REG - Schroder Orientl Inc - Half-year Report
Thu 07:00
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250522:nRSV6475Ja&default-theme=true
RNS Number : 6475J Schroder Oriental Income Fund Ltd 22 May 2025
Schroder Oriental Income Fund Limited
Half year report for the six months ended 28 February 2025
Schroder Oriental Income Fund Limited (the "Company") hereby submits its half
year report for the six months ended 28 February 2025 as required by the
Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.2.
Nick Winsor, Chairman of the Company, commented:
"Our strategy of investing in income producing companies with strong balance
sheets that can successfully navigate today's challenges has never felt more
relevant to investors, and the Board believes that the portfolio management
team remains well placed to capitalise on these investment opportunities."
Key highlights
· Over the past decade, the Company has delivered an impressive
cumulative NAV total return of +116.3%, outperforming the reference benchmark,
which returned +83.3%.
· The net asset value per share of the Company delivered a positive
return of +2.5% over the six months to end February 2025 but lagged the
Reference Index over the period.
· This relative underperformance was in large part due to
underweight positioning in China and the rally of internet platform names and
IT companies - most of which pay little or no dividend, resulting in minimal
exposure there.
· The Company's portfolio continues to be focused on the core
Asia-Pacific markets of Taiwan, Australia, Singapore, and China/Hong Kong.
· The Company has paid a first and second interim dividend for the
year ending 31 August 2025 of 2.00 pence per share.
· Having grown its dividend every year since launch, the Company is
classed in the AIC's next generation of dividend heroes and it remains the
Board's aim to achieve full dividend hero status.
The Company's half year report is being published in hard copy format and an
electronic copy of that document will shortly be available to download from
the Company's web pages Schroder Oriental Income Fund Limited
(https://www.schroders.com/en-gb/uk/individual/funds-and-strategies/investment-trusts/schroder-oriental-income-fund-limited/)
The Company's half year report will shortly be uploaded to the Financial
Conduct Authority's National Storage Mechanism and will 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 / Charlotte Banks (Press) 020 7658 6000
Natalia de Sousa (Company Secretary) 020 7658 6000
Chairman's Statement
I am pleased to present my first interim report as Chairman of the Company. I
would like to begin by thanking Paul Meader, the outgoing Chair, for his
commitment, dedication and wisdom over the past eight years. The Company
performed well under Paul's leadership and I look forward to building on this
success, working with my colleagues on the Board and the investment team at
Schroders, to deliver strong returns to you, our shareholders.
Performance
The period under review was characterised by two distinct factors affecting
Asia-Pacific markets: an initial rally in China as a result of government
stimulus, which subsequently faltered due to a lack of further support
measures, and a later period of volatility across the region as investors
sought to digest the implications of Donald Trump's election for a second term
as US president. In addition to the uncertainty created by the election of
President Trump, a firmer outlook for interest rates and a stronger dollar
also negatively impacted sentiment across the region.
Against this backdrop, the Company's NAV per share total return was +2.5%,
which lagged the Reference Index (MSCI AC Pacific ex Japan (Net of Dividends
Reinvested) Index in Sterling terms) return of +10.4%. The share price total
return for the six months ended 28 February 2025 was +4.9%. This performance
gap was largely as a result of being underweight China, where we remain
cautious due to the significant economic challenges facing the government, and
where technology stocks were the main beneficiaries of the rally. These
companies generally do not pay dividends and fall outside the investment
mandate of the Company. We have experienced similar short-term performance
gaps in the past and remain confident in the medium-term outlook.
You can read a more detailed account of company performance in the Investment
Manager's Report.
Outlook
The outlook for global investment markets has become increasingly uncertain.
President Trump's inauguration came late on in our first-half reporting
period, and while he quickly signed a slew of executive orders in his first
weeks in office, these were largely focused on domestic and border matters
rather than on broader international trade. More recently there has been a
marked shift, with the announcement of significant tariffs on US trading
partners across the world, some of the highest of which were seen in Asia:
Cambodia (49%); Vietnam (46%); Thailand (36%) and Taiwan (32%), the latter
being a critical element of the global technology supply chain.
At the time of writing, these tariffs have been 'paused' (scaled back to 10%)
for 90 days to allow time for bilateral negotiations. Meanwhile, Presidents
Trump and Xi of China are engaged in an escalating battle of tit-for-tat
tariff increases, which has unsettled investors around the world. These
factors present a significant challenge to the recent trend in global
manufacturing, which had seen US-domiciled businesses, such as Apple, shift
some of its production of iPhones, iPads, MacBooks, and AirPods from China to
Vietnam and India.
Nevertheless, the economies of Asia remain among the fastest growing in the
world, according to the latest International Monetary Fund forecasts, and this
growth is being increasingly driven from within the region itself. The Asian
Development Bank has noted that 52% of the foreign direct investment in Asia
is intra-regional and the degree of Asia's trade integration is now comparable
to that of the European Union and the UK. If the region can continue on this
path, then the long-term prospects for your Company and the businesses in
which it invests should remain favourable, regardless of how the dust from
President Trump's tariff war settles.
Discount Management
The Board endorses share buybacks when the market price significantly
undervalues the portfolio and closely monitors the Company's share price
relative to its NAV, committing to repurchasing shares to effectively manage
this situation. During the six months up to 28 February 2025, the Company
repurchased 9,632,000 ordinary shares. The Board remains confident in the
intrinsic value of the Company's investments and will continue to repurchase
shares when it meaningfully enhances asset value per share.
Revenue and Dividends
The Company has paid a first interim dividend for the year ending 31 August
2025 of 2.00 pence per share (2024: 2.00 pence per share) on 14 February 2025.
