Schroder Oriental
Income Fund Limited
Annual Report and Accounts
For the year ended
31 August 2022
176257 Oriental Income Fund - AR FSC Mix 70% Pt1.qxp_176257 Oriental Income Fund - AR FSC Mix 70% Pt1 03/11/2022 16:37 Page a
Investment objective
The investment objective of Schroder Oriental Income Fund
Limited (the “Company”) is to provide a total return for
investors primarily through investments in equities and equity-
related investments, of companies which are based in, or which
derive a significant proportion of their revenues from, the Asia
Pacific region and which offer attractive yields.
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. A full
breakdown of the investment portfolio may be found on
pages10 and 11.
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
Board has set a limit such that covered calls cannot be written
over portfolio holdings representing in excess of 15% of gross
assets. However, the Company may only invest in derivatives
for the purposes of efficient portfolio management. 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.
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Contents
Strategic Report
Financial Highlights 2
10 Year Financial Record 3
Chairman’s Statement 4
Manager’s Review 6
Investment Portfolio 10
Strategic Review 12
Governance
Board of Directors 26
Directors’ Report 28
Audit and Risk Committee Report 31
Management Engagement Committee Report 34
Nomination and Remuneration Committee Report 35
Directors’ Remuneration Report 38
Statement of Directors’ Responsibilities in respect of
the Annual Report and Accounts 41
Financial
Independent Auditors’ Report 42
Statement of Comprehensive Income 48
Statement of Changes in Equity 49
Balance Sheet 50
Cash Flow Statement 51
Notes to the Accounts 52
Definitions of Terms and Alternative Performance
Measures 67
Annual General Meeting
Annual General Meeting – Recommendations 69
Notice of Annual General Meeting 70
Explanatory Notes to the Notice of Annual General Meeting 71
Shareholder Information Inside back cover
Annual Report and Accounts
for the year ended 31 August 2022
1
Strategic Report
Governance Financial
Annual General Meeting
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2
Schroder Oriental Income Fund Limited
Financial Highlights
Other financial information
31August 31August
2022 2021 % Change
Shareholders’ funds (£’000) 724,147 751,419 (3.6)
Shares in issue (excluding shares held in treasury) 261,203,024 267,468,024 (2.3)
NAV per share (pence) 277.24 280.94 (1.3)
Share price (pence) 264.00 271.50 (2.8)
Share price discount to NAV per share* (%) (4.8) (3.4)
Gearing* (%) 4.0 2.7
Year ended Year ended
31August 31August
2022 2021 % Change
Net revenue after taxation (£’000) 34,105 27,682 +23.2
Revenue earnings per share (pence) 12.94 10.30 +25.6
Dividends per share (pence) 11.40 10.50 +8.6
Ongoing Charges* (%) 0.86 0.85
Definitions of terms and performance measures used throughout this report can be found on pages 67 and 68.
Total returns
*
for the year ended 31 August 2022
+2.5
%
Net asset value (“NAV”) per share total return
+1.2
%
Share price total return
2021: +21.9% 2021: +21.2%
Some of the financial measures below are classified as Alternative Performance Measures, as defined by the
European Securities and Markets Authority and are indicated with an asterisk (*). Definitions of these
performance measures, and other terms used in this report, are given on pages 67 and 68, together with
supporting calculations where appropriate.
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Ten-Year Financial Record
At 31August 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Shareholders’ funds (£’000) 395,926 428,456 410,090 528,662 635,466 642,711 661,804 646,699 751,419 724,147
NAV per share (pence) 181.46 193.44 175.95 222.56 258.63 252.94 251.94 239.28 280.94 277.24
Share price (pence) 177.00 195.50 176.50 224.50 261.00 250.00 253.00 233.00 271.50 264.00
Share price (discount)/
premium to NAV per share (%) (2.5) 1.1 0.3 0.9 0.9 (1.2) 0.4 (2.6) (3.4) (4.8)
Gearing (%)
1
2.1 5.1 5.5 0.4 2.0 4.5 5.3 4.0 2.7 4.0
For the year ended
31August 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net revenue after taxation
(£’000) 16,571 17,802 19,660 21,296 23,939 26,421 27,376 26,537 27,682 34,105
Revenue earnings per share
(pence) 8.74 8.12 8.73 9.03 9.94 10.52 10.60 9.86 10.30 12.94
Dividends per share
(pence) 7.45 7.65 8.00 8.50 9.20 9.70 10.10 10.30 10.50 11.40
Ongoing Charges (%)
2
0.93 0.88 0.87 0.89 0.85 0.83 0.86 0.87 0.85 0.86
Performance
3
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
NAV total return 100.0 115.0 127.8 120.9 159.7 192.5 195.5 202.8 200.9 245.0 250.6
Share price total
return 100.0 113.0 130.1 122.2 162.3 195.8 194.6 205.0 197.0 238.7 241.6
1
Borrowings used for investment purposes, less cash, expressed as a percentage of net assets.
2
Ongoing Charges represents the management fee and all other operating expenses excluding finance costs, transaction costs and any performance fee
payable, expressed as a percentage of the average daily net asset values during the year.
3
Source: Morningstar. Rebased to 100 at 31 August 2012.
Annual Report and Accounts
for the year ended 31 August 2022
3
Strategic Report
NAV total returns and dividends per share over ten years to 31 August 2022
1
Source: Morningstar. Rebased to 100 at 31 August 2012.
NAV total return
1
(LHS)
Dividend
per
share
(Pence)
31-Aug-202231-Aug-202131-Aug-202031-Aug-201931-Aug-201831-Aug-201731-Aug-201631-Aug-201531-Aug-201431-Aug-2013
31-Aug-2012
5
10
15
40
60
80
100
120
140
160
180
200
220
240
260
280
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4
Schroder Oriental Income Fund Limited
Dear Shareholder
The Company’s financial
year, to 31st August 2022,
saw us witness two very
different environments in
the global economy and
financial markets. The
autumn period through to
the end of 2021 saw
continued strong economic
growth, growing inflationary
pressures, bond market
stability and equity market
euphoria. 2022 started with
a sharp reversal of market
sentiment, exacerbated in February by the invasion of Ukraine.
As global energy prices and inflation rose ever higher, so did
bond yields and equities fell sharply.
Against this backdrop, the Company produced an encouraging,
albeit modest, positive net asset value (“NAV”) total return of
2.5%. In 2021, Asia had not experienced the same euphoria in
equity markets as elsewhere, as the shadow of China’s policy
choices lay across the region. Similarly, the falls in 2022 have
been more muted than in the US and Europe but, nonetheless,
the MSCI AC Pacific ex Japan Index (in sterling terms) still fell by
7.7% over the financial year to 31st August.
As I have mentioned before, this index is an interesting
yardstick but it is little more than that. It is not the key driver of
how our portfolio is invested. Instead, Richard Sennitt and
Abbas Barkhordar seek to build a diversified portfolio of quality,
income generating companies based on fundamental stock
analysis. They do not slavishly follow macro themes. However,
the reasons for the material outperformance during the year
are noteworthy and are well explained in the Manager’s Review
on page 6. What I do want to highlight is the growing dividend
stream received by the Company which has underpinned
another increase in our own dividend to shareholders to 11.40
pence per share. During 2020 and 2021, we dipped modestly
into our revenue reserves until the COVID storm abated. We
believed that, with generally low payout ratios and good
fundamentals, our portfolio companies would recommence
dividend growth when confidence or, in certain cases,
regulation permitted. So it has proven and the Company’s
dividend for this financial year is back, once again, to being well
covered, allowing us to replenish our revenue reserve as well
as increase the total dividend to you. This year’s increase
represents an 8.6% rise in the dividend since last year and is
the 16th consecutive dividend increase since the Company’s
launch in 2005.
That said, a modest health warning is warranted. The
Company’s revenue is accounted for in sterling and our
dividend to you is paid in sterling. Our underlying revenue from
our portfolio has grown well in local currency terms this year,
which is heartening, but the significant weakness of sterling
during the year (and subsequently) has flattered both our NAV
performance and our revenue when translated into sterling
terms. We don’t seek to predict or to hedge the vagaries of
sterling but the performance of the currency can have a
material impact on shareholder total returns and our revenue.
For many years it has been a wind at our back. Any reversal of
recent sterling weakness would, conversely, act as a headwind
in the future.
So far, I have focused on our NAV performance. Our share price
has tracked this fairly closely during the financial year and
generated a total return (dividends reinvested) of 1.2%.
However, the discount that arose in 2020 has persisted, ending
the period at 4.8%. This follows many years when the
Company’s share price traded at a modest premium and the
Company issued shares at a premium. Emerging or widening
discounts are not unique to the Company: the average discount
across the investment trust sector is now wider than during the
global pandemic. However, as I noted in this year’s Interim
Report, the Board does not believe that our discount is justified
given our strong performance, attractive yield and relevance
within client portfolios. So we have been willing to continue to
repurchase shares when there has been a mismatch of supply
and demand in the market. During the financial year, a total of
6,265,000 shares were repurchased at an average discount of
5.1%. Since the financial year end, markets have fallen again
and volatility has risen. Discounts of investment trusts have
widened further, sometimes markedly. Our discount has crept
out to around 5-7%. We have redoubled our efforts accordingly
and will continue to repurchase shares when we believe that it
is in the best interests of shareholders.
In addition to financial performance, investors are increasingly
focused on how results are achieved, to ensure that their funds
are being invested in responsible companies and that returns
are sustainable. You will be pleased to hear that this is also a
focus of the Board and the Manager, and details of how
Environmental, Social and Governance (“ESG”) considerations
are factored into investment decisions is covered on pages 14
to 17.
Aside from this, there are two other items that I would like to
highlight. Firstly, as announced in the Interim Report published
in May, Schroders has agreed to reduce the performance fee
payable by the Company. This has had no impact on the year
just past because the total return was below the hurdle rate to
trigger any performance fee. But, the benefit of the increase in
that hurdle from 7% to 8% and the reduction of the cap to
0.65% (from 0.75% previously) will be felt in future years. It
represents a notable financial improvement to shareholders
and the Board would like to thank Schroders for this.
Secondly, we have been delighted to welcome Isabel Liu to the
Board. Isabel joined in November 2021 and is already making
a notable contribution to our discussions. Her extensive
knowledge of China and the region is generating lively and
relevant debate around the board table. Our succession
planning over the last five years has enabled us to build a
genuinely diverse board with different experience,
backgrounds and perspectives. We were supportive of the
FCA’s initiative to enshrine diversity into the Listing Rules and
are pleased to be able to adopt these changes early. Our report
on diversity can be found on page 19. This year also saw us
conduct a board review, externally facilitated by Stogdale St
James. I am pleased to be able to report that this found that
your board achieves the high standards we outline in our
Purpose, Values and Culture on page 18.
Looking forward, it is easy to despair. Without doubt, the
economic environment will get worse before it gets better. A
global recession seems likely, even if it may prove shallow. But,
financial markets are forward looking and have already
Chairman’s Statement
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Annual Report and Accounts
for the year ended 31 August 2022
5
Strategic Report
Chairman’s Statement
discounted much bad news. Looking more specifically at Asia,
caution seems warranted in relation to investment in China.
Politics, zero-COVID and economic vulnerability, especially to a
highly leveraged property market, suggest a bumpy ride ahead
for Chinese investments. But aside from China, the region
represents something of a haven and, whilst China is
important, it is not all of Asia. Many economies outside of China
are thriving and represent increasingly attractive alternatives
for production, investment and growth. Equity valuations in the
region are not demanding and offer interesting opportunities.
Our portfolio is well diversified, tilted away from China and
focused on companies with strong and reliable fundamentals.
Of course, in the short term, equities could fall further. Yet, we
see no reason why our portfolio should not prosper in the
medium term and generate growing dividends and attractive
total returns. Recent events in the UK place into even sharper
focus the importance of a globally diversified portfolio for all
types of investors, including income investors. Schroder
Oriental Income seems to me to have a well deserved place
amongst that diversification.
The Company’s Annual General Meeting will be held at 4.30pm
on Monday 5th December 2022 at Schroder’s offices, 1,London
Wall Place. Our investment managers, Richard Sennitt and
Abbas Barkhordar will be giving presentations at an investor
webinar on Tuesday 29th November 2022 at 10.30 am (which
can be signed up to via the Company's website,
http://www.schroders.co.uk/orientalincome), and at the
Company's Annual General Meeting and I would encourage
you to come and listen to them. We hope to welcome many of
you to the AGM in person and to hear your thoughts and
questions.
Paul Meader
Chairman
3 November 2022
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6
Schroder Oriental Income Fund Limited
Manager’s Review
The net asset value per share of the company recorded a total
return of +2.5% over the twelve months to end August 2022.
Four interim dividends have been declared totalling 11.40p
(10.50p last year).
Performance of the MSCI AC Pacific ex
Japan net dividends reinvested Index in
GBP and USD – 31 August 2021 to
31August 2022
Source: Thompson Datastream as at 31 August 2022.
The past year has been a tumultuous period for markets with
a number of headwinds globally and regionally weighing on
sentiment. Geopolitical tensions worsened with the shock
Russian invasion of Ukraine as well as ongoing tensions
between the US and China and increasing concerns
surrounding Taiwan. Inflation, in part driven by the war in
Ukraine and in part by shortages of both goods and labour,
rose materially and saw aggressive responses from Central
Banks which in turn focussed attention back on to the state of
the slowing global economy and its knock-on to earnings. In
Asia, the period was dominated by concerns over the health of
the Chinese economy with its ‘zero-COVID’ policy exacerbating
ongoing worries over an already weak property market.
Increased levels of regulation in China (particularly amongst
the internet names) also weighed on sentiment. Later in the
period, some easing measures announced by the Chinese
government, together with an apparent shift in focus towards
‘stability’, looked to underpin sentiment.
With the rise in and potential for a more sustained higher level
of inflation globally, there was renewed concern over higher
interest 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. This favoured income stocks. Towards the end of
the period there were some hopes that inflation was nearing a
peak and this would elicit a pivot from the US Federal Reserve
to a more dovish stance. However, this proved to be relatively
short-lived.
The divergence of returns across the regional markets
continued to be high, with China lagging for the reasons
mentioned above. Korea, often a market correlated with global
growth expectations, was also weak with the memory sector
names falling on concerns over falling demand as well as some
of the more highly rated internet names under pressure. 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. IT stocks in
Taiwan underperformed as concerns over the impact of a
slowing consumer would have on end demand, with rising
prices eating into real incomes. The other ASEAN markets
performed better, helped initially by the potential for post-
pandemic re-opening, as well as value stocks outperforming,
in which they tend to have higher weightings. Indonesia, in
particular, stood out as a beneficiary of higher commodity
prices.
Market returns of the MSCI AC Pacific ex
Japan Net Dividends Reinvested Index in
GBP and local currency – 31 August 2021
to 31 August 2022
Source: Schroders, Factset.
Sector returns across the region also saw a large spread.
Beneficiaries of rising commodity prices did well, especially
energy names, and 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 did a number of the
e-commerce and internet related names largely found in the
consumer discretionary and communication services sectors.
Information technology sold off towards the end of the period
as there was increasing concern over a slowdown in consumer
demand at a time when some of the bottlenecks around supply
were clearing.
The recovery in earnings over the past year has, in part, started
to be reflected in higher dividend payments. Areas of
improvement included Australian resource names buoyed by
higher commodity prices, as well as some of the real estate
companies and financials in Hong Kong 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 +2.5% over the year
compared favourably with that of the reference benchmark
which fell -7.7% over the year. Although growth expectations
have started coming down, the initial recovery in global growth,
seen as pandemic restrictions started to be lifted in many
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Annual Report and Accounts
for the year ended 31 August 2022
7
Strategic Report
Manager’s Review
economies, combined with interest rates starting 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
low valuations. The Australian resources exposure was also
positive thanks to higher commodity prices driven by the global
recovery. This saw the stocks 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.
Our overweight to information technology was a headwind as
the sector saw negative earnings revisions, but our positions
added value thanks to strong stock selection in some of the
Taiwanese names, which more than offset the negative from
being overweight the sector. The fund’s real estate holdings
also added value thanks to being overweight as well as from
positive stock selection. A lack of Chinese private developers
and exposure to some of the Singaporean names that, in part,
benefitted from ‘opening up’ helped here.
From a regional perspective, positioning in Singapore and
China were the major contributors to relative performance. In
China, both the significant underweight to, and stock selection
in, the market added value, as the ongoing issues highlighted
above impacted stocks. Here, the internet names were among
those that bore the brunt of the sell down. In Singapore, stock
selection was very strong owing to our positioning in banks,
telcos and property. Those areas also saw the Hong Kong
overweight add value. Our small overweight to Australia, being
the best performing of the larger markets, helped but again it
was stock selection in materials and financials that had the
bigger impact. Whilst stock selection was also strong in Korea
and Taiwan, our underweight to some of the other ASEAN
markets, in particular Malaysia and the Philippines detracted.
The geographic exposure in the Company’s portfolio continues
to be mainly spread between Taiwan, Australia, Singapore,
Hong Kong, Korea and China. 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 had performed
particularly strongly and now looked more fully valued in favour
of those names that had lagged and looked more attractive
from a valuation perspective. We continued in aggregate to add
to financials where we are overweight with valuations still
looking relatively attractive given higher interest rates and
subdued credit costs. Here we added to Korean, Australian and
Indonesian names, albeit these were partly funded from names
elsewhere including in Taiwan. 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 despite concerns over the
Chinese property sector. We own one Chinese name which has
performed strongly but do not own any of the private
residential developers where the problems have been centred.
We have also taken money out of some of the Singapore REITs
that are sensitive to rising rates and have been experiencing
large increases in costs.
The other area where we have reduced exposure is in the
materials sector where sales have been focussed in the
Australian names. The sector has performed strongly over the
last year, in part helped by the surge in commodity prices.
Information technology is the biggest sectoral exposure in the
fund after financials. Although near term earnings have been
seeing downward revisions we continue to see some strong
long-term drivers for growth around digitisation and the roll
out of 5G and the ‘Internet of Things’ and our focus remains on
the Taiwanese and Korean companies.
Investment Outlook
Slowing global and weak Chinese growth, elevated geopolitical
tensions around Ukraine and Taiwan and rising interest rates,
combined with ongoing downward revisions to earnings, mean
that headwinds for markets are likely to continue. However,
some areas of the markets are starting to look more attractive
from a longer term perspective having derated markedly.
Globally, consumption is under pressure as rising prices eat into
real incomes. This, allied with the shift away from consumption
of goods to consumption of services as the majority of
economies open up post-pandemic, has seen the demand for
goods falter. This in turn has started to see inventories
accumulate across supply chains globally, leading to a fear that
we will see a painful period of inventory adjustment on top of
an already slowing global economy. From an Asian perspective,
this is likely to have an impact on exports and from our
portfolio’s perspective is most likely to evidence itself in the
technology hardware sector. To an extent, markets have
already started to discount this with technology names in both
Korea and Taiwan already underperforming despite earnings
holding up relatively well for now. In our view, valuations are
now starting to factor in a slowdown but not yet a “hard
landing” which, although not our base case, is a possibility. In
general, the stocks we own in this sector are leaders in their
area with high market shares and strong balance sheets on
attractive valuations, so in our view should prove to be relatively
resilient. Although we did take some money out of the sector
earlier in the year, we remain overweight.
The other trend that the pandemic and Ukraine crisis have
reinforced has been the need for increased self sufficiency. The
need for diversified supply chains was something that the
COVID crisis had highlighted, given 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 also
highlighted the vulnerability of nations to energy supply
dependency. The recently concluded Party Congress in China
saw President Xi mention ‘security’ 91 times in his opening
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8
Schroder Oriental Income Fund Limited
Manager’s Review
speech (according to Bloomberg) compared with 55 mentions
five years ago, reinforcing a view that China will continue to
intensify efforts around ‘self sufficiency’ in core technologies
and strategic industries. All this will likely lead to further
localisation of supply chains and an era of reduced
globalisation.
Geopolitics will continue to remain a risk, including
surrounding Taiwan as highlighted by the recent visit by Nancy
Pelosi to the island, which has resulted in increased tensions
between the US and China. Other actions such as the recent
moves by the US to restrict China’s ability to purchase and
manufacture high-end semiconductors combined with the
upcoming mid-term elections in the US mean it is unlikely we
will see any meaningful relaxation in tensions near term and
this is likely to continue to weigh on sentiment.
From an Asian perspective the biggest impact on growth is
coming from the ‘zero-COVID’ policy in China, where the
lockdowns have had a severe impact on growth as well as
exacerbating the weakness in the property sector. It is not clear
how long this policy will remain in place but for now there is
unlikely, in our view, to be any major volte-face. The recent
Party Congress gave no indication when the policy might be
eased and whilst vaccination rates in China are high and
comparable to most developed nations, a large tranche of the
elderly still remain unvaccinated making it difficult for them to
open up until this is rectified. Although a wholesale opening up
is unlikely near term, it is possible that some more incremental
easing measures occur but in our view China’s consumption
and growth will continue to remain lacklustre as regular mass
testing and sporadic targeted lockdowns weigh on sentiment.
Given this, we have started to see a number of actions to
loosen policy including rate cuts, easing of property purchase
restrictions and increases in infrastructure spending and fiscal
incentives. In our view, it is likely that we will see further easing
measures but whilst the ‘zero-COVID’ policy remains their
impact for the large part is likely to resemble pushing on a
string. Nevertheless, given how poorly the market has
performed, together with the move to an easing bias there
(whilst most of the rest of the world are tightening), as well as
a tentative easing of the severity of lockdowns, there is
potential for the market to experience better periods of
performance. From our positioning perspective we have been
very underweight China for some time and although we
continue to look for new opportunities given the falls, we
remain so and believe that the challenges that were there for
the market remain.
Longer term, although Xi’s confirmation at the Congress as the
Party’s General Secretary for his third five year term was not a
surprise, the make-up of the Politburo Standing Committee
(“PSC”) (and Politburo) was decidedly one-sided being
dominated by Xi loyalists, further cementing his power within
the Party. The lack of countervailing voices within the new PSC
potentially heightens policy risk and likely means that many of
the challenges brought about by increased regulation will
persist, with the narrative around areas such as ‘common
prosperity’ continuing to weigh on the potential returns of
parts of the private sector. All this means one shouldn’t
necessarily use a mean reversion argument alone when it
comes to valuation.
Sector-wise, aside from information technology, financials
remain an important overweight. Here banks, in our view, still
remain attractive in aggregate on the back of benefits from
rising rates and low valuations. However, given the backdrop
of rising rates in most markets combined with slowing growth
there is a risk that if rates move up faster than expected it could
start to impact asset quality, offsetting the benefit of expanding
margins, so we remain selective. Underweights are largely
found in some of the more ‘defensive’ areas such as utilities,
consumer staples and healthcare where valuations are
generally, in our view, quite full.
While recent events described above don’t paint a particularly
optimistic picture, this has in part been reflected in market
action with valuations today looking much less frothy than they
did a year ago. Nevertheless, the US Federal Reserve being
more aggressive on rates near term is clearly a headwind,
given its near term impact on growth and earnings. However,
this in turn should start to cap long-term inflationary
expectations which will pave the way for lower rates at some
point in the future. Until then, it is likely that we see further
downward revisions to earnings and a period of inventory
adjustment amongst companies to reflect the slower growth
and hopefully put them in a position to start to grow earnings
once more. Given overall aggregate valuations for the region
are now trading at or below long-term averages, this does set
up a more constructive backdrop for Asian markets next year,
barring a global hard landing or a more extreme geopolitical
risk event.
