TIDMSOI
RNS Number : 3447M
Schroder Oriental Income Fund Ltd
23 May 2022
23 May 2022
Half Year Report
Schroder Oriental Income Fund Limited hereby submits its Half
Year Report for the period ended 28 February 2022 as required by
the UK Listing Authority's Disclosure Guidance and Transparency
Rule 4.2.
The Half Year Report is also being published in hard copy format
and an electronic copy of that document is available at the link
below:
http://www.rns-pdf.londonstockexchange.com/rns/3447M_1-2022-5-21.pdf
This will also shortly be available to download from the
Company's website https://www.schroders.co.uk/orientalincome
The Company has submitted its Half Year Report to the National
Storage Mechanism and it will shortly be
available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Enquiries:
Nicola Lambourne
Schroder Investment Management Limited
Tel: 020 7658 2382
Half Year Report and Accounts for the six months ended 28
February 2022
Interim Management Report - Chairman's Statement
Global financial markets have had a bumpy ride since I wrote to
you last autumn. Bond yields have risen swiftly as global interest
rate forecasts pivoted higher and, combined with the war in
Ukraine, this has acted as a considerable headwind to equities.
Asia has had its own challenges, especially continued outbreaks of
Covid in China and the consequent lockdowns and economic slowdown.
Against that backdrop, it is encouraging that the Company's net
asset value ("NAV") total return rose by 0.9% during the six month
period to 28th February 2022, the more so considering the
performance of broad equity markets across the region. The
Company's reference index, the MSCI Pacific ex Japan index, fell by
7.9% during the same period. So last year's material outperformance
has continued. I am cautious about drawing too many conclusions
from this or extrapolating it into the future because the Company's
investment strategy does not seek benchmark outperformance per se.
But, nonetheless, it is heartening that in the 18 month period from
1st September 2020 to 28th February 2022 the Company's total NAV
return outperformed that of the index by over 18%.
It is, however, worth dwelling a little on why the Company has
outperformed and preserved capital against a difficult background.
The primary factor behind this, I believe, is the Manager's
investment approach. In times of rising interest rates or rising
inflation, investors first focus back on to companies with visible
earnings growth and pricing power and then, as economic growth
slows, a focus on quality and sustainable earnings growth becomes
increasingly important. The love affair with profitless growth
companies can quickly turn sour. The Manager has always sought
exactly those quality companies with strong balance sheets,
steadily growing earnings and robust dividends. The inherent
strength of our approach has been proven time and again over the 17
years since the launch of the Company.
What has been especially pleasing recently has been the
resumption of growth in dividend receipts from our investments.
Having used a very small amount of our revenue reserves to grow our
dividend through the Covid crisis, the improved confidence of many
of our portfolio companies in Asia has seen dividend receipts grow
nicely during the period. This, in turn, should enable us to grow
the dividend that we pay to you. It is notable that, despite a dip,
dividend flows in Asia were much more robust through the Covid
pandemic than in traditional equity income markets such as the UK,
re-emphasising the original case for the Company - that Asian
equity income is an attractive diversifier for traditional UK
income investors.
Given positive absolute NAV performance, strong relative
performance and a growing dividend stream, it is a little
disappointing, therefore, that our share price continues to trade
at a modest discount. The share price discount to NAV ended the six
month period at 5.2%, a little wider than the 3.4% at the end of
the last financial year in August. That meant that the shareholder
total return was -0.7% during the period. We are very aware that
this is the return that really matters to you. The fact that other
Asian investment trusts saw greater discount widening is of little
comfort. Your board sees no reason for our discount to persist,
even if the "risk off" sentiment of recent months has made it hard
to close the gap. Accordingly, we have been happy to repurchase
shares at a discount when there is an imbalance in the market.
During the six month period, a total of 4,000,000 shares were
repurchased at an average discount of 4.5% and a further 1,240,000
shares have been repurchased since the period end. As we have
stated previously, we stand willing to repurchase further shares
should the discount linger and, in the meantime, will redouble our
efforts to spread the word about the Company's success and of the
opportunities that the Manager sees in Asian markets.