A second interim dividend of 2.00 pence per ordinary share was paid on 16 May
2025 to shareholders on the register at close on 2 May 2025.
The income from investments received by the Company during the first half of
the financial year has fallen marginally by 1.3% compared to the same period
last year. The Company has revenue reserves of £23,657,000 (equivalent to
10.19 pence per share) after paying the first interim dividend. Such reserves
are available to support the level of dividend you receive. This ability
remains key advantage of investment trusts over other savings and investment
vehicles.
In the short-term, volatility is likely to prevail, and, in such an
environment, dividends stand out as a reliable anchor. The Asia-Pacific
markets produce some of the highest dividend yields globally, yet pay-out
ratios are below the global average, suggesting considerable scope for future
dividend growth. Furthermore, several Asian nations (including China, India,
Japan and Korea) have made or are implementing corporate governance reforms to
encourage a greater focus on shareholder returns. Companies that prioritise
rewarding their shareholders through dividends often possess defensive
qualities such as strong balance sheets and consistent earnings, and this has
underpinned the historically observed ability of yield-focused investment
strategies to outperform during times of market stress.
Having grown its dividend every year since launch, the Company is classed in
the 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.
Gearing
The Company has established a £100 million revolving credit facility with The
Bank of Nova Scotia. During the period, the average gearing was 5.5%,
contributing modestly, net of financing costs, to the Company's overall
performance.
Summary
Asian countries are grappling with uncertainty regarding potential trade
restrictions/tariffs under the Trump administration, especially in relation to
China. This unpredictability, coupled with rising US interest rates, volatile
exchange rates and the challenges facing the Chinese economy, are likely to
weigh on regional stock performance. Against this background, our strategy of
investing in income producing companies with strong balance sheets that can
successfully navigate today's challenges has never felt more relevant to
investors, and the Board believes that the portfolio management team remains
well placed to capitalise on these investment opportunities.
NICK WINSOR
Chairman
21 May 2025
Investment Manager's Review
Ten Year Cumulative Performance - total returns
6 months 1 year 3 years 5 years 10 years
Share Price +4.9 +14.6 +19.4 +59.9 +103.8
Net Asset Value(1) +2.5 +12.7 +18.6 +53.1 +116.3
Reference index +10.4 +17.5 +10.4 +25.3 +83.3
Source: Morningstar, 28 February 2025, net of fees. All data is after fees.
Share price data is now sourced from Morningstar. The Reference Index is the
MSCI AC Pacific ex Japan. (1)Cum-income fair NAV.
Asia-Pacific (ex Japan) markets in the six months to end of February 2025 were
dominated by shifting sentiment towards China, as well as the impact on Asia
of the election of Donald Trump for a second term as US president. Against
this backdrop, China was the standout performer, accounting for a significant
portion of the total return of the Reference Index, which was up 10.4% over
the period in sterling.
The net asset value per share of the Company also delivered a positive return,
but meaningfully lagged the Reference Index over the period, recording a total
return of +2.5% over the six months to end February 2025. This relative
underperformance was in large part due to our underweight positioning in
China. It should also be said that it was a tough period for income-orientated
investors, with the top three quintiles of the region by dividend yield (that
is, the highest-yielding 60% of the market) all lagging the Reference Index
and the lowest-yielding quintile up more than 20% - double the return of the
index. During the period, two interim dividends have been declared totalling
8.00p (H1 2024: 7.80p).
This report delves further into the drivers of this performance, as well as
factors influencing the current investment landscape and the potential
implications for investors.
Performance of the Reference Index in GBP and USD - 31 August 2024 to 28
February 2025
At the full year, we identified the outlook for China and the US elections as
the likely key drivers for Asian markets. In China, the market initially
rallied very strongly on the back of a much more coordinated set of stimulus
announcements in September. However, the lack of further meaningful measures
disappointed, which saw the market pull back and move sideways for much of the
rest of 2024. Meanwhile, regional sentiment took a knock with the election of
President Trump in November, with his approach to trade tariffs and expected
stimulatory economic agenda seeing interest rate expectations and the dollar
strengthen - usually an unfavourable combination for Asia. It was also a
period marked by a strong outperformance of growth versus value stocks (that
is, higher priced stocks with faster earnings growth prospects versus those
that are perceived as trading below their intrinsic value trading on
relatively low valuations often with high yields), which has historically not
been a great backdrop for income strategies, given growth companies' lower
propensity for paying out dividends.
The other major catalyst for the Chinese market during the review period
occurred towards the end of January, when artificial intelligence (AI)
business DeepSeek launched a new large language model (LLM) apparently
developed at the fraction of the cost of the US market leaders such as
ChatGPT. This saw a surge in the share prices of a number of China's internet
platform companies, which were perceived as beneficiaries of this development.
Unfortunately, this was a headwind for our relative performance given these
companies in general pay little in the way of dividends and therefore tend to
be unattractive in the context of the Company's investment criteria.
The other consequence of the launch of this 'low cost' AI model was to call
into question the need for the current and anticipated high level of spending
on AI-related semiconductors, which caused a lot of the technology names
related to capital spending in this area to sell off. This saw a meaningful
correction in Taiwan, with a number of companies exposed to the Nvidia supply
chain being notably weak.
Across the region, the spread of returns was particularly high. Alongside
China, the only markets to outperform the Reference Index were Hong Kong and
Singapore. Hong Kong benefitted from the positive sentiment towards China, but
lagged mainland returns by a considerable margin in part due to the change in
interest rate outlook for the US, where 'higher for longer' is a headwind
given the combination of a currency peg to the US dollar and a weaker domestic
economy. Singapore, on the other hand, benefitted from the higher rates
outlook given its large weighting to financials, as higher interest rates tend
to be positive for banks' net interest margins.
