Final Results

Schroder Oriental Income Fund Ltd 01 November 2007 SCHRODER ORIENTAL INCOME FUND LIMITED Unaudited Results for the year to 31 August 2007 This preliminary announcement of unaudited results was approved by the Board of Directors on 1 November 2007. Chairman's Statement Performance I am pleased to report on a positive year for your Company. The Company's net asset value increased substantially during the year under review, producing a total return of 27.8%. The shares produced a total return of 29.3% during the year. Full details of investment performance, as well as portfolio activity, policy and outlook, may be found in the Investment Manager's Review. Dividends I am also pleased to report that the Directors of the Company have declared the payment of a second interim dividend of 2.70 pence per share for the year ended 31 August 2007, following the payment of a first interim dividend of 2.25 pence per share. The second interim dividend will be paid on 30 November 2007 to shareholders on the Register on 9 November 2007. Total dividends paid in respect of the year ended 31 August 2007 represent an increase of 10.0% when compared to total dividends paid in respect of the first financial year (on an annualised basis). Premium/discount management The ordinary shares have traded either at a slight premium or at a slight discount to net asset value during the year under review. In accordance with the Listing Particulars, the Directors' have implemented an active discount management policy, which includes consideration of the potential use of share buybacks to seek to maintain the price at which the ordinary shares trade relative to their prevailing net asset value at no greater than a 5 per cent. discount. The Company currently has authority to make purchases of shares for cancellation and, while this was not utilised during the year as the discount remained within the guideline parameters, a resolution has been included in the Notice of the Annual General Meeting which, if passed, will renew the authority for a further year. Should the Company's shares trade at a premium to asset value, we will consider the issue of shares at a premium to net asset value in circumstances where we believe such issuance to be in the interests of our shareholders. Gearing At the beginning of the year the Company had in place a revolving credit facility of £37 million. At the end of September 2007 this was increased to £45 million. Drawings under the facility during the year represented 15.31% of net assets at the beginning of the year under review and 15.27% at the end of the year. As stated in the Listing Particulars, the Company's policy is to permit borrowings of up to 25% of the Company's net asset value. During the year, the average borrowings (based on month-end net asset value) employed by the Company were 14.85%. Outlook Asian markets have shown both relative and absolute strength since the end of the financial year and our Manager shares a measure of the evident optimism on the prospects for Asian markets. Our Manager also believes that the portfolio's exposure to domestically oriented sectors and companies, such as financials, real estate, and telecommunications are likely to be beneficial in the current environment, while exporters may suffer pressures from slowing external growth and rising exchange rates. Against this background, we remain optimistic on the prospects for your Company. Annual General Meeting The Annual General Meeting will be held in Guernsey at 12.00 noon on Wednesday 17 December 2007 and shareholders are invited to attend. Robert Sinclair Chairman Investment Manager's Review The net asset value of the Company recorded a total return of 27.8% over the year. A second interim dividend of 2.70p per share is proposed, making 4.95p for the year. The strong market rises of the first half have been extended in the second with economic and financial conditions remaining very supportive for regional equity markets. External demand has been robust even as growth in the United States has slowed thanks to the increasingly diverse sources of demand for regional exports. Trade within the region has continued to grow strongly, while other emerging markets and Europe have become more significant end markets, the latter aided by the strength of the euro. Domestically generated growth has been fuelled by strong local real estate markets and firm employment and income trends. There have been increasing signs that the investment booms which have hitherto been largely confined to India and China are spreading to other Asian countries driven by residential construction activity, and a long awaited recovery in infrastructure spending. In this environment, it is unsurprising that interest rates have been rising in many countries. Notable policy tightening has been evident in China, India, Korea, and, more latterly, Singapore through a combination of increased interest rates, higher reserve requirements for the banks and stronger currencies. In contrast, interest rates have continued to fall in those countries which have historically suffered from very high interest rates such as Indonesia and the Philippines. While all markets have offered attractive returns, it has been China that has dominated market sentiment. The economy has continued to perform remarkably well. Strong export growth remains an important component, but with high productivity growth supporting household incomes, consumer spending is providing increased balance to the economy. Liquidity remains ample. Tightening monetary policy has yet to make any impact on the latter, and it is questionable how far it needs to. Inflation running at over 6% is purely a function of food prices; non food inflation is rising at a 1% pace. With massive domestic liquidity looking for a home, domestic A shares have been the major beneficiaries, perhaps encouraged by the authorities fruitless attempts to cool the property market. This has resulted in even