Another important factor is the Company's own competitiveness
and I am delighted to be able to announce a reduction in the fees
payable by shareholders. The Company has both a recurring
investment management fee (generally low by the standards of our
peers) and a performance fee. The Board believes it is important
that any performance fee rewards the Manager proportionately and
for delivering genuine added value rather than just market based
returns. We have now agreed a reduction in the performance fee with
the Manager. Historically, the Manager would receive 10% of any
gains in excess of a 7% NAV return in a financial year, capped at
0.75% of NAV in any year. Henceforth (but backdated to 1st
September 2021), the Manager will receive 10% of any gains in
excess of 8%, capped at 0.65%. In addition, the carry forward from
the cap that previously existed has been eliminated. In
combination, this represents a meaningful saving for shareholders
whilst ensuring that the Manager is properly incentivised and
rewarded for true added value. Had the new fee basis been in
operation, that would have produced a saving of GBP752,000 over the
past year. This reduced fee basis will ensure that the Company's
total expense ratio remains competitive. The Board would like to
thank Schroders for agreeing to the fee reduction.
Looking forward, it is easy to focus on the short term negatives
in the world: Covid, Ukraine and the squeeze in living standards to
name just a few. It is also important to ponder the longer term
shifts, many of which, themselves, are not positive for global
investment markets: the likelihood that inflation will be
structurally higher in the next decade, the reversal of
globalisation, the fracturing of geo-politics and the increasing
hazards of investing in China all give pause for thought. The
almost inevitable outcome will be lower real investment returns
over the coming decade relative to the last. But, despite these
global headwinds, Asia and the Asian income strategy of the Company
in particular look well placed. The Manager continues to identify
attractive opportunities in companies across the region, especially
outside of China, and, as he concludes in his own report, it is
important to remember that the approach is one of bottom-up stock
picking: picking well managed companies with growing earnings and
structural advantages. This approach may not always be fashionable
and markets can be volatile in the short term. But it should enable
us to continue to deliver a growing dividend and capital
appreciation over time, qualities that seem all the more important
given the uncertainties of the world at present.
I look forward to reporting to you further in the autumn but in
the meantime would like to thank you for your continued support of
the Company.
Paul Meader
Chairman
Interim Management Report - Manager's Review
The net asset value per share of the company recorded a total
return of +0.9% over the six months to end February 2022.
Asian markets were volatile across the 6 months to end February
2022 falling 7.9% with a number of headwinds globally and
regionally weighing on sentiment. The Russian invasion of Ukraine
towards the end of the period is a tragedy that has created a human
crisis which will have long lasting impacts. In Asia the period was
dominated by ongoing elevated levels of regulation in China
(particularly amongst the internet names), the health of the
Chinese economy and how weak the property market was, the potential
impact of Omicron on the region as well as global concerns over
supply chain issues, rising inflation and the outlook for interest
rates. Later in the period some easing measures out of China
together with an apparent shift in focus towards 'stability' helped
underpin sentiment. With the rise in and potential for a more
sustained higher level of inflation globally, there was renewed
concern over the potential for higher rates. This saw some of the
more highly rated growth stocks come under pressure, especially the
less profitable names, with value stocks outperforming growth
stocks over the period. Cash generating companies which reward
shareholders with resilient dividend streams also out-performed in
this environment.
The divergence of returns across the regional markets continued
to be high with China lagging due to a combination of ongoing
regulatory fears, concern over defaults in the property sector and
weaker economic growth. Korea was also weak with the memory sector
names in the doldrums and some of the internet names under
pressure, not only from rising rates impacting valuations, but also
uncertainty over regulation given the upcoming election. Of the
larger markets Taiwan, Australia and Singapore all outperformed.
