## Schroder Oriental ## Income Fund Limited ### Annual report and accounts ### for the year ended 31 August 2023 # Introduction ![img-0.jpeg](img-0.jpeg) ## Performance summary Net Asset Value ("NAV") per share total return* **-3.5%** (2022: +2.5%) Ongoing charges ratio* **0.88%** (2022: 0.86%) Share price total return* **-3.1%** (2022: +1.2%) Dividends per share **11.80p** (2022: 11.40p) Scan this QR code on your smartphone camera to sign-up to receive regular updates on Schroder Oriental Income Fund Limited ![img-1.jpeg](img-1.jpeg) ### Strategic report Page 4 ![img-2.jpeg](img-2.jpeg) ### Financial Page 46 ![img-3.jpeg](img-3.jpeg) ### Governance Page 30 ![img-4.jpeg](img-4.jpeg) ### Other information Page 72 Schroder Oriental Income Fund Limited Introduction Strategic report Governance Financial ### Share price discount Revenue earnings ### to NAV per share* per share ## 4.5% 11.81p Other information (unaudited)Strategic report Governance Financial Other information (unaudited)Introduction ### (2022: 4.8%) (2022: 12.94 pence) ### Gearing* Share price Net revenues after taxation ## 4.4% 244.50p £30.4m ### (2022: 4.0%) (2022: 264.00p) (2022: £34.1m) | Strategic Report | Directors’ Remuneration Report 41 | Other information | | --- | --- | --- | | Chairman’s Statement 4 | Statement of Directors’ | (unaudited) | | | Responsibilities 44 | Annual General Meeting – | Investment Manager’s Review 6 Recommendations 72 Investment Portfolio 12 Financial Notice of Annual General Meeting 73 Ten Year Financial Record 13 Independent Auditors’ Report 46 Explanatory Notes to the Notice Business Review 14 of Meeting 74 Statement of Comprehensive Income 52 Denitions of Terms and Governance Performance Measures 75 Statement of Changes in Equity 53 Board of Directors 30 Shareholder Information 77 Balance Sheet 54 Directors’ Report 32 Information about the Company IBC Cash Flow Statement 55 Audit and Risk Committee Report 35 Notes to the Accounts 56 Management Engagement Committee Report 38 Nomination and Remuneration Committee Report 39 Some of the financial measures above 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 75 and 76, together with supporting calculations where appropriate. Schroder Oriental Income Fund Limited 1 2 ## Strategic report Strategic report | Chairman’s statement | 4 | | --- | --- | | Investment Manager’s Review | 6 | | Investment Portfolio | 12 | | Ten Year Financial Record | 13 | | Business Review | 14 | 3 ### Chairman’s statement Dear Shareholder, I ended my last Chairman’s since before the pandemic, we accompanied ## I need to commend Statement in the spring on a note of cautious the Managers this summer to visit Schroders’ ## our Investment optimism that the outlook for Asian equities offices and some of our investee companies was starting to brighten. Sadly, in the last in Hong Kong and Taiwan. ## Manager for achieving six months anyway, the sun has not shone I hardly need to remind anyone of the and the second half of our financial year ## such consistent various global macroeconomic and political saw modest declines in total returns. That headwinds which have troubled financial brought the Net Asset Value (“NAV”) total ## and considerable markets over the last year. Asia is not return for the full financial year to -3.5%, immune to any of these effects, especially with a similar return from the share price. ## outperformance over with China now showing signs of economic The bright spot is that this is, once again, a strain. However, with the exception of ## recent years notable outperformance of the reference some geopolitics and private sector debt index, the MSCI AC Pacific ex Japan in issues in China, Asia is not at the epicentre sterling terms, which fell by 8.1% during of the pressures. The region is relatively the same period. It is also worth noting well placed in terms of inflation, economic that the strength of sterling was a material strength, interest rates, indebtedness and contributory factor to the fall. After many competitiveness. That Asia is vibrant and an years of decline, sterling strengthened economic powerhouse is something of a significantly over the year and this erodes hackneyed phrase but the truth of this was our total return once the local currency is brought home to the Board on our visit. It is translated back into sterling. Indeed, our too easy to slip into viewing Asia through a underlying return in local currency terms was European lens. positive. We have cautioned in the past about the potential impact of sterling movements, Another interesting observation of our visit which have often been favourable to our total was the extent of meaningful implementation returns. We do not seek to hedge or mitigate around sustainability amongst many