Looking at the laggards, Korea was the weakest market, impacted by the
political chaos that ensued following the introduction of martial law there,
which culminated in the impeachment and eventual removal from office of
President Yoon Suk Yeol. Although the crisis itself was brief, it also
impacted the currency and saw the market de-risk as investors sought relative
safety. From a stock perspective, Samsung Electronics fell, with sentiment
dented by the ongoing delays to its gaining qualification to supply
high-bandwidth memory to Nvidia. Higher rates and the stronger dollar impacted
smaller markets with weaker external accounts, including Indonesia and the
Philippines. Sentiment in Indonesia was further affected by concerns over the
new President's economic policies and potential appointments in his
administration.
Of the major sectors, consumer discretionary and communications services were
the standout outperformers at an index level, driven by the large Chinese
weighting to the internet names which performed well. Financials also
outperformed on higher rate expectations, whilst information technology (IT)
lagged following a sell-off late in the period on concerns around demand for
AI-related semiconductors as described earlier. Materials and energy were also
weaker as commodity prices pulled back on concerns over supply and demand.
Positioning and performance
As we highlighted above, the Company made gains over the period, with a NAV
total return of 2.5%, but considerably lagged the reference index return of
10.4%.However, over the past decade, the Company has delivered an impressive
cumulative NAV total return of +116.3%, outperforming the Reference Index
which returned +83.3%. The vast majority of our relative underperformance over
the six months to 28 February 2025 came from one market - China - where our
significant underweight allocation and stock selection (the relative impact of
which includes stocks we do not own) both detracted. As previously mentioned,
the strength of the rally in China was narrowly focused on the internet
platform names, such as Alibaba, most of which pay little or no dividend,
resulting in our having minimal exposure there. A partial offset to this came
from our overweight to and stock selection in Hong Kong, with holdings in
financials Hong Kong Exchange and BOC Hong Kong outperforming. Smaller drags
came from our overweight positioning in Indonesia and stock selection in
Korea, where the biggest detractor was the overweight to Samsung Electronics,
for the reasons touched on earlier. Elsewhere there were positives from stock
selection in Taiwan (fabless semiconductor design house MediaTek and
semiconductor packager ASE Technology) and Thailand, where Kasikornbank
materially outperformed. The overweight to Singapore was positive, albeit
largely offset by negative stock selection there. From a sectoral perspective,
positioning in Consumer Discretionary and Communications Services were the
biggest drag due to our underweight to Chinese names in those sectors.
Information technology also lagged thanks to our holding in Samsung
Electronics and not owning Xiaomi, a Chinese smartphone and electric vehicle
(EV) producer. Positively, stock selection in Materials (diversified mining
groups Rio and BHP) and Real Estate (China Resources Land and Hang Lung Group)
was strong, and the underweights to Healthcare, Utilities and Materials also
contributed positively.
Geographically, the Company's portfolio continues to be focused on core
Asia-Pacific (ex Japan) markets such as Taiwan, Australia, Singapore, China,
and Hong Kong. China remains a substantial underweight versus the Reference
Index, but we have selectively added there, as well as into Hong Kong. This
has seen us initiate two new positions in mainland China. Anta Sports is a
domestic sportswear company, with several leading and emerging brands in
China. It is a key beneficiary of the long-term market share shift in China
away from international sportswear names (such as Nike and Adidas) in favour
of home-grown brands. We also added Kweichow Moutai, the producer of China's
leading Baiju product, a premium alcoholic beverage. The strength of its brand
and distribution network allows Moutai to earn superior returns, but it had
de-rated along with other Chinese consumer stocks given the weak economy and
consumer confidence, presenting a good buying opportunity. We have also added
to our position in videogaming company NetEase, a new holding in the previous
financial year. The underweight to China continues to be partly offset by an
overweight to the Hong Kong market, which, in general, looks more attractive
from a valuation perspective; there we have increased our position in regional
insurer AIA. We also initiated an off-benchmark position in Power Grid in
India, which had sold off recently along with the wider market. It is a
beneficiary of the growth in transmission capacity of the Indian electricity
network, with renewable solar and wind projects needing to be linked into the
wider grid. Elsewhere, we continue to like Singapore, where we have positions
in the banks and Singapore Telecom, as well as being overweight in some of the
smaller markets such as Indonesia and the Philippines.
From a sectoral perspective our main additions were into some of the
traditionally more defensive areas that had underperformed, such as Consumer
Staples and Utilities. As mentioned, we bought new positions in Chinese staple
Kweichow Moutai and Indian utility Power Grid. These additions were, in part,
financed by reductions to Information Technology. Until recently, the IT
sector had performed very strongly on the back of the AI thematic, where there
are increasing signs that the market has got ahead of itself given question
marks over the long-term sustainability of demand. Therefore, in Taiwan we
reduced our holdings in Delta Electronics, TSMC and MediaTek. We also reduced
the size of our overweight position in Samsung Electronics, partly reflecting
reduced conviction given disappointing execution, and sold out of Venture, a
contract manufacturer in Singapore. In financials, we made a net reduction to
our overweight by reducing our banks exposure, including selling out of
Westpac and trimming some of the other Australian names, and exiting the small
remaining position in China Construction Bank, which had performed well.
Financials and IT remain the Company's two largest exposures, although we have
brought down the size of the overweight to the latter for the reasons
mentioned earlier.