Australia and Singapore were aided by a strong recovery in the
financials and materials sectors whereas Taiwan saw a recovery in
some of the oversold IT names, as well as strength in some of the
more cyclical areas including financials. The other ASEAN markets
performed better, helped initially by potential for opening up, as
well as value stocks outperforming, in which they tend to have
higher weightings.
Sector returns across the region also saw a large spread of
returns. Beneficiaries of rising commodity prices did well, with
energy and materials outperforming, and the prospect for higher
interest rates meant financials also outperformed. Sectors with a
high growth component sold off including the healthcare names
dragged down by the high multiple biotechnology stocks, as were a
number of the e-commerce and internet related names.
The recovery in earnings over the past year has, in part,
started to be reflected in dividend payments. Areas of improvement
included Australian resource names buoyed by higher commodity
prices as well as some of the financials and real estate companies
in HK and Korea. Australian and Singaporean banks also announced
increased dividends in part due to regulators becoming more
comfortable with the macro backdrop and in part due to the earnings
headwinds starting to abate. Concerns over renewed outbreaks of
COVID, supply chain disruption and a volatile geopolitical backdrop
understandably did see caution from some companies in areas which
were more dependent on the opening up of economies or whose
earnings were more impacted by shortages.
Positioning and Performance
The Company's positive NAV total return of +0.9% over the period
compared favourably with that of the reference benchmark which fell
-7.9% over the period. The recovery in global growth and the
potential for interest rates to start to move up was a relatively
positive backdrop for the fund as it favoured some of the more
economically sensitive sectors such as financials and materials at
the expense of the more expensive growth names. Our overweight to,
and stock selection in, financials and materials added value. In
financials this was driven by the positions in banks which in
general benefitted from a firming of interest rate expectations
combined with their lowly valuations. Australian resources exposure
also was positive thanks to higher commodity prices driven by the
global recovery. This saw them generate substantial levels of free
cash flow which in turn led to record dividend payments. A lack of
exposure to the higher growth names was also positive with rising
rates weighing on valuations. In particular, internet and
healthcare names, which tend to pay little or no dividend and where
the fund has no exposure, lagged in the period.
From a country perspective, the major contributor to relative
performance was the significant underweight to, and stock selection
in, China where the regulatory clampdown and concern over the
slowing economy impacted returns. Here the internet names bore the
brunt of this. Positioning in Singapore and Korea also added value
in part thanks to financials and telecoms exposure. ASEAN markets
outperformed meaning our underweight to the smaller markets of
Malaysia, Indonesia and the Philippines detracted but this was more
than offset by our overweight to Singapore.
The geographic exposure in the Company's portfolio continues to
be mainly spread between Taiwan, Hong Kong, Australia, Korea, China
and Singapore. China remains a substantial underweight but is, in
part, offset by the overweight to Hong Kong. Over the period we did
reduce our exposure to Hong Kong by reducing exposure to some of
the property names that had performed relatively well and by
selling our Macau gaming stock early on in the period. Here
concerns over regulation together with ongoing uncertainty as to
when travel restrictions would be relaxed due to further COVID
outbreaks were the driver. Elsewhere, we added to Singapore, where
we are overweight, and also to a limited extent to Korea.
As throughout much of 2021, portfolio moves tended to take
advantage of the valuation spread that we saw across industries,
reducing those stocks that performed particularly strongly and now
look more fully valued in favour of those names that have lagged
and look more attractive from a valuation perspective. We continued
in aggregate to add to financials where valuations still look
relatively attractive given the prospect of higher interest rates
and subdued credit costs. Here we added to Korean, Australian and
Indonesian names albeit these were partly funded from names in
Taiwan and Thailand which had run ahead. However, the net additions
leave us overweight the sector. Real estate continues to be an
important sector in the fund but we did reduce the size of that
overweight, taking profits in Hong Kong and China names that had
performed relatively well. This was despite concerns over Chinese
residential developers, where we have minimal exposure, with our
focus being predominantly on commercial names. Information
technology remains the biggest sectoral exposure in the fund where
we continue to see some strong long-term drivers for growth around
digitisation and the roll out of 5G and 'Internet of Things' and
our focus remains on the Taiwanese and Korean companies.