of the influence of the sterling exchange rate; our portfolio companies. It was genuinely we see our job as investing in good quality impressive. Perhaps it was, again, my Asian companies, not trading exchange rates. European perspective but my impression Since the summer, sterling has begun to prior to the visit was that Asia was, generally, weaken once again. lagging Europe and the US in this regard. This is far from the truth, at least as far as our Before moving from performance, I need portfolio companies are concerned. to commend our Investment Manager for | achieving such consistent and considerable | In the same vein, shifting political sands in the | | --- | --- | | outperformance over recent years. The | US, enhanced regulatory scrutiny in Europe | | reasons for this year’s outperformance are | and a tougher economic environment has | | explained in the Investment Manager's | seen less enthusiasm from global investors | | Review on page 6. It is clear to me that | for “pure play” Environmental, Social and | | Schroders apply considerable knowledge, | Governance (“ESG”) investing. However, as | | experience and skill, as well as keeping a | an integrated input to investment decision | | cool head. This is very valuable. The Board | making, ESG factors remain valuable. | | has recently had the benefit of seeing the | Schroders has long had many aspects of | | substantial resources and expertise of | ESG at the heart of their process, indeed | | Schroders in Asia when, for the first time | before anyone thought of combining three | Schroder Oriental Income Fund Limited4 Introduction disparate words into one concept and that payout ratios in Asia are modest so giving it an acronym. Today, their approach our companies are not under financial remains as valid as ever. The Company seeks pressure. Our Manager is not forecasting Strategic report ## Picking these quality to buy businesses that have an attractive notable falls in receipts. The Company also income proposition as well as offering the has considerable revenue reserves. Any ## companies is at the opportunity for capital growth. Schroders’ slowing in our dividend receipts is likely to approach naturally guides us to invest in be transitory and we are comfortable, as and ## heart of what the | | businesses that are truly sustainable in the | when we need to, to dip into our reserves | | | --- | --- | --- | --- | | team at Schroders | broadest sense of the word, rather than | for a short time to maintain or grow our | | | | ones that merely espouse targets for the | own dividend to Shareholders. For this last | | | seeks to do and is | future. Picking these quality companies is | financial year we have increased the dividend | | | | at the heart of what the team at Schroders | by 3.5% to 11.80 pence per share. | | | evidenced in our | seeks to do and is evidenced in our current | | | | | | Finally, I wanted to touch on the merits of | Governance Financial | portfolio. This integrated approach to ESG ## current portfolio. This an income orientation to investment in Asia. is also, I believe, a meaningful contributor Many managers seek to find the next big to our strong long-term performance. More ## integrated approach to growth winner in the pursuit of returns. Some information around Schroders’ approach to will succeed, for some of the time. I believe ## ESG is also, I believe, a ESG can be found on pages 17 to 21. that an income orientation brings natural Some of you will have seen our benefits, that this has contributed to the ## meaningful contributor announcement on 3 August 2023 of the Company’s strong long-term performance forthcoming retirement from the Board of and that attractive income from growing ## to our strong long‑term Kate Cornish-Bowden. Schroders are being companies need not come at the cost of ## performance. appointed as investment manager of the reduced total return. The income universe International Biotechnology Trust (“IBT”) and available to our Managers provides fertile her role as chair of IBT means that she has territory for their true strength – stock felt that she should resign from our board to selection – and it is a universe that is less ensure that perceptions of her independence volatile than many of the low yielding, cyclical are not compromised. We respect this but will and growth areas of the market. The strong really miss Kate, her experience, knowledge dividend income available in Asia, its low Other information (unaudited) and good humour. I can also assure payout ratios and the current undemanding Shareholders of this company and of IBT valuations across the region suggest to me that no one should doubt her independence that the attractive long-term performance of mind. The Board has