Schroder Oriental Income Fund Ltd - Half-year Report
Half Year Report and Accounts for the six months ended 28 February 2019
Interim Management Report
This is my first report to shareholders as Chairman, following Robert Sinclair's retirement at the Annual General Meeting. During the six-month period to 28 February 2019 the Company's NAV produced a total return of -1.5%, against a volatile period for regional markets. During the same period, the share price produced a total return of 1.4% as the discount narrowed from 1.2% at the start of the period to a premium of 1.8% at its close.
Further details of investment performance, as well as portfolio activity, policy and outlook, may be found in the Manager's Review.
During the period, the Company declared two interim dividends for the year ending 31 August 2019, amounting to 3.60 pence per share (2018: 3.40 pence per share). The board is proud of its track record of dividends which have increased every year since the Company was launched. This has been recognised by the Association of Investment Companies identifying the Company as a 'next generation dividend hero'.
Demand for the Company's shares has remained strong and your board has, during the period under review, issued 5,135,000 ordinary shares at a small premium to the prevailing net asset value in order to provide liquidity to the market. At the period end, the Company's share capital comprised 259,233,024 ordinary shares. No shares were held in treasury. 752,000 further shares have been issued at a premium since the period end.
The Company continues to have in place a multi-currency revolving credit facility of £100 million, which was partly drawn in US dollars and Japanese yen during the period. Gearing stood at 4.5% at the beginning of the period and had increased to 5.5% as at 28 February 2019. Average gearing during the period was 5.4%. The level of gearing continues to be monitored closely by the board, in conjunction with the Manager.
The board continues to review its composition and its plans for succession and refreshment.
Robert Sinclair retired from the board at the last Annual General Meeting, which was held during the period. As a result of this change, and my appointment to the role of chairman, the Nomination and Remuneration Committee conducted an analysis of the board's composition. A search process was then undertaken facilitated by two external agencies and as a result Kate Cornish-Bowden was appointed as a director on 20 December 2018. Kate brings significant investment management experience and expertise to the board.
As in previous years, the majority of companies in our portfolio have continued to increase their dividends in local currency terms. Such consistency is reassuring as these increases are a key metric for us. We believe that we have the investment strategy - and the income reserve - to meet our goals provided the portfolio companies continue to maintain or increase distributions. There will always be macro-economic uncertainties, but overall I believe the economies of the Asian region continue to provide a dynamic environment which is supportive of the Company's objectives and I look forward with confidence to the second half of the financial year.