Investment Outlook
At the time of writing the tragic conflict unfolding in Ukraine
has created a human crisis resulting in suffering for millions of
people. This crisis also has implications for the global economy
and stock markets. The conflict demonstrates the unpredictability
of geopolitics and its impact on commodity prices will have
ramifications for inflation, trade balances, nominal GDP and
earnings growth globally as well as impacting markets. Although
direct impacts on Asia are relatively limited, rising commodity
prices and any impact on global growth are headwinds. China's
relationship with Russia is also likely to be a focus.
Unfortunately, this crisis has exacerbated some of the trends that
were already there in relation to rising prices and shortages. It
has also reinforced the need for self-sufficiency; a desire that
will inevitably have implications for globalisation.
This backdrop means that Asian markets are likely to remain
volatile, with the path of the conflict in Ukraine a key driver of
markets. Direct impact of the crisis is limited with none of the
Company's investments having significant exposure to Russia or
Ukraine from a revenue or asset perspective, and direct trade
between the region and Russia is extremely limited. However, it is
the indirect impacts that are potentially more significant,
specifically the pressure that the conflict has had on commodity
prices which were already rising. Higher prices will eat into
consumers' real incomes globally and hence consumption, potentially
hurting demand for Asian products. Asia, in aggregate, is a net
importer of many commodities, including energy, and thus rising
prices will act as a drag on economic growth and trade balances.
Furthermore, Asian companies in general will find their raw
material costs rising which will potentially squeeze profitability
unless companies are able to pass them through in end prices.
Nevertheless, although painful for certain countries' external
accounts, and many companies' input costs, volatility in commodity
prices is a risk that investors are used to dealing with in Asia
and creates winners as well as losers.
With price rises being seen globally in many areas, the question
whether inflation will be transitory or more structural remains but
for now the path for rate expectations has moved higher. Therefore,
it is likely that we see renewed concerns over tightening and
tapering going forward. Although most economies in Asia remain
better placed than in 2013 when we last saw a prolonged QE tapering
episode, thanks to improved external accounts and higher real
interest rate differentials with the US, valuations in some 'high
growth' areas may come under pressure. Beneficiaries of higher
prices and firmer interest rates include materials companies and
financials, both areas where we are overweight.
The other trend that the crisis has reinforced has been the need
for increased self-sufficiency. The need for diversified supply
chains was something that the COVID crisis had highlighted
following the disruption the pandemic caused. With security of
supply already a focus in areas such as semiconductor production
thanks to ongoing US-China tensions and the concentration of
advanced manufacturing in Taiwan, the Ukraine conflict has
highlighted the vulnerability of nations to energy supply
dependency. All this will likely lead to further localisation of
supply chains and an era of reduced globalisation.
Regionally, a number of other issues have been weighing on
sentiment. Although globally most countries are starting 'to live'
with COVID, in part thanks to high rates of vaccination, China
remains an outlier in continuing to pursue a zero COVID policy. The
Omicron variant has proven to be very difficult to control, with a
deadly fifth wave impacting Hong Kong. At the time of writing
various parts of China including Shanghai are locked down, with
estimates that around 200mn people are under full or partial
lockdown. Although the overall vaccination rate is high in China,
there still remains a large tranche of the very elderly that are
unvaccinated, which means a move away from zero COVID in the near
term is unlikely and that these rolling shutdowns are likely to
continue and potentially weigh heavily on growth.
From an economic perspective, there were already concerns over
the strength of the economy in China given the weakness of the
property sector and the generally lacklustre consumer. This
combined with the ongoing regulatory scrutiny being faced by many
of the internet names had already seen the government shift policy
onto an easing track, with a focus on stability. These latest
lockdowns are likely to see renewed pressure to take further
stimulative actions especially if global growth, and thus exports,
start to slow.