Investment outlook
Perhaps of greatest concern for investors in Asia, at the time of writing, is
the uncertainty around the longer-term impact of trade restrictions on
countries in the region - and China in particular - as a result of punitive
tariffs announced by the Trump administration. Here it is 'uncertainty' that
is the key, rather than the absolute level of any tariffs. After all, we have
already seen that any announcements coming from the White House can quickly be
reversed, changed or forgotten. While the barriers to trade and investment
have certainly risen from their levels prior to the end of the review period,
the eventual extent and precise targets of increased restrictions remain hard
to predict. Indeed, differential tariffs or restrictions (i.e. China facing
greater barriers) could end up benefiting other exporting countries across
Asia, which will become relatively more competitive. However, with President
Trump having so far shown little distinction between allies and adversaries
when it comes to trade policy, there is no guarantee that any country with a
bilateral trade surplus with the US can avoid being further targeted. Asian
exports remain a key driver for regional earnings (see chart in the Half Year
Report) so the impact of policy here, as well as the broader strength of the
US economy, will continue to be a key focus for markets given the size and
scope of tariffs, at the time of writing, have materially exceeded
expectations (even from those at the start of the year).
Another key driver of Asian stock market performance is likely to be the path
of US interest rates and the strength of the US dollar in coming years. Global
bond and currency markets have already started to price in a 'higher for
longer' interest rate outlook, driven by the incoming administration's
protectionist and looser fiscal policies, which are seen as likely to lead to
stickier inflation. This reassessment, together with an improved outlook
elsewhere, has seen the dollar actually weaken since the beginning of the
year, which (until "Liberation Day") was accompanied by a rally in Asian
markets in line with historic precedent (see chart in the Half Year Report).
That said, higher interest rates would likely prove a headwind for those
countries with weaker external balances, including some of the ASEAN markets,
although they could be a tailwind for other areas, including many Asian
financial stocks.
The other major driver has been China. Within the region, the Chinese economy
remains weak, as consumer confidence is still extremely low. Although the
government has announced further measures to support the economy (extending
and expanding subsidies for home appliances, EVs and other durable consumer
products, for example), 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. More recently, the excitement
around the success of the launch of DeepSeek's new LLM and what appears to be
a more constructive approach towards the private sector, following a meeting
between President Xi and top business leaders (including Jack Ma, the former
leader of Alibaba) sparked hope that we could see an improvement in 'animal
spirits' across the broader economy. Furthermore, some investors expect the
government to be more aggressive on stimulus once there is more clarity on the
tariffs exporters will face under the new US administration, but there is
scope for disappointment if this fails to materialise. Also, the recent
surprise addition of internet platform company Tencent and battery maker
Contemporary Amperex Technology (CATL) to a US Department of Defence list of
Chinese military-linked companies underlined the ongoing uncertainties facing
investors from US-China tensions.
With China's domestic and external sectors both facing challenges, we remain
underweight the market, though we have added to some positions over the
period. As a reminder, it is always likely we will be underweight China given
the significant weighting in the index to internet platform companies, which
pay relatively little from a dividend perspective. A focus on rewarding
shareholders has become more prevalent in the market, but among these names it
has been focused mainly on share buybacks rather than dividends.
We remain overweight Hong Kong, in part as an offset to our underweight to the
China market but it continues to suffer not only from the spillover impacts of
a weak China, but also the high level of interest rates, which, as noted
earlier, are inappropriate for the weak domestic economy.
In the South-East Asian region, we are most exposed to Singapore, which is
benefitting from its increasing status as a regional wealth management hub, as
well as the growth of its ASEAN neighbours. We also have direct exposure to
some of the smaller ASEAN markets, such as Indonesia, Vietnam, Thailand and
the Philippines; however, while valuations look increasingly attractive in
this region, they are some of the most exposed in Asia to higher global
interest rates and a strong US dollar. As mentioned earlier, there is also
some concern over the political developments in Indonesia which bear
monitoring. India (which does not feature in our Reference Index) remains a
relatively expensive low-yielding market, but has started to offer more value
following its recent pullback, hence our initiation of a position in Power
Grid.
Our Australian weighting is broadly neutral, having moderated our exposure to
the market partially by reducing our banking positions. Although Australia
remains an attractive market, from the perspective of strong shareholder focus
and being relatively insulated from the impact of the US election, its
earnings outlook is lacklustre and its relative valuation high. This is in
part because its large banking sector has rerated materially despite the
earnings outlook being largely unchanged, leaving it relatively fully valued
in our view. And although the other major sector - resources - looks
relatively cheap from a valuation perspective, commodity prices have been
under pressure as Chinese growth has disappointed, which will continue to
weigh on earnings growth.
As described above, from a sector perspective, Information Technology
experienced one of the biggest changes in sentiment over the period given the
potential impact on slowing demand for advanced semiconductors if capital
expenditure among the big US tech companies peaks. The question for us remains
how successfully some of these AI 'models' can be monetised; thus far, beyond
the big internet companies such as Meta in the US and Tencent in China, there
is still very limited evidence of enterprise or consumer willingness to spend
significant sums of money on AI services. There is therefore potentially a
discrepancy between the capex from tech companies on AI servers and the
datacentres needed to house them, and the revenues being generated from this
spending. Whether this is merely a timing mismatch remains to be seen -
history does suggest falling prices tend to lead to greater demand, but for
now there is clearly potential for some indigestion. Therefore, we have
moderated our overweight in IT in recent months, given this uncertainty and
the fact valuations had moved higher on cyclical improvements and the surge in
demand for AI hardware.