commenced a achieved for Shareholders to date is succession process and we will make an sustainable in the future. Once again, I look announcement in due course. forward with modest optimism. The vagaries of financial markets may prove me wrong In line with the broader investment trust for another six months, perhaps longer. But, industry, the Company’s shares continue eventually, the fundamentals of the region, its to trade at a discount to NAV. The Board companies and their strong dividend growth believes that the discount is unwarranted will once again attract international capital. given the Company’s performance and The Company is well placed to benefit from the liquidity of our underlying portfolio. that trend when it arrives. Perhaps, though, at a time of sharply | widening discounts across the investment | Our investment managers, Richard Sennitt | | --- | --- | | trust universe, we may have to be patient | and Abbas Barkhordar will be giving | | before we see ours eliminated once again. | presentations at an investor webinar on | | During the course of the year, a total of | Wednesday 29 November 2023 at 2.00 pm | | 8,010,000 shares were repurchased at an | (which can be signed up to via the following | | average discount of 5.2% to NAV, with further | link: https://www.schroders.events/SOI23). | purchases of 2,220,000 shares since the The Company’s Annual General Meeting financial year end. Please be assured that we (“AGM”) will be held at 2pm on Monday 4 remain committed to repurchasing shares at December at 1 London Wall Place, London, a discount when there is a notable imbalance EC2Y 5AU. in the market and it is in Shareholders’ best interests. The Company’s Investment Managers and the Board will attend to make a presentation I have already touched on the impact of and answer questions from Shareholders. sterling on our total return for the period. It I encourage all of you to join us, and hope has the same impact on our dividend receipts to meet you then. I also look forward to which in sterling terms have fallen a little this reporting to you again in the interim financial year, though were higher in local currency statements next spring. terms. We have continued to grow our own dividend to Shareholders progressively for 17 years and the current dividend yield on Paul Meader our share price is approximately 5%. As the Chairman global economy begins to slow, we may consequently see some slowdown in dividend 8 November 2023 growth from our portfolio companies. However, it is important to remember Schroder Oriental Income Fund Limited 5 ### Investment Manager's Review The net asset value per share of the Company recorded a total return of -3.5% over the 12 months to end August 2023. Four interim dividends have been declared totalling 11.80p (11.40p last year). ### Performance of the MSCI AC Pacific ex Japan net dividends reinvested Index in GBP and USD ### – 31 August 2022 to 31August 2023 sed to 100 5 0 5 0 95 90 85 80 | | | | | | Jan 23 | | | | | | Jul 23 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Sep 22 | Oct 22 | | Dec 22 | | Feb 23 | | Apr 23 | | Jun 23 | | | | Aug 22 | | | Nov 22 | | | | Mar 23 | | May 23 | | | Aug 23 | MSCI AC Pacific ex Japan Net USD MSCI AC Pacific ex Japan Net GBP Thompson Datastream as at 31 August 2023 Asian markets experienced huge swings in sentiment over the has more recently been increased dialogue between the two, with 12 months to end August, largely driven by gyrations in expectations meetings between US and Chinese officials at a number of levels. for the Chinese domestic economy, the impact of geopolitics, Furthermore, domestically in China, there was a shift in tone around including over Ukraine, Taiwan and US-China relations, and the regulation towards the internet companies, together with further outlook for the global economy, with the path of US interest rates of announcements of government support for the private sector, particular importance. Despite this litany of concerns, the region’s leading to hopes that the worst of the regulatory tightening had been markets rose by around 1.9% in local terms, albeit the strength of seen. sterling meant they finished down some 8.1% over the period in sterling terms. The best performing markets over the period were Korea and Taiwan. These are markets that have high weightings in the information However, across the region there were large differences in returns. technology (“IT”) sector, which was the best performing sector China and Hong Kong were very volatile but ended down the most over the period. Post-COVID, the IT sector had seen a slowdown as over the period. We saw large falls in both markets during the fourth demand for goods faded as people switched to consuming more quarter