All of the above paints a pretty negative backdrop. However,
this has in part been reflected in market action with valuations
today looking much less frothy than they did a year ago,
particularly versus global equities. Although it is likely we will
see further downward revisions to earnings, aggregate valuations
for the region are now trading at or below long-term averages and
at the lower end of the range versus the rest of the world.
It is also our belief that Asia remains an attractive source of
equity income, potentially providing diversification for UK
investors seeking income. For many companies across the region, we
have started to see dividend payments recover, although there is
still a lot of uncertainty as to where they will go given the
unfolding geopolitical events and the ongoing impact from Covid-19.
All that said, we still believe that in most cases this is more a
matter of timing rather than these companies' ability to pay. In
the medium to long-term, dividends tend to follow earnings and
earnings have recovered materially from the Covid-19 lows, albeit
earnings growth this year will likely face some pressures as
outlined above. Still, it should not be forgotten that overall pay
out ratios in Asia do not look extended versus some other markets
and corporates in Asia remain relatively lowly geared. From an
overall fund distribution perspective, the other dynamic to be
cognisant of is Sterling, whose direction will obviously impact the
size of translated dividends, with a stronger Sterling acting as a
headwind. Finally, it is worth highlighting that whilst inflation
rising faster than expected is not great for equities in the
short-term, longer term real asset income sources should look
attractive versus the 'risk-free return' that is fixed income.
To conclude it is worth remembering that as investors we buy
companies not countries. We are mindful of the impact political and
macroeconomic factors can have on equities and returns, but we are
bottom-up stock-pickers first and foremost focusing on the
company's return prospects and valuation. We do not try to pick
companies which will do well based purely on a particular macro
environment which we have forecast; rather we try to pick
well-managed companies with attractive and growing distributions,
which have structural advantages allowing them to survive (and
hopefully thrive!) in as wide a range of external conditions as
possible. Therefore, a focus on attractive bottom-up ideas, in our
view, remains essential.
Portfolio by sector (gearing* currently at 4.4%)
Portfolio weight
%
Consumer Discretionary 4.6
Consumer Staples 3.2
Energy 1.0
Banks 19.1
Real Estate 17.3
Other Financials 7.0
Health Care -
Industrials 0.7
Information Technology 29.8
Materials 11.6
Communication Services 10.1
Utilities -
*Net cash less loans outstanding.
Source: Schroders as at February 28, 2022
Portfolio by country (gearing* currently at 4.4%)
Portfolio weight
%
Australia 19.2
Hong Kong 15.3
China 11.2
India -
Indonesia 1.7
Japan 1.4
Korea 13.2
Malaysia -
New Zealand 0.7
Philippines -
Singapore 15.2
Taiwan 24.4
Thailand 2.1
Other -
*Net cash less loans outstanding.
Source: Schroders as at February 28, 2022
Schroder Investment Management Limited
Past Performance is not a guide to future performance. 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.
Interim Management Report
Principal risks and uncertainties
The principal risks and uncertainties with the Company's
business fall into the following categories: strategic; investment
management; financial and currency risk; political; custody;
gearing and leverage; accounting, legal and regulatory; service
provider and cyber. The Board notes that although the principal
risks and uncertainties have not materially changed during the six
months ended 28 February 2022, the war in Ukraine has significantly
increased political tensions and contributed to rising inflation
and weakened global stability. The Board continues to monitor the
impact of this situation on a regular basis.
A detailed explanation of the risks and uncertainties in each of
these categories can be found on pages 20 and 22 of the Company's
published annual report and accounts for the year ended 31 August
2021.
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 23 of the published annual report and accounts
for the year ended 31 August 2021, the Directors consider it
appropriate to adopt the going concern basis in preparing the
accounts.
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 2022.
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 April 2021 and that this Interim
Management 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.