We also remain overweight to financials - a diverse sector spanning not only
banks, but also insurers and exchange companies. The banks we own are
generally well capitalised with strong deposit franchises. Many of our
holdings are in the more mature markets, such as Singapore, which in general
trade at attractive valuations and decent dividend yields, but we also have
exposure to the faster growing hinterlands. Direct exposure to these
developing economies, where credit penetration is relatively low, includes
ASEAN markets such as Indonesia. The direction of interest rates from here
will be an important driver of relative performance for many financials, given
the importance of rates for net interest margins.
We believe aggregate valuations for the region are no longer particularly
cheap and as of the end of March are trading at slightly above long-term
averages. However, this masks a large variation across individual markets,
with Hong Kong, Korea, Indonesia and the Philippines, looking relatively cheap
versus history, whilst India, Australia and Singapore look relatively
expensive (see chart in the Half Year Report). China is no longer at the
bottom end of its valuation range following its rally in early 2025, though it
doesn't look expensive either.
In the short-term at least, we believe it is the actual (as opposed to
speculated) policies of the Trump administration, the responses to these, and
ultimately the impact they have on US and global growth that will drive
markets. Against this backdrop, any further announcements regarding Chinese
stimulus are likely to be of particular significance from an Asian perspective
together with the path of global interest rates.
Turning to dividends, payout ratios remain reasonable, dividend yields in
aggregate are comparable to or higher than most major markets except the UK,
and consensus expectations are for some growth in underlying earnings which,
if correct, should see some corresponding growth in local dividends. Perhaps
the bigger unknown is the outlook for the currencies, in particular sterling.
Over the last two years, the pound has been relatively strong versus the
dollar and a number of Asian currencies, which has been a headwind for
dividends once translated into sterling. More recently, sterling had started
to show some weakness against the dollar and other currencies, before
reversing some of those falls.
Thank you for your continued trust and investment in the Schroder Oriental
Income Fund.
RICHARD SENNITT
Portfolio Manager
For Schroder Investment Management Limited
21 May 2025
Investment Portfolio at 28 February 2025
Investments are classified by the Manager in the region or country of their
main business operations or listing. Stocks in bold are the 20 largest
investments, which by value account for 61.5% (29 February 2024: 57.9% and 31
August 2024: 59.8%) of total investments and derivative financial instruments.
£'000 %
Taiwan
TSMC 78,919 11.1
MediaTek 24,568 3.5
ASE Technology 17,548 2.5
Hon Hai Precision Industries 17,254 2.4
United Microelectronics 9,845 1.4
Uni-President Enterprises 7,715 1.1
Delta Electronics 6,307 0.9
--------------- ---------------
Total Taiwan 162,156 22.9
========= =========
Australia
Telstra 19,279 2.7
Rio Tinto(1) 14,491 2.1
BHP Billiton(1) 12,770 1.8
National Australia Bank 12,629 1.8
Coles Group 12,091 1.7
Suncorp 11,699 1.7
ANZ Group 11,349 1.6
Sonic Healthcare 7,819 1.1
Woodside Energy 7,508 1.1
Woolworths 6,372 0.9
Orica 4,016 0.6
--------------- ---------------
Total Australia 120,023 17.1
========= =========
Singapore
Oversea-Chinese Banking 26,590 3.8
Singapore Telecommunications 25,141 3.6
DBS 24,358 3.5
CapitaLand Integrated Commercial Trust (REIT^) 10,264 1.5
CapitaLand Ascendas (REIT^) 9,875 1.4
United Overseas Bank 9,429 1.3
Singapore Exchange 7,385 1.0
--------------- ---------------
Total Singapore 113,042 16.1
========= =========
China
Midea Group warrants 10/07/2025(2) and A shares 20,893 3.0
NetEase 15,039 2.1
China Petroleum & Chemical H shares(3) 9,142 1.3
Anta Sports Products(3) 8,846 1.3
Ping An Insurance H shares(3) 8,070 1.1
Shenzou International(3) 8,022 1.1
China Pacific Insurance(3) 7,873 1.1
Sany Heavy Industry A Shares 7,654 1.1
Kweichou Moutai 7,429 1.1
China Resources Land(3) 6,016 0.9
--------------- ---------------
Total China 98,984 14.1
========= =========
Hong Kong (SAR)
BOC Hong Kong 22,367 3.2
Hong Kong Exchanges & Clearing 16,216 2.3
AIA Group 15,615 2.2
HKT Trust and HKT 8,019 1.1
Link REIT^ 6,539 0.9
Swire Properties 5,547 0.8
Hang Lung Group 4,132 0.6
Swire Pacific B 3,323 0.5
Hang Lung Properties 2,990 0.4
--------------- ---------------
Total Hong Kong (SAR) 84,748 12.0
========= =========
Korea
Samsung Electronics (including preference shares) 32,586 4.6
Samsung Fire and Marine Insurance (including preference shares) 13,734 1.9
SK Telecom 9,002 1.3
KB Financial 7,614 1.1
Kia Corporation 6,929 1.0
--------------- ---------------
Total Korea 69,865 9.9
========= =========
Indonesia
Bank Mandiri 11,234 1.6
Telekomunikasi Indonesia 5,892 0.8
Bank Negara Indonesia 5,210 0.7
--------------- ---------------
Total Indonesia 22,336 3.1
========= =========
Thailand
Kasikornbank NDVR* 8,708 1.2
--------------- ---------------
Total Thailand 8,708 1.2
========= =========
India
Power Grid Corporation of India 7,519 1.1
--------------- ---------------
Total India 7,519 1.1
========= =========
Philippines
International Container Terminal Services 7,090 1.0
--------------- ---------------
Total Philippines 7,090 1.0
========= =========
Vietnam
Vietnam Dairy Products 6,511 0.9
--------------- ---------------
Total Vietnam 6,511 0.9
========= =========
Japan
Sumitomo Mitsui Financial Group 4,174 0.6
--------------- ---------------
Total Japan 4,174 0.6
========= =========
Total Investments(4) 705,156 100.0
========= =========
1 Listed in the UK
2 Listed in Luxembourg
3 Listed in Hong Kong
4 Total investments comprises:
£'000 %
Equities and NVDR 662,510 94.0
Preference shares 30,347 4.3
Warrants 12,299 1.7
--------------- ---------------
Total Investments 705,156 100.0
========= =========
* "NVDR" means non-voting depositary receipts
^ "REIT" means real estate investment trust
Interim Management Statement
Investment Policy
The investment policy of the Company is to invest in a diversified portfolio
of investments, primarily equities and equity-related investments, of
companies which are based in, or derive a significant proportion of their
revenues from, the Asia Pacific region. The portfolio is diversified across a
number of industries and a number of countries in that region. The portfolio
may include government, quasi-government, corporate and high yield bonds and
preferred shares.