of last year in the run up to, and post, the Communist Party services. This slowdown had led to an increase in inventories and Congress before seeing a dramatic recovery driven by the Chinese acted as an overhang for the sector. However, this then elicited a Reba authorities’ move away from ‘Zero COVID’. However, optimism faded supply-side response by these companies to the lower demand, 11 when economic data, whilst generally showing an improvement, seeing them cut both production and capital expenditure which disappointed expectations. High-end spending and services has seen the inventory imbalance start to correct, lifting stock consumption did much better when compared to the wider economy, 11 prices. More recently, some of these have benefitted from the hope but even that was lacklustre. Residential property numbers continued that artificial intelligence (“AI”) would drive a surge in demand for to disappoint and renewed concerns over the state of the Local increased computing power. 10 Government Financing Vehicles’ (“LGFVs”) finances, and some of the private residential developers’ liquidity positions, weighed on the Despite the deteriorating outlook for global growth, inflation market. During July, the Chinese market recovered on expectations pressures remained elevated for much of the year and financial 10 of a sizeable stimulus, but measures announced thus far have been conditions generally tightened. Of the major markets, Australia and modest. Singapore proved defensive, with resource companies in Australia and financials in Singapore performing relatively well. From a US-China relations continued to be a driver of sentiment over the sector perspective, materials were supported by higher-for-longer period but, on balance, did see some stabilisation during the year. commodity prices, with higher interest rates supportive of financials. Positives included the G-20 meeting in Bali, where presidents Xi and Defensive sectors generally underperformed over the period. Biden met face-to-face, and progress from the US PCAOB (Public Company Accounting Oversight Board) inspection of Chinese accounts. Although “balloon gate”, together with more restrictions on the export of high-end technologies to China, did sour relations, there Schroder Oriental Income Fund Limited6 Source: Introduction ### Country returns of the MSCI AC Pacific ex Japan Net Dividends Reinvested Index in GBP and ### local currency – 31August 2022 to 31 August 2023 Strategic report MSCI AC Pacific ex Japan net returns by country 31 August 2022 to 31 August 2023 Korea Taiwan Singapore Australia Indonesia Governance Financial New Zealand Thailand CI AC Pacific ex JP Malaysia Philippines China Hong Kong Returns in GBP Returns in local currency Turning to dividends - last financial year, there was a broad-based positive one derived from our positioning in China. The two biggest pick up in dividends, but this year has been more mixed, with detractors in Hong Kong were our positions in Bank of China (Hong Other information (unaudited) dividends in some areas such as the Australian resource names Kong) and telecom company HK Telecom. 1 (and other more cyclical areas) coming down as falls in underlying From a sector perspective, stock picks in the financials sector did well, commodity prices saw profits retreat from high levels. Financials, on including banks in Singapore (Oversea-Chinese Banking Corporation the other hand, saw the banks benefit as interest rates rose, helping and United Overseas Bank (“UOB”)), Bank Mandiri in Indonesia and both margins and earnings and enabling higher dividends. However, our holding in out-of-benchmark SMFG in Japan. Our underweights from a Company perspective, the main headwind for dividends came to consumer discretionary and some of the more defensive sectors, from the appreciation of sterling during the course of the year which such as healthcare, utilities and staples, all added value. Our made gains against most of the region’s currencies, thus impacting overweight to IT names also contributed positively, as described the translation from local currencies back into sterling. earlier. Our overweight to real estate was a negative — although this was almost entirely offset by strong selection including from our ### Positioning and Performance holdings in Singapore, Australia and China. Our overweight to Hong Although the Company’s NAV fell over the period, with a NAV total Kong real estate was a drag, where our exposure is predominantly to return of -3.5%, this compared favourably to the fall in the reference landlords operating in mainland China as well as Hong Kong. Given benchmark of -8.1%. Relative performance over the period was their exposure to retail spend via their malls, disappointment