Statement of Comprehensive Income
For the six months ended 28 February 2022 (unaudited)
(Unaudited) (Unaudited) (Audited)
For the six months For the six months
ended ended For the year ended
28 February 2022 28 February 2021 31 August 2021
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains
on investments
held at fair
value through
profit or
loss - (2,259) (2,259) - 129,359 129,359 - 121,017 121,017
Net foreign
currency
(losses)/gains - (862) (862) - 962 962 - 395 395
Income from
investments 13,273 1,448 14,721 10,791 219 11,010 32,394 219 32,613
Other income 5 - 5 1 - 1 1 - 1
---------------------- -------- --------- -------- -------- --------- --------- --------- --------- ---------
Total income/(loss) 13,278 (1,673) 11,605 10,792 130,540 141,332 32,395 121,631 154,026
Management
fee (765) (1,785) (2,550) (771) (1,799) (2,570) (1,584) (3,697) (5,281)
Performance
fee - - - - (5,356) (5,356) - (5,636) (5,636)
Administrative
expenses (580) (2) (582) (534) (3) (537) (1,033) (5) (1,038)
---------------------- -------- --------- -------- -------- --------- --------- --------- --------- ---------
Profit/(loss)
before finance
costs and
taxation 11,933 (3,460) 8,473 9,487 123,382 132,869 29,778 112,293 142,071
Finance costs (46) (107) (153) (52) (115) (167) (94) (220) (314)
---------------------- -------- --------- -------- -------- --------- --------- --------- --------- ---------
Profit/(loss)
before taxation 11,887 (3,567) 8,320 9,435 123,267 132,702 29,684 112,073 141,757
Taxation (note
4) (801) - (801) (811) - (811) (2,002) - (2,002)
---------------------- -------- --------- -------- -------- --------- --------- --------- --------- ---------
Net profit/(loss)
and total
comprehensive
income 11,086 (3,567) 7,519 8,624 123,267 131,891 27,682 112,073 139,755
---------------------- -------- --------- -------- -------- --------- --------- --------- --------- ---------
Earnings/(losses)
per share
(note 5) 4.18p (1.35)p 2.83p 3.20p 45.76p 48.96p 10.30p 41.70p 52.00p
The "Total" column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with
International Financial Reporting Standards. The "Revenue" and
"Capital" columns represent supplementary information prepared
under guidance issued by the Association of Investment Companies.
The Company has no other items of other comprehensive income, and
therefore the net profit for the period is also the total
comprehensive income 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 2022 (unaudited)
Treasury Capital
Share share redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 August
2021 234,347 (9,500) 39 150,374 345,929 30,230 751,419
Repurchase of
shares into
treasury - (10,597) - - - - (10,597)
Net (loss)/profit - - - - (3,567) 11,086 7,519
Dividends paid
in the period
(note 6) - - - - - (17,740) (17,740)
------------------- -------- --------- ----------- -------- --------- -------- --------
At 28 February
2022 234,347 (20,097) 39 150,374 342,362 23,576 730,601
------------------- -------- --------- ----------- -------- --------- -------- --------
For the six months ended 28 February 2021 (unaudited)
Treasury Capital
Share share redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 August 2020 234,347 (2,155) 39 150,374 233,856 30,238 646,699
Repurchase of shares
into treasury - (5,233) - - - - (5,233)
Net profit - - - - 123,267 8,624 131,891
Dividends paid
in the period (note
6) - - - - - (17,504) (17,504)
--------------------- -------- --------- ----------- -------- --------- -------- --------
At 28 February
2021 234,347 (7,388) 39 150,374 357,123 21,358 755,853
--------------------- -------- --------- ----------- -------- --------- -------- --------
For the year ended 31 August 2021 (audited)
Treasury Capital
Share share redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 August 2020 234,347 (2,155) 39 150,374 233,856 30,238 646,699
Repurchase of shares
into treasury - (7,345) - - - - (7,345)
Net profit - - - - 112,073 27,682 139,755
Dividends paid
in the year (note
6) - - - - - (27,690) (27,690)