As we have discussed previously, it is our belief that Asia
remains an attractive source of equity income, potentially
providing diversification for some UK investors seeking income
as we saw through the initial wave of COVID. For many
companies across the region, dividend payments have
recovered along with the recovery in earnings seen over the
last year. In the medium- and long-term, dividends tend to
follow earnings and earnings have recovered materially from
the COVID lows. As described above, earnings growth this year
will likely face some downward pressures which may impact
dividends, particularly in some of the more cyclical areas
including resources and information technology. However, it
should not be forgotten that overall payout 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
is rising faster than expected is not great for equities in the
short term, longer-term real asset income sources should look
attractive versus fixed income alternatives.
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
potentially 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.
176257 Oriental Income Fund - AR FSC Mix 70% Pt1.qxp_176257 Oriental Income Fund - AR FSC Mix 70% Pt1 03/11/2022 16:37 Page 8
Sectoral breakdown of portfolio (gearing*
currently at 4.0%)
Portfolio weight
(%)
Consumer Discretionary 3.5
Consumer Staples 3.9
Energy 1.7
Banks 22.3
Real Estate 15.2
Other Financials 7.1
Health Care –
Industrials 2.4
Information Technology 27.4
Materials 9.5
Communication Services 11.0
Utilities –
*Net cash less loans outstanding.
Source: Schroders as at August 31, 2022.
Regional breakdown of portfolio (gearing*
currently at 4.0%)
Portfolio weight
(%)
Australia 20.4
Hong Kong 14.4
China 11.3
India –
Indonesia 2.3
Japan 1.4
Korea 13.1
Malaysia –
New Zealand 0.6
Philippines 0.5
Singapore 16.0
Taiwan 20.6
Thailand 2.2
Vietnam 1.2
*Net cash less loans outstanding.
Source: Schroders as at August 31, 2022
Schroder Investment Management Limited
3 November 2022
Annual Report and Accounts
for the year ended 31 August 2022
9
Strategic Report
Manager’s Review
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10
Schroder Oriental Income Fund Limited
£’000 %
Taiwan
Taiwan Semicon Manufacturing 64,424 8.5
Hon Hai Precision Industry 23,860 3.2
Delta Electronics 12,718 1.7
ASE Technology 9,745 1.3
Mediatek 9,492 1.3
Uni-President Enterprises 7,973 1.1
CTBC Financial 6,962 0.9
Novatek Microelectronics 6,876 0.9
Far EasTone Telecommunications 6,856 0.9
Total Taiwan 148,906 19.8
Australia
BHP Billiton
1
24,166 3.2
National Australia Bank 21,782 2.9
Telstra 18,873 2.5
Rio Tinto
1
18,166 2.4
Mirvac 10,341 1.4
Westpac Banking 10,243 1.4
Woolworths 8,145 1.1
Orica 7,067 1.0
Australia and New Zealand Banking 6,995 0.9
James Hardie Industries 6,793 0.9
Suncorp 5,525 0.7
Deterra Royalties 4,770 0.6
Woodside Energy
1
4,266 0.6
Total Australia 147,132 19.6
Singapore
Singapore Telecom 23,080 3.1
Oversea-Chinese Banking 21,383 2.8
United Overseas Bank 17,590 2.3
CapitaLand Integrated
Commercial Trust (REIT^) 13,695 1.8
Singapore Exchange 11,395 1.5
Venture 11,304 1.5
Mapletree Industrial Trust (REIT^) 7,460 1.0
Frasers Centrepoint Trust (REIT^) 5,584 0.7
Suntec (REIT^) 2,766 0.4
Mapletree Pan Asia Commercial
Trust (REIT^) 2,330 0.3
Total Singapore 116,587 15.4
£’000 %
Hong Kong (SAR)
BOC Hong Kong 21,947 2.9
HKT Trust and HKT 21,389 2.9
Link (REIT) 13,123 1.7
Kerry Properties 11,342 1.5
HK Exchanges & Clearing 7,870 1.0
Fortune Real Estate Investment Trust 7,190 1.0
Swire Properties 6,990 0.9
Hang Lung Properties 6,441 0.9
Hang Lung Group 5,467 0.7
Swire Pacific B 3,048 0.4
Total Hong Kong (SAR) 104,807 13.9
South Korea
Samsung Electronics (including
preference shares) 58,918 7.9
SK Telecom 8,941 1.2
Samsung Fire and Marine
Insurance (including preference
shares) 8,574 1.1
LG Chemical preference shares 7,260 1.0
KB Financial 6,253 0.8
Hana Financial 4,583 0.6
Total South Korea 94,529 12.6
Mainland China
Midea Group warrants
21/06/2023
2
and A shares 21,633 2.9
Ping An Insurance H shares
3
11,858 1.6
China Resources Land
3
10,239 1.4
Sany Heavy Industry A shares 9,221 1.3
China Petroleum & Chemical
H shares
3
8,064 1.1
China Construction Bank
3
7,665 1.1
China Life Insurance
3
6,473 0.9
Shenzhou International
3
3,994 0.6
Total Mainland China 79,147 10.9
Indonesia
Bank Mandiri 16,569 2.2
Total Indonesia 16,569 2.2
Investment Portfolio
at 31 August 2022
Investments are classified by the Manager in the region or country of their main business operations. Stocks in bold are the 20
largest investments, which by value account for 59.5% (2021: 59.6%) of total investments and derivative financial instruments.
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Annual Report and Accounts
for the year ended 31 August 2022
11
Strategic Report
£’000 %
Thailand
Kasikornbank NVDR* 8,977 1.2
Land and Houses NVDR* 5,900 0.8
Total Thailand 14,877 2.0
Japan
Sumitomo Mitsui Financial 9,982 1.3
Total Japan 9,982 1.3
Vietnam
Vietnam Dairy Products 9,321 1.2
Total Vietnam 9,321 1.2
New Zealand
Fletcher Building 4,671 0.6
Total New Zealand 4,671 0.6
Philippines
International Container
Terminal Services 3,844 0.5
Total Philippines 3,844 0.5
Total Investments
4
750,372 100.0
1
Listed in UK
2
Listed in Luxembourg
3
Listed in Hong Kong
4
Total investments comprises: £’000 %
Equities and NVDR* 691,391 92.1
Preference shares 58,981 7.9
Total investments 750,372 100.0
*“NVDR” means non-voting depositary receipts
^“REIT” means real estate investment trust
Investment Portfolio
at 31 August 2022
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12
Schroder Oriental Income Fund Limited
Strategic Review
Business model
•
Responsible for
overall strategy and
oversight including
risk management
• Activities centred
on the creation of
shareholder value
Investor
Value
• Manager implements
the investment strategy
by following an
investment process
• Supported by strong
research and risk
environment
• Regular reporting and
interaction with the
Board
• Set objectives,
strategy and KPIs
• Appoint Manager
and other service
providers to achieve
objectives
• Marketing and sales
capability of the
Manager
• Support from the
corporate broker with
secondary market
intervention to support
discount/premium
management
Board is focused on
ensuring:
• that the fees
and ongoing
charges remain
competitive
• that the vehicle
remains attractive
to investors
Investment
Strategy
Promotion
Competitiveness
Board
• Oversee portfolio
management
• Monitor achievement
of KPIs
• Oversee the use of
gearing
• Oversee discount/
premium management
and the provision of
liquidity through share
issuance and
repurchase
Oversight
The Strategic Review sets out the Company’s strategy for delivering the investment objective (set out on the
inside front cover), the business model, the risks involved and how the Board manages and mitigates those
risks. It also details the Company’s purpose, values and culture, and how it interacts with stakeholders.
The Company is a listed investment trust, that has outsourced
its operations to third party service providers. The Board has
appointed the Manager, Schroder Unit Trusts Limited, to
implement the investment strategy and to manage the
Company’s assets in line with the appropriate restrictions
placed on it by the Board, including limits on the type and
relative size of holdings which may be held in the portfolio and
on the use of gearing, cash, derivatives and other financial
instruments as appropriate. The terms of the appointment are
described more completely in the Directors’ Report including
delegation to the portfolio manager and his team. The
Manager also promotes the Company using its sales and
marketing teams. The Board and Manager work together to
deliver the Company’s investment objective, as demonstrated
in the diagram above.
Investment process
Stock selection is at the heart of the investment approach for
the Company. A key strength of the Manager is its network of
analysts in Asia whose focus is on identifying companies able
to grow shareholder value in the long term. Although the in-
house analysts are the primary source of stock ideas, the
portfolio managers also generate stock ideas through their
own research and draw on a number of other sources including
other investment professionals within Schroders, a proprietary
quantitative screen and sell-side analysts.
The investment approach is primarily bottom-up, driven by an
assessment of the financial and non-financial (including ESG)
factors which influence company returns. In addition, there is
a top-down regional allocation review process, carried out on a
monthly basis, combining the output of an in-house
quantitative model and the qualitative views of the Manager.
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Annual Report and Accounts
for the year ended 31 August 2022
13
Strategic Report
Strategic Review
The chart below details the Manager’s investment process.
Stock research
The Manager believes that equity markets are not efficient in
Asia, and to generate alpha over the long term the best
approach is to focus on fundamental bottom-up stock analysis.
In particular, the Manager’s analytical focus is on the future
trend in a company’s return on invested capital (“ROIC”) relative
to its cost of capital, in the belief that this reflects the
attractiveness and sustainability of the business model and
serves as a predictor of long-term shareholder returns.
Given this focus on fundamental research, it forms a key input
into the Manager’s stock selection decisions. The Manager has
39 dedicated equity analysts across the Asia Pacific ex Japan
region, who have an average of over 16 years’ investment
experience, seven of which have been with Schroders
(September 2022). As a result of their level of experience, these
analysts have an exceptional knowledge of Asian markets and
the companies within them. The foundation of the Manager’s
internal research is a programme of regional company contacts
each year (over 2,300 for calendar year 2021), with the majority
of Schroders’ analysis being done using internal research and
company valuation models.
This is supplemented by other resources across the Schroders
group including the ESG and Data Insight Unit teams as well as
other equity teams focussed on Global and Emerging markets.
Stock selection/portfolio construction
When constructing the portfolio for the Company, the Manager
focuses on the following factors:
– conviction on investment thesis;
– upside to the internal estimate of fair value;
– any grade awarded by Schroders’ analysts;
– ability to increase or sustain dividend payout;
– relative attractiveness of other available opportunities;
– the risks to the investment case;
– the ESG credentials of that company; and
– the sustainability of that company’s profits.
Many of the stocks will already have attractive yields, but the
Manager also looks to exploit opportunities in stocks which are
set to benefit from improving capital efficiency, rising returns
and increasing shareholder distributions. There is no minimum
yield requirement applied to every stock, but portfolio
construction is carried out with reference to the overall
Company yield.
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14
Schroder Oriental Income Fund Limited
For a long time, the Manager has incorporated into its decision
making a thorough assessment of management quality,
environmental, social and governance factors, whether implicitly
or explicitly. We recognise the importance of appraising both
financial and non-financial factors when analysing a company
and its security. Your Manager believes that integrating an
analysis and evaluation of ESG factors in our security valuation
and selection process is key to enhancing and protecting long-
term shareholder value. The appraisal of non-financial factors,
including ESG considerations, contributes to a better
understanding of a company’s risk characteristics and return
potential.
As long-term, bottom-up investors, assessing the sustainability
of a company’s returns and financial position has always been
at the core of our research and investment decisions in Asia.
Consistent with this approach we engage with company
management teams (Schroders conducts over 2,300 meetings
with regional companies a year
1
) as well as voting all our proxies
where practically possible. Our analysts are directly responsible
for assessing ESG risks and opportunities as we believe they are
best placed to understand their companies and determine the
impact of ESG issues on the sustainability of the business.
ESG analysis is an integrated and important part of our
investment process from initial screening through to final
portfolio construction. ESG analysis impacts our investment
process in four direct ways:
1. Initial screening – ESG helps determine which companies
we consider to be investable as part of our initial screening.
2. Sustainability of earnings – ESG analysis helps understand
the impact ESG externalities may have on the future
earnings power of the business and with it our assessment
of the return on invested capital (“ROIC”) and shareholder
return classification (“SRC”) of the company.
3. Fair Value and recommendation – ESG is an indirect and
direct input into our fair value estimate of a company.
Indirect, to the extent that a company’s SRC may influence
the assumptions used in establishing our fair value estimate
of a company; and direct, to the extent that we may apply
an additional explicit discount/premium to that fair value
estimate.
4. Portfolio construction – ESG helps shape portfolio
construction and may influence how we size positions. For
example, poor ESG performance or heightened ESG risks may
result in a decision to underweight a security, hold a smaller
position size or avoid an investment completely. There is no
automatic rule – each investment opportunity is assessed on
a case-by-case basis, with the focus on the materiality of ESG
factors on a company’s valuation and risk profile.
In summary, ESG analysis helps determine which companies we
look at, how we assess their sustainability and, hence, how we
value them. And while company valuations ultimately drive our
portfolio construction, our ESG insights play a crucial role in the
investment process and influence how we size positions within
a portfolio. Furthermore, our ESG analysis is broad reaching and
we are not only interested in the potential downside risks that
we may identify but also the upside return implications for stocks
we invest in.
Integration of ESG into the investment process
This report reflects the ESG views and activities of the Manager in relation to the Company's portfolio, and more widely. References
to “our” or “we” in this section of the report refer to the views of the Manager.
How are ESG factors incorporated into the Asian investment process?
Schroders has been considering Environmental, Social and Governance (“ESG”) issues, and sustainability generally, for over
20years, as detailed in the timeline below.
Sustainability at Schroders
A continuously evolving approach
Source: Schroders, September 2022.
1
Carbon Disclosure Project.
2
UN Principles for Responsible Investing.
3
UN Global Compact.
4
Strategy and Governance module.
5
For certain businesses acquired during the course of 2020 and 2021 we have not yet integrated
ESG factors into investment decision-making. There are also a small number of strategies for which ESG integration is not practicable or now possible, for example passive index tracking or legacy businesses or investments
in the process of or soon to be liquidated, and certain joint venture businesses are excluded.
'Issues such as climate change, resource scarcity, population growth and corporate failure have put responsible investment at the forefront of
esults for our
clients.'
Peter Harrison, Group Chief Executive, Schroders plc
1998 2001 2006 2007 2008 2011 2016 2017 2019 2020 2021 2022
Published corporate
governance policy
Published first socially
responsible policy
Became a CDP
1
signatory
Became a UNPRI
2
signatory
Top 5 in 2017
AODP Global
Climate 50 Asset
Manager Index
Developed responsible
fixed income policy
6 years of
A+ UNPRI
rating
4
Became a
UNGC
3
signatory
Developed
responsible real
estate investment
policy
Acquired majority
stake in
BlueOrchard
Launched first
sustainable
strategy
Launched SustainEx &
Climate Progress
Dashboard
Linked ESG to
revolving credit
facility
Business
operating on a
carbon-
neutral basis
+
Achieved
full ESG
integration
5
Science-based
targets
validated by
SBTi
Launched
CONTEXT
Natural Capital
Research
partnership
#1 in ShareAction
European RI asset
management survey
CEO letter to
FTSE350
companies on
climate change
First dedicated
ESG resource
Founding
Signatory to
Net Zero Asset
Managers
Initiative
Became a
member of
the UN Race
to Net Zero
Initiative
Published
Engagement
Blueprint
Published
Climate
Transition
Action Plan
Became a Natural Capital
Investment Alliance
member
Acquired 75%
shareholding in
Greencoat Capital
Partnership with
Akaria Natural
Capital
Strategic Review
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Annual Report and Accounts
for the year ended 31 August 2022
15
Strategic Report
Strategic Review
Asia ex Japan ESG analysis in practice
1
Our Asian equity analysts are expected to provide written ESG
analysis for all companies under coverage. This identifies and
assesses the potential effect of ESG issues on the investment case.
For our ESG analysis to be more robust and more integrated,
we have drawn on the proprietary tools developed by
Schroders such as Context and Sustainex. Asia Context, which
is the principal tool employed, captures our ESG analysis in one
template using a stakeholder based framework and is a key
step in our overall assessment of a company. In addition to
separate rankings for ‘E’, ‘S’ & ‘G’, we generate an overall score
for each company’s ESG rating.
We have always engaged with the companies that we invest in,
and direct company contact is an important component of the
initial due diligence and ongoing monitoring process. The Asia
Context template provides us with a clearer, and broader,
roadmap on the issues requiring engagement. It has also
helped refresh our team’s focus on ROIC and enhances
appreciation of the downside and upside risks to a company’s
business model. The analysts have the option to apply an
explicit discount or premium to their fair value estimate as a
result of their ESG analysis.
One of the Asian Equities team’s greatest strengths is our
experienced analysts working hand-in-hand with our
experienced fund managers – often involving discussions from
the beginning to the end of the research on a company. Many
of our fund managers are ex-analysts and they are heavily
involved in the discussions that underpin our ESG conclusions–
especially given the inherent subjectivity of how certain ESG
considerations will impact a company. We do not expect our
analysts to score our Asia Context templates in isolation – in
many instances we need to build a team consensus on which
issues to address and how to score them.
Chart 1: Schroders Context Framework:
Source: Schroders
Company
G
o
v
e
r
n
a
n
c
e
G
o
v
e
r
n
a
n
c
e
Employees
Employer choices, motivation
Suppliers
Operational continuity,
reputational risk
Environment
Cost pressures,
product efficiency
Regulators
License to operate, pricing,
competitive structure
Communities
Disruption to local operations
Customers
Brand perceptions,
product demands
In addition to the merits of an individual stock idea, portfolio
managers will also take into consideration the overall balance
of the portfolio when selecting stocks and sizing positions –
looking, for instance, at overall sector and country weights. As
part of that process a company’s ESG characteristics may
influence how portfolio managers size positions within a
portfolio. The portfolio manager may elect to limit, or even rule
out, exposure to a particular stock in view of a specific ESG
concern. We assess each situation on its merits, focusing on the
materiality of ESG factors on a stock’s valuation and risk profile.
Working with the Schroders Group’s Sustainable
Investment Team
Schroders has a team of more than 50
2
dedicated ESG
professionals who develop proprietary ESG tools and oversee
ESG analysis across Schroders.
The ESG specialists will also engage directly with companies,
prioritising those with exposure to higher ESG risk and low ESG
ratings. They attend company meetings with portfolio
managers and analysts to discuss specific sustainability issues
directly with company management, in addition to financial
performance, as well as engaging with company sustainability
experts directly.
Corporate Governance Analysts in the team will also work
alongside investors, and our internal compliance and legal
teams to ensure our voting activities comply with our ESG
policy.
To enhance the Asian team’s ESG expertise, we have two
members of the Sustainable Investment team based in Asia,
supporting the investment team and ensuring they are kept
fully informed of the relevant output of the Sustainable
Investment team in London. In addition, we have a Sustainable
Equity Analyst on the team who brings additional insight and
perspective to our ESG analysis and engagement.
In addition the Asian investment team collaborates with the
Sustainable Investment team, both formally and informally
1 The above ESG research framework covers investments in companies covered by our team of locally based Asia ex Japan analysts. The detail of ESG
coverage in other regions where analysts report locally (eg Australia, India) may differ, but is underpinned by the same broad approach.
2 As at July 2022.
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Schroder Oriental Income Fund Limited
participating, for instance, in a monthly ESG conference call
together with other investors globally to discuss topical issues
as well as ESG best practice.
So what is the outcome for the Company?
The process described above in relation to how we approach
ESG in our view results in a portfolio that is likely to be less
exposed to areas that could be deemed ‘sensitive’ from an ESG
perspective and where there is ‘sensitivity’, it is likely to be to
markets that are generally well regulated with a focus on the
better practitioners. It should be noted that the Company does
not screen out all companies in sensitive sectors, rather the
process results in a much higher hurdle for stocks to get into
the portfolio than might otherwise be the case. Below is a table
that covers some of the more ‘sensitive’ sectors and our
exposure to them. As you can see exposure to the more
sensitive areas is limited.
Strategic Review
Sector Reasons for Caution Our Approach Approx. Fund Exposure
Avoid; small exposure 0%
Tobacco Social Avoid 0%
Gambling 0%
0%
Auto
Resources 7.3% (4 stocks)
*
Oil and Gas 1.7% (2 stocks)
Property 15.1% (14 stocks)
Defence Monopsony structure, corruption Avoid 0%
Source: Schroders, as at 30 September 2022. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
*Includes mining related stocks.
Environmental, Social, Governance, (low
barriers of entry, widespread questionable
practices)
Agribusinesses/
Aquaculture
Limited exposure to best-in-
class players in well-
regulated markets (eg
Australia, Macau)
Social, Governance. Licence to operate/
promotional practices
Avoid carbon heavy energy
providers, focus on hydro
and sustainable energy
providers in well-regulated
markets
Environmental, Governance, (national service
obligations, uncertain regulations/risks of
backlash against coal plants, mostly state-
owned enterprises)
Utilities
(traditional)
0% Original Equipment
Manufacturers
0% Supply chain
0.8% Electric Vehicle
battery manufacture
(1stock)
Avoid exposure to traditional
OEMs, minimise exposure to
supply chains/EV batteries
Environmental (regulations against the sector –
too much hot money in EVs and multiple
players will mean poor returns for all)
Avoid except for Australian
blue chip/focussed names,
with minimal thermal coal
exposure
Environmental, Social, Governance
(questionable practices such as bribery and
poor environmental and safety controls
concerns in Asia ex Australia)
Limited exposure to sector
ideally with a gas focus or
self help story
Environmental, Governance (regulations,
unfavourable taxes, price takers, big carbon
producers)
Exposure mainly Hong Kong,
Australia and Singapore
listed stocks.
Environmental, Social, Governance (bribery
issues, flooding, land clearance compensation,
labour practices)
Several of these industries are traditionally prominent in income
funds, as they typically contain many companies with high
dividend yields. Our approach, however, has been to take a
cautious approach to exposure in those companies which, while
they may be paying attractive dividends currently, are not
always operating in a sustainable way which could potentially
impact future earnings and by extension dividend payments.
We have tended, therefore, to take our exposure to these
industries through the higher quality names, operating in well-
regulated markets. For example, while we believe commodity
resources will continue to be necessary in future (and indeed
crucial for a transition to a lower carbon world), our exposure
to this sector is through blue-chip Australian companies, rather
than more marginal miners in emerging countries. Similarly, for
the real estate sector, our exposure is largely through
companies which have a focus on strong governance, operating
in the most well-regulated markets in the region. For some
sectors (e.g. tobacco or thermal coal), our requirement for
operations to be sustainable in the long-term is a high hurdle
to clear, regardless of the governance or regulatory
frameworks a company is operating under, so we have tended
to have very limited exposure there.
Perhaps the most prominent area of ESG-related risk is that of
Climate Change. Although the Manager doesn’t explicitly target
a lower carbon footprint from the Company’s holdings than the
reference index the table below shows that this is currently the
case. Whilst there are variations depending on the data source,
and there isn’t complete coverage of all stocks in the universe,
on most measures below the Company appears better
positioned than the index.
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Annual Report and Accounts
for the year ended 31 August 2022
17
Strategic Report
Strategic Review
Investment restrictions and spread of
risk
Risk in relation to the Company’s investments is spread as a
result of the Manager monitoring the Company’s portfolio with
a view to ensuring that it retains an appropriate balance to
meet the Company’s investment objective.
In order to comply with the Listing Rules, the Company will not
invest more than 10%, in aggregate, of the value of its total
assets (calculated at the time of any relevant investment) in
other investment companies or investment trusts which are
listed on the Official List of the London Stock Exchange (the
“Official List”) (save to the extent that those investment
companies or investment trusts have stated investment
policies to invest no more than 15% of their gross assets in
other investment companies or investment trusts which are
listed on the Official List). Additionally, the Company will not:
(i) invest more than 15% of its gross assets in other
investment companies or investment trusts which are
listed on the Official List;
(ii) invest, either directly or indirectly, or lend more than 20%
(calculated at the time of any relevant investment or loan)
of its gross assets to any single underlying issuer (including
the underlying issuer’s subsidiaries or affiliates);
(iii) invest more than 20% (calculated at the time of any
relevant investment) of its gross assets in one or more
collective investment undertakings which may invest more
than 20% of its gross assets in other collective investment
undertakings;
(iv) invest more than 40% (calculated at the time of any
relevant investment) of its gross assets in another
collective investment undertaking;
(v) expose more than 20% of its gross assets to the
creditworthiness or solvency of any one counterparty;
(vi) invest in physical commodities; or
(vii) invest in derivatives except for the purposes of efficient
portfolio management.