in the helped by the underweight to, and strong stock selection in, China. consumer recovery weighed on share prices. Stocks in the insurance sector there, such as our holdings in China The geographic exposure in the Company's portfolio continues Pacific Insurance and Ping An, were perceived to be beneficiaries of to be mainly spread between Taiwan, Australia, Singapore, Hong the move away from ‘Zero COVID’, as it would enable sales agents Kong, Korea and China. Over the period, we did add to positions in to conduct more face-to-face meetings which had been constrained China and Hong Kong, including insurance (China Pacific Insurance during COVID. Also, although the private sector residential property Company) and other financial names (Hong Kong Exchange) which developers had been hit hard by the weak property market, our we believe would benefit from the ending of Chinese ‘Zero COVID’ holding in China Resources Land substantially outperformed, with its -20% -15% -10% -5% 0% 5% 10% 15% policy, but which were not excessively valued in our view. China investment properties providing a recurring income stream which, remains a substantial underweight but is, in part, offset by the together with its relatively robust balance sheet, proved defensive. overweight to Hong Kong. We believe the Hong Kong market, in An absence of the e-commerce names, who pay little or no dividends, general, looks more attractive from a valuation perspective, with was also a positive, as was not holding any of the healthcare names, several names set to benefit from the re-opening of the border given a large number derated meaningfully over the year. with the mainland. Elsewhere, we reduced Singapore, reducing our Our stock picks in Taiwan added value, led by the IT names. These exposure to some of the REIT names there which had performed well included semiconductor packaging company ASE, fabless design and will see costs rise along with interest rates, as well as cutting our house Novatek, and power electronics company Delta Electronics, position in UOB, a bank that had outperformed. However, we remain whose products have benefitted from the positive trends in AI and overweight the market. We also took some money out of some of the EVs. There was also a positive contribution from stocks in Australia, better performing Taiwanese IT names, as well as selling out of Far driven by the diversified resource names. The biggest drag on EasTone, a telecom company that had performed strongly. MS performance came from the overweight to, and stock selection in Hong Kong, albeit its negative impact was much smaller than the 1 Cyclical stocks: a stock whose price is affected by macroeconomic or systematic changes in the overall economy, such as consumer goods. Schroder Oriental Income Fund Limited 7 Source: Schroders, Factset ### Investment Manager's Review ### continued ### Hong Kong likely to benefit from China opening up post Covid Recovery will support growth Hong Kong visitor number of arrivals 0 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20 Mar 21 Mar 22 Mar 23 Hong Kong visitor arrivals updated October 2023. recommendation to buy or sell. We continued in aggregate to add to financials, where we are ### Investment Outlook overweight, with valuations still looking relatively attractive given The euphoria seen in markets at the beginning of 2023 over China’s higher interest rates and subdued credit costs. Here, we added to move away from its ‘Zero COVID’ policy feels like a distant memory, as Chinese names, as described earlier in this report. We also reduced China’s long awaited post-COVID recovery has proved weaker than the overweight to real estate, trimming names that had performed expected. Economic data out of China, and a lack of forceful policy strongly across the region, and in IT as described above. Although response, has been disappointing, reigniting concerns over local near term earnings have been seeing downward revisions, we government debts and the wider residential property sector. This has continue to see some strong long-term drivers for growth around overshadowed more positive global developments stemming from digitisation, AI adoption, and the roll-out of 5G and ‘Internet of more favourable US inflation data, its knock-on to the US interest Things’. In IT, our focus remains on the Taiwanese and Korean rate cycle, and potential for a soft landing in the US. There are some companies. signs that the inventory cycle has started to bottom, potentially The other area where we have reduced exposure is in the materials pointing to a more favourable demand outlook. Rising demand for sector. Here, sales have been focussed in the Australian names earlier Asian manufactured product has historically