stronger returns in the Hong Kong listed H shares which trade at a discount, and which the Chinese authorities are making available to domestic investors on a limited basis. This has encouraged arbitrage buying, taking all Chinese shares to demanding valuations. The range of returns in other markets has been narrower. Taiwan and Korea have been hampered by high export reliance (particularly in the key information technology sector) where sentiment has been impacted by slowing US growth and currency pressures. Political uncertainty has continued to weigh on sentiment in Thailand. Performance and Portfolio Activity The Company's performance has been strong in absolute terms, although it has been below that of the MSCI All Country Pacific ex Japan index. However, this index does not have a bias towards high income shares, and higher income stocks have been somewhat out of favour during a period when growth and momentum have been increasingly dominant drivers of market performance. The other major factor impacting relative returns has been the extent of outperformance by Chinese stocks, which do not generally offer attractive current dividend yields. In terms of policy, the major exposures have remained fairly stable, with the four markets of Australia, Taiwan, Singapore and Hong Kong comprising the bulk of the Company's portfolio, complemented by a significant weighting in emerging ASEAN markets. In terms of changes, we have raised the Hong Kong commitment (along with the Chinese exposure to the extent that the income discipline allows) reflecting the increased momentum behind these markets. This has been funded through reductions in Indonesia, Korea and Thailand. Outlook and Policy Over the end of the fiscal year and in recent weeks, the regional markets have shown remarkable relative and absolute strength. The catalyst has been the pro-active response of the US Federal Reserve to the sub-prime problem with cuts in both the discount and Fed Funds rates. We would share a measure of the evident optimism. Our central expectation is that United States growth will slow, but that severe recession can be avoided. This should allow a more balanced pattern to global growth, enabling a modest rebuilding of savings rates and a contraction of the current account deficit in the United States. Domestic demand elsewhere (Europe and Asia) should remain robust. A combination of moderate global growth (allowing steady if not spectacular expansion in Asian exports) and the prospect of flat, and very possibly declining, US dollar interest rates is a potentially powerful support to Asian asset and equity prices. Corporate profits should continue to expand, while domestic liquidity and consumption are likely to remain strong. There is also ample evidence that domestic capital spending across Asia (i.e. not just in China and India) is set to recover given strong corporate and national balance sheets. This should help address capacity constraints which, in some cases, have either been absent or ignored since the Asian crisis of the mid 1990s. One corollary of this view is that domestically oriented sectors and companies are likely to be favoured in this environment, while exporters may suffer pressures from slowing external growth and rising exchange rates. The Company's portfolio is very heavily oriented towards domestic sectors such as financials, real estate, and telecommunications. While this is partly dictated by the income requirements, we also believe that these sectors should be relatively well-placed in the environment which we expect. Schroder Investment Management Limited Income Statement (Unaudited) Year to 31 August 2007 Revenue Capital Total £'000 £'000 £'000 Gains/(losses) on investments held at fair value - 37,717 37,717 Other currency gains - 1,526 1,526 Income (Note 2) 11,248 434 11,682 Investment management fee (415) (2,903) (3,318) Administrative expenses (369) (45) (414) _______ ________ ________ Net return before finance costs and taxation 10,464 36,729 47,193 Interest payable and similar charges (414) (963) (1,377) ________ ________ ________ Net return on ordinary activities before taxation 10,050 35,766 45,816 Taxation on ordinary activities (879) - (879) _______ ________ ________ Return attributable to equity shareholders 9,171 35,766 44,937 ===== ====== ====== Net return per Ordinary share (pence) (Note 3) 5.84 22.77 28.61 ===== ====== ====== Income Statement (Comparative) Period from 17 June 2005 to 31 August 2006 Revenue Capital Total £'000 £'000 £'000 Gains/(losses) on investments held at fair value - (1,826) (1,826) Other currency gains - 1,677 1,677 Income (Note 2) 12,539 - 12,539 Investment management fee (378) (883) (1,261) Administrative expenses (376) (53) (429) _______ ________ ________ Net return before finance costs and taxation 11,785 (1,085) 10,700 Interest payable and similar charges (434) (984) (1,418) ________ ________ ________ Net return/(loss) on ordinary activities before taxation 11,351 (2,069) 9,282 Taxation on ordinary activities (1,222) - (1,222) _______ ________ ________ Return/(loss) attributable to equity shareholders 10,129 (2,069) 8,060 ===== ====== ====== Net return per Ordinary share (pence) (Note 3) 6.50 (1.33) 5.17 ===== ====== ====== Notes 1. The total column shown above for each period represents the Profit and Loss Account of the Company. 2. The revenue and capital items derive from continuing activities. 3. A Statement of Total Recognised Gains and Losses has not been presented as all gains and losses are recognised in the Income Statement. 