--------------------- -------- --------- ----------- -------- --------- -------- --------
At 31 August 2021 234,347 (9,500) 39 150,374 345,929 30,230 751,419
--------------------- -------- --------- ----------- -------- --------- -------- --------
Balance Sheet
(Unaudited) (Unaudited) (Audited)
28 February 28 February 31 August
2022 2021 2021
GBP'000 GBP'000 GBP'000
Non current assets
Investments at fair value through
profit or loss 758,190 785,355 774,425
----------------------------------- ----------- ----------- ----------
Current assets
Receivables 6,946 8,556 6,881
Cash and cash equivalents 4,886 6,272 16,147
----------------------------------- ----------- ----------- ----------
11,832 14,828 23,028
----------------------------------- ----------- ----------- ----------
Total assets 770,022 800,183 797,453
Current liabilities
Bank loans (37,265) (35,763) (36,331)
Payables (2,156) (8,567) (9,703)
----------------------------------- ----------- ----------- ----------
(39,421) (44,330) (46,034)
----------------------------------- ----------- ----------- ----------
Net assets 730,601 755,853 751,419
----------------------------------- ----------- ----------- ----------
Equity attributable to equity
holders
Share capital (note 7) 234,347 234,347 234,347
Treasury share reserve (20,097) (7,388) (9,500)
Capital redemption reserve 39 39 39
Special reserve 150,374 150,374 150,374
Capital reserves 342,362 357,123 345,929
Revenue reserve 23,576 21,358 30,230
----------------------------------- ----------- ----------- ----------
Total equity shareholders' funds 730,601 755,853 751,419
----------------------------------- ----------- ----------- ----------
Net asset value per share (note
8) 277.30p 281.78p 280.94p
Cash Flow Statement
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
28 February 28 February 31 August
2022 2021 2021
GBP'000 GBP'000 GBP'000
Operating activities
Profit before finance costs and
taxation 8,473 132,869 142,071
Foreign currency losses/(gains) 862 (962) (395)
Losses/(gains) on investments
at fair value through profit or
loss 2,259 (129,359) (121,017)
Net sales of investments at fair
value through
profit or loss 10,589 11,865 16,858
Decrease/(increase) in receivables 1,374 (1,367) (1,719)
(Decrease)/increase in payables (5,686) 5,543 5,753
Overseas taxation paid (707) (539) (2,131)
--------------------------------------- ------------ ------------ ----------
Net cash inflow from operating
activities before interest 17,164 18,050 39,420
--------------------------------------- ------------ ------------ ----------
Interest paid (159) (169) (310)
--------------------------------------- ------------ ------------ ----------
Net cash inflow from operating
activities 17,005 17,881 39,110
--------------------------------------- ------------ ------------ ----------
Financing activities
Bank loans repaid - (5,241) (5,304)
Repurchase of ordinary shares
into treasury (10,597) (5,233) (6,402)
Dividends paid (17,740) (17,504) (27,690)
--------------------------------------- ------------ ------------ ----------
Net cash outflow from financing
activities (28,337) (27,978) (39,396)
--------------------------------------- ------------ ------------ ----------
Decrease in cash and cash equivalents (11,332) (10,097) (286)
Cash and cash equivalents at the
start of the period 16,147 17,028 17,028
Effect of foreign exchange rate
changes on cash and cash equivalents 71 (659) (595)
--------------------------------------- ------------ ------------ ----------
Cash and cash equivalents at the
end of the period 4,886 6,272 16,147
--------------------------------------- ------------ ------------ ----------
Dividends received during the period amounted to GBP16,170,000
(period ended 28 February 2021: GBP9,307,000 and year ended 31
August 2021: GBP30,823,000) and bond and deposit interest receipts
amounted to GBP5,000 (period ended 28 February 2021: GBPnil and
year ended 31 August 2021: GBP1,000).
Notes to the Accounts
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
2022 and 28 February 2021 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 2021.