Equity-related investments which the Company may hold include investments in
other collective investment undertakings (including real estate investment
trusts and related stapled securities), warrants, depositary receipts,
participation certificates, guaranteed performance bonds, convertible bonds,
other debt securities, equity-linked notes and similar instruments (whether or
not investment grade) which give the Company access to the performance of
underlying equity securities, particularly where the Company may be restricted
from directly investing in such underlying equity securities or where the
Manager considers that there are benefits to the Company in holding such
investments instead of directly holding the relevant underlying equity
securities. Such investments may be listed or traded outside the Asia Pacific
region. Such investments may subject the Company to credit risk against the
issuing entity. The Company may also participate, subject to regulatory and
tax implications, in debt-to-equity conversion programmes.
The Manager may consider writing calls over some of the Company's holdings, as
a low risk way of enhancing the returns from the portfolio, although it has
not written any to date. The Company may only invest in derivatives for the
purposes of efficient portfolio management. The Board has set a limit such
that covered calls cannot be written over portfolio holdings representing in
excess of 15% of gross assets. Investors should note that the types of
equity-related investments listed above are not exhaustive of all of the types
of securities and financial instruments in which the Company may invest, and
the Company will retain the flexibility to make any investments unless these
are prohibited by the investment restrictions applicable to the Company.
Although the Company has the flexibility to invest in bonds and preferred
shares as described above, the intention of the directors is that the assets
of the Company which are invested (that is to say, which are not held in cash,
money funds, debt securities, interest bearing gilts or treasuries) will
predominantly comprise Asia Pacific equities and equity-related investments.
Principal risks and uncertainties
The principal risks and uncertainties of the Company's business fall into the
following categories: geopolitical, market, currency/exchange rate, investment
performance, climate change, service provider performance, and cyber.
A detailed explanation of the risks and uncertainties in each of these
categories can be found on pages 24 to 26 of the Company's published annual
report and accounts for the year ended 31 August 2024.
These principal risks and uncertainties have not materially changed during the
six months ended 28 February 2025.
Going concern
Having assessed the principal risks and uncertainties, and the other matters
discussed in connection with the viability statement as set out on page 27 of
the Company's published annual report and accounts for the year ended 31
August 2024, the directors consider it appropriate to adopt the going concern
basis in preparing the interim report.
Related party transactions
There have been no transactions with related parties that have materially
affected the financial position or the performance of the Company during the
six months ended 28 February 2025.
Directors' responsibility statement
The directors confirm that, to the best of their knowledge, this set of
condensed financial statements has been prepared in accordance with the
Companies (Guernsey) Law, 2008, International Financial Reporting Standards
and with the Statement of Recommended Practice, "Financial Statements of
Investment Companies and Venture Capital Trusts" issued in July 2022 and that
this Half-yearly Report includes a fair review of the information required by
4.2.7R and 4.2.8R of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules.