led to a resurgence in in the period after the sector had performed strongly, in part helped Asian markets. However, as already highlighted, geopolitics remains by the surge in commodity prices. an overhang to the region with areas of tension including US-China, Taiwan, Ukraine and the Middle East. The electoral cycle is a likely point of focus with both the US and Taiwan having elections next year. Overall earnings have continued to be revised down following a reset to China and global growth expectations, leaving aggregate valuations broadly in line with their longer-term averages. However, this masks a large variation across individual markets where Singapore and Hong Kong, amongst others, look relatively cheap versus history. 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 Schroder Oriental Income Fund Limited8 Source: Refinitiv Datastream, Countries and regions shown are for illustrative purposes only and should not be viewed as a Introduction ### China — problem is poor confidence holding back consumer spend High savings rates are able to fund consumption if confidence returns Strategic report | | 1 | | 2 | | --- | --- | --- | --- | | China consumer confidence | Chinese consumer in a different position to US one | | | | 130 | | 40 | | | 125 | | 35 | | 120 30 115 25 110 20 Governance Financial 105 15 100 10 95 | 90 | | 5 | | | --- | --- | --- | --- | | 85 | | 0 | | | Dec 16 Dec 17Dec 18 Dec 19 Dec 20 Dec 21 Dec 22 | | 20132014 2015 2016 2017 2018 2019 20202021 2022 | | | | China consumer confidence | | China US | 2023. Refinitiv, CEIC, Schroders Economics Group. 17 February 2023. The regions and countries shown are for illustrative purposes only and should not be Although we did not have an optimistic view on the growth outlook appear to be peaking. Otherwise, we remain overweight to financials for China, it has still managed to disappoint. This has brought – a diverse sector spanning not only banks, but also insurers and Other information (unaudited) renewed focus back on to the residential property sector, where exchange companies. Although we saw concern over banks earlier in private sector developers have seen a liquidity squeeze, as sales the year following the Silicon Valley Bank and Credit Suisse collapses, have continued to disappoint impacting cashflow for the whole the banks we own are generally well-capitalised with strong deposit sector. The recent negative headlines around Chinese property franchises and fall into two camps: those that are benefitting from developers such as Country Garden could cause further deterioration increased credit penetration, such as in Indonesia, and the more in homebuyers’ sentiment and financing capabilities for other private domestically-focussed retail names in more mature markets, such as sector developers, indirectly raising the risk of more defaults in the Singapore, that in general trade at attractive valuations and decent industry going forward. We expect policy easing, both on the demand dividend yields. and supply sides, to intensify to avoid more defaults and any wider We remain overweight real estate with our broad thesis around our impact on the financial sector. Our long-term concerns around the holdings here remaining unchanged, focusing on landlords, rather structural headwinds for the residential sector remain - property is than developers, and those names with strong recurring income likely to be less of a driver for the economy than in the past, given growth and thus dividend appeal. We have, however, cut the size the already high levels of residential investment combined with an of our overweight during the year and we have roughly half our ageing demographic. Near term, we believe it is a lack of consumer exposure coming from Hong Kong and China names, with the rest confidence that is the problem rather than an inability to spend from a few other countries including Singapore and Australia. We do due to high borrowings. In fact, household balance sheets have not own any of the Chinese private sector residential developers. only strengthened over the last two years, due to high levels of precautionary savings, and it is measures to address this, such as Underweights remain in those areas of the market generally progress on reforms, rather than a massive fiscal stimulus which is perceived as more defensive, including consumer staples, healthcare needed to give the consumer greater confidence to spend more. and utilities, where valuations in our view still remain relatively full. Nevertheless, in our view it is likely we will see further government Near term, it is likely that we will see further downward revisions to stimulus, on top of the piecemeal measures we have seen so far. earnings as global growth slows, and