are monitored on an
ongoing basis by Schroders' Portfolio Compliance Team.
Exposure to the custodian
The Custodian of the Company's assets at the balance sheet date was HSBC Bank
plc which has Long-Term Credit Ratings of AA- with Fitch and A1 with 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 of its investments 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 balance sheet. In
accordance with usual banking practice, the Company will rank as a general
creditor to the Custodian in respect of cash balances and open currency
contracts.
Credit risk exposure
The following amounts shown in the balance sheet, represent the maximum
exposure to credit risk at the current and comparative year end.
2025 2024
Current assets Balance Maximum Balance Maximum
sheet
exposure
sheet
exposure
£'000
£'000
£'000
£'000
Receivables - dividends and interest 2,720 2,720 2,962 2,962
Securities sold awaiting settlement 1,379 1,379 3,017 3,017
Cash and cash equivalents 8,527 8,527 6,942 6,942
--------------- --------------- --------------- ---------------
12,626 12,626 12,921 12,921
========= ========= ========= =========
No items included in "Receivables" are past their due date and none have been
provided for.
21. Capital management policies and procedures
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding year.
The Company's debt and capital structure comprises the following:
2025 2024
£'000
£'000
Debt
Bank loan 37,008 38,045
--------------- ---------------
Equity
Share capital 234,347 234,347
Reserves 497,748 465,968
--------------- ---------------
732,095 700,315
========= =========
Total debt and equity 769,103 738,360
========= =========
The Company's capital management objectives are to ensure that it will
continue as a going concern and to maximise total return to its equity
shareholders through an appropriate level of gearing.
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.
2025 2024
£'000
£'000
Borrowings used for investment purposes, less cash 28,481 31,103
Net assets 732,095 700,315
Gearing 3.9% 4.4%
========= =========
The Board, with the assistance of the Manager, monitors and reviews the broad
structure of the Company's capital on an ongoing basis. This review includes:
· the planned level of gearing, which takes into account the
Manager's views on the market;
· the need to buy back the Company's own shares for
cancellation or to hold in treasury, which takes into account the share price
discount;
· the opportunities for issuance of new shares or to reissue
shares from treasury; and
· the amount of dividend to be paid, in excess of that which is
required to be distributed.
22. Events after the accounting date that have not been reflected in the
financial statements
The Depositary, Administration and Custody services of the Company
transitioned from HSBC Bank plc to J.P. Morgan Europe Limited and JPMorgan
Chase Bank, N.A., London Branch effective 3 October 2025.
As detailed in the Section 172 Report within the Annual Report and Accounts,
following discussions regarding the fee structure, on 6 November 2025 the
Board and Manager agreed as follows:
· the performance fee will be terminated as of 31 August 2026;
· the cap on the total amount of any performance fee payable
this year will be reduced to 0.55% of the net asset value payable, calculated
at the end of the relevant accounting period.
· a new marketing fee of £200,000 payable to the Manager will
be introduced from the end of this current financial year; and
· the notice period in the AIFM agreement will be reduced from
12 to 6 months
There have been no other events we are aware of since the balance sheet date
which either require changes to be made to the figures included in the
financial statements or to be disclosed by way of note.
2025 Financial Information
The figures and financial information for 2024 are extracted from the Annual
Report and Financial Statements for the year ended 31 August 2025 and do not
constitute the statutory accounts for that year. The Annual Report and
Financial Statements include the Report of the Independent Auditors which is
unqualified and does not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006. The Annual Report and Financial
Statements will be delivered to the Registrar of Companies in due course.
2024 Financial Information
The figures and financial information for 2023 are extracted from the
published Annual Report and Financial Statements for the year ended 31 August
2024 and do not constitute the statutory accounts for the year. The Annual
Report and Financial Statements have been delivered to the Registrar of
Companies and included the Report of the Independent Auditors which was
unqualified and did not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006.
Neither the contents of the Company's web pages nor the contents of any
website accessible from hyperlinks on the Company's web pages (or any other
website) is incorporated into, or forms part of, this announcement.
6 November 2025
For further information:
Natalia de Sousa
Schroder Investment Management Limited
E-mail: AMCompanySecretary@Schroders.com
(mailto:AMCompanySecretary@Schroders.com)
Issued by Schroder Investment Management Limited. Registration No 1893220
England.
Authorised and regulated by the Financial Conduct Authority.
ENDS
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