4. No operations were acquired or discontinued during the year. Reconciliation of Movements in Shareholders' Funds (Unaudited) for the year to 31 August 2007 Called-up Share premium Special Capital Revenue Total £'000 Share capital account £'000 reserve reserve reserve £'000 £'000 £'000 £'000 Issue of ordinary shares 1,571 155,711 - - - 157,282 Share issue expenses - (1,824) - - - (1,824) Cancellation of share premium account - (153,887) 153,887 - - - Capital Return - - - (2,069) - (2,069) Revenue Return - - - - 10,129 10,129 First interim dividend for period ended 31 August 2006 - - - - (3,887) (3,887) ______ ______ ______ ______ ______ _____ At 31 August 2006 1,571 - 153,887 (2,069) 6,242 159,631 Net return on ordinary activities - - - 35,766 9,171 44,937 Second interim dividend for period ended 31 August 2006 - - - - (3,769) (3,769) First interim dividend for period ended 31 August 2007 - - - - (3,534) (3,534) ______ ______ ______ ______ ______ ______ At 31 August 2007 1,571 - 153,887 33,697 8,110 197,265 ===== ===== ===== ===== ===== ===== Balance Sheet (Unaudited) At At 31 August 31 August 2007 2006 £'000 £'000 Fixed assets Investments held at fair value through profit or loss 219,523 180,296 _______ _______ 219,523 180,296 Current assets Debtors 5,048 1,137 Cash at bank and short-term deposits 5,178 2,102 _______ _______ 10,226 3,239 Current liabilities Creditors - amounts falling due within one year (32,484) (23,904) _______ _______ Net Current Liabilities (22,258) (20,665) _______ _______ Net Assets 197,265 159,631 ====== ====== Capital and Reserves Called up share capital 1,571 1,571 Special reserve 153,887 153,887 Capital reserves 33,697 (2,069) Revenue reserve 8,110 6,242 _______ _______ Equity Shareholders' Funds 197,265 159,631 ====== ====== Net asset value per Ordinary share (pence) (Note 4) 125.61 101.64 ===== ===== Cash Flow Statement (Unaudited) Year to Period from 31 August 17 June 2005 to 2007 31 August 2006 £'000 £'000 Operating activities Dividends and interest received from investments 10,810 10,912 Interest received on deposits 198 429 Investment management fee paid (1,311) (971) Administrative expenses paid (439) (326) _______ _______ Net cash inflow from operating activities 9,258 10,044 _______ _______ Servicing of finance Bank overdraft interest paid (1) (12) Bank loan interest paid (1,382) (1,388) _______ _______ Net cash outflow from servicing of finance (1,383) (1,400) _______ _______ Taxation Overseas tax paid (676) (1,222) _______ _______ Total tax paid (676) (1,222) _______ _______ Dividends paid (7,303) (3,887) _______ _______ Investment activities Purchase of investments (167,646) (301,348) Disposal of investments 163,579 119,290 _______ _______ Net cash outflow from investment activities (4,067) (182,058) _______ _______ _______ _______ Net cash outflow before financing (4,171) (178,523) _______ _______ Financing Bank loans drawn 7,151 25,063 Net proceeds from issue of ordinary shares - 155,458 _______ _______ Net cash inflow from financing 7,151 180,521 _______ _______ Net cash inflow 2,980 1,998 ====== ====== Notes 1. Accounting Policies The accounts have been prepared under the historical cost convention, modified to include the revaluation of investments and in accordance with applicable UK Accounting Standards and with the Statement of Recommended Practice ('SORP') for 'Financial Statements of Investment Trust Companies' issued in January 2003 and revised in December 2005 by the Association of Investment Companies (AIC). The Company's accounting policies have not varied from those described in the Report and Accounts for the year ended 31 August 2006. 2. Dividends and Other Income Dividends and Other Income comprise: 2007 2006 £'000 £'000 Income from investments: Overseas dividends 9,957 10,851 Income from fixed interest securities 901 1,195 Stock dividends 179 64 _______ _______ 11,037 12,110 Interest on deposits 211 429 _______ _______ 11,248 12,539 Allocated to capital: Special dividend income taken to capital 434 - _______ _______ 11,682 12,539 ===== ===== 3. Return per Ordinary Share The total return per Ordinary share is calculated on the return attributable to Ordinary shareholders of £44,937,000 (2006: £8,060,000) and 157,050,000 (2006: 155,782,500) Ordinary shares, being the weighted average number of shares in issue during the year. The revenue return per Ordinary share is calculated on the return attributable to Ordinary shareholders of £9,171,000 (2006: £10,129,000) and 157,050,000 (2006: 155,782,500) Ordinary shares, being the weighted average number of shares in issue during the year. The capital return per Ordinary share is calculated on the return attributable to Ordinary shareholders of £35,766,000 (2006: deficit of £2,069,000) and 157,050,000 (2006: 155,782,500) Ordinary shares, being the weighted average number of shares in issue during the year. 4. Net Asset Value The Net Asset Value per Ordinary share is calculated on net assets of £197,265,000 (2006: £159,631,000) and 157,050,000 (2006: 157,050,000) Ordinary shares in issue at the year-end. Second Interim Dividend The Directors of the Company have declared the payment of a second interim dividend of 2.70 pence per share for the year ended 31 August 2007 on the Ordinary Shares of the Company. Ex-Dividend Date: 7 November 2007 Record date: 9 November 2007 Payment Date: 30 November 2007 Dividend per share: 2.70p Annual Report and Accounts The financial information contained in this preliminary announcement of annual results is unaudited and does not constitute statutory accounts. Full statutory accounts for the year ended 31 August 2006 included a report from the Company's auditors, which was unqualified. No statutory accounts in respect of any period after 31 August 2006 have been reported on by the Company's auditors. The statutory accounts for the year to 31 August 2007 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement. The Report and Accounts will be mailed to registered shareholders in November 2007 and from the date of release copies of the Report and Accounts will be made available to the public at the Company's Registered Office and at 31 Gresham Street, London EC2V 7QA. Schroder Investment Management Limited Company Secretary 1 November 2007 This information is provided by RNS The company news service from the London Stock Exchange

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