an ongoing period of inventory More positively, the regulatory backdrop doesn’t appear to be adjustment amongst companies to reflect this slower growth, getting worse and there are even tentative signs of re-engagement Index Household saving rate (%) which will hopefully put them in a position to start to grow earnings between the US and China. Despite this, we remain very underweight once more when demand recovers. Positively, we are starting to combined Hong Kong and China, albeit we have been selectively see early indicators of a potential bottoming in the global goods looking to add to holdings in both markets where valuations have cycle with purchasing managers’ indices showing tentative signs of come back. We are more positive on Hong Kong, where valuations improvement in inventories and new orders which historically, with are lower and the SAR should see a recovery as the border with the a lag, have been a good lead indicator of exports. The distortion in mainland has reopened. Although visitor numbers to Hong Kong and the goods cycle from COVID was significant, with goods demand Macau have picked-up materially, one needs to remain cognisant of collapsing, post its surge in 2020, as services recovered, meaning the potential for tighter capital controls by the Chinese government that the goods cycle is much progressed when compared to that of should external balances become too wide. services. Given overall aggregate valuations for the region are now Sector-wise, IT stocks, where we have been overweight, are still trading at or below long-term averages, this does set up a more trading at relatively attractive levels from a valuation perspective, in constructive backdrop for Asian markets in the coming year, barring a our view. While the visibility of demand remains low, the supply side global hard landing or a more extreme geopolitical risk event. adjustment is starting to take place as announcements on production and capital expenditure cuts have started to be seen and inventories Schroder Oriental Income Fund Limited 9 Source: Refinitiv Datastream, as at 30 September viewed as a recommendation to buy or sell. Investment Manager's Review continued ## Goods cycle starting to bottom China's nominal exports could return to y/y growth in early 2024 ![img-5.jpeg](img-5.jpeg) Source: Refinitiv, Schroders Economics Group, 6 October 2023 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. The dividend yield for the region looks relatively attractive at the moment versus a global benchmark. In the medium to long term, dividends tend to follow earnings and earnings have recovered materially from the COVID lows. However, earnings growth this year is likely to face some ongoing pressures, as has been seen in earnings revisions trends, which may impact dividends. Still, we believe overall payout ratios in Asia do not look extended versus some other markets and corporates in Asia remain relatively lowly geared. The arguably more significant impact on dividends received comes from the level of sterling, which was quite strong over the period, and thus a headwind. At the time of writing, we had seen some reversal in sterling's strength, partly due to an expectation that UK rates could potentially be peaking. This would reduce these pressures if the trend were to persist. 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 distribution profiles, which have structural advantages. ## MSCI AC Asia Pacific ex Japan versus MSCI World relative dividend yield ![img-6.jpeg](img-6.jpeg) Source: Factset, MSCI as at 30 September 2023. The regions and countries shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. 10 Schroder Oriental Income Fund Limited Introduction Strategic report Governance Financial Other information (unaudited) ### Sectoral breakdown of portfolio (gearing* at 4.4%) | | Portfolio Weight (%) | | --- | --- | | Information Technology | 26.8 | | Banks | 24.1 | | Real Estate | 12.2 | | Communication Services | 10.4 | | Other Financials | 10.3 | | Materials | 8.0 | | Consumer Discretionary | 4.4 | | Industrials | 3.0 | | Consumer Staples | 3.0 | | Energy | 2.2 | | Utilities | - | | Healthcare | - | *Borrowings used for investment purposes, less cash, expressed as a percentage of net assets. Source: Schroders as at 31 August 2023 ### Regional breakdown of portfolio (gearing* at 4.4%) | | Portfolio Weight (%) | | --- | --- | | Australia | 19.5 | | Taiwan | 19.2 | | Singapore | 15.3 | | Korea | 13.8 | | China | 13.1 | | Hong Kong | 12.0 | | Indonesia | 4.2 | | Thailand | 2.1 | | Japan | 2.0 | | Philippines | 1.2 | | New Zealand | 0.6 | | Vietnam | 1.3 | | Malaysia | - | Source: Schroders as at 31 August 2023 Schroder Investment Management Limited 8 November 2023 *Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.