In the event of any breach of the investment restrictions
applicable to the Company, shareholders will be informed of
the actions to be taken by the Manager by notice sent to the
registered addresses of the shareholders in accordance with
the Company’s articles of incorporation or by an
announcement issued through a regulatory information
service approved by the Financial Conduct Authority (“FCA”). No
breaches of these investment restrictions occurred during the
year ended 31August 2022.
The investment portfolio on pages 10 and 11 and the
Manager’s Review on pages6 to 9 demonstrate that, as at
31August 2022, the portfolio was invested in 10 countries and
in 10 different industry sectors within such countries. There
were 64holdings in the portfolio at the year end. The Board
therefore believes that the objective of spreading investment
risk has been achieved.
Gearing
The Company has a £75 million multi-currency revolving credit
facility with Bank of Nova Scotia which was US$50.0 million
(£43.0 million) drawn at the end of the year. The facility was
taken out on 18 July 2022 and expires on 17 July 2023.
The Company’s policy is to permit net borrowings (including
foreign currency borrowings) of up to 25% of the Company’s
net assets (measured when new borrowings are incurred). It is
intended that the Manager should have the flexibility to utilise
this power to leverage the Company’s portfolio in order to
enhance returns where and to the extent that this is considered
appropriate by the directors. Full details of the gearing
employed by the Company are set out in note20 on page63.
Promotion
The Company promotes its shares to a broad range of
investors including discretionary wealth managers, private
investors, financial advisers and institutions which have the
potential to be long-term supporters of the investment
strategy. The Board seeks to achieve this through its Manager
and corporate broker, which promote the shares of the
Source: Benchmark data MSCI AC Pacific ex JP, September 30, 2022.
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Schroder Oriental Income Fund Limited
Company through regular contact with both current and
potential shareholders.
These activities consist of investor lunches, one-on-one
meetings, webinars, regional road shows and attendances at
conferences. In addition, the Company’s shares are supported
by the Manager’s wider marketing of investment companies
targeted at all types of investors. This includes maintaining
close relationships with adviser and execution-only platforms,
advertising in the trade press, maintaining relationships with
financial journalists and the provision of digital information on
Schroders’ website.
The Board also seeks active engagement with investors and
meetings with the Chairman are offered where appropriate.
Shareholders are also encouraged to sign up to the Manager’s
Investment Trusts update, to receive information on the
Company directly. https://www.schroders.com/en/uk/private-
investor/fundcentre/funds-in-focus/investment-trusts/schroders
-investmenttrusts/never-miss-an-update/
Key performance indicators
The investment objective
The Board measures the development and success of the
Company’s business through achievement of the Company’s
investment objective, to provide a total return for investors
primarily through investments in equities in the Asia Pacific
region, which is considered to be the most significant key
performance indicator for the Company.
Commentary on performance against the investment objective
can be found in the Chairman’s Statement.
At each meeting, the Board considers a number of
performance indicators to assess the Company’s success in
achieving its investment objective. These are as follows: NAV
total return; share price total return; share price
discount/premium to NAV per share and ongoing charges.
These are classed as Alternative Performance Measures
(“APMs”) and their calculations are explained in more detail on
pages 67 and 68.
The performance against these indicators is reported on
page2.
Net asset value and share price total return
At each meeting, the Board reviews the performance of the
portfolio in detail and discusses the views of the portfolio
manager with him.
Share price discount/premium to net asset value
per share
The Board reviews the level of discount/premium to net asset
value per share at every board meeting and is alert to the value
shareholders place on maintaining as low a level of
discount/premium volatility as possible. Details of how the
Company’s discount control mechanism works and its
operation during the year under review can be found on
page30.
Ongoing charges
The Board reviews the Company’s ongoing charges to ensure
that the total costs incurred by shareholders in the running of
the Company remain competitive when measured against peer
group funds. An analysis of the Company’s costs, including
management and performance fees, directors’ fees and
general expenses, is submitted to each board meeting.
Management and any performance fees payable are reviewed
at least annually.
Dividends payable
On a quarterly basis the Board considers the earnings from the
Company’s holdings in determining the dividend payable to
shareholders based on input from the Manager. Details of the
Company’s dividend policy and the dividends paid during the
year are set out on page29.
Risk factors
In addition to the performance indicators set out above, the
Board also monitors risk factors relating to investment
performance on a quarterly basis.
Purpose, Values and Culture
The Company’s purpose is to create long-term shareholder
value, in line with the investment objective.
The Company’s culture is driven by its values: Transparency,
Engagement and Rigour, with collegial behaviour and
constructive, robust challenge. The values are all centred on
achieving returns for shareholders in line with the Company’s
investment objective. The Board also promotes the effective
management or mitigation of the risks faced by the Company
and, to the extent it does not conflict with the investment
objective, aims to structure the Company’s operations with
regard to all its stakeholders and take account of the impact of
the Company’s operations on the environment and community.
Acting with high standards of integrity and transparency the
Board is committed to encouraging a culture that is responsive
to the views of shareholders and its wider stakeholders.
As the Company has no employees and acts through its service
providers, its culture is represented by the values and
behaviour of the Board and third parties to which it delegates.
The Board aims to fulfil the Company’s investment objective by
encouraging a culture of constructive challenge with the key
suppliers and openness with all stakeholders. The Board is
responsible for embedding the Company’s culture in the
Company‘s operations.
The Board recognises the Company’s responsibilities with
respect to corporate and social responsibility and engages with
its outsourced service providers to safeguard the Company’s
interests. As part of this ongoing monitoring, the Board
receives reporting from its service providers with respect to
their anti-bribery and corruption policies; Modern Slavery Act
2015 statements; diversity policies; and greenhouse gas and
energy usage reporting.
Responsible investment
The Company delegates to its Manager the responsibility for
taking ESG issues into account when assessing the selection,
Strategic Review
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Annual Report and Accounts
for the year ended 31 August 2022
19
Strategic Report
retention and realisation of investments. The Board expects the
Manager to engage with investee companies on social,
environmental and business ethics issues and to promote best
practice. The Board expects the Manager to exercise the
Company’s voting rights in consideration of these issues.
Further detail on engagement and stewardship can be found
on page 20.
In addition to the description of the Manager’s integration of
ESG into the investment process and the details in this Strategic
Review, a description of the Manager’s policy on these matters
can be found on the Schroders website at www.schroders.com.
The Board notes that Schroders believes that companies with
good ESG management often perform better and deliver
superior returns over time. Engaging with companies to
understand how they approach ESG management is an integral
part of the investment process. Schroders has committed to the
UN Global Compact, amongst codes and standards, and
information about the application of Schroders’ sustainability
and responsible investment policies can be found at:
https://www.schroders.com/en/sustainability/corporate-
responsibility/.
The Board has received reporting from the Manager on the
application of its policy.
Financial crime policy
The Company continues to be committed to carrying out its
business fairly, honestly and openly operates a financial crime
policy, covering bribery and corruption, tax evasion, money
laundering, terrorist financing and sanctions, as well as seeking
confirmations that the Company’s service providers’ policies are
operating soundly.
Greenhouse gas emissions and energy usage
As the Company outsources its operations to third parties, it
consumed less than 40,000 kWh during the year and so has no
greenhouse gas emissions, energy consumption or energy
efficiency action to report. The Manager has sought to estimate
the carbon usage of the Company’s investee companies and this
estimate is included on page 17, for illustrative purposes only.
Relations with shareholders
Shareholder relations are given high priority by both the Board
and the Manager and are detailed further in ‘Promotion’ on
pages 17 and 18.
In addition to the engagement and meetings held during the
year the chairs of the Board and committees, as well as the
other directors, attend the AGM and are available to respond
to queries and concerns from shareholders.
Strategic Review
Diversity
The Board is pleased to have adopted the new FCA’s Listing Rule in relation to diversity early. The below tables set out the gender
and ethnic diversity composition of the Board (as at 31 August 2022 and at the date of this report).
Gender Diversity
Number of
senior positions
Number of Percentage of on the board
board members the board (SID and chair)
Men 2 40% 1
Women 3 60% 1
Other n/a n/a n/a
Not-specified/prefer not to say n/a n/a n/a
Ethnic Diversity
Number of
senior positions
Number of Percentage of on the board
board members the board (SID and chair)
White British or other White (including minority white groups) 4 80% 2
Mixed/Multiple Ethnic Groups n/a n/a n/a
Asian/Asian British 1 20% 0
Black/African/Caribbean/Black British n/a n/a n/a
Other ethnic group, including Arab n/a n/a n/a
Not specified/prefer not to say n/a n/a n/a
Given that the Company is an investment trust with no executive board members, the columns and references regarding executive
management have not been included.
The Board has adopted a diversity and inclusion policy. Appointments and succession plans will always be based on merit and
objective criteria and, within this context, the Board seeks to promote diversity of gender, social and ethnic backgrounds, cognitive
and personal strengths. The Board will encourage any recruitment agencies it engages to find a range of candidates that meet
the objective criteria agreed for each appointment. Candidates for Board vacancies are selected based on their skills and
experience, which are matched against the balance of skills and experience of the overall Board taking into account the criteria
for the role being offered.
The Board also considers the diversity and inclusion policies of its key service providers.
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Schroder Oriental Income Fund Limited
Stakeholder Engagement, Section 172 of the Companies Act 2006
During the period, the Board discharged its duty under section 172 of the Companies Act 2006 to promote the success of the
Company for the benefit of its members as a whole, having regard to the interests of all stakeholders. As an externally managed
investment trust, the Company has no employees, operations or premises. The Board has identified its key stakeholders as
the Company’s shareholders, the Manager, other service providers, the Investee companies and the Company’s Lender.
The table below explains how the Directors have engaged with all stakeholders and outlines key activities undertaken during
the reporting period.
Strategic Review
Stakeholder Engagement
Shareholders
The Company welcomes attendance and participation from Shareholders at the Annual General Meeting.
Unfortunately, COVID 19 restrictions prevented us from holding a physical AGM last year, but
Shareholders were nevertheless able to submit questions to the Board. This year will, therefore, be the
first opportunity for Shareholders to physically attend an AGM in London, following the Company’s
transfer to being a UK investment trust from Guernsey in 2020. We look forward to welcoming as many
of you as possible to the AGM, details of which are on page 70 of this report. This will provide an
opportunity for Shareholders to engage with the Board and hear from the Portfolio Managers, Richard
Sennitt and Abbas Barkhordar, who will also be present. Shareholders unable to attend the AGM are
invited to submit questions to the Company Secretary in advance of the meeting; and will be able to
view a presentation from the Manager on-line.
The annual and half year results presentations, as well as monthly updates are available on the
Company’s webpage with results announced via a regulatory news service.
The Directors receive regular updates on the shareholder register, any trading activity and feedback
received from investor meetings held by the Manager and Broker.
The Board is responsible for discount and premium management and is alert to the value Shareholders
place on maintaining as low a level of discount volatility as possible. During the financial year, a total of
6,265,000 shares were bought back and a further 1,785,000 have been bought back since the period
end. The Board will continue to buy back shares when it judges it is in the best interests of Shareholders
to do so.
The Manager The Board maintains a constructive and collaborative relationship with the Manager, encouraging open
discussion.
The Board invites the Portfolio Managers to attend all Board and certain committee meetings and
receives regular reports on the performance of the investments and the implementation of the
investment strategy, policy and objective. The portfolio activities undertaken by the Portfolio Managers
and the impact of decisions affecting investment performance are set out in the Portfolio Managers’
Review on pages 6 to 9.
The Management Engagement Committee reviews the performance of the Manager, its remuneration
and the discharge of its contractual obligations at least annually. During the year under review the Board
sought feedback and advice from shareholders and independent service providers regarding the level
of performance fees paid by the Company. As a result of this feedback and following consultation with
the Manager, the Board has negotiated a reduction in performance fees, details of which are outlined
on page 28.
The Manager contributed feedback to the external board evaluation process completed this year.
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Annual Report and Accounts
for the year ended 31 August 2022
21
Strategic Report
Strategic Review
Stakeholder Engagement
Other service
providers
The Board maintains regular contact with its key service providers, both at the Board and committee
meetings, and through ad hoc communication throughout the year. The need to foster business
relationships with key service providers is central to the Directors’ decision-making as the Board of an
externally managed investment trust.
During the period, the Management Engagement Committee undertook reviews of the third-party
service providers and agreed that their continued appointment remained in the best interests of the
Company and its Shareholders. The Committee periodically reviews the market rates for services
received, to ensure that the Company continues to receive high quality service at a competitive cost.
During the year, Directors attended a meeting to assess the internal controls of certain service providers
including the Company’s Depositary and Custodian HSBC, the Delegated Administrator, Registrar and
Schroder’s Group Internal Audit. These meetings enable the Board to conduct due diligence on
operations and IT risks amongst service providers; and to receive up to date information on changes in
regulation and market practice in the industry. The Board also engaged with its service providers on
their own commitments on ESG, Financial Crime, Modern Slavery, Whistle-blowing etc.
In addition to the Board meetings, the Directors also met separately with the Company’s Broker, Numis,
to discuss market changes and investor feedback. The Broker’s views on the performance of the Board
were also included in the external board evaluation process.
Investee
companies
The Board believes that it is in the interests of all stakeholders to consider ESG factors. The Board
supports and encourages the ESG policy which the Schroders investment team has implemented as part
of the investment decision making process, details of which can be found on pages 12 to 17.
The Manager has discretionary powers to exercise voting rights on behalf of the Company and it reports
on voting decisions to the Board. The Board monitors investment decisions and questions the Portfolio
Managers’ rationale for exposures taken and voting decisions made.
In addition to regular discussions with the Manager regarding the ESG aspects of portfolio companies,
the Board met with Schroders engagement team to gain a more in depth understanding of the
Manager’s active engagement with investee companies.
The Company’s
lender
During the year under review, the Board entered into a new revolving credit facility agreement with
Scotiabank. The Board is responsible for ensuring that the Company adheres to all loan covenants.
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Schroder Oriental Income Fund Limited
Strategic Review
Principal risks and uncertainties
The Board is responsible for the Company’s system of risk management and internal control and for reviewing its effectiveness.
The Board has adopted a detailed matrix of principal risks affecting the Company’s business as an investment trust and has
established associated policies and processes designed to manage and, where possible, mitigate those risks, which are
monitored by the Audit and Risk Committee on an ongoing basis. This system assists the Board in determining the nature and
extent of the risks it is willing to take in achieving the Company’s strategic objectives. Both the principal risks and the monitoring
system are also subject to robust review at least annually. The last assessment took place in October 2022.
Although the Board believes that it has a robust framework of internal controls in place this can provide only reasonable, and
not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.
Actions taken by the Board and, where appropriate, its committees, to manage and mitigate the Company’s principal risks
and uncertainties are set out in the table below. The arrows in the Change column indicate if the Board thinks the risk has
increased, decreased or stayed the same during the year.
Emerging risks and uncertainties
During the year, the Board also discussed and monitored a number of risks that could potentially impact the Company’s ability
to meet its strategic objectives. The most significant was climate change risk. The Board has determined that this risk is worthy
of close monitoring.
Climate change risk includes how climate change could affect the Company’s investments, and potentially shareholder returns.
The Board notes the Manager has integrated ESG considerations, including climate change, into the investment process. The
Board will continue to monitor this as an emerging risk.
*The “Change” column on the right highlights at a glance the Board’s assessment of any increases or decreases in risk during
the year after mitigation and management. The arrows show the risks as increased or decreased, and dashes show risks as
stable.
Risk
Mitigation and management
Change (post
mitigation and
management)*
Geo-Political Risks
Political developments globally might materially
affect the ability of the Company to achieve its
investment objective.
In addition to the Ukraine war, the Board monitored
key political developments in the Asia Pacific region
including US/China tension, the political situation in
Hong Kong, Taiwan and political developments in
mainland China.
The Board and the portfolio manager periodically
meet with the Manager’s economists to gauge the
likelihood and impact of certain political changes.
Political
developments,
including in
China.
Market Risks
The Company is exposed to the effect of market
fluctuations due to the nature of its business. A
significant fall in underlying corporate earnings
and/or equity markets could have an adverse
impact on the market value of the Company’s
underlying investments.
The risk profile of the portfolio is considered and
appropriate strategies to mitigate any negative
impact of substantial changes in markets are
discussed with the Manager.
The Manager seeks to invest in companies with
strong balance sheets and sustainable business
models.
The extreme
market volatility
seen recently.
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Annual Report and Accounts
for the year ended 31 August 2022
23
Strategic Report
Strategic Review
Risk
Mitigation and management
Change (post
mitigation and
management)*
Currency
The Company is exposed to the effect of currency
fluctuations due to the nature of its business. The
Company invests predominantly in assets which
are denominated in a range of currencies. Its
exposure to changes in the exchange rate
between sterling and other currencies has the
potential to have significant impact on returns
and the sterling value of dividend income from
underlying investments.
The risk profile of the portfolio is considered and
appropriate strategies to mitigate negative impact of
substantial changes in currency are discussed with
the Manager.
The Company has no formal policy of hedging
currency risk but may use foreign currency
borrowings or forward foreign currency contracts to
limit exposure. The Company does not hedge
against sterling.
Investment Performance
The Company’s investment objectives may
become out of line with the requirements of
investors, resulting in a wide discount of the
share price to underlying NAV per share.
The appropriateness of the Company’s investment
mandate and the long-term investment strategy is
periodically reviewed and the success of the
Company in meeting its stated objectives is
monitored.
Share price relative to NAV per share is monitored by
the Board as a key performance indicator and is
reviewed against the Company’s peers on a regular
basis. The use of buy back authorities is considered
on a regular basis. The Manager and Corporate
Broker monitor market feedback and the Board
considers this at each quarterly meeting.
Marketing and distribution activity is actively
reviewed.
Proactive engagement with shareholders.
–
The Manager’s investment strategy and levels
of resourcing, if inappropriate, may result in the
Company underperforming the market and/or
peer group companies, leading to the Company
and its objectives becoming unattractive to
investors.
Review of the Manager’s compliance with agreed
investment restrictions, investment performance
and risk against investment objectives and strategy;
relative performance; the portfolio’s risk profile; and
whether appropriate strategies are employed to
mitigate any negative impact of substantial changes
in markets. The Manager also reported on the
impact of COVID-19 on the Company’s portfolio, and
the market generally.
Annual review of the ongoing suitability of the
Manager, including resources and key personnel
risk.
–
Competitiveness
The Company’s fees could become
uncompetitive against its peer group and
against open-ended alternatives
The Management Engagement Committee
reviews fees paid to the Manager at least annually.
Ongoing monitoring of fees charged by other
service providers takes place alongside an annual
review of the Company’s Ongoing Charges figure.
The Board approves significant non-routine
expenses.
–
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Schroder Oriental Income Fund Limited
Strategic Review
Risk assessment and internal controls review by the Board
Risk assessment includes consideration of the scope and quality of the systems of internal control operating within key
service providers, and ensures regular communication of the results of monitoring by such providers to the Audit and Risk
Committee, including the incidence of significant control failings or weaknesses that have been identified at any time and the
extent to which they have resulted in unforeseen outcomes or contingencies that may have a material impact on the
Company’s performance or condition.
No significant control failings or weaknesses were identified from the Audit and Risk Committee’s ongoing risk assessment
which has been in place throughout the financial year and up to the date of this report. The Board is satisfied that it has
undertaken a detailed review of the risks facing the Company.
A full analysis of the financial risks facing the Company is set out in note 20 to the accounts on pages 61 to 66.
Risk
Mitigation and management
Change (post
mitigation and
management)*
Gearing and leverage
The Company utilises credit facilities. These
arrangements increase the funds available for
investment through borrowing. While this has
the potential to enhance investment returns in
rising markets, in falling markets the impact
could be detrimental to performance.
Gearing is monitored and strict restrictions on
borrowings are imposed: gearing continues to
operate within pre-agreed limits so as not to exceed
25% of the Company’s net assets.
–
Environmental, social and governance
Underestimating the increasing impact of ESG
factors on investment performance, and
potentially demand for the Company’s shares.
The Manager has implemented a comprehensive
ESG policy which is outlined in detail on pages 14
to17. The Manager reports on its ESG engagement
at regular board meetings. The Board ensures that
ESG factors are incorporated into reports to
shareholders.
Scrutiny of ESG
issues has
increased,
together with
the potential
for these to
affect the value
of invested
companies.
Service provider performance
The Company has no employees and has
delegated certain functions to a number of service
providers. Failure of controls, including as a result
of fraud, and poor performance of any service
provider, could lead to disruption, reputational
damage or loss.
Service providers appointed subject to due diligence
processes and with clearly documented contractual
arrangements detailing service expectations.
Regular reports are provided by key service providers
and the quality of their services is monitored,
including an annual presentation to the Audit and
Risk Committee chair and other directors from key
risk and internal controls personnel at the
Company's main service providers.
Review of annual audited internal controls reports
from key service providers, including confirmation of
business continuity arrangements and IT controls, is
undertaken. Service providers’ internal controls
reports continue to be robust, as businesses
gradually return to physical workplaces.
–
Cyber
The Company’s service providers are all exposed
to the risk of cyber attacks. Cyber attacks could
lead to loss of personal or confidential
information, unauthorised payments or inability
to carry out operations in a timely manner.
Service providers report on cyber risk mitigation and
management at least annually, which includes
confirmation of business continuity capability in the
event of a cyber attack.
In addition, the Board receives presentations from
the Manager, the registrar, and the safekeeping
agent and custodian on cyber risk.
–
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Annual Report and Accounts
for the year ended 31 August 2022
25
Strategic Report
Viability statement
The directors have assessed the viability of the Company over
a five year period, taking into account the Company’s position
at 31August 2022 and 3 November 2022 and the potential
impact of the principal risks and uncertainties it faces for the
review period. The directors have assessed the Company’s
operational resilience and they are satisfied that the Company’s
outsourced service providers will continue to operate
effectively, following the implementation of their business
continuity plans.
A period of five years has been chosen as the Board believes
that this reflects a suitable time horizon for strategic planning,
taking into account the investment policy, liquidity of
investments, potential impact of economic cycles, nature of
operating costs, dividends and availability of funding. This time
period also reflects the average hold period of an investment.
In its assessment of the viability of the Company, the directors
have considered each of the Company’s principal risks and
uncertainties detailed on pages22 to 24 and in particular the
impact of a significant fall in regional equity markets on the
value of the Company’s investment portfolio. The directors
have also considered the Company’s income and expenditure
projections and the fact that the Company’s investments
comprise readily realisable securities which can be sold to meet
funding requirements if necessary.
The directors have also considered a stress test which
represents a severe but plausible scenario along with
movement in foreign exchange rates. This scenario assumes a
severe stock market collapse and/or exchange rate movements
at the beginning of the five year period, resulting in a 50% fall
in the value of the Company’s investments and investment
income and no subsequent recovery in either prices or income
in the following five years. It is assumed that the Company
continues to pay an annual dividend in line with current levels
and that the borrowing facility remains available and remains
drawn, subject to the gearing limit.
The Company’s investments comprise highly liquid, large, listed
companies and so its assets are readily realisable securities and
could be sold to meet funding requirements or the repayment
of the gearing facility should the need arise. There is no
expectation that the nature of the investments held within the
portfolio will be materially different in the future.