3. Accounting policies
The accounts 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 2021. Where presentational
guidance set out in the Statement of Recommended Practice (the
"SORP") for investment trusts issued by the Association of
Investment Companies in April 2021, is consistent with the
requirements of International Financial Reporting Standards, the
accounts have been prepared on a basis compliant with the
recommendations of the SORP.
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 Taxes Act 2010, from that
date.
5. Earnings/(losses) per share
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
28 February 28 February 31 August
2022 2021 2021
GBP'000 GBP'000 GBP'000
Net revenue profit 11,086 8,624 27,682
Net capital (loss)/profit (3,567) 123,267 112,073
----------------------------------- ------------ ------------ ------------
Net total profit 7,519 131,891 139,755
----------------------------------- ------------ ------------ ------------
Weighted average number of shares
in issue during the period 264,965,262 269,389,571 268,751,860
Revenue earnings per share 4.18p 3.20p 10.30p
Capital (losses)/earnings per
share (1.35)p 45.76p 41.70p
----------------------------------- ------------ ------------ ------------
Total earnings per share 2.83p 48.96p 52.00p
----------------------------------- ------------ ------------ ------------
6. Dividends paid
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
28 February 28 February 31 August
2022 2021 2021
GBP'000 GBP'000 GBP'000
2021 fourth interim dividend of
4.80p (2020: 4.60p) 12,727 12,404 12,404
First interim dividend of 1.90p
(2021: 1.90p) 5,013 5,100 5,100
Second interim dividend of 1.90p - - 5,097
Third interim dividend of 1.90p - - 5,089
---------------------------------- ----------- ----------- ----------
17,740 17,504 27,690
---------------------------------- ----------- ----------- ----------
A second interim dividend of 1.90p (2021: 1.90p) per share,
amounting to GBP5,006,000 (2021: GBP5,097,000) has been declared
payable in respect of the year ending 31 August 2022.
7. Share capital
Changes in the number of shares in issue during the period were
as follows:
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
28 February 28 February 31 August
2022 2021 2021
Ordinary shares of 1p each, allotted,
called-up and fully paid
Opening balance of shares in issue,
excluding shares held in treasury 267,468,024 270,268,024 270,268,024
Repurchase of shares into treasury (4,000,000) (2,025,000) (2,800,000)
--------------------------------------- ------------ ------------ ------------
Closing balance of shares in issue,
excluding shares held in treasury 263,468,024 268,243,024 267,468,024
Shares held in treasury 7,765,000 2,990,000 3,765,000
--------------------------------------- ------------ ------------ ------------
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 28 February 31 August
2022 2021 2021
Net assets attributable to shareholders
(GBP'000) 730,601 755,853 751,419
Shares in issue at the period
end, excluding shares held in
treasury 263,468,024 268,243,024 267,468,024
----------------------------------------- ------------ ------------ ------------
Net asset value per share 277.30p 281.78p 280.94p
----------------------------------------- ------------ ------------ ------------
9. Disclosures regarding 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 2021.
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 2022, the Company's investment portfolio was
categorised as follows:
(Unaudited) (Unaudited) (Audited)
28 February 28 February 31 August
2022 2021 2021
GBP'000 GBP'000 GBP'000
Level 1 758,190 785,355 769,397
Level 2 - - -
Level 3 - - 5,028
--------- ----------- ----------- ---------
Total 758,190 785,355 774,425
--------- ----------- ----------- ---------
There have been no transfers between Levels 1, 2 or 3 during the
period (period ended 28 February 2021 and year ended 31 August
2021: nil).
10. Events after the interim period that have not been reflected
in the financial statements for the interim period
The war in Ukraine has continued to cause disruption in global
financial markets after the interim accounting date. At 19 May 2022
the Company's share price and NAV were 262.5p and 270.19p
respectively.
The directors have not noted any other events which have not
been reflected in the financial statements.
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END
IR BXGDUXSDDGDB
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May 23, 2022 02:00 ET (06:00 GMT)
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