NICK WINSOR
Chairman
For and on behalf of the Board
21 May 2025
Financial
Statement of Comprehensive Income for the six months ended 28 February 2025
(unaudited)
(Unaudited) (Unaudited) (Audited)
For the six months For the six months For the year
ended 28 February 2025 ended 29 February 2024 ended 31 August 2024
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held at fair value through profit or loss - 11,738 11,738 - 41,051 41,051 - 89,708 89,708
Net foreign currency (losses)/gains - (1,741) (1,741) - (118) (118) - 1,266 1,266
Income from investments 9,420 486 9,906 9,541 504 10,045 33,824 510 34,334
Other income 53 - 53 84 - 84 161 - 161
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total income 9,473 10,483 19,956 9,625 41,437 51,062 33,985 91,484 125,469
========= ========= ========= ========= ========= ========= ========= ========= =========
Management fee (954) (1,430) (2,384) (925) (1,387) (2,312) (1,905) (2,858) (4,763)
Performance fee - - - - - - - (4,552) (4,552)
Other administrative expenses (666) (4) (670) (584) (1) (585) (1,170) (3) (1,173)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Profit before finance costs and taxation 7,853 9,049 16,902 8,116 40,049 48,165 30,910 84,071 114,981
Finance costs (451) (678) (1,129) (547) (820) (1,367) (1,075) (1,611) (2,686)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Profit before taxation 7,402 8,371 15,773 7,569 39,229 46,798 29,835 82,460 112,295
Taxation 4 (450) - (450) (445) - (445) (1,899) - (1,899)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net profit and total comprehensive income 6,952 8,371 15,323 7,124 39,229 46,353 27,936 82,460 110,396
========= ========= ========= ========= ========= ========= ========= ========= =========
Earnings per share (pence) 5 2.95 3.55 6.50 2.84 15.66 18.50 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 as adopted by the
European Union. 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 the
"net profit/(loss)" for the period. Accordingly the "Net profit/(loss) for the
period is also the "Total comprehensive income/expense" for the period.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
Statement of Changes in Equity
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2025 (UNAUDITED)
Note Called-up Treasury Capital Special Capital Revenue Total
share share redemption reserve reserves reserve £'000
capital reserve reserve £'000 £'000 £'000
£'000 £'000 £'000
At 31 August 2024 234,347 (75,125) 39 150,374 355,161 35,519 700,315
Repurchase of ordinary shares into treasury - (26,403) - - - - (26,403)
Net profit and total comprehensive income - - - - 8,371 6,952 15,323
Dividends paid in the period 6 - - - - - (18,814) (18,814)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 28 February 2025 234,347 (101,528) 39 150,374 363,532 23,657 670,421
========= ========= ========= ========= ========= ========= =========
FOR THE SIX MONTHS ENDED 29 FEBRUARY 2024 (UNAUDITED)
Note Called-up Treasury Capital Special Capital Revenue Total
share share redemption reserve reserves reserve £'000
capital reserve reserve £'000 £'000 £'000
£'000 £'000 £'000
At 31 August 2023 234,347 (46,118) 39 150,374 272,701 36,865 648,208
Repurchase of shares into treasury - (13,857) - - - - (13,857)
Net profit and total comprehensive income - - - - 39,229 7,124 46,353
Dividends paid in the period 6 - - - - - (19,525) (19,525)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 29 February 2024 234,347 (59,975) 39 150,374 311,930 24,464 661,179
========= ========= ========= ========= ========= ========= =========
For the year ended 31 August 2024 (audited)
Note Called-up Treasury Capital Special Capital Revenue Total
share share redemption reserve reserves reserve £'000
capital reserve reserve £'000 £'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 profit and total comprehensive income - - - - 82,460 27,936 110,396
Dividends paid in the year 6 - - - - - (29,282) (29,282)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 2024 234,347 (75,125) 39 150,374 355,161 35,519 700,315
========= ========= ========= ========= ========= ========= =========
Balance Sheet as at 28 February 2025 (unaudited)
Note (Unaudited) (Unaudited) (Audited)
At 28 February At 29 February At 31 August
2025 2024 2024
£'000 £'000 £'000
Non-current assets
Investments at fair value through profit or loss 705,156 698,166 735,607
Current assets
Receivables 4,962 3,130 6,017
Cash and cash equivalents 2,918 3,044 6,942
--------------- --------------- ---------------
7,880 6,174 12,959
========= ========= =========
Total assets 713,036 704,340 748,566
========= ========= =========
Current liabilities
Payables (42,615) (43,161) (48,251)
--------------- --------------- ---------------
Net assets 670,421 661,179 700,315
========= ========= =========
Equity attributable to shareholders
Share capital 7 234,347 234,347 234,347
Treasury share reserve (101,528) (59,975) (75,125)
Capital redemption reserve 39 39 39
Special reserve 150,374 150,374 150,374
Capital reserves 363,532 311,930 355,161
Revenue reserve 23,657 24,464 35,519
--------------- --------------- ---------------
Total equity shareholders' funds 670,421 661,179 700,315
========= ========= =========
Net asset value per share (pence) 8 288.77 267.12 289.63
========= ========= =========
Registered in Guernsey
Company registration number: 43298
Cash Flow Statement for the six months ended 28 February 2025 (unaudited)
(Unaudited) (Unaudited) (Audited)
For the For the For the
six months ended six months ended year ended
28 February 2025 29 February 2024 31 August 2024
£'000 £'000 £'000
Operating activities
Profit before finance costs and taxation 16,902 48,165 114,981
Add back net foreign currency losses/(gains) 1,741 118 (1,266)
Gains on investments at fair value through profit or loss (11,738) (41,051) (89,708)
Net sales of investments at fair value through profit or loss 40,143 17,038 29,282
Decrease in receivables 810 1,903 1,144
(Decrease)/increase in payables (4,649) 1,149 4,559
Overseas taxation paid (399) (427) (1,972)
--------------- --------------- ---------------
Net cash inflow from operating activities before interest 42,810 26,895 57,020
Interest paid (1,135) (1,365) (2,679)
--------------- --------------- ---------------
Net cash inflow from operating activities 41,675 25,530 54,341
========= ========= =========
Financing activities
Repurchase of ordinary shares into treasury (26,809) (13,911) (28,969)
Dividends paid (18,814) (19,525) (29,282)
--------------- --------------- ---------------
Net cash outflow from financing activities (45,623) (33,436) (58,251)
Decrease in cash and cash equivalents (3,948) (7,906) (3,910)
Cash and cash equivalents at the start of the period 6,942 11,000 11,000
Effect of foreign exchange rate changes on cash and cash equivalents (76) (50) (148)
--------------- --------------- ---------------
Cash and cash equivalents at the end of the period 2,918 3,044 6,942
========= ========= =========
Dividends received during the period amounted to £10,719,000 (period ended 29
February 2024: £11,800,000 and year ended 31 August 2024: £35,326,000) and
bond and deposit interest receipts amounted to £59,000 (period ended 29
February 2024: £100,000 and year ended 31 August 2024: £171,000).
Notes to the Financial Statements
1. Principal activity
The Company carries on business as a Guernsey closed-ended investment company.