The operating costs of the Company are predictable and
modest in comparison with the assets and there are no capital
commitments foreseen which would alter that position.
Furthermore, the Company has no employees and
consequently no redundancy or other employment related
liabilities.
The Board reviews the performance of the Company’s service
providers regularly, including the Manager, along with internal
controls reports to provide assurance regarding the effective
operation of internal controls as reported on by their reporting
accountants. The Board also considers the business continuity
arrangements of the Company’s key service providers.
The Board monitors the portfolio risk profile, limits imposed on
gearing, counterparty exposure, liquidity risk and financial
controls at its quarterly meetings.
Although there continue to be regulatory changes which could
increase costs or impact revenue, the directors do not believe
that this would be sufficient to affect its viability.
The Board has assumed that the business model of a closed
ended investment company, as well as the Company’s
investment objective, will continue to be attractive to investors.
The directors also considered the beneficial tax treatment the
Company is eligible for as an investment trust. If changes to
these taxation arrangements were to be made it would affect
the viability of the Company to act as an effective investment
vehicle.
Based on the above the directors have concluded that there is
a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due
over the five year period of their assessment.
Going concern
The directors have assessed the principal risks, the impact of
the emerging risks and uncertainties and the matters referred
to in the viability statement. Based on the work the directors
have performed, they have not identified any material
uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Company’s
ability to continue as a going concern for the period assessed
by the directors, being the period to 3 November 2023 which
is at least 12months from the date the financial statements
were authorised for issue.
By order of the Board
Schroder Investment Management Limited
Company Secretary
3 November 2022
Strategic Review
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Schroder Oriental Income Fund Limited
26
Board of Directors
Paul Meader
Status: independent non-executive chairman
Length of service: 6 years – appointed a director in January 2016
Experience: Mr Meader is an independent director of investment companies,
insurers and investment funds. Until the autumn of 2012 he was Head of Portfolio
Management for Collins Stewart based in Guernsey, prior to which he was Chief
Executive of Corazon Capital. He has 35years’ experience in financial markets in
London, Dublin and Guernsey, holding senior positions in portfolio management
and trading. Prior to joining Corazon he was Managing Director of Rothschild’s Swiss
private-banking subsidiary in Guernsey. Mr Meader is a Fellow of the Chartered
Institute of Securities & Investments, a former Commissioner of the Guernsey
Financial Services Commission and past chairman of the Guernsey International
Business Association. He is a graduate of Hertford College, Oxford. Mr Meader also
holds a number of directorships in other companies one of which is publicly quoted,
ICG-Longbow Senior Secured UK Property Debt Investments Limited.
Committee membership: Audit and Risk, Management Engagement and
Nomination and Remuneration Committees
Remuneration for the reporting period: £45,000 per annum
Number of shares held: 11,000*
Alexa Coates
Status: independent non-executive director
Length of service: 4 years – appointed a director in February 2018
Experience: Mrs Coates is a chartered accountant who brings 30years of significant
financial expertise to the Board. MrsCoates was a senior executive of HSBC for nine
years, where she served as the global CFO for the group’s asset management
business and more recently led the finance function for commercial banking
operations in Europe. Prior to joining HSBC, MrsCoates worked in senior roles in
retail, healthcare and professional services at JSainsbury plc, BUPA, Williams Lea
Group Ltd and CIT Bank. She started her career at Ernst & Young in 1991, where she
worked in the UK and France. Mrs Coates is a non-executive director of Marsh
Limited, the insurance broker, Aviva Investors and its UK fund services company as
well as non-executive director and chair of the audit and risk committee of Polar
Capital Holdings plc, a publicly quoted company, and a trustee at the University of
Essex.
Committee membership: Audit and Risk, Management Engagement and
Nomination and Remuneration Committees, (chair of the Audit and Risk Committee)
Remuneration for the reporting period: £40,000 per annum
Number of shares held: 10,000*
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Annual Report and Accounts
for the year ended 31 August 2022
Governance
27
Board of Directors
Kate Cornish-Bowden
Status: senior independent non-executive director
Length of service: 3 years – appointed in December 2018
Experience: Ms Cornish-Bowden is a non-executive director of Finsbury Growth &
Income Trust PLC, International Biotechnology Trust plc, and CC Japan Income &
Growth Trust plc where she is chair of the audit committee. Ms Cornish-Bowden
worked for 12 years as a fund manager for Morgan Stanley Investment
Management, where she was managing director and head of the global equity
team. Prior to Morgan Stanley she worked as a research analyst at M&G. Ms
Cornish-Bowden is a member of the Chartered Financial Analyst Institute (CFA),
holds a Masters in Business Administration (MBA), and has completed the Financial
Times Non-Executive Director Diploma.
Committee membership: Audit and Risk, Management Engagement and
Nomination and Remuneration Committees
Remuneration for the reporting period: £35,000 per annum
Number of shares held: 24,780*
Isabel Liu
Status: independent non-executive director
Length of service: 1 year – appointed in November 2021
Experience: Isabel has 25 years’ global experience investing equity in infrastructure.
She started her investment career in Asia with the $1 billion AIG Asian Infrastructure
Fund. She was Managing Director of the Asia Pacific investment business of John
Laing plc. After relocating from Hong Kong to London, she was Investment Director
for the €1 billion ABN AMRO Global Infrastructure Fund. Most recently Isabel served
as Board Director at Pensions Infrastructure Platform, sponsored by UK pension
schemes. She has also been Chair of the Audit Risk Assurance and Remuneration
Committee as a Board Member of Transport Focus. Isabel is a non-executive
director of Utilico Emerging Markets Trust plc and Gresham House Energy Storage
Fund Plc. Isabel holds a BA in Economics from the Ohio State University, a Masters
in Public Policy from Harvard Kennedy School, and an MBA from the University of
Chicago Booth School of Business.
Committee membership: Audit and Risk, Management Engagement and
Nomination and Remuneration Committees
Remuneration for the reporting period: £35,000 per annum
Number of shares held: 8,918*
Nick Winsor
Status: independent non-executive director
Length of service: 2 years – appointed in March 2020
Experience: Nick is an independent consultant and non-executive director. He has
more than 35 years of retail and commercial banking experience with HSBC Group in
a number of international markets: Brunei; Channel Islands; Hong Kong; India; Japan;
Qatar; Singapore; Taiwan; UAE and the UK. He was CEO of HSBC’s businesses in the
Channel Islands and Isle of Man, CEO and VP of HSBC Bank (Taiwan) Limited and a
Director of HSBC Bank Middle East Limited. Before this, he was Head of Personal
Financial Services for the Asia Pacific Region. Nick is a Non-Executive Director of Metro
Bank plc and a member of the Risk Oversight Committee. He is also a Non-Executive
Director of the States of Jersey Development Company, Chair of the Remuneration
and Nomination Committee and a member of the Deal Advisory Panel. He is the Chair
of Autism Jersey and was awarded an MBE in the Queen's 2020 Birthday Honours list
for services to the community. Nick holds a Masters in Physics from Oxford University
and is a Fellow of the Institute of Directors.
Committee membership: Audit and Risk, Management Engagement and
Nomination and Remuneration Committees, (chair of the Nomination and
Remuneration Committee)
Remuneration for the reporting period: £35,000 per annum
Number of shares held: 20,000*
*Shareholdings are as at 2 November 2022, full details of directors’ shareholdings are set out in the Remuneration Report on page40.
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Schroder Oriental Income Fund Limited
28
Directors and officers
Chairman
The Chairman is an independent non-executive director who
is responsible for leadership of the Board and ensuring its
effectiveness in all aspects of its role. The Chairman’s other
significant commitments are detailed on page26. He has no
conflicting relationships.
Senior Independent Director (“SID”)
The SID is responsible for the evaluation of the Chairman, and
also serves as a secondary point of contact for shareholders.
Company Secretary
Schroder Investment Management Limited provides company
secretarial support to the Board and is responsible for
assisting the Chairman with Board meetings and advising the
Board with respect to governance. The Company Secretary
also manages the relationship with the Company’s service
providers, except for the Manager. Shareholders wishing to
lodge questions in advance of the AGM are invited to do so by
writing to the Company Secretary at the address given on the
outside back cover.
Role and operation of the Board
The Board is the Company’s governing body; it sets the
Company’s strategy and is collectively responsible to
shareholders for its long-term success. The Board is
responsible for appointing and subsequently monitoring the
activities of the Manager and other service providers to seek
to ensure that the investment objective of the Company
continues to be met. The Board also ensures that the Manager
adheres to the investment restrictions set by the Board and
acts within the parameters set by it in respect of any gearing.
The Strategic Review on pages12 to 25 sets out further detail
of how the Board reviews the Company’s strategy, risk
management and internal controls and also includes other
information required for the Directors’ Report, and is
incorporated by reference.
A formal schedule of matters specifically reserved for decision
by the Board has been defined and a procedure adopted for
directors, in the furtherance of their duties, to take
independent professional advice at the expense of the
Company.
The Chairman ensures that all directors receive relevant
management, regulatory and financial information in a timely
manner and that they are provided, on a regular basis, with
key information on the Company’s policies, regulatory
requirements and internal controls. The Board meets at least
quarterly and receives and considers reports regularly from
the Manager and other key advisers and ad hoc reports and
information are supplied to the Board as required.
Four Board meetings are usually scheduled each year to deal
with matters including: the setting and monitoring of
investment strategy, approval of borrowings and/or cash
positions, review of investment performance, the level of
discount of the Company’s shares to NAV, promotion of the
Company, and services provided by third parties. Additional
meetings of the Board are arranged as required.
The Board has approved a policy on directors’ conflicts of
interest. Under this policy, directors are required to disclose all
actual and potential conflicts of interest to the board as they
arise for consideration and approval. The Board may impose
restrictions or refuse to authorise such conflicts if deemed
appropriate. No directors have any connections with the
Manager, shared directorships with other directors or material
interests in any contract which is significant to the Company’s
business.
Key service providers
The Board has adopted an outsourced business model and
has appointed the following key service providers:
Manager
The Company is an alternative investment fund as defined by
the AIFM Directive and has appointed Schroder Unit Trusts
Limited (“SUTL”) as the Manager in accordance with the terms
of an alternative investment fund manager (“AIFM”)
agreement. The AIFM agreement, which is governed by the
laws of England and Wales, can be terminated by either party
on 12months’ notice or on immediate notice in the event of
certain breaches or the insolvency of either party. As at the
date of this report no such notice had been given by either
party.
SUTL is authorised and regulated by the FCA and provides
portfolio management, risk management, accounting and
company secretarial services to the Company under the AIFM
agreement. Part of the fund accounting and administration
activities are currently performed by HSBC Securities Services
(UK) Limited. The Manager also provides general marketing
support for the Company and manages relationships with key
investors, in conjunction with the Chairman, other Board
members or the corporate broker as appropriate. The
Manager has delegated investment management, marketing,
administrative, accounting and company secretarial services
to another wholly owned subsidiary of Schroders plc,
Schroder Investment Management Limited. The Manager has
in place appropriate professional indemnity cover.
The Schroders Group manages £773.4 billion (as at 30 June
2022) on behalf of institutional and retail investors, financial
institutions and high net worth clients from around the world,
invested in a broad range of asset classes across equities,
fixed income, multi-asset and alternatives.
The Manager is entitled to receive a management fee of an
amount equivalent to 0.75% per annum of the net assets of
the Company, reducing to 0.70% per annum on net assets
above £250million and 0.65% per annum on net assets above
£750 million. The fee is payable quarterly in arrears and
calculated as at the last business day in February, May, August
and November in each year.
The Manager is also entitled to receive a performance fee
based on the performance of the Company’s NAV per ordinary
share. The performance fee is 10% of the amount in pounds
sterling of any gains, being the amount by which the closing
adjusted NAV per ordinary share (adjusted as described
below) at the end of the relevant calculation period exceeds
the highest of:
(i) A hurdle, being 108% of the NAV per ordinary share,
taken from the audited balance sheet at the end of the
previous calculation period;
(ii) The highest closing NAV per ordinary share (unadjusted)
as per the audited accounts for any previous period in
which a performance fee has been paid; and
(iii) 100p
Closing Adjusted NAV per ordinary share is the NAV per share
on the last day of the financial year in respect of which the
performance fee is being calculated, adjusted to add back any
performance fee accrued during the year but not crystallised;
Directors’ Report
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Annual Report and Accounts
for the year ended 31 August 2022
Governance
29
to adjust for the deemed reinvestment of any dividends paid
by the Company during the period; and to remove the impact
on NAV per share due to any share buy-backs and issues.
The total amount of any performance fee payable in respect of
any one accounting period has been capped at 0.65% of the
net asset value, calculated at the end of the relevant
accounting period.
Any investment management fees payable to the Manager or
to other subsidiaries of Schroders plc in respect of
investments by the Company in collective investment
schemes and investment companies managed or advised by
the Schroders Group are deducted from the fee payable to the
Manager under the AIFM agreement. There were no such
investments during the year ended 31August 2022.
The management and performance fees payable in respect of
the year ended 31 August 2022 amounted to £5,149,000
(2021: £5,281,000) and £nil (2021: £5,636,000) respectively.
The Manager is also entitled to a fee for providing
administrative, accounting and company secretarial services
to the Company. For these services, it receives an annual fee,
payable quarterly in arrears, of £150,000.
Details of all amounts payable to the Manager are set out in
note17 on page 60.
The Board has reviewed the performance of the Manager, and
fees paid to it, during the year under review and continues to
consider that it has the appropriate depth and quality of
resource to achieve above-average returns in the longer term.
Thus, the Board considers that the Manager’s appointment
under the terms of the AIFM agreement, is in the best
interests of shareholders as a whole.
Safekeeping and cashflow monitoring agent
HSBC Bank plc (“HSBC Bank”), which is authorised by the
Prudential Regulation Authority and regulated by the FCA and
the Prudential Regulation Authority, has been appointed to
carry out certain duties of a safekeeping and cashflow
monitoring agent specified in the AIFM Directive for the
Company, including:
– safekeeping of the assets of the Company which are
entrusted to it;
– cash monitoring; and
– oversight of the Company and the Manager to the extent
described in the AIFM Directive.
HSBC Bank is liable to the Company for losses suffered by it as
a result of any negligence, wilful default, fraud or fraudulent
misrepresentation on its part.
The Company, the Manager and HSBC Bank may terminate
the safekeeping and cashflow monitoring agent services
agreement pursuant to which HSBC Bank provides these
services at any time by giving 90 days’ notice in writing. HSBC
Bank may only be removed from office when a new
safekeeping and cashflow monitoring agent is appointed by
the Company.
Registrar
Computershare Investor Services (Guernsey) Limited
(“Computershare”) has been appointed as the Company’s
registrar. Computershare’s services to the Company include
share register maintenance (including the issuance, transfer
and cancellation of shares as necessary), acting as agent for
the payment of any dividends, management of company
meetings (including the registering of proxy votes and
scrutineer services as necessary), handling shareholder
queries and correspondence and processing corporate
actions.
Compliance with the AIC Code of Corporate
Governance
The Board of the Company has chosen to adopt the principles
and provisions of the AIC Code of Corporate Governance (the
“AIC Code”). The Code addresses the Principles and Provisions
set out in the UK Corporate Governance Code (the “UK Code”),
as well as setting out additional Provisions on issues that are
of specific relevance to the Company as an investment
company.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council and the Guernsey Financial
Services Commission, provides more relevant information to
shareholders.
The UK Listing Authority requires all UK listed companies to
disclose how they have complied with the provisions of the
Code. This statement, together with the Statement of
Directors’ Responsibilities, viability statement and going
concern statement set out on page 25 respectively indicates
how the Company has complied with the principles of good
governance of the Code and its requirements on internal
control. The Strategic Report and Directors’ Report provide
further details on the Company’s risk management,
governance and diversity policies.
The Company complied with the Principles and Provisions of
the AIC Code during the year under review and to date.
The AIC Code is available on the AIC website
(www.theaic.co.uk). It includes an explanation of how the AIC
Code adapts the Principles and Provisions set out in the UK
Code to make them relevant for investment companies.
The Guernsey Financial Services Commission’s Finance Sector
Code of Corporate Governance (the “GFSC Code”) provides a
framework which applies to all companies in the regulated
finance sector in Guernsey. The Company reports against the
AIC Code, which meets the requirements of the GFSC Code.
Revenue and dividend policy
It is the Board’s policy that, except subject to unforeseen
circumstances, interim dividends on the Company’s ordinary
shares will be declared in respect of the quarters ended
30November, 28February, 31 May and 31August in January,
April/May, July and October/November each year.
Having already paid interim dividends amounting to
5.80pence per share, the Board has declared a fourth interim
dividend of 5.60pence per share for the year ended 31August
2022, which is payable on 30November 2022 to shareholders
on the register on 11November 2022. Thus, dividends for the
year amount to 11.40 pence (2021: 10.50 pence) per share.
This represents an increase of 8.6% over the rate of dividends
payable in respect of the previous year.
The Board noted that the Company’s shareholders
appreciated the board’s discount management control. The
Board agreed to request renewal of the authorities to issue
and buyback shares as described on page69.
Total dividends declared in respect of the year amount to
£29,868,000, which is £4,237,000 less than the £34,105,000
Directors’ Report
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Schroder Oriental Income Fund Limited
30
revenue profit after taxation available for distribution.
Accordingly, the Company will be able to add £4,237,000 to
brought forward revenue reserves. However in accordance
with accounting standards, the fourth interim dividend
amounting to £14,627,000 will not be accounted for until it is
has been paid.
Committees
In order to assist the Board in fulfilling its governance
responsibilities, it has delegated certain functions to
committees. The roles and responsibilities of these
committees, together with details of work undertaken during
the year under review, is outlined over the next few pages.
The reports of the Audit and Risk Committee, Management
Engagement Committee and Nomination and Remuneration
Committee are incorporated into and form part of the
Directors’ Report. Each committee’s effectiveness was
assessed, and judged to be satisfactory, as part of the Board’s
annual review of the Board and its committees.
Other required Directors’ Report
disclosures under laws, regulations, and
the AIC Code
Status
The Company carries on business as a Guernsey incorporated,
Guernsey Financial Services Commission authorised, closed-
ended investment company. Its shares are listed and admitted
to trading on the premium segment of the main market on
the London Stock Exchange. The Company was added to the
FTSE 250 index on 17September 2019.
On 1September 2020, following approval by the Company’s
shareholders at a general meeting, the Company became tax
resident in the United Kingdom and since then it has been
approved by HM Revenue & Customs, by way of a one-off
application, as an investment trust in accordance with section
1158 of the Corporation Tax Act 2010. It is intended that the
Company will continue to conduct its affairs in a manner
which will enable it to retain this status. The Company is not a
“close” company for taxation purposes.
It is not intended that the Company should have a limited life,
and the articles of incorporation do not contain any provisions
for review of the future of the Company at specified intervals.
Share capital and substantial share interests
As at the date of this report, the Company had 271,233,024
ordinary shares of 1p in issue. 11,815,000 shares were held in
treasury. 6,265,000 shares were bought back during the year
ended 31August 2022. 1,785,000shares were bought back in
the period from the year-end until 2 November 2022.
Accordingly, the total number of voting rights in the Company
at the date of this report is 259,418,024. Details of changes to
the Company’s share capital during the year under review are
given in note13 to the accounts on page58. All shares in issue
rank equally with respect to voting, dividends and any
distribution on winding up.
The Company has received notifications in accordance with
the Financial Conduct Authority’s (“FCA”) Disclosure Guidance
and Transparency Rule 5.1.2R of the below interests in 5% or
more of the voting rights attaching to the Company’s issued
share capital. The Company is reliant on investors to comply
with these regulations, and certain investors may be
exempted from providing these. As such, this should not be
relied on as an exhaustive list of shareholders holding above
5% of the Company’s voting rights.
Ordinary
shares as % total
at 31August voting
2022 rights
Investec Wealth &
Investment Limited 25,092,429 9.66
Brewin Dolphin Limited 14,571,888 5.61
There have been no notified changes to the above holdings
since the year end.
Provision of information to the auditors
The directors at the date of approval of this report confirm
that, so far as each of them is aware, there is no relevant audit
information of which the Company’s auditors are unaware;
and each director has taken all the steps that he or she ought
to have taken as a director in order to make himself or herself
aware of any relevant audit information and to establish that
the Company’s auditors are aware of that information.
Directors’ attendance at meetings
The number of scheduled meetings of the Board and its
committees held during the financial year and the attendance
of individual directors is shown below. Whenever possible all
directors attend the AGM.
Audit Management
and Risk Nomination Engagement
Board Committee Committee Committee
Alexa Coates 4/4 3/3 2/2 2/2
Kate Cornish-
Bowden 4/4 3/3 2/2 2/2
Isabel Liu
1
3/3 2/2 1/1 2/2
Paul Meader 4/4 3/3 2/2 2/2
Nick Winsor 4/4 3/3 2/2 2/2
1
Isabel Liu was appointed as a director on 4 November 2021.
Directors’ and officers’ liability insurance
and indemnities
Directors’ and officers’ liability insurance cover was in place in
respect of the directors throughout the year under review. The
Company provides an indemnity to each director to the extent
permitted by Guernsey law whereby the Company is able to
indemnify such director against any liability incurred in
proceedings in which the director is successful, and for costs
in defending a claim brought against the director for breach
of duty where the director acted honestly and reasonably.
By order of the Board
Paul Meader
Chairman
3 November 2022
Directors’ Report
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Annual Report and Accounts
for the year ended 31 August 2022
Governance
31
The responsibilities and work carried out by the Audit and Risk Committee during the year under review are set out in the
following report. The duties and responsibilities of the committee, which include monitoring the integrity of the Company’s
financial reporting and internal controls, are set out in further detail below, and may be found in the terms of reference which
are set out on the Company’s webpages, www.schroders.co.uk/orientalincome.
All directors are members of the committee. Alexa Coates is the chair of the committee. The Board has satisfied itself that at
least one of the committee’s members has recent and relevant financial experience and that the committee as a whole has
competence relevant to the sector in which the company operates.
Audit and Risk Committee Report
Approach
The committee’s key roles and responsibilities are set out below.
Risks and Internal Controls Financial Reports and Valuation Audit
Principal risks
To establish a process for identifying,
assessing, managing and monitoring
emerging and principal risks of the
Company.
Financial statements
To monitor the integrity of the financial
statements of the Company and any
formal announcements relating to the
Company’s financial performance and
valuation. To review the annual and half
year reports.
Audit results
To discuss any matters arising from the
audit and recommendations made by
the auditors.
Risks and uncertainties
To ensure a robust assessment of the
Company’s emerging and principal
risks and procedures are in place to
identify emerging risks, and an
explanation of how these are being
managed or mitigated.
Going concern
To review the position and make
recommendations to the Board in
relation to whether it considers it
appropriate to adopt the going
concern basis of accounting in
preparing its annual and half-yearly
financial statements.
Auditors‘ appointment,
independence and performance
To make recommendations to the
Board, in relation to the appointment,
re- appointment, effectiveness and
removal of the external auditors, to
review their independence, and to
approve their remuneration and terms
of engagement. Reviewing the audit
plan and engagement letter.
Ongoing risk review
Half year
report
Audit
planning
Audit
Annual
report
Post-audit
review
The table overleaf sets out how the committee discharged its duties during the year. The committee met three times during the
year. Further details on attendance can be found on page 30. An evaluation of the committee’s effectiveness and review of its
terms of reference were completed during the year.
Significant issues that the committee considered in relation to the financial statements, and how these issues were addressed, are
outlined below.
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Schroder Oriental Income Fund Limited
32
Audit and Risk Committee Report
Application during the year
Risks and Internal Controls Financial Reports and Valuation Audit
Principal & emerging risks
Reviewed the principal and emerging
risks faced by the Company and the
systems, processes and oversight in
place to manage and mitigate them.
Valuation and existence of holdings
Quarterly review of portfolio holdings
and assurance reports.
Meetings with the auditors
Met the auditors without
representatives of the Manager
present. Representatives of the
auditors attended the committee
meeting at which the draft annual
report and accounts were considered.
Internal controls and risk
mitigation
Consideration of several key aspects
of internal control and risk
management operating within the
Manager, depositary and registrar,
including assurance reports and
presentations on these controls.
Calculation of the investment
management fee and performance
fee
Consideration of the methodology
used to calculate the fees, matched
against the criteria set out in the AIFM
agreement.
In particular, reviewed the
methodology for the revised
performance fee.
Auditors independence
PricewaterhouseCoopers CI LLP were
appointed as auditors on 25 May
2018. The auditors are required to
rotate the senior statutory auditor
every five years. There are no
contractual obligations restricting the
choice of external auditors.
During the year, and following the
company becoming tax resident in the
UK on 1 September 2020,
PricewaterhouseCoopers CI LLP
resigned & PricewaterhouseCoopers
LLP was appointed as auditors to the
company to enable a smoother more
efficient audit process and therefore
reduce costs to shareholders.
The Company is compliant with the
provisions of the September 2014
Competition and Markets Authority
Order, which requires that FTSE 350
companies put their audit out to
tender at least every ten years.
Service provider control reviews
Reviewed the operational controls
maintained by the Manager,
depositary and registrar in June 2022
at an annual review meeting. Received
quarterly reports covering the
operation of the service providers.
Recognition of investment income
Considered dividends received against
forecast and the allocation of special
dividends to income or capital.
Effectiveness of the independent
audit process and auditors
performance
Evaluated the effectiveness of the
independent audit firm and process
prior to making a recommendation
that it should be re-appointed at the
forthcoming AGM. Evaluated the
auditors’ performance against agreed
criteria including: qualification;
knowledge, expertise and resources;
independence policies; effectiveness
of audit planning; adherence to
auditing standards; and overall
competence; alongside feedback from
the Manager on the audit process.
Assessed all relationships with the
auditors and received confirmation
from the auditors that they remained
independent and that it had
implemented policies and procedures
to meet the requirements of the
Auditing Practices Board’s Ethical
Standards. The Committee is
therefore satisfied that the auditors
are independent.
Professional scepticism of the auditors
was questioned and the committee
was satisfied with the auditors’ replies.
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Annual Report and Accounts
for the year ended 31 August 2022
Governance
33
Audit and Risk Committee Report
Recommendations made to, and approved by, the Board:
As a result of the work performed, the committee has concluded that the annual report for the year ended 31 August
2022, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to
assess the Company’s position, performance, business model and strategy, and has reported on these findings to the
Board. The Board’s conclusions in this respect are set out in the Statement of Directors’ Responsibilities on page 41.
Following the Company becoming a tax resident in the UK on 1 September 2020, the audit was transferred from
PricewaterhouseCoopers CILLP to PricewaterhouseCoopers LLP (the UK team) to enable a smooth and cost efficient
audit.
Having reviewed the performance of the auditors as described above, the committee considered it appropriate to
recommend the firm’s re-appointment. Resolutions to re-appoint PricewaterhouseCoopers LLP as auditors to the
Company, and to authorise the Directors to determine their remuneration will be proposed at the AGM.
Application during the year
Risks and Internal Controls Financial Reports and Valuation Audit
Compliance with the investment
trust qualifying rules in S1158 of the
Corporation Tax Act 2010
Consideration of the Manager’s report
confirming compliance.
Overall accuracy of the annual
report and accounts
Consideration of the draft annual
report and accounts and the letter
from the Manager in support of the
letter of representation to the
auditors.
Audit results
Met with and reviewed a comprehensive
report from the auditors which detailed
the results of the audit, compliance with
regulatory requirements, safeguards
that have been established, and on their
own internal quality control procedures.
Fair, balanced and understandable
Reviewed the annual report and
accounts to ensure that it was fair,
balanced and understandable.
Provision of non-audit services by
the auditors
The committee has reviewed the FRC’s
Guidance on Audit Committees and
has formulated a policy on the
provision of non-audit services by the
Company’s auditors. The committee
has determined that the Company’s
appointed auditors will not be
considered for the provision of certain
non-audit services, such as accounting
and preparation of the financial
statements, internal audit and
custody. The auditors may, if required,
provide other non-audit services
which will be judged on a case-by-case
basis.
The auditors did not provide any non-
audit services to the Company during
the year.
Going concern and viability
Reviewed the impact of risks on going
concern and longer-term viability, as
described further on page 25.
Consent to continue as auditors
PricewaterhouseCoopers LLP has
indicated to the committee their
willingness to continue to act as
auditors.
Alexa Coates
Audit and Risk Committee chair
3 November 2022
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Schroder Oriental Income Fund Limited
34
The committee met with senior management, as well
as representatives from various business functions
supporting the portfolio manager.
The committee undertook a detailed review of the
Manager’s performance and agreed that it has the
appropriate depth and quality of resource to deliver
superior returns over the longer term.
The committee also reviewed the terms of the AIFM
agreement and agreed they remained fit for purpose.
As reported in the Half Year Report, the committee
reviewed the performance fee basis and recommended
to the Board a reduction in the performance fee.
The annual review of each of the service providers was
satisfactory.
The committee noted that the Audit and Risk
Committee had undertaken a detailed evaluation of the
Manager, registrar, and safekeeping agents’ internal
controls.
Application during the year
Oversight of the Manager
The committee:
• reviews the Manager’s performance, over the short-
and long-term, against the reference index, peer
group and the market;
• considers the reporting it has received from the
Manager throughout the year, and the reporting
from the Manager to the shareholders;
• assesses management fees on an absolute and
relative basis, receiving input from the Company’s
broker, including peer group and industry figures, as
well as the structure of the fees;
• reviews the appropriateness of the Manager’s
contract, including terms such as notice period.
• visits the Manager’s Asian and London offices
periodically to meet with relevant investment and
controls functions; and
• assesses if the Company receives appropriate
administrative, accounting, company secretarial and
marketing support from the Manager.
Oversight of other service providers
The committee reviews the performance and
competitiveness of the following service providers on at
least an annual basis:
• Safekeeping agents
• Corporate broker
• Registrars
• Lender
The committee also receives a report from the
Company Secretary on ancillary service providers, and
considers any recommendations.
The committee noted the Audit and Risk Committee’s
review of the auditors.
Management Engagement Committee Report
The Management Engagement Committee is responsible for (1) the monitoring and oversight of the Manager’s performance
and fees, and confirming the Manager’s ongoing suitability, and (2) reviewing and assessing the Company’s other service
providers, including reviewing their fees. All directors are members of the committee. Paul Meader is the chair of the
committee. Its terms of reference are available on the Company’s webpages, www.schroders.co.uk/orientalincome.
Approach
Recommendations made to, and approved by, the Board:
• That the ongoing appointment of the Manager on the terms of the AIFM agreement was in the best interests of
shareholders as a whole.
• That the Company’s service providers’ performance remained satisfactory.
• That a lower performance fee be agreed.
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Annual Report and Accounts
for the year ended 31 August 2022
Governance
35
Selection and induction
• Committee prepares a job
specification for each role.
Proposals are sought from
independent search firms,
which are evaluated by the
Board and a firm selected.
• For the chairman and the
chairs of committees, the
committee also considers
current board members.
• Job specification outlines the
knowledge, professional skills
personal qualities and
experience requirements.
• The search firm sources a long
list of potential candidates, who
are assessed against the job
specification.
• Committee discusses the long
list, invites a number of
candidates for interview and
makes a recommendation to
the Board.
• Committee reviews the
induction and training of new
directors.
Board evaluation and directors’ fees
• Committee assesses each director
annually.
• Evaluation focuses on whether each
director continues to demonstrate
commitment to their role and provides a
valuable contribution to the Board during
the year, taking into account time
commitment, independence, conflicts and
training needs.
• Following the evaluation, the committee
provides a recommendation to
shareholders with respect to the annual
re-election of directors at the AGM.
• Committee reviews directors’ fees, taking
into account comparative data and
reports to shareholders in the
remuneration report.
• Any proposed changes to the
remuneration policy for directors
discussed and reported to shareholders.
Succession
• The Board’s succession policy is
that directors’ tenure will be for
no longer than nine years,
except in exceptional
circumstances, and that each
director will be subject to
annual re-election at AGMs.
• Committee reviews the Board’s
current and future needs at
least annually. Should any need
be identified, the committee
will initiate the selection
process.
• Committee oversees the
handover process for retiring
directors.
Nomination and Remuneration Committee Report
The Nomination and Remuneration Committee is responsible for (1) the recruitment, selection, induction and remuneration
of all directors, (2) their assessment during their tenure, and (3) the Board’s succession. All directors are members of the
committee. Nick Winsor is the chair of the committee. Its terms of reference are available on the Company’s webpages,
www.schroders.co.uk/orientalincome.
Approach
Oversight of directors
Selection
Induction
Annual
evaluation
Annual review
of succession
policy
Application
of succession
policy
For application see page 36
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Schroder Oriental Income Fund Limited
36
Nomination and Remuneration Committee Report
Application during the year
Selection and induction
• Isabel Liu was appointed
during the period under
review.
Details regarding her selection
and induction process were
reported in last year’s
committee report.
Board evaluation and directors’ fees
• During the year an external Board
evaluation was undertaken by Valerie
Stogdale of Stogdale St James. This firm
was chosen after a formal panel selection
process, which concluded that the reviewer
is experienced, independent and objective.
This review considered the performance of
the Board, its Committees as well as the
chairman. In addition, it considered the
Board’s existing skills matrix and the
collective skills and experience of the
directors. The board evaluation comprised
a comprehensive questionnaire, plus one-
on-one interviews with the whole board,
the Company Secretary, Client Director, the
portfolio managers and the Schroders’
finance representative, along with some
third-party providers.
The review concluded that “The Board is
high functioning, harmonious and diligent
with valuable complementary skills and a
balance of personality types”. It also noted
that “the Board’s composition is very good
in terms of diversity (gender and ethnicity)
and technical, sector expertise and
functional specialism.” The evaluation
reported positively on the performance of
the chairman.
While there were no significant findings,
the evaluation inevitably identified
opportunities for further improvement.
The directors discussed the evaluation with
Valerie Stogdale and agreed a list of minor
actions, mainly on improving internal and
external communication and engagement,
which the Board will implement over the
coming year.
• The committee also reviewed each
director’s time commitment and
independence by reviewing a complete list
of appointments, including pro bono not
for profit roles, to ensure that each director
remained free from conflict and had
sufficient time available to discharge each
of their duties effectively.
The committee considered each director's
contributions, and noted that in addition to
extensive experience as professionals and
non-executive directors, each director had
valuable skills and experience, as detailed
in their biographies on pages 26 and 27.
Succession
• The committee reviewed the
succession policy and agreed it
was still fit for purpose.
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Annual Report and Accounts
for the year ended 31 August 2022
Governance
37
Nomination and Remuneration Committee Report
Selection and induction Board evaluation and directors’ fees
All directors were considered to be
independent in character and judgement.
• Based on its assessment, the committee
provided individual recommendations for
each directors’ re-election.
• The committee reviewed directors’ fees,
using external benchmarking, and
recommended an increase in directors’
fees, as detailed in the remuneration
report.
The committee noted the new FCA Listing
rule regarding diversity reporting and
agreed to adopt the new reporting early.
Succession
Application during the year
Recommendations made to, and approved by, the Board:
• That Isabel Liu be appointed to the Board with effect from 4 November 2021.
• That all directors continue to demonstrate commitment to their roles, provide a valuable contribution to the deliberations of
the Board, contribute towards the Company's long-term success, and remain free from conflicts with the Company and its
directors, so should all be recommended for • re-election by shareholders at the AGM.
• That directors’ fees be increased to the following levels effective from 1 September 2022: chairman £47,000, Audit and Risk
chair: £42,000 and other directors: £37,000.
• That the Company should early adopt the new FCA Listing Rule regarding diversity reporting.
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Schroder Oriental Income Fund Limited
38
Directors’ Remuneration Report
Introduction
The following remuneration policy is currently in force and is
subject to a binding vote every three years. The next vote will
take place at the AGM to be held in 2024 and the current policy
provisions will apply until that date. The below directors’
annual report on remuneration is subject to an annual
advisory vote. An ordinary resolution to approve this report
will be put to shareholders at the forthcoming AGM.
At the AGM held on 11 December 2020 when the policy was
last voted on by shareholders, 99.69% of the votes cast
(including votes cast at the chairman’s discretion) in respect of
approval of the directors’ remuneration policy were in favour,
while 0.31% were against. 112,388 votes were withheld.
At the AGM held on 15 December 2021, 99.68% of the votes
cast (including votes cast at the chairman’s discretion) in
respect of approval of the directors’ remuneration report for
the year ended 31 August 2021 were in favour, while 0.3%
were against. 59,439votes were withheld.
Directors’ remuneration policy
The determination of the directors’ fees is a matter dealt with
by the Nomination and Remuneration Committee and the
Board.
It is the Nomination and Remuneration Committee’s policy to
determine the level of directors’ remuneration having regard
to amounts payable to non-executive directors in the industry
generally, the role that individual directors fulfil in respect of
Board and committee responsibilities, and time committed to
the Company’s affairs, taking into account the aggregate limit
of fees set out in the Company’s articles of incorporation
(currently £300,000). Any increase in the level set out therein
requires approval by the Board and the Company’s
shareholders.
The chairman of the Board and the chair of the Audit and Risk
Committee each receives fees at a higher rate than the other
directors to reflect their additional responsibilities. The fees
payable to directors are not performance related. They are set
at a level to recruit and retain individuals of sufficient calibre,
with the level of knowledge, experience and expertise
necessary to promote the success of the Company in reaching
its short and long-term strategic objectives.
The Board and its committees exclusively comprise non-
executive directors. No director past or present has an
entitlement to a pension from the Company, and the Company
has not, and does not intend to, operate a share scheme for
directors or to award any share options or long-term
performance incentives to any director. No director has a
service contract with the Company, although directors have a
letter of appointment. Directors do not receive exit payments
and are not provided with any compensation for loss of office.
No other payments are made to directors other than the
reimbursement of reasonable out-of-pocket expenses
incurred in attending to the Company’s business.
Implementation of policy
The terms of directors’ letters of appointment are available for
inspection at the Company’s registered office address during
normal business hours and during the AGM at the location of
such meeting.
The Board did not seek the views of shareholders in setting
this remuneration policy. Any comments on the remuneration
policy received from shareholders would be considered on a
case-by-case basis.
As the Company does not have any employees, no employee
pay and employment conditions were taken into account
when setting this remuneration policy and no employees were
consulted in its construction.
Directors’ fees are reviewed annually and take into account
research from third parties on the fee levels of directors of
peer group companies, as well as industry norms and factors
affecting the time commitment expected of the directors. New
directors are subject to the provisions set out in this
remuneration policy.
Directors’ annual report on remuneration
This report sets out how the remuneration policy was
implemented during the year ended 31 August 2022.
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Annual Report and Accounts
for the year ended 31 August 2022
Governance
39
Directors’ Remuneration Report
Consideration of matters relating to directors’
remuneration
Directors’ remuneration was last reviewed by the Board in July
2022. The members of the Board at the time that
remuneration levels were considered were as set out on
pages 26 to 27. Although no external advice was sought in
considering the levels of directors’ fees, information on fees
paid to directors of investment trusts managed by Schroders
and peer group companies provided by the Manager and
corporate broker was taken into consideration.
Following annual review, the Board agreed that fees should be
increased with effect from 1 September 2022 to the following
levels: chairman £47,000, Audit and Risk Committee chair
£42,000 and other directors £37,000. Directors’ fees were last
increased from 1 September 2018. The Board will continue to
review fee levels on an annual basis.
Expenditure by the Company on remuneration and
distributions to shareholders
The table below compares the remuneration payable to
directors to distributions paid to shareholders during the year
under review and the prior financial year. In considering these
figures, shareholders should take into account the Company’s
investment objective.
Year Year
ended ended
31August 31August
2022 2021 Change
£’000 £’000 %
Remuneration payable
to Directors 189 165 +14.5
1
Distributions paid to
shareholders
  Dividends 27,968 27,690
  Share buybacks 17,172 6,402
Total distributions paid
to shareholders 45,140 34,092 +32.4
1
This change reflects the increase from 4 to 5 directors from 4November
2021.
Remuneration Report for the year ended 31 August 2022
Fees paid to directors
The following amounts were paid by the Company to directors for their services in respect of the year ended 31 August 2022
and the preceding financial year. Directors' remuneration is all fixed; they do not receive any variable remuneration. The
performance of the Company over the financial year is presented on page 2, under the heading "Financial highlights".
Change in annual
fee over years
Fees Taxable benefits
1
Total ended 31 August
2022 2021 2022 2021 2022 2021 2022 2021 2020
Director £ £ £ £ £ £ % % %
Paul Meader
2
45,000 42,242 3,127 – 48,127 42,242 13.9 20.7 0.0
Alexa Coates 40,000 40,000 563 – 40,563 40,000 1.4 0.0 0.0
Kate Cornish-Bowden 35,000 35,000 467 – 35,467 35,000 1.3 0.0 n/a
Isabel Liu
3
28,839 – 356 – 29,195 – n/a n/a n/a
Peter Rigg
4
– 12,606 – – – 12,606 n/a n/a 7.7
Nick Winsor 35,000 35,000 467 – 35,467 35,000 1.3 n/a n/a
Total 183,839 164,848 4,980 – 188,819 164,848
1
Comprise amounts reimbursed for expenses incurred in carrying out business for the Company, and which have been grossed up to include PAYE and
NI contributions.
2
Appointed as chairman on 11 December 2020.
3
Appointed as a director on 4 November 2021.
4
Retired as chairman and from the board on 11 December 2020.
The information in the above table has been audited.
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Schroder Oriental Income Fund Limited
40
10 year performance of the share price total
return versus the MSCI All Countries Pacific ex
Japan Index, with net dividends reinvested, in
sterling terms
1
1
Source: Morningstar. Rebased to 100 at 31 August 2012. The MSCI All
Countries Pacific ex Japan Index with net dividends reinvested, sterling
adjusted, has been chosen as an appropriate comparison, as it comprises
companies within the Company’s primary investment objective.
Directors’ share interests
The Company’s articles of incorporation do not require
directors to own shares in the Company. The interests of
directors, including those of connected persons, at the
beginning and end of the financial year under review are set
out below.
Ordinary Ordinary
shares shares
of 1p each of 1p each
31 August 31 August
2022 2021
Paul Meader 11,000 11,000
Alexa Coates 10,000 10,000
Kate Cornish-Bowden 24,780 24,780
Nick Winsor 20,000 20,000
Isabel Liu 8,918 n/a
The information in the above table has been audited. There
have been no changes since the year end.
Paul Meader
Chairman
3 November 2022
80
100
120
140
160
180
200
220
240
260
280
300
A
u
g
-
1
2
A
u
g
-
1
3
A
u
g
-
1
4
A
u
g
-
1
5
A
u
g
-
1
6
A
u
g-1
7
A
u
g
-
1
8
A
u
g
-
1
9
A
u
g
-
2
0
A
u
g
-
2
2
A
u
g
-
2
2
MSCI All Countries Pacific ex Japan
Index with net dividends reinvested,
sterling adjusted
Share price total return
Directors’ Remuneration Report
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Annual Report and Accounts
for the year ended 31 August 2022
Governance
41
Statement of Directors’ Responsibilities
in respect of the Annual Report and Accounts
The directors are responsible for preparing the financial
statements in accordance with applicable Guernsey law and
generally accepted accounting principles.
Guernsey company law requires the directors to prepare
financial statements for each financial year which give a true
and fair view of the state of affairs of the Company and of the
profit or loss of the Company for that period. In preparing
these financial statements, the directors should:
– select suitable accounting policies, and apply them
consistently;
– present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
– provide additional disclosures when compliance with the
specific requirements in International Financial Reporting
Standards (“IFRS”) as adopted by the European Union is
insufficient to enable users to understand the impact of
particular transactions, other events and conditions on
the entity’s financial position and financial performance;
– state that the Company has complied with IFRS as
adopted by the European Union, subject to any material
departures disclosed and explained in the financial
statements;
– prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business; and
– make judgements and estimates that are reasonable and
prudent.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure
that the financial statements comply with The Companies
(Guernsey) Law, 2008 (as amended). They are also responsible
for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of
fraud and other irregularities.
Each of the directors, whose names and functions are listed
on pages 26 and 27, confirms that, to the best of their
knowledge:
– the financial statements, which have been prepared in
accordance with IFRS as adopted by the European Union
and with The Companies (Guernsey) Law, 2008 (as
amended) and in accordance with the requirements set
out above, and give a true and fair view of the assets,
liabilities, financial position and the net return of the
Company;
– the Strategic Review includes a fair review of the
development and performance of the business and the
position of the Company, together with a description of
the principal risks and uncertainties that it faces; and
– the Annual Report and Accounts, taken as a whole, are
fair, balanced and understandable and provide the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy.
So far as each of the directors are aware, there is no relevant
audit information of which the Company’s auditors are
unaware, and each director has taken all the steps that he or
she ought to have taken as a director in order to make himself
or herself aware of any relevant audit information and to
establish that the Company’s auditors is aware of that
information.
On behalf of the Board
Paul Meader
Chairman
3 November 2022
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42
Schroder Oriental Income Fund Limited
Independent Auditors’ Report
to the Members of Schroder Oriental Income Fund Limited
Report on the audit of the financial statements
Opinion
In our opinion, Schroder Oriental Income Fund Limited’s financial statements:
– give a true and fair view of the state of the company’s affairs as at 31 August 2022 and of its profit and cash flows for the
year then ended;
– have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union; and
– have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008 (as amended).
We have audited the financial statements, included within the Annual Report, which comprise: Balance Sheet as at 31 August
2022; Statement of Comprehensive Income, Statement of Changes in Equity and Cash Flow Statement for the year then ended;
and the Notes to the Financial Statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the Financial Reporting Council’s (“FRC”) Ethical Standard, as applicable to listed
public interest entities in accordance with the requirements of the Crown Dependencies’ Audit Rules and Guidance for market-
traded companies, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Context
The financial statements of Schroder Oriental Income Fund Limited were previously audited by PricewaterhouseCoopers CI LLP.
Following the recommendation of the Audit and Risk Committee, PricewaterhouseCoopers LLP were appointed by the Directors
on 31 May 2022 to audit the financial statements for the year ended 31 August 2022 and subsequent financial periods.
Our audit approach
Overview
Audit scope
– The company is a standalone authorised, closed ended investment company registered in the Bailiwick of Guernsey with its
shares listed on the main market of the London Stock Exchange.
– The Board of directors engages Schroder Unit Trusts Limited (the “Manager”) to manage the company’s assets.
– The Board of directors and the Manager engages HSBC Bank plc (the “Custodian”) to carry out duties of safekeeping and
cashflow monitoring agent.
– We conducted our audit using information provided by the Manager and Schroder Investment Management Limited (the
“Investment Manager”), as well as HSBC Securities Services (“HSS”) to whom the Manager has delegated the provision of
certain administrative functions.
– We tailored the scope of our audit taking into account the types of investments within the company, the involvement of the
third parties referred to above, the accounting processes and controls, and the industry in which the company operates.
– We obtained an understanding of the control environment in place at both the Investment Manager and HSS, and adopted
a fully substantive testing approach using reports obtained from the Investment Manager and HSS.
Key audit matters
– Income from investments at fair value
– Valuation and existence of investments at fair value through profit or loss
Materiality
– Overall materiality: £7,241,000 based on approximately 1% of net assets.
– Performance materiality: £5,430,000
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements.