2. Financial statements
The financial information for the six months ended 28 February 2025 and 29
February 2024 has not been audited or reviewed by the Company's auditor. These
financial statements do not include all of the information required to be
included in annual financial statements and should be read in conjunction with
the financial statements of the Company for the year ended 31 August 2024.
3. ACCOUNTING POLICIES
(a) Basis of accounting
The financial statements have been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting" and the accounting
policies set out in the statutory accounts of the Company for the year ended
31 August 2024. Where presentational guidance set out in the Statement of
Recommended Practice (the "SORP") for investment trusts issued by the
Association of Investment Companies in July 2022, is consistent with the
requirements of International Financial Reporting Standards, the financial
statements have been prepared on a basis compliant with the recommendations of
the SORP.
(b) Accounting estimates
In common with many other investment companies, the Board has chosen to adopt
the 'allocation approach', as set out in the SORP, and has determined that
basis of allocation of expenses to capital should reflect the long-term split
of returns in the form of capital gains and income. The Company allocates 60%
of the management fee and finance costs to capital and the remaining 40% to
revenue. The Board monitors the assumptions that underpin the basis of
allocation.
4. Taxation
Taxation comprises irrecoverable overseas withholding tax deducted from
dividends receivable. The Company became resident in the United Kingdom for
taxation purposes on 1 September 2020 and has been granted approval as an
investment trust under Sections 1158 and 1159 of the Corporation Tax Act 2010,
from that date.
5. Earnings per share
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended 31 August 2024
28 February 2025 29 February 2024 £'000
£'000 £'000
Revenue profit 6,952 7,124 27,936
Capital profit 8,371 39,229 82,460
--------------- --------------- ---------------
Total profit 15,323 46,353 110,396
========= ========= =========
Weighted average number of shares in issue during the period 235,851,510 250,573,464 247,361,808
Revenue earnings per share (pence) 2.95 2.84 11.29
Capital earnings per share (pence) 3.55 15.66 33.34
--------------- --------------- ---------------
Total earnings per share (pence) 6.50 18.50 44.63
========= ========= =========
6. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended 31 August 2024
28 February 2025 29 February 2024 £'000
£'000 £'000
2024 fourth interim dividend of 6.00p (2023: 5.80p) 14,160 14,547 14,547
First interim dividend of 2.00p (2024: 2.00p) 4,654 4,978 4,982
Second interim dividend of 2.00p - - 4,899
Third interim dividend of 2.00p - - 4,854
--------------- --------------- ---------------
Total dividends paid in the period 18,814 19,525 29,282
========= ========= =========
A second interim dividend of 2.00p (2024: 2.00p) per share, amounting to
£4,643,000 (2024: £4,899,000) has been declared payable in respect of the
year ending 31 August 2025.
7. Share capital
Changes in the number of shares in issue during the period were as follows:
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended 31 August 2024
28 February 2025 29 February 2024
Ordinary shares of 1p each, allotted, called-up and fully paid
Opening balance of shares in issue, excluding shares held in treasury 241,798,024 253,193,024 253,193,024
Repurchase of shares into treasury (9,632,000) (5,670,000) (11,395,000)
--------------- --------------- ---------------
Closing balance of shares in issue, excluding shares held in treasury 232,166,024 247,523,024 241,798,024
Shares held in treasury 39,067,000 23,710,000 29,435,000
--------------- --------------- ---------------
Closing balance of shares in issue 271,233,024 271,233,024 271,233,024
========= ========= =========
8. Net asset value per share
(Unaudited) (Unaudited) (Audited)
28 February 2025 29 February 2024 31 August 2024
Net assets attributable to shareholders (£'000) 670,421 661,179 700,315
Shares in issue at the period end, excluding shares held in treasury 232,166,024 247,523,024 241,798,024
Net asset value per share (pence) 288.77 267.12 289.63
========= ========= =========
9. Financial instruments measured at fair value
The Company's portfolio of investments, comprising investments in companies
and any derivatives, are carried in the balance sheet at fair value. Other
financial instruments held by the Company comprise amounts due to or from
brokers, dividends and interest receivable, accruals, cash and drawings on the
credit facility. For these instruments, the balance sheet amount is a
reasonable approximation of fair value. The recognition and measurement
policies for financial instruments measured at fair value have not changed
from those set out in the statutory accounts of the Company for the year ended
31 August 2024.
The investments in the Company's portfolio 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.
At 28 February 2025, the Company's investment portfolio and derivative
financial instruments were categorised as follows:
(Unaudited) (Unaudited) (Unaudited)
28 February 2025 29 February 2024 31 August 2024
£'000 £'000 £'000
Level 1 692,857 680,098 719,252
Level 2 12,299 18,068 16,355
Level 3 - - -
--------------- --------------- ---------------
Total 705,156 698,166 735,607
========= ========= =========
Level 2 investments comprise one holding in Midea Group warrants.
There have been no transfers between Levels 1, 2 or 3 during the period
(period ended 29 February 2024 and year ended 31 August 2024: nil).
10. Events after the interim period that have not been reflected in the
financial statements for the interim period
The directors have evaluated the period since the interim date and have not
noted any significant events which have not been reflected in the financial
statements.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR BXGDUIXDDGUBRecent news on Schroder Oriental Income Fund
See all newsREG - Schroder Orientl Inc - Net Asset Value(s)
AnnouncementREG - Schroder Orientl Inc - Transaction in Own Shares
AnnouncementRCS - Schroder Orientl Inc - Results analysis from Kepler Trust Intelligence
AnnouncementREG - Schroder Orientl Inc - Net Asset Value(s)
AnnouncementREG - Schroder Orientl Inc - Half-year Report
Announcement