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Annual Report and Accounts
for the year ended 31 August 2022
43
Financial
Independent Auditors’ Report
to the Members of Schroder Oriental Income Fund Limited
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or
not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter How our audit addressed the Key audit matter
Income from investments at fair value
Refer to the Audit and Risk Committee Report, the Statement of
comprehensive income, Note 1 Accounting Policies and Note 3
Income.
We focused on the accuracy, occurrence and completeness
both of net capital gains/losses on investments and of
dividend income recognition. We assessed the presentation of
income in the Statement of Comprehensive Income in
accordance with the requirements of The Association of
Investment Companies’ Statement of Recommended Practice
(the “AIC SORP”).
ISAs (UK) presume there is a risk of fraud in income
recognition. We considered this risk to relate to the risk of
overstating investment gains and the misclassification of
dividend income as either capital or revenue due to the
pressure management may feel to achieve a certain level of
capital or income growth in line with the objective of the
Company and in order to maintain the level of dividends paid
to shareholders in line with the dividend policy.
We assessed the accounting policy for income recognition for
compliance with International Financial Reporting Standards
as adopted by the European Union and the AIC SORP and
performed testing to confirm that income had been
accounted for in accordance with this stated accounting
policy.
We found that the accounting policies implemented were in
accordance with International Financial Reporting Standards
and the AIC SORP, and that income has been accounted for in
accordance with the stated accounting policy.
We understood and assessed the design and implementation
of key controls surrounding income recognition.
Dividend Income
We tested the accuracy of all dividend receipts by agreeing the
dividend rates for investments to independent market data.
We tested occurrence by testing that all dividends recorded in
the year had been declared in the market by investment
holdings, and we traced a sample of dividends received to
bank statements.
To test for completeness, we tested that the appropriate
dividends had been received in the year by reference to
independent data of dividends declared for all dividends
during the year.
We tested the allocation and presentation of dividend income
between the revenue and capital return columns of the
Statement of Comprehensive Income in line with the
requirements set out in the AIC SORP by determining the
reasons behind dividend distributions.
Gains/losses on investments at fair value through profit or
loss
The gains/losses on investments held at fair value comprise
realised and unrealised gains/losses.
For unrealised gains and losses, we tested the valuation of the
portfolio at the year-end, together with testing the
reconciliation of opening and closing investments, thereby we
have assessed the accuracy of the gains/losses recorded. We
have also verified the occurrence of the gains/losses through
our testing of the existence of investments, as noted above.
For realised gains/losses, we tested a sample of disposals by
agreeing the proceeds to bank statements in order to verify
the occurrence of the gain/loss. We re-performed the
calculation of a sample of realised gains/losses in order to
assess the accuracy of the gains/losses recorded.
Based on the audit procedures performed and evidence
obtained, we concluded that income from investments was
not materially misstated.
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44
Schroder Oriental Income Fund Limited
Independent Auditors’ Report
to the Members of Schroder Oriental Income Fund Limited
Key audit matter How our audit addressed the Key audit matter
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the
industry in which the company operates.
In planning our audit, we made enquiries of the directors to understand the extent of the potential impact of climate change
risk on the Company’s financial statements.
The directors concluded that the impact on the measurement and disclosures within the financial statements is not material
because the Company’s investment portfolio is primarily made up of level 1 quoted securities which are valued at fair value
based on market prices. We found this to be consistent with our understanding of the Company’s investment activities.
We also considered the consistency of the climate change disclosures included in the Strategic Report with the financial
statements and our knowledge from our audit.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
We use performance materiality to reduce to an appropriately low level probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to £5,430,000 for the
company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above
£362,000 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Valuation and existence of investments at fair value
through profit or loss
Refer to the Investment Portfolio, the Audit and Risk Committee
Report, Note 1 Accounting Policies and Note 10 Investments at fair
value through profit or loss.
The investment portfolio at 31 August 2022 comprised listed
equity investments of £750 million.
We focused on the valuation and existence of investments
because investments represent the principal element of the
net asset value as disclosed in the Statement of Financial
Position in the financial statements.
We tested the valuation of all the listed investments by
agreeing the prices used in the valuation to independent third
party sources.
We tested the existence of all listed investments by agreeing
the holdings to an independent confirmation from the
Custodian, as at 31 August 2022.
No material misstatements were identified from this testing.
Overall company materiality £7,241,000.
How we determined it approximately 1% of net assets
Rationale for benchmark applied We believe that net assets is the primary measure used by the shareholders
in assessing the performance of the entity, and is a generally accepted
auditing benchmark. This benchmark provides an appropriate and consistent
year on year basis for our audit.
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Annual Report and Accounts
for the year ended 31 August 2022
45
Financial
Independent Auditors’ Report
to the Members of Schroder Oriental Income Fund Limited
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of accounting
included:
– evaluating the directors’ updated risk assessment and considering whether it addressed relevant threats, including the
ongoing impact of COVID-19, rising inflation, Russia’s invasion of Ukraine, and the subsequent economic uncertainty;
– evaluating the directors’ assessment of potential operational impacts, considering their consistency with other available
information and our understanding of the business and assessed the potential impact on the financial statements;
– reviewing the directors’ assessment of the Company’s financial position in the context of its ability to meet future expected
operating expenses and debt repayments, their assessment of liquidity as well as their review of the operational resilience
of the Company and oversight of key third-party service providers;
– assessing the premium/discount at which the Company’s share price trades compared to the net asset value per share; and
– assessing the implication of significant reductions in Net Asset Value (NAV) as a result of market performance on the
ongoing ability of the Company to operate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the company’s
ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly
stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
Corporate governance statement
ISAs (UK) require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance
Code, which the Listing Rules of the Financial Conduct Authority specify for review by auditors of premium listed companies. Our
additional responsibilities with respect to the corporate governance statement as other information are described in the
Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit, and
we have nothing material to add or draw attention to in relation to:
– The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
– The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or mitigated;
– The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their identification of any material uncertainties to the company’s ability
to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
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Schroder Oriental Income Fund Limited
Independent Auditors’ Report
to the Members of Schroder Oriental Income Fund Limited
– The directors’ explanation as to their assessment of the company’s prospects, the period this assessment covers and why
the period is appropriate; and
– The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Company was substantially less in scope than
an audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that
the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the
statement is consistent with the financial statements and our knowledge and understanding of the company and its
environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the
audit:
– The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the company’s position, performance, business model and
strategy;
– The section of the Annual Report that describes the review of effectiveness of risk management and internal control
systems; and
– The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the
Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities in respect of the Annual Report and Accounts, the directors
are responsible for the preparation of the financial statements in accordance with the applicable framework and for being
satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and
regulations related to breaches of section 1158 of the Corporation Tax Act 2010, and we considered the extent to which non-
compliance might have a material effect on the financial statements. We also considered those laws and regulations that have
a direct impact on the financial statements such as Section 262 of The Companies (Guernsey) Law, 2008. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase
revenue (investment income and capital gains) or to increase net asset value. Audit procedures performed by the engagement
team included:
– discussions with the Manager and the Audit and Risk Committee, including specific enquiry of known or suspected instances
of non-compliance with laws and regulation and fraud where applicable;
– reviewing relevant meeting minutes, including those of the Audit and Risk Committee;
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Annual Report and Accounts
for the year ended 31 August 2022
47
Financial
Independent Auditors’ Report
to the Members of Schroder Oriental Income Fund Limited
– assessment of the Company’s compliance with the requirements of section 1158 of the Corporation Tax Act 2010, including
recalculation of numerical aspects of the eligibility conditions;
– identifying and testing journal entries, in particular any material or revenue-impacting manual journal entries posted as part
of the Annual Report preparation process; and
– designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through
collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we
will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Other required reporting
Company Law exception reporting Under The Companies (Guernsey) Law, 2008 we are required to report to you if, in our
opinion:
– we have not obtained all the information and explanations we require for our audit; or
– proper accounting records have not been kept; or the financial statements are not in agreement with the accounting
records.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit and Risk Committee, we were appointed by the directors on 31 May 2022 to audit
the financial statements for the year ended 31 August 2022 and subsequent financial periods. This is therefore our first year of
uninterrupted engagement.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements
form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct
Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance
over whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS.
Colleen Local
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Recognised Auditor London
3 November 2022
Notes:
a. The maintenance and integrity of the Schroder Oriental Income Fund Limited website is the responsibility of the directors; the work carried out by
the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have
occurred to the financial statements since they were initially presented on the website.
b. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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48
Schroder Oriental Income Fund Limited
Statement of Comprehensive Income
for the year ended 31 August 2022
2022 2021
Revenue Capital Total Revenue Capital Total
Note £’000 £’000 £’000 £’000 £’000 £’000
(Losses)/gains on investments at fair value
through profit or loss 2 – (7,810) (7,810) – 121,017 121,017
Net foreign currency (losses)/gains – (6,572) (6,572) – 395 395
Income from investments 3 39,047 1,448 40,495 32,394 219 32,613
Other income 3 24 – 24 1 – 1
Total income/(loss) 39,071 (12,934) 26,137 32,395 121,631 154,026
Management fee 4 (1,545) (3,604) (5,149) (1,584) (3,697) (5,281)
Performance fee 4 – – – – (5,636) (5,636)
Other administrative expenses 5 (1,114) (4) (1,118) (1,033) (5) (1,038)
Profit/(loss) before finance costs
and taxation 36,412 (16,542) 19,870 29,778 112,293 142,071
Finance costs 6 (161) (376) (537) (94) (220) (314)
Profit/(loss) before taxation 36,251 (16,918) 19,333 29,684 112,073 141,757
Taxation 7 (2,146) – (2,146) (2,002) – (2,002)
Net profit/(loss) and total comprehensive income 34,105 (16,918) 17,187 27,682 112,073 139,755
Earnings/(loss) per share 9 12.94p (6.42)p 6.52p 10.30p 41.70p 52.00p
The “Total” column of this statement represents the Company’s Statement of Comprehensive Income, prepared in accordance
with IFRS. The "Revenue and Capital" columns represent supplementary information prepared under guidance set out in the
statement of recommended practice for investment trust companies (the “SORP”) issued by the Association of Investment
Companies in July 2022.
The Company does not have any income or expense that is not included in net profit for the year. Accordingly the “Net profit”
for the year is also the “Total comprehensive income” for the year.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or
discontinued in the year.
The notes on pages 52 to 66 form an integral part of these financial statements.
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Annual Report and Accounts
for the year ended 31 August 2022
49
Financial
Statement of Changes in Equity
for the year ended 31 August 2022
Treasury Capital
Share share redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
Note £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 31 August 2020 234,347 (2,155) 39 150,374 233,856 30,238 646,699
Repurchase of ordinary shares into
treasury – (7,345) – – – – (7,345)
Net profit and total comprehensive
income – – – – 112,073 27,682 139,755
Dividends paid in the year 8 – – – – – (27,690) (27,690)
At 31 August 2021 234,347 (9,500) 39 150,374 345,929 30,230 751,419
Repurchase of ordinary shares into treasury – (16,491) – – – – (16,491)
Net (loss)/profit and total comprehensive
income – – – – (16,918) 34,105 17,187
Dividends paid in the year 8 – – – – – (27,968) (27,968)
At 31 August 2022 234,347 (25,991) 39 150,374 329,011 36,367 724,147
The notes on pages 52 to 66 form an integral part of these financial statements.
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Schroder Oriental Income Fund Limited
2022 2021
Note £'000 £'000
Non current assets
Investments at fair value through profit or loss 10 750,372 774,425
Current assets 11
Receivables 4,355 6,881
Cash and cash equivalents 14,155 16,147
18,510 23,028
Total assets 768,882 797,453
Current liabilities
Payables 12 (44,735) (46,034)
Net assets 724,147 751,419
Equity attributable to equity holders
Share capital 13 234,347 234,347
Treasury share reserve 14 (25,991) (9,500)
Capital redemption reserve 14 39 39
Special reserve 14 150,374 150,374
Capital reserves 14 329,011 345,929
Revenue reserve 14 36,367 30,230
Total equity shareholders’ funds 724,147 751,419
Net asset value per share 15 277.24p 280.94p
The financial statements on pages 48 to 51 were approved by the Board of Directors on 3 November 2022 and signed on its
behalf by:
Director
The notes on pages 52 to 66 form an integral part of these financial statements.
Registered in Guernsey as a public company limited by shares
Company registration number: 43298
Balance Sheet
at 31 August 2022
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Annual Report and Accounts
for the year ended 31 August 2022
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Financial
2022 2021
£’000 £’000
Operating activities
Profit before finance costs and taxation 19,870 142,071
Add back net foreign currency losses/(gains) 6,572 (395)
Losses/(gains) on investments at fair value through profit or loss 7,810 (121,017)
Net sales of investments at fair value through profit or loss 16,211 16,858
Decrease/(increase) in receivables 1,032 (1,719)
(Decrease)/increase in payables (5,676) 5,753
Overseas taxation paid (2,229) (2,131)
Net cash inflow from operating activities before interest 43,590 39,420
Interest paid (509) (310)
Net cash inflow from operating activities 43,081 39,110
Financing activities
Bank loans repaid – (5,304)
Repurchase of ordinary shares into treasury (17,172) (6,402)
Dividends paid (27,968) (27,690)
Net cash outflow from financing activities (45,140) (39,396)
Decrease in cash and cash equivalents (2,059) (286)
Cash and cash equivalents at the start of the year 16,147 17,028
Effect of foreign exchange rates on cash and cash equivalents 67 (595)
Cash and cash equivalents at the end of the year 14,155 16,147
Dividends received during the year amounted to £41,682,000 (2021: £30,823,000) and bond and deposit interest receipts
amounted to £15,000 (2021: £1,000).
The notes on pages 52 to 66 form an integral part of these financial statements.
Cash Flow Statement
for the year ended 31 August 2022
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Schroder Oriental Income Fund Limited
1. Accounting Policies
(a) Basis of accounting
The financial statements have been prepared in accordance with the Companies Guernsey Law 2008 and International Financial
Reporting Standards (“IFRS”), which comprise standards and interpretations approved by the International Accounting
Standards Board (“IASB”), together with interpretations of the International Accounting Standards and Standing Interpretations
Committee approved by the International Accounting Standards Committee (“IASC”), that remain in effect and to the extent that
they have been adopted by the European Union.
Where consistent with the requirements of IFRS, the directors have sought to prepare the accounts on a basis compliant with
presentational guidance set out in the statement of recommended practice for investment trust companies (the “SORP”) issued
by the Association of Investment Companies in July 2022.
The policies applied in these financial statements are consistent with those applied in the preceding year.
The Company’s share capital is denominated in sterling and this is the currency in which its shareholders operate and expenses
are generally paid. The Board has therefore determined that sterling is the functional currency and the currency in which the
accounts are presented. Amounts have been rounded to the nearest thousand.
The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the
revaluation of investments held at fair value through profit or loss. The directors believe that the Company has adequate
resources to continue operating to 31 December 2023, which is at least 12 months from the date of approval of these financial
statements. In forming this opinion, the directors have taken into consideration: the controls and monitoring processes in place;
the Company’s level of debt and other payables; the low level of operating expenses, comprising largely variable costs which
would reduce pro rata in the event of a market downturn; and that the Company’s assets comprise cash and readily realisable
securities quoted in active markets. In forming this opinion, the directors have also considered any potential impact of the
COVID-19 pandemic, climate change, inflation, high interest rates and the energy crisis on the viability of the Company. Further
details of directors' considerations regarding this are given in the Chairman’s Statement, Portfolio Managers’ Review, Going
Concern Statement, Viability Statement and under the Emerging Risks and uncertainties heading on page 22.
The principal accounting polices adopted are set out below.
(b) Presentation of the Statement of Comprehensive Income
In order to better reflect the activities of an investment company and in accordance with the recommendations of the SORP,
supplementary information has been presented which analyses items in the Statement of Comprehensive Income between
those which are income in nature and those which are capital in nature.
(c) Investments at fair value through profit or loss
The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and
capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance
with a documented investment objective and information is provided internally on that basis to the Company's board of
directors. Accordingly, investments are designated upon initial recognition as investments at fair value through profit or loss,
and are measured at subsequent reporting dates at fair value, which are quoted bid market prices for investments traded in
active markets.
Investments that are unlisted or not actively traded are valued using a variety of techniques to determine their fair value; all such
valuations are reviewed by both the AIFM’s fair value pricing committee and by the directors.
Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms
require delivery within a timeframe established by the market concerned.
(d) Accounting for reserves
Gains and losses on sales of investments, including the related foreign exchange gains and losses, are included in the Statement
of Comprehensive Income and in capital reserves within “Gains and losses on sales of investments”. Increases and decreases in
the valuation of investments held at the year end, including the related foreign exchange gains and losses, are included in the
Statement of Comprehensive Income and in capital reserves within “Holding gains and losses on investments”.
Foreign exchange gains and losses on cash and deposit balances are included in the Statement of Comprehensive Income and
in capital reserves within Gains and losses on sales of investments. Unrealised exchange gains and losses on foreign currency
loans are included in the Statement of Comprehensive Income and dealt with in capital reserves within Holding gains and losses
on investments.
Notes to the Accounts
for the year ended 31 August 2022
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(e) Repurchases of shares into treasury and subsequent reissues
The cost of repurchasing shares into Treasury is debited to ‘Treasury share reserve”. The sales proceeds of Treasury shares
reissued are credited back to Treasury share reserve until the debit balance on that reserve is extinguished and thereafter to
capital reserves.
(f) Income
Dividends receivable from equity shares are included in revenue on an ex-dividend basis except where, in the opinion of the
board, the dividend is capital in nature, in which case it is included in capital.
Income from fixed interest debt securities is recognised using the effective interest method.
Deposit interest outstanding at the year end is calculated and accrued on a time apportionment basis using market rates of
interest.
(g) Expenses
All expenses are accounted for on an accruals basis. Expenses are allocated wholly to revenue with the following exceptions:
– The management fee is allocated 30% to revenue and 70% to capital in line with the board's expected long-term split of
revenue and capital return from the Company's investment portfolio.
– Any performance fee is allocated 100% to capital.
– Expenses incidental to the purchase or sale of investments are charged to capital. These expenses are commonly
referred to as transaction costs and mainly comprise brokerage commission. Details of transaction costs are given in
note 10 on page 57.
(h) Finance costs
Finance costs, including any premiums payable on settlement or redemption and direct issue costs, are accounted for on an
accruals basis in profit or loss using the effective interest method.
Finance costs are allocated 30% to revenue and 70% to capital in line with the board's expected long-term split of revenue and
capital return from the Company's investment portfolio.
(i) Other financial assets and liabilities
Cash and cash equivalents may comprise cash and demand deposits which are readily convertible to a known amount of cash
and are subject to insignificant risk of changes in value. Other receivables are non interest-bearing, short-term in nature and are
accordingly stated at nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.
Interest-bearing bank loans are initially recognised at cost, being the proceeds received net of direct issue costs, and
subsequently at amortised cost.
(j) Taxation
The taxation charge in the Statement of Comprehensive Income comprises irrecoverable overseas withholding tax deducted
from dividends receivable.
(k) Foreign currency
The results and financial position are expressed in sterling. Transactions in currencies other than sterling are recorded at the
rates of exchange prevailing on the dates of the transaction. At each balance sheet date, monetary items and non monetary
assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at 1600 hours on the
balance sheet date. Gains or losses arising on translation are included in net profit or loss for the year and presented as revenue
or capital as appropriate.
(l) New and amended accounting standards
At the date of authorisation of these financial statements there are no new or revised Standards or Interpretations, which are in
issue but which are not yet effective, which the board expects to have any significant effect on the Company's accounts.
(m) Significant accounting judgments, estimates and assumptions
Other than the directors’ assessment of going concern, no significant judgements, estimates or assumptions have been
required in the preparation of these financial statements in accordance with IFRS.
Notes to the Accounts
for the year ended 31 August 2022
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Schroder Oriental Income Fund Limited
2. (Losses)/gains on investments held at fair value through profit or loss
2022 2021
£’000 £’000
(Losses)/gains on sales of investments based on historic cost (923) 62,577
Amounts recognised in investment holding gains and losses in the previous year in respect of
investments sold in the year (2,532) (33,768)
(Losses)/gains on sales of investments based on the carrying value at the previous balance
sheet date (3,455) 28,809
Net movement in investment holding gains and losses (4,355) 92,208
(Losses)/gains on investments held at fair value through profit or loss (7,810) 121,017
3. Income
2022 2021
£’000 £’000
Income from investments:
Overseas dividends 39,047 32,394
Other income:
Deposit interest 24 1
Total income 39,071 32,395
Capital:
Special dividend allocated to capital 1,448 219
4. Management and performance fee
2022 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Management fee 1,545 3,604 5,149 1,584 3,697 5,281
Performance fee – – – – 5,636 5,636
1,545 3,604 5,149 1,584 9,333 10,917
The basis for calculating the investment management fee and any performance fee is set out in the Directors’ Report on page28.
5. Other administrative expenses
2022 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Administration expenses 721 4 725 643 5 648
Directors’ fees 190 – 190 165 – 165
Secretarial fee 150 – 150 150 – 150
Auditors’ remuneration for audit services
1
53 – 53 75 – 75
1,114 4 1,118 1,033 5 1,038
1
No amounts are payable to the auditors for non-audit services.
Notes to the Accounts
for the year ended 31 August 2022
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6. Finance costs
2022 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest on bank loans and overdrafts 161 376 537 94 220 314
7. Taxation
(a) Analysis of tax charge for the year
2022 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Irrecoverable overseas tax 2,146 – 2,146 2,002 – 2,002
Taxation for the year 2,146 – 2,146 2,002 – 2,002
The Company became resident in the United Kingdom for taxation purposes, with effect from 1 September 2020. The Company
has no corporation tax liability for the year ended 31 August 2022 (2021: nil).
(b) Factors affecting tax charge for the year
The tax assessed for the year ended 31 August 2022 is lower (2021: lower) than the Company’s applicable rate of corporation
tax for that year of 19.0% (2021:19%). The factors affecting the tax charge for the year are as follows:
2022 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Net return/(loss) before taxation 36,251 (16,918) 19,333 29,684 112,073 141,757
Net return/(loss) before taxation multiplied by the Company's
applicable rate of corporation tax for the year of 19.0%
(2021:19%) 6,888 (3,215) 3,673 5,640 21,294 26,934
Effects of:
Capital losses/(returns) on investments – 2,732 2,732 – (23,068) (23,068)
Revenue not chargeable to corporation tax (6,406) (275) (6,681) (5,568) (42) (5,610)
Expenses disallowed – 1 1 – 1 1
Unrelieved expenses – 316 316 – 1,772 1,772
Marginal Tax Relief (267) 267 – – – –
Double Tax Relief (215) 174 (41) (72) 43 (29)
Irrecoverable overseas tax 2,146 – 2,146 2,002 – 2,002
Taxation for the year 2,146 – 2,146 2,002 – 2,002
(c) Deferred taxation
The Company has an unrecognised deferred tax asset of £2,745,000 (2021: £2,332,000) based on a main rate of corporation tax
of 25%. In its 2020 budget, the UK government announced that the main rate of corporation tax would increase to 25% for the
fiscal year beginning on 1 April 2023.
The deferred tax asset has arisen due to the excess of deductible expenses over taxable income. Given the composition of the
Company's portfolio, it is not likely that this asset will be utilised in the foreseeable future and therefore no asset has been
recognised in the financial statements.
The Company was granted status as an investment trust company by HMRC effective from 1 September 2020, and intends to
continue to meet the conditions required to retain that status. Therefore, no provision has been made for deferred UK capital
gains tax on any capital gains or losses arising on the revaluation or disposal of investments.
Notes to the Accounts
for the year ended 31 August 2022
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Schroder Oriental Income Fund Limited
8. Dividends
(a) Dividends paid and declared
2022 2021
£’000 £’000
2021 fourth interim dividend of 4.80p (2020: 4.60p) 12,727 12,404
First interim dividend of 1.90p (2021: 1.90p) 5,013 5,100
Second interim dividend of 1.90p (2021: 1.90p) 4,997 5,097
Third interim dividend of 2.00p (2021: 1.90p) 5,231 5,089
Total dividends paid in the year 27,968 27,690
2022 2021
£’000 £’000
Fourth interim dividend declared of 5.60p (2021: 4.80p) 14,627 12,838
Under the Companies (Guernsey) Law 2008, the Company may pay dividends out of both capital and revenue reserves, subject
to passing a solvency test. However all dividends paid and declared to date have been paid, or will be paid, out of revenue profits.
The Company has passed the solvency test for all dividends paid to date.
The fourth interim dividend declared in respect of the year ended 31 August 2021 differs from the amount actually paid due to
shares repurchased and cancelled after the balance sheet date but prior to the share register record date.
(b) Dividends for the purposes of Section 1158 of the Corporation Tax Act 2010 (“Section 1158”)
The Company was granted status as an investment trust company by HMRC effective from 1 September 2020, and intends to
continue to meet the minimum distribution requirements of Section 1158, in order to retain that status. Those requirements are
considered on the basis of dividends declared in respect of the financial year as shown below. The revenue available for
distribution by way of dividend for the year is £34,105,000 (2021: £27,682,000).
2022 2021
£’000 £’000
First interim dividend of 1.90p (2021: 1.90p) 5,013 5,100
Second interim dividend of 1.90p (2021: 1.90p) 4,997 5,097
Third interim dividend of 2.00p (2021: 1.90p) 5,231 5,089
Fourth interim dividend of 5.60p (2021: 4.80p) 14,627 12,838
Total dividends of 11.40p (2021: 10.50p) 29,868 28,124
9. Earnings/(loss) per share
2022 2021
£’000 £’000
Revenue profit 34,105 27,682
Capital (loss)/profit (16,918) 112,073
Total profit 17,187 139,755
Weighted average number of Ordinary shares in issue during the year 263,653,736 268,751,860
Revenue earnings per share 12.94p 10.30p
Capital (loss)/earnings per share (6.42)p 41.70p
Total earnings per share 6.52p 52.00p
Notes to the Accounts
for the year ended 31 August 2022
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10. Investments at fair value through profit or loss
2022 2021
£’000 £’000
Opening book cost 639,015 595,213
Opening investment holding gains 135,410 76,971
Opening fair value 774,425 672,184
Analysis of transactions made during the year
Purchases at cost 130,731 225,406
Sales proceeds (146,974) (244,182)
(Losses)/gains on investments held at fair value through profit or loss (7,810) 121,017
Closing fair value 750,372 774,425
Closing book cost 621,849 639,015
Closing investment holding gains 128,523 135,410
Closing fair value 750,372 774,425
The Company received £146,974,000 (2021: £244,182,000) from disposal of investments in the year. The book cost of these
investments when they were purchased was £147,897,000 (2021: £181,605,000). These investments have been revalued over
time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
The following transaction costs, mainly comprising brokerage commissions, were incurred during the year:
2022 2021
£’000 £’000
On acquisitions 90 198
On disposals 247 401
337 599
11. Current assets
Receivables
2022 2021
£’000 £’000
Dividends and interest receivable 4,207 5,212
Securities sold awaiting settlement 2 1,578
Other receivables 146 91
4,355 6,881
The directors consider that the carrying amount of receivables approximates to their fair value.
Cash and cash equivalents
Cash and cash equivalents comprises bank balances and cash held by the Company, including short-term deposits. The carrying
amount of these represents their fair value. Cash balances in excess of a predetermined amount are placed on short-term
deposit at market rates of interest.
Notes to the Accounts
for the year ended 31 August 2022
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Schroder Oriental Income Fund Limited
12. Current liabilities
Payables
2022 2021
£’000 £’000
Bank loan 42,970 36,331
Securities purchased awaiting settlement – 1,608
Repurchase of ordinary shares into treasury awaiting settlement 262 943
Other payables and accruals 1,503 7,152
44,735 46,034
The bank loan comprises US$50 million drawn down on the Company’s £75 million multicurrency credit facility with Bank of Nova
Scotia. The facility is secured and drawings are subject to covenants and restrictions which are customary for a facility of this
nature and all of these have been complied with. Further details of the facility are given in note 20(a)ii on page63.
The bank loan at the prior year end comprised US$50 million drawn down on the Company’s previous £100 million multicurrency
credit facility with SMBC Bank International plc. This agreement expired in July 2022, and was replaced by a new agreement with
the Bank of Nova Scotia. The previous loan was repaid directly by the new lender and thus the Company was not required to
make any liquidity available.
13. Share capital
2022 2021
£’000 £’000
Ordinary shares of 1p each, allotted, called-up and fully paid:
Opening balance of 267,468,024 (2021: 270,268,024) shares,
excluding shares held in treasury 224,847 232,192
Repurchase of 6,265,000 (2021: 2,800,000) shares into treasury (16,491) (7,345)
Subtotal of 261,203,024 (2021: 267,468,024) shares, excluding shares held in treasury 208,356 224,847
10,030,000 (2021: 3,765,000) shares held in treasury 25,991 9,500
Closing balance of 271,233,024 (2021: 271,233,024) shares 234,347 234,347
The ordinary shares rank pari passu, and each share carries one vote in the event of a poll at a general meeting. The Company
has authority to issue an unlimited number of ordinary shares.
During the year, the Company purchased 6,265,000 of its own shares, nominal value £62,650 to hold in treasury for a total
consideration of £16,491,000 representing 2.3% of the shares outstanding at the beginning of the year. The reason for these
share purchases was to seek to manage the volatility of the share price discount to net asset value per share.
Notes to the Accounts
for the year ended 31 August 2022
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14. Reserves
Capital reserves
Capital Gains and Investment
Treasury redemp- losses on holding
Share share tion Special sales of gains and Revenue
capital reserve reserve reserve investments losses reserve
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 31 August 2021 234,347 (9,500) 39 150,374 205,800 140,129 30,230
Losses on sales of investments based on the
carrying value at the previous balance sheet date – – – – (3,455) – –
Movement in investment holding gains and losses – – – – – (4,355) –
Transfer on disposal of investments – – – – 2,532 (2,532) –
Realised exchange gains on cash and short-term
deposits – – – – 67 – –
Exchange losses on foreign currency credit facility – – – – – (6,639) –
Repurchase of ordinary shares into treasury – (16,491) – – – – –
Management fee, finance costs and other
expenses charged to capital – – – – (3,984) – –
Dividends allocated to capital – – – – 1,448 – –
Dividends paid in the year – – – – – – (27,968)
Net revenue profit for the year – – – – – – 34,105
At 31 August 2022 234,347 (25,991) 39 150,374 202,408 126,603 36,367
Capital reserves
Capital Gains and Investment
Treasury redemp- losses on holding
Share share tion Special sales of gains and Revenue
capital reserve reserve reserve investments losses reserve
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 31 August 2020 234,347 (2,155) 39 150,374 152,791 81,065 30,238
Gains on sales of investments based on the
carrying value at the previous balance sheet date – – – – 28,809 – –
Movement in investment holding gains and losses – – – – – 92,208 –
Transfer on disposal of investments – – – – 33,768 (33,768) –
Realised exchange losses on cash and short-term
deposits – – – – (597) – –
Realised gains on derivative contracts – – – – 2 – –
Exchange gains on foreign currency credit facility – – – – 366 624 –
Repurchase of ordinary shares into treasury – (7,345) – – – – –
Management fee, finance costs and other
expenses charged to capital – – – – (3,922) – –
Performance fee charged to capital – – – – (5,636) – –
Dividends allocated to capital – – – – 219 – –
Dividends paid in the year – – – – – – (27,690)
Net revenue profit for the year – – – – – – 27,682
At 31 August 2021 234,347 (9,500) 39 150,374 205,800 140,129 30,230
Under the Companies (Guernsey) Law 2008, the Company may buy back its own shares, or pay dividends, out of any reserves,
subject to passing a solvency test. This test considers whether, immediately after the payment, the Company's assets exceed its
liabilities and whether it will be able to pay its debts when they fall due.
Notes to the Accounts
for the year ended 31 August 2022
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Schroder Oriental Income Fund Limited
15. Net asset value per share
2022 2021
Net assets attributable to shareholders (£'000) 724,147 751,419
Shares in issue at the year end 261,203,024 267,468,024
Net asset value per share 277.24p 280.94p
16. Contingent liabilities and capital commitments
There were no contingent liabilities or capital commitments at the balance sheet date (2021: none).
17. Transactions with the Manager
The Company has appointed Schroder Unit Trusts Limited (“the Manager”), a wholly owned subsidiary of Schroders plc, to
provide investment management, accounting, secretarial and administration services. Details of the management and
performance fee agreement are given in the Directors' Report on page 28. The management fee payable in respect of the year
amounted to £5,149,000 (2021: £5,281,000), of which £1,276,000 (2021: £1,337,000) was outstanding at the year end. The
company secretarial fee payable to the Manager amounted to £150,000 (2021: £150,000) of which £37,500 (2021: £37,500) was
outstanding at the year end. No performance fee is payable is payable in respect of the year (2021: £5,636,000 was payable and
outstanding at the year end).
If the Company invests in funds managed or advised by the Manager or any of its associated companies, any fee earned by the
Manager from those funds is deducted from the management fee payable by the Company. There have been no such
investments during the current or comparative year.
18. Related Party transactions
Details of the remuneration payable to Directors are given in the Directors’ Remuneration Report on page 39 and details of
Directors' shareholdings are given in the Directors' Remuneration Report on page 40. Details of transactions with the Manager
are given in note 17 above. There have been no other transactions with related parties during the year (2021: nil).
19. Disclosures regarding financial instruments measured at fair value
The Company's portfolio of investments, which may comprise investments in equities, equity linked securities, government
bonds and derivatives, are carried in the balance sheet at fair value. Other financial instruments held by the Company may
comprise amounts due to or from brokers, dividends and interest receivable, accruals, cash at bank and drawings on the credit
facility.
For these instruments, the balance sheet amount is a reasonable approximation of fair value.
The investments are categorised into a hierarchy comprising the following three levels:
Level 1 – valued using quoted prices in active markets.
Level 2 – valued by reference to valuation techniques using observable inputs other than quoted market prices included within
Level 1.
Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value
measurement of the relevant asset.
Details of the valuation techniques used by the Company are given in note 1(c) on page 52.
At 31 August 2022, the Company's investment portfolio was categorised as follows:
2022
Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Investments in equities and equity linked securities 730,624 19,748 – 750,372
Total 730,624 19,748 – 750,372
Level 2 investments comprise one holding in Midea Group warrants 21/06/2023. There were no transfers between Levels 1, 2 or
3 during the year ended 31 August 2022.
Notes to the Accounts
for the year ended 31 August 2022
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2021
Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Investments in equities and equity-linked securities 769,397 – 5,028 774,425
Total 769,397 – 5,028 774,425
Level 3 investments comprise one holding in global depositary receipts which delisted during the year. There were no other
transfers between Levels 1, 2 or 3 during the year ended 31 August 2021.
20. Financial instruments’ exposure to risk and risk management policies
The Company's investment objective is to provide a total return for investors primarily through investments in equities and
equity-related investments, of companies which are based in, or which derive a significant proportion of their revenues from,
the Asia Pacific region and which offer attractive yields. In pursuing this objective, the Company is exposed to a variety of risks
that could result in a reduction in the Company’s net assets. These risks include market risk (comprising currency risk, interest
rate risk and market price risk), liquidity risk and credit risk. The Directors' policy for managing these risks is set out below. The
board coordinates the Company's risk management policy.
The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set out below,
have not changed from those applying in the comparative year.
The Company’s classes of financial instruments are as follows:
– investments in equities and equity-related securities of companies in the Asia Pacific region which are held in accordance
with the Company's investment objective;
– short-term receivables, payables and cash arising directly from its operations; and
– a multicurrency credit facility with Bank of Nova Scotia, the purpose of which is to assist in financing the Company's
operations.
(a) Market risk
The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market
prices. This market risk comprises three elements - currency risk, interest rate risk and market price risk. Information to enable
an evaluation of the nature and extent of these three elements of market risk is given in parts (i) to (iii) of this note, together with
sensitivity analysis where appropriate. The board reviews and agrees policies for managing these risks and these policies have
remained unchanged from those applying in the comparative year. The Manager assesses the exposure to market risk when
making each investment decision and monitors the overall level of market risk on the whole of the investment portfolio on an
ongoing basis.
(i) Currency risk
The majority of the Company's assets, liabilities and income are denominated in currencies other than sterling, which is the
Company's functional currency and the presentational currency of the accounts. As a result, movements in exchange rates will
affect the sterling value of those items.
Management of currency risk
The Manager monitors the Company’s exposure to foreign currencies and regularly reports to the board. The Manager
measures the risk to the Company of the foreign currency exposure by considering the effect on the Company's net asset value
and income of a movement in the rates of exchange to which the Company's assets, liabilities, income and expenses are
exposed. The Company may use foreign currency borrowings or forward foreign currency contracts to limit the exposure to
anticipated changes in exchange rates which might otherwise affect the value of the portfolio of investments. Income
denominated in foreign currencies is converted into sterling on receipt.
Foreign currency exposure
The fair value of the Company’s monetary items that have foreign currency exposure at 31 August are shown below. The
Company’s investments (which are not monetary items) have been included separately in the analysis so as to show the overall
level of exposure.
Notes to the Accounts
for the year ended 31 August 2022
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Schroder Oriental Income Fund Limited
2022
Hong New
Japanese Kong Australian Singapore Taiwan Thai Zealand US
yen dollars dollars dollars dollars baht dollars dollars Other Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Current assets 2 1,075 1,096 459 568 150 16 128 555 4,049
Current liabilities – – – – – – – (42,977) – (42,977)
Foreign currency exposure on
net monetary items 2 1,075 1,096 459 568 150 16 (42,849) 555 (38,928)
Investments at fair value through
profit or loss
1
9,982 153,099 100,532 116,588 148,905 14,878 4,671 19,749 135,370 703,774
Total net foreign currency exposure 9,984 154,174 101,628 117,047 149,473 15,028 4,687 (23,100) 135,925 664,846
2021
Hong New
Japanese Kong Australian Singapore Taiwan Thai Zealand US
yen dollars dollars dollars dollars baht dollars dollars Other Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Current assets 3 2,905 818 706 1,105 143 139 2,315 1,755 9,889
Current liabilities – (1,608) – – – – – (36,338) – (37,946)
Foreign currency exposure on net
monetary items 3 1,297 818 706 1,105 143 139 (34,023) 1,755 (28,057)
Investments at fair value through
profit or loss
1
9,659 191,364 84,769 99,889 174,726 12,648 6,028 27,111 113,589 719,783
Total net foreign currency exposure 9,662 192,661 85,587 100,595 175,831 12,791 6,167 (6,912) 115,344 691,726
1
Excluding any stocks priced in sterling.
The above year end amounts are broadly representative of the exposure to foreign currency risk during the current and
comparative year.
Foreign currency sensitivity
The following tables illustrate the sensitivity of net profit for the year and net assets with regard to the Company’s monetary
financial assets and financial liabilities and exchange rates. The sensitivity analysis is based on the Company’s monetary currency
financial instruments held at each balance sheet date and assumes a 10% (2021: 10%) appreciation or depreciation in sterling
against the currencies to which the Company is exposed, which is considered to be a reasonable illustration based on the
volatility of exchange rates during the year.
If sterling had weakened by 10% this would have had the following effect:
2022 2021
£’000 £’000
Statement of Comprehensive Income – net profit
Net revenue profit 3,676 3,030
Net capital profit (3,786) (2,806)
Net assets (110) 224
Conversely if sterling had strengthened by 10% this would have had the following effect:
2022 2021
£’000 £’000
Statement of Comprehensive Income – net profit
Net revenue profit (3,676) (3,030)
Net capital profit 3,786 2,806
Net assets 110 (224)
In the opinion of the directors, the above sensitivity analysis with respect to monetary financial assets and liabilities is broadly
representative of the whole of the current and comparative year. The sensitivity of the Company's investments to changes in
foreign currency exchange rates is subsumed into market price risk sensitivity on page 64.
Notes to the Accounts
for the year ended 31 August 2022
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(ii) Interest rate risk
Interest rate movements may affect the level of income receivable on cash deposits and the interest payable on variable rate
borrowings when interest rates are re-set.
Management of interest rate risk
Liquidity and borrowings are managed with the aim of increasing returns to shareholders. The Company’s gearing policy is to
limit gearing to 25% where gearing is defined as borrowings used for investment purposes, less cash, expressed as a percentage
of net assets.
The possible effects on cash flows that could arise as a result of changes in interest rates are taken into account when the
Company draws on the credit facility. However, amounts drawn down on this facility are for short-term periods and therefore
exposure to interest rate risk is not significant.
Interest rate exposure
The exposure of financial assets and financial liabilities to floating interest rates, giving cash flow interest rate risk when rates
are re-set, is shown below:
2022 2021
£’000 £’000
Exposure to floating interest rates:
Cash and cash equivalents 14,155 16,147
Other payables: drawings on the credit facility (42,970) (36,331)
Total exposure (28,815) (20,184)
Cash deposits at call, earn interest based on the Sterling Overnight Interest Average (2021: LIBOR) rates.
The Company has arranged a £75 million credit facility with Bank of Nova Scotia, effective from 18 July 2022. Interest is payable
at the aggregate of the compounded Risk Free Rate (“RFR”) for the relevant currency and loan period, plus a margin. Amounts
are normally drawn down on the facility for a one month period, at the end of which it may be rolled over or adjusted. At
31August 2022, the Company had drawn down US$50.0 million (£43.0 million) for a one month period, at an interest rate of
3.19% per annum.
At 31 August 2021, the Company had drawn down US$50.0 million (£36.3 million) on the previous £100 million multicurrency
revolving credit facility with SMBC International plc. This facility expired on 17 July 2022, and the loan was replaced by a new
agreement with the Bank of Nova Scotia. The previous loan was repaid directly by the new lender and thus the Company was
not required to make any liquidity available.
The above year end amounts are not representative of the exposure to interest rates during the year as the level of cash
balances and drawings on the credit facility have fluctuated. The maximum and minimum net interest rate exposure during the
year has been as follows:
2022 2021
£’000 £’000
Maximum interest rate exposure during the year – net debt (32,379) (36,397)
Minimum interest rate exposure during the year – net debt (12,713) (19,874)
Notes to the Accounts
for the year ended 31 August 2022
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Schroder Oriental Income Fund Limited
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 1.0% (2021: 1.0%)
increase or decrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities. This level of
change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis
is based on the Company’s monetary financial instruments held at the balance sheet date with all other variables held constant.
2022 2021
1.0% increase 1.0% decrease 1.0% increase 1.0% decrease
in rate in rate in rate in rate
£’000 £’000 £’000 £’000
Statement of Comprehensive Income – net profit
Net revenue profit 13 (13) 52 (52)
Net capital profit (301) 301 (254) 254
Net total profit (288) 288 (202) 202
Net assets (288) 288 (202) 202
In the opinion of the directors, this sensitivity analysis may not be representative of the Company’s future exposure to interest
rate changes due to fluctuations in the level of cash balances and drawings on the credit facility.
(iii) Market price risk
Market price risk includes changes in market prices which may affect the value of the Company' investments.
Management of market price risk
The Board meets on at least four occasions each year to consider the asset allocation of the portfolio and the risk associated
with particular industry sectors. The investment management team has responsibility for monitoring the portfolio, which is
selected in accordance with the Company’s investment objective and seeks to ensure that individual stocks meet an acceptable
risk/reward profile.
Market price risk exposure
The Company’s total exposure to changes in market prices at 31 August comprised the following:
2022 2021
£’000 £’000
Investments at fair value through profit or loss 750,372 774,425
The above data is broadly representative of the exposure to market price risk during the year.
Concentration of exposure to market price risk
An analysis of the Company’s investments is given on pages 10 and 11. This shows that the portfolio principally comprises
investments quoted on Asian stock markets. Accordingly there is a concentration of exposure to that region. However it should
be noted that an investment may not be entirely exposed to the economic conditions in its country of domicile or of listing.
Market price risk sensitivity
The following table illustrates the sensitivity of the net profit for the year and net assets to an increase or decrease of 20% (2021:
20%) in the fair values of the Company’s equities. This level of change is considered to be a reasonable illustration based on
observation of current market conditions. The sensitivity analysis is based on the Company’s equities, adjusting for changes in
the management fee, but with all other variables held constant
2022 2021
20% increase 20% decrease 20% increase 20% decrease
in fair value in fair value in fair value in fair value
£’000 £’000 £’000 £’000
Statement of Comprehensive Income – net profit
Net revenue profit (315) 315 (326) 326
Net capital profit 149,339 (149,339) 154,126 (154,126)
Net total profit for the year and net assets 149,024 (149,024) 153,800 (153,800)
Notes to the Accounts
for the year ended 31 August 2022
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Annual Report and Accounts
for the year ended 31 August 2022
65
Financial
(b) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities that are
settled by delivering cash or another financial asset.
Management of the risk
Liquidity risk is not significant as the Company’s assets comprise mainly readily realisable securities, which can be sold to meet
funding requirements if necessary. Short-term flexibility is achieved through the use of a credit facility.
The Board’s policy is for the Company to remain fully invested in normal market conditions and that the credit facility be used
to manage working capital requirements and to gear the Company as appropriate.
Liquidity risk exposure
Contractual maturities of financial liabilities, based on the earliest date on which payment can be required are as follows:
Three Three
months months
or less or less
2022 2021
£’000 £’000
Other payables
Bank loan - including interest 43,086 36,356
Other payables and accruals 1,469 7,145
44,555 43,501
(c) Credit risk
Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under that transaction could
result in loss to the Company.
Management of credit risk
This risk is managed as follows:
Portfolio dealing
The Company invests almost entirely in markets that operate a “Delivery Versus Payment” settlement process which mitigates
the risk of losing the principal of a trade during settlement. The Manager continuously monitors dealing activity to ensure best
execution, which involves measuring various indicators including the quality of trade settlement and incidence of failed trades.
Counterparties must be pre-approved by the Manager's credit committee.
The Company may sometimes invest in equity-linked securities, such as low exercise price options, warrants, participatory notes
and depositary receipts, which provide synthetic equity exposure where the Company may otherwise find it problematic to
invest in the underlying assets directly. They have the same economic risks as a direct investment, except that there is a
counterparty risk to the issuing investment bank. Counterparties must be approved by the Manager’s Credit Risk Team based
on a list of criteria and are monitored on an ongoing basis by Schroders' Portfolio Compliance Team.
Exposure to the Custodian
The Custodian of the Company's assets is HSBC Bank plc which has Long-Term Credit Ratings of AA- with Fitch and Aa3 with
Moody’s.
The Company’s investments are held in accounts which are segregated from the Custodian’s own trading assets. If the Custodian
were to become insolvent, the Company's right of ownership of its investments is clear and they are therefore protected.
However the Company's cash balances are all deposited with the Custodian as banker and held on the Custodian's balance
sheet. Accordingly, in accordance with usual banking practice, the Company will rank as a general creditor to the Custodian in
respect of cash balances and open currency contracts.
Notes to the Accounts
for the year ended 31 August 2022
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Schroder Oriental Income Fund Limited
Credit risk exposure
The following amounts shown in the Balance Sheet, represent the maximum exposure to credit risk at the current and
comparative year end.
2022 2021
Balance Maximum Balance Maximum
sheet exposure sheet exposure
£’000 £’000 £’000 £’000
Current assets
Receivables – dividends and interest 4,207 4,207 5,212 5,212
Securities sold awaiting settlement 2 2 1,578 1,578
Cash and cash equivalents 14,155 14,155 16,147 16,147
18,364 18,364 22,937 22,937
No items included in “Receivables” are past their due date and none have been provided for.
21. Capital management policies and procedures
The Company's objectives, policies and processes for managing capital are unchanged from the preceding year.
The Company’s debt and capital structure comprises the following:
2022 2021
£’000 £’000
Debt
Bank loan 42,970 36,331
Equity
Share capital 234,347 234,347
Reserves 489,800 517,072
724,147 751,419
Total debt and equity 767,117 787,750
The Company’s capital management objectives are to ensure that it will continue as a going concern and to maximise total
return to its equity shareholders through an appropriate level of gearing.
The Board’s policy is to limit gearing to 25%. Gearing for this purpose is defined as borrowings used for investment purposes,
less cash, expressed as a percentage of net assets.
2022 2021
£’000 £’000
Borrowings used for investment purposes, less cash 28,815 20,184
Net assets 724,147 751,419
Gearing 4.0% 2.7%
The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on an
ongoing basis. This review includes:
– the planned level of gearing, which takes into account the Manager’s views on the market;
– the need to buy back the Company's own shares for cancellation or to hold in treasury, which takes into account the share
price discount;
– the opportunities for issues of new shares or to reissue shares from treasury; and
– the amount of dividend to be paid, in excess of that which is required to be distributed.
22. Events after the reporting period
With effect from 1 September 2022, the Board has determined that the management fee and finance costs will be allocated 40%
to revenue and 60% to capital in line with the board’s expected long-term split of revenue and capital return from the Company’s
investment portfolio. Prior to this date, these expenses had been allocated 30% to revenue and 70% to capital.
Notes to the Accounts
for the year ended 31 August 2022
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Annual Report and Accounts
for the year ended 31 August 2022
67
Definitions of Terms and Alternative
Performance Measures
The terms and performance measures below are those
commonly used by investment companies to assess
values, investment performance and operating costs.
Numerical calculations are given where relevant. Some of
the financial measures below are classified Alternative
Performance Measures (“APMs”) as defined by the
European Securities and Markets Authority. Under this
definition, APMs include a financial measure of historical
financial performance or financial position, other than a
financial measure defined or specified in the applicable
financial reporting framework.
Net asset value (”NAV”) per share
The NAV per share of 277.24p (2021: 280.94p) represents the
net assets attributable to equity shareholders of £724,147,000
(2021: £751,419,000) divided by the number of shares in issue
of 261,203,024 (2021: 267,468,024).
The change in the NAV amounted to -1.3% (2021: +17.4%) over
the year. However this performance measure excludes the
positive impact of dividends paid out by the Company during
the year. When these dividends are factored into the
calculation, the resulting performance measure is termed the
“total return”. Total return calculations and definitions are
given below.
Total return
The combined effect of any dividends paid, together with the
rise or fall in the NAV per share or share price. Total return
statistics enable the investor to make performance
comparisons between investment companies with different
dividend policies. Any dividends received by a shareholder are
assumed to have been reinvested in either the assets of the
Company at its NAV per share at the time the shares were
quoted ex-dividend (to calculate the NAV per share total
return) or in additional shares of the Company (to calculate the
share price total return).
The NAV total return for the year ended 31 August 2022 is
calculated as follows:
NAV at 31/8/21 280.94p
NAV at 31/8/22 277.24p
NAV on Cumulative
Dividend XD date XD date Factor factor
4.8p 11/11/21 277.66p 1.0173 1.0173
1.9p 27/01/22 279.27p 1.0068 1.0242
1.9p 28/04/22 279.68p 1.0068 1.0312
2.0p 04/08/22 270.27p 1.0074 1.0388
NAV total return, being the closing
NAV, multiplied by the cumulative factor,
expressed as a percentage increase in
the opening NAV +2.5%
The NAV total return for the year ended 31 August 2021 is
calculated as follows:
NAV at 31/8/20 239.28p
NAV at 31/8/21 280.94p
NAV on Cumulative
Dividend XD date XD date Factor factor
4.6p 12/11/20 257.85p 1.0178 1.0178
1.9p 04/02/21 282.72p 1.0067 1.0247
1.9p 29/04/21 294.49p 1.0065 1.0313
1.9p 05/08/21 281.86p 1.0067 1.0382
NAV total return, being the closing
NAV, multiplied by the cumulative factor,
expressed as a percentage increase in
the opening NAV +21.9%
The share price total return for the year ended 31 August
2022 is calculated as follows:
Share price at 31/8/21 271.50p
Share price at 31/8/22 264.00p
Share price
on Cumulative
Dividend XD date XD date Factor factor
4.8p 11/11/21 262.50p 1.0183 1.0183
1.9p 27/01/22 270.00p 1.0070 1.0255
1.9p 28/04/22 262.00p 1.0073 1.0329
2.0p 04/08/22 255.00p 1.0078 1.0410
Share price total return, being the
closing share price, multiplied by
the cumulative factor, expressed
as a percentage increase in the
opening share price +1.2%
The share price total return for the year ended 31 August
2021 is calculated as follows:
Share price at 31/8/20 233.00p
Share price at 31/8/21 271.50p
Share price
on Cumulative
Dividend XD date XD date Factor factor
4.6p 12/11/20 245.50p 1.0187 1.0187
1.9p 04/02/21 271.00p 1.0070 1.0259
1.9p 29/04/21 289.00p 1.0066 1.0326
1.9p 05/08/21 276.50p 1.0069 1.0397
Share price total return, being the
closing share price, multiplied by
the cumulative factor, expressed
as a percentage increase in the
opening share price +21.2%
Financial
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Schroder Oriental Income Fund Limited
68
Definitions of Terms and Alternative
Performance Measures
Discount/premium
The amount by which the share price of an investment trust is
lower (discount) or higher (premium) than the NAV per share.
This metric is useful for investors to compare the price of a
share in the Company with the value of the underlying assets
attributable to it. A premium or discount is generally the
consequence of supply and demand for the shares on the
stock market. The discount or premium is expressed as a
percentage of the NAV per share. The discount at the year end
amounted to 4.8% (2021: discount of 3.4%), as the closing
share price at 264.00p (2021: 271.50p) was 4.8% (2021: 3.4%)
lower than the closing NAV of 277.24p (2021: 280.94p).
Gearing
The gearing percentage reflects the amount of borrowings
(i.e. bank loans or overdrafts) which the Company has drawn
down and invested in the market. An investment trust can
borrow money to invest in additional investments for its
portfolio. The effect of the borrowing on the shareholders’
assets is called ‘gearing’. If the Company’s assets grow, the
shareholders’ assets grow proportionately more because the
debt remains the same. But if the value of the Company’s
assets falls, the situation is reversed. Therefore, gearing can
enhance performance in rising markets but can also adversely
impact performance in falling markets. This represents
borrowings used for investment purposes, less cash,
expressed as a percentage of net assets. The gearing figure at
the year end is calculated as follows:
2022 2021
£’000 £’000
Borrowings used for investment
purposes, less cash 28,815 20,184
Net assets 724,147 751,419
Gearing 4.0% 2.7%
Leverage
For the purpose of the Alternative Investment Fund Managers
(AIFM) Directive, leverage is any method which increases the
Company’s exposure, including the borrowing of cash and the
use of derivatives. Higher leverage figures are thus indicative
of higher market risk. It is expressed as the ratio of the
Company’s exposure to its net asset value and is required to
be calculated both on a “Gross” and a “Commitment” method.
Under the Gross method, exposure represents the sum of the
absolute values of all positions, so as to give an indication of
overall exposure. Under the Commitment method, exposure is
calculated in a similar way, but after netting off hedges which
satisfy certain strict criteria. The leverage ratios and limits at 31
August 2022 are presented on page 73 under Shareholder
Information.
Ongoing Charges
The Ongoing Charges figure is an indication of the ongoing
operating costs of the Company. It is calculated in accordance
with the AIC’s recommended methodology and represents the
management fee and all other operating expenses excluding
finance costs, transaction costs and any performance fee
payable amounting to £6,267,000 (2021: £6,319,000),
expressed as a percentage of the average daily net asset
values during the year of £731,663,000 (2021: £739,772,000).
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Annual Report and Accounts
for the year ended 31 August 2022
Annual General Meeting
69
Annual General Meeting – Recommendations
The Annual General Meeting (“AGM”) of the Company
will be held on Monday, 5 December 2022 at 4.30pm. The
formal Notice of Meeting is set out on page 70.
The following information is important and requires
your immediate attention. If you are in any doubt about
the action you should take, you should consult an
independent financial adviser, authorised under the
Financial Services and Markets Act 2000. If you have sold
or transferred all of your ordinary shares in the
Company, please forward this document with its
accompanying form of proxy at once to the purchaser or
transferee, or to the stockbroker, bank or other agent
through whom the sale or transfer was effected, for
onward transmission to the purchaser or transferee.
Ordinary business
Resolutions 1 to 9 are all ordinary resolutions.
Resolution 1 is a required resolution. Resolution 2 concerns
the Directors’ Remuneration Report, on pages 38 to 40.
Resolutions 3 to 7 invite shareholders to re-elect each of the
directors standing for re-election for another year, following
the recommendations of the Nomination and Remuneration
Committee, set out on pages35 to 37 (their biographies are
set out on pages26 and 27). Resolutions 8 and 9 concern the
re-appointment and remuneration of the Company’s
auditors, discussed in the Audit and Risk Committee report
on pages31 to 33.
Special business
Resolution 10 – approval of the Company’s
dividend policy (ordinary resolution)
In line with corporate governance best practice the Board is
putting the Company’s dividend policy to shareholders for
approval. No change to the Company’s dividend policy is
proposed at this time.
Resolution 11 – authority to make market
purchases of the Company’s own shares (special
resolution)
At the AGM held on 15 December 2021, the Company was
granted authority to make market purchases of up to
39,744,939 ordinary shares for cancellation or holding in
treasury. 4,800,000 ordinary shares were bought back under
this authority and the Company therefore has remaining
authority to purchase up to 34,944,939 ordinary shares. This
authority will expire at the forthcoming AGM.
The directors believe it is in the best interests of the
Company and its shareholders to have a general authority
for the Company to buy back its ordinary shares in the
market as they keep under review the share price discount
to NAV per share and the purchase of ordinary shares. A
special resolution will be proposed at the forthcoming AGM
to give the Company authority to make market purchases of
up to 14.99% of the ordinary shares in issue at 2 November
2022 (excluding treasury shares). The directors will exercise
this authority only if the directors consider that any
purchase would be for the benefit of the Company and its
shareholders, taking into account relevant factors and
circumstances at the time. Any shares so purchased would
be cancelled or held in treasury for potential reissue. If
renewed, the authority to be given at the 2022 AGM will
lapse at the conclusion of the AGM in 2023 unless renewed,
varied or revoked earlier.
Resolution 12 – disapplication of pre-emption
rights (extraordinary resolution)
The directors are seeking authority to allot a limited number
of unissued ordinary shares for cash without first offering
them to existing shareholders in accordance with statutory
pre-emption procedures.
An extraordinary resolution will be proposed at the
forthcoming AGM to authorise the directors to allot shares
up to a maximum aggregate nominal amount of £259,418
(being 10% of the issued share capital as at 2 November
2022) and to give the directors authority to allot securities
for cash on a non pre-emptive basis up to a maximum
aggregate nominal amount of £259,418 (being 10% of the
Company’s issued share capital as at the date of the Notice
of the AGM).
The directors do not intend to allot shares pursuant to these
authorities other than to take advantage of opportunities in
the market as they arise and only if they believe it to be
advantageous to the Company’s existing shareholders to do
so and when it should not result in any dilution of NAV per
share. If approved, both of these authorities will expire at
the conclusion of the AGM in 2023 unless renewed, varied or
revoked earlier.
Recommendations
The Board considers that the resolutions relating to the
above items of business are in the best interests of
shareholders as a whole. Accordingly, the Board
unanimously recommends to shareholders that they vote in
favour of the above resolutions and the other resolutions to
be proposed at the forthcoming AGM, as they intend to do in
respect of their own beneficial holdings.
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Schroder Oriental Income Fund Limited
70
NOTICE is hereby given that the annual general meeting of
Schroder Oriental Income Fund Limited will be held on
5 December 2022 at 4.30 pm at 1 London Wall Place,
London EC2Y 5AU to consider and, if thought fit, to pass the
following resolutions, of which resolutions 1 to 10 will be
proposed as ordinary resolutions. Resolution 11 will be
proposed as a special resolution and resolution 12 will be
proposed as an extraordinary resolution:
1. To receive the Directors’ Report and the audited
accounts for the year ended 31 August 2022.
2. To approve the Directors’ Remuneration Report for the
year ended 31 August 2022.
3. To approve the re-election of Paul Meader as a director
of the Company.
4. To approve the re-election of Alexa Coates as a director
of the Company.
5. To approve the re-election of Kate Cornish-Bowden as a
director of the Company.
6. To approve the re-election of Isabel Liu as a director of
the Company.
7. To approve the re-election of Nick Winsor as a director
of the Company.
8. To re-appoint PricewaterhouseCoopers LLP as the
Company’s auditors.
9. To authorise the directors to determine the
remuneration of PricewaterhouseCoopers LLP as
auditors to the Company.
10. To approve the Company’s dividend policy as set out on
page29 of the Annual Report and Accounts.
11. To consider and, if thought fit, to pass the following
resolution as a special resolution:
“That the Company be and is hereby generally and
unconditionally authorised in accordance with section
315 of The Companies (Guernsey) Law, 2008 (as
amended), to make market purchases of ordinary
shares of 1p each in the capital of the Company (“Share”)
at whatever discount the prevailing market price
represents to the prevailing net asset value per share,
provided that:
(a) the maximum number of Shares hereby authorised
to be purchased shall be 38,886,762, representing
14.99% of the issued share capital (ex treasury) as at
2 November 2022;
(b) the maximum price (exclusive of expenses) which
may be paid for a Share shall not exceed the higher of
(i) 105% of the average of the middle market
quotations for the Shares as taken from the
London Stock Exchange Daily Official List for
the five business days immediately preceding
the date of purchase; and
(ii) the higher of the last independent bid and the
highest current independent bid on the London
Stock Exchange;
(c) the minimum price which may be paid for a share is
1p, being the nominal value per share;
(d) the authority hereby conferred shall expire at the
conclusion of the next annual general meeting of
the Company in 2023 (unless previously renewed,
varied or revoked prior to such date);
(e) the Company may make a contract to purchase
Shares under the authority hereby conferred which
will or may be executed wholly or partly after the
expiration of such authority and may make a
purchase of Shares pursuant to any such contract;
and
(f) Any Shares so purchased will be held in treasury or
cancelled.”
12. To consider and, if thought fit pass the following as an
extraordinary resolution:
“That the Board be and is hereby authorised in
accordance with Section 291 of The Companies
(Guernsey) Law, 2008 (as amended) to allot ordinary
shares for cash and/or sell treasury shares up to
25,941,802 ordinary shares of 1p each in aggregate,
representing 10% of the share capital in issue
(extreasury) on 2 November 2022, for cash and the right
of shareholders to receive a pre-emptive offer in respect
of such ordinary shares shall be excluded pursuant to
Article 3.24 of the Company’s articles of incorporation,
provided that this authority shall expire (unless
previously renewed, varied or revoked by the Company
in general meeting) from the conclusion of the annual
general meeting of the Company to be held in 2023 save
that the Board may allot ordinary shares for cash or sell
treasury shares after the expiry of this authority in
pursuance of an offer or agreement made by the
Company before such expiry that would or might
require ordinary shares to be allotted or treasury shares
to be sold after such expiry.”
Notice of Annual General Meeting
By order of the Board
For and on behalf of Registered office:
PO Box 208
Arnold House
Schroder Investment Management Limited St Julian’s Avenue
Company Secretary St Peter Port
Guernsey GY1 3NF
3 November 2022
Registered number: 43298
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Annual Report and Accounts
for the year ended 31 August 2022
Annual General Meeting
71
Explanatory Notes to the Notice of Annual General
Meeting
1. An ordinary shareholder entitled to attend and vote at the meeting is
entitled to appoint one or more proxies to attend and (insofar as
permitted by the Company’s articles of incorporation) to vote instead
of him/her.
A proxy need not be a member. A form of proxy is enclosed for
ordinary shareholders which should be completed and returned to
the Company’s registrar, care of Computershare Investor Services
PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, not later than
48 hours before the time fixed for the meeting. Completion of the
proxy will not preclude an ordinary shareholder from attending and
voting in person.
To appoint more than one proxy, an additional proxy form(s) may be
obtained by contacting the Registrar’s helpline on 0370 707 4040 or
you may photocopy this form. Please indicate in the box next to the
proxy holder’s name (see reverse) the number of shares in relation to
which they are authorised to act as your proxy. Please also indicate by
marking the box provided if the proxy instruction is one of multiple
instructions being given. All forms must be signed and should be
returned together in the same envelope.
2. The biographies of each of the directors offering themselves for re-
election are set out on pages 26 and 27 of the annual report and
accounts for the year ended 31 August 2022.
3. As at 2 November 2022, the Company had 271,233,024 ordinary
shares of 1p each in issue (11,815,000 shares were held in treasury).
Accordingly, the total number of voting rights in the Company on
2November 2022 is 259,418,024.
4. The Company’s privacy policy is available on its webpages
http://www.schroders.co.uk/orientalincome. Shareholders can
contact Computershare for details of how Computershare processes
their personal information as part of the AGM.
5. The ‘Vote Withheld‘ option overleaf is provided to enable you to
abstain on any particular resolution. However, it should be noted that
a ‘Vote Withheld‘ is not a vote in law and will not be counted in the
calculation of the proportion of the votes ‘For‘ and ‘Against‘ a
resolution.
6. Pursuant to Regulation 41 of the Uncertificated Securities (Guernsey)
Regulations 2009, entitlement to attend and vote at the meeting and
the number of votes which may be cast thereat will be determined by
reference to the Register of Members of the Company at close of
business on the day which is two days before the day of the meeting.
Changes to entries on the Register of Members after that time shall be
disregarded in determining the rights of any person to attend and
vote at the meeting.
7. To appoint one or more proxies or to give an instruction to a proxy
(whether previously appointed or otherwise) via the CREST system,
CREST messages must be received by the issuer's agent (ID number
3RA50) not later than 2 working days (excluding non working days)
before the time appointed for holding the meeting. For this purpose,
the time of receipt will be taken to be the time (as determined by the
timestamp generated by the CREST system) from which the issuer's
agent is able to retrieve the message. The Company may treat as
invalid a proxy appointment sent by CREST in the circumstances set
out in Regulation 34(1) of the Uncertificated Securities (Guernsey)
Regulations 2009.
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Schroder Oriental Income Fund Limited
72
Notes
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Annual Report and Accounts
for the year ended 31 August 2022
Annual General Meeting
73
Shareholder Information
Webpages and share price information
The Company has dedicated webpages, which may be found
at www.schroders.co.uk/orientalincome. The webpages are
the Company’s primary method of electronic communication
with shareholders. They contain details of the Company’s
share price and copies of the annual report and accounts and
other documents published by the Company as well as
information on the directors, terms of reference of
committees and other governance arrangements. In addition,
the webpages contain links to announcements made by the
Company to the market and Schroders’ website. There is also
a section entitled “How to Invest”.
The Company releases its NAV per share on both a cum and
ex-income basis to the market on a daily basis.
Share price information may also be found in the Financial
Times and on the Company’s webpages.
The Manager publishes monthly and quarterly updates on the
Company and other Schroders investment trusts, which may
be found under the “Literature” section on the Company’s
webpages.
Association of Investment Companies
The Company is a member of the Association of Investment
Companies. Further information on the Association can be
found on its website, www.theaic.co.uk.
Individual Savings Account (“ISA”) status
The Company’s shares are eligible for stocks and shares ISAs.
Non-Mainstream Pooled Investments
status
The Company currently conducts its affairs so that its shares
can be recommended by independent financial advisers to
ordinary retail investors in accordance with the FCA’s rules in
relation to non-mainstream investment products and intends
to continue to do so for the foreseeable future. The
Company’s shares are excluded from the FCA’s restrictions
which apply to non-mainstream investment products because
they are shares in an investment trust.
Financial calendar
First interim dividend paid January
Second interim dividend paid May
Half year results announced April/May
Third interim dividend paid July
Financial year end 31 August
Annual results announced November
Fourth interim dividend paid November/December
Annual General Meeting December
Alternative Investment Fund Managers
Directive (“AIFMD”) disclosures
The AIFMD, as transposed into the FCA Handbook in the UK,
requires that certain pre-investment information be made
available to investors in Alternative Investment Funds (such as
the Company) and also that certain regular and periodic
disclosures are made. This information and these disclosures
may be found either below, elsewhere in this annual report, or
in the Company’s AIFMD information disclosure document
published on the Company’s webpages.
Leverage
The Company’s leverage policy and details of its leverage ratio
calculation and exposure limits as required by the AIFMD are
published on the Company’s webpages and within this report.
The Company is also required to periodically publish its actual
leverage exposures. As at 31 August 2022 these were:
Maximum Actual
Leverage exposure exposure exposure
Gross method 200.0% 111.9%
Commitment method 200.0% 109.9%
Illiquid assets
As at the date of this report, none of the Company’s assets are
subject to special arrangements arising from their illiquid
nature.
Remuneration disclosures
Quantitative remuneration disclosures to be made in this
annual report in accordance with FCA Handbook rule
FUND3.3.5 may be found in the Company’s AIFMD
information disclosure document published on the
Company’s webpages.
Publication of Key Information Document (“KID”)
by the AIFM
Pursuant to the Packaged Retail and Insurance Based
Investment Products Regulation, the Manager, as the
Company’s AIFM, is required to publish a short KID on the
Company. KIDs are designed to provide certain prescribed
information to retail investors, including details of potential
returns under different performance scenarios and a
risk/reward indicator. The Company’s KID is available on its
webpages.
176257 Oriental Income Fund - AR FSC Mix 70% Pt4.qxp_176257 Oriental Income Fund - AR FSC Mix 70% Pt4 03/11/2022 16:36 Page 73
Directors
Paul Meader
Alexa Coates
Kate Cornish-Bowden
Isabel Liu
Nick Winsor
Advisers
Alternative investment fund manager
(the“Manager”)
Schroder Unit Trusts Limited
1 London Wall Place
London EC2Y 5AU
United Kingdom
Investment Manager and Company Secretary
Schroder Investment Management Limited
1 London Wall Place
London EC2Y 5AU
United Kingdom
Telephone: 020 7658 6596
Registered office
PO Box 208
Arnold House
St Julian’s Avenue
St Peter Port
Guernsey GY1 3NF
Safekeeping and cashflow
monitoring agent (including custodian)
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
Lending bank
Bank of Nova Scotia
201 Bishopsgate
London EC2M 3NS
United Kingdom
Corporate broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
United Kingdom
Independent auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Registrar
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House
Le Bordage
St Peter Port
Guernsey GY1 1DB
Communications with shareholders are mailed to the address
held on the register. Any notifications and enquiries relating
to shareholdings, including a change of address or other
amendment should be directed to Computershare Investor
Services (Guernsey) Limited at the address set out above.
Designated manager
HSBC Securities Services (Guernsey) Limited
Arnold House
St Julian’s Avenue
St Peter Port
Guernsey GY1 3NF
Shareholder enquiries
General enquiries about the Company should be addressed to
the company secretary at the address set out above.
Dealing codes
ISIN: GB00B0CRWN59
SEDOL: B0CRWN5
Ticker: SOI
Global intermediary identification number (GIIN)
1TVP6A.99999.SL.83
Legal entity identifier (LEI)
5493001U9X6P8SS0PK40
www.schroders.co.uk/orientalincome
The Company’s privacy notice is
available on its webpages.
Shareholder Information
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