* Schroder Oriental Income Fund Limited 11 ### Schroder Oriental Income Fund Limited ### Investment Portfolio At 31 August 2023 Investments are classified by the Manager in the region or country of their main business operations or listing. Stocks in bold are the 20 largest investments, which by value account for 57.9% (2022: 59.5%) of total investments and derivative financial instruments. £’000 % Sany Heavy Industry A shares 7,880 1.2 3 China Resources Land 7,573 1.1 Australia 3 1 China Construction Bank 6,062 0.9 BHP Billiton 18,837 2.8 3 China Merchants Bank 5,439 0.8 Telstra 17,919 2.6 Total Mainland China 84,887 12.6 National Australia Bank 16,782 2.5 1 Hong Kong (SAR) Rio Tinto 14,729 2.2 BOC Hong Kong 19,420 2.9 Westpac Banking 9,026 1.3 HKT Trust and HKT 13,092 1.9 Mirvac 7,840 1.2 HK Exchanges & Clearing 10,851 1.6 Suncorp 7,809 1.2 Kerry Properties 7,388 1.1 Australia & New Zealand Banking 7,697 1.1 Link REIT^ 6,347 0.9 ASX 7,178 0.9 Swire Properties 5,821 0.9 Orica 6,231 0.9 Hang Lung Properties 4,741 0.7 Deterra Royalties 4,396 0.6 Hang Lung Group 4,094 0.6 Woodside Energy 4,015 0.6 Fortune REIT^ 3,228 0.5 Coles Group 3,783 0.6 Swire Pacic B 3,170 0.5 Total Australia 126,242 18.5 Total Hong Kong (SAR) 78,152 11.6 Taiwan Indonesia Taiwan Semiconductor Manufacturing 61,645 9.2 Bank Mandiri 19,393 2.9 Hon Hai Precision Industry 12,583 1.9 Telekomunikasi Indonesia 8,040 1.2 ASE Technology 11,831 1.7 Total Indonesia 27,433 4.1 Delta Electronics 11,635 1.7 Thailand MediaTek 11,129 1.6 Kasikornbank NVDR* 7,298 1.1 Uni-President Enterprises 6,852 1.0 Land and Houses NVDR* 6,590 1.0 CTBC Financial 5,317 0.8 Total Thailand 13,888 2.1 Novatek Microelectronics 2,762 0.4 Japan Total Taiwan 123,754 18.3 Sumitomo Mitsui Financial Group 13,065 1.9 Singapore Total Japan 13,065 1.9 Oversea-Chinese Banking 20,388 3.0 Vietnam Singapore Telecom 18,755 2.8 Vietnam Dairy Products 8,586 1.3 DBS Group 12,886 1.9 Total Vietnam 8,586 1.3 Singapore Exchange 10,254 1.5 Philippines CapitaLand Integrated Commercial Trust | (REIT^) 8,700 1.3 | International Container Terminal Services 7,910 1.2 | | --- | --- | | Venture 7,686 1.1 | Total Philippines 7,910 1.2 | | Mapletree Logistics Trust (REIT^) 7,120 1.1 | New Zealand | | United Overseas Bank 6,765 1.0 | Fletcher Building 3,591 0.5 | | Mapletree Industrial Trust (REIT^) 6,433 1.0 | Total New Zealand 3,591 0.5 | 4 Total Singapore 98,987 14.7 Total Investments 676,323 100.0 South Korea 1 Listed in UK Samsung Electronics (including 2 Listed in Luxembourg preference shares) 54,740 8.1 3 Listed in Hong Kong Samsung Fire and Marine Insurance 4 Total investments comprises: (including preference shares) 11,445 1.7 | SK Telecom 9,619 1.4 | | £’000 % | | --- | --- | --- | | LG Chemical preference shares 7,667 1.1 | Equities and NVDR 600,695 88.7 | | | KB Financial 6,357 0.9 | Preference shares 55,684 8.2 | | | Total South Korea 89,828 13.2 | Warrants 19,944 3.0 | | | Mainland China | Total investments 676,323 100.0 | | 2 Midea Group warrants 08/07/2024 *NVDR means non-voting depositary receipts and A shares 19,944 3.0 ^REIT means real estate investment trust 3 Ping An Insurance H shares 11,028 1.6 3 China Petroleum & Chemical H shares 10,015 1.5 3 Shenzhou International 8,851 1.3 3 China Pacic Insurance 8,095 1.2 Schroder Oriental Income Fund Limited12 Ten-Year Financial Record | At 31 August | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Shareholders' funds (£'000) | 428,456 | 410,090 | 528,662 | 635,466 | 642,711 | 661,804 | 646,699 | 751,419 | 724,147 | 648,208 | | NAV per share (pence) | 193.44 | 175.95 | 222.56 | 258.63 | 252.94 | 251.94 | 239.28 | 280.94 | 277.24 | 256.01 | | Share price (pence) | 195.50 | 176.50 | 224.50 | 261.00 | 250.00 | 253.00 | 233.00 | 271.50 | 264.00 | 244.50 | | Share price (discount)/premium to NAV per share (%) | 1.1 | 0.3 | 0.9 | 0.9 | (1.2) | 0.4 | (2.6) | (3.4) | (4.8) | (4.5) | | Gearing (%)^{1} | 5.1 | 5.5 | 0.4 | 2.0 | 4.5 | 5.3 | 4.0 | 2.7 | 4.0 | 4.4 | | For the year ended 31 August | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Net revenue after taxation (£'000) | 17,802 | 19,660 | 21,296 | 23,939 | 26,421 | 27,376 | 26,537 | 27,682 | 34,105 | 30,399 | | Revenue earnings per share (pence) | 8.12 | 8.73 | 9.03 | 9.94 | 10.52 | 10.60 | 9.86 | 10.36 | 12.94 | 11.81 | | Dividends per share (pence) | 7.65 | 8.00 | 8.50 | 9.20 | 9.70 | 10.10 | 10.30 | 10.50 | 11.40 | 11.80 | | Ongoing Charges (%)^{2} | 0.88 | 0.87 | 0.89 | 0.85 | 0.83 | 0.86 | 0.87 | 0.85 | 0.86 | 0.88 | | Performance ^{3} | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | NAV total return | 100.0 | 127.8 | 120.9 | 159.7 | 192.5 | 195.5 | 202.8 | 200.9 | 245.0 | 250.6 | 241.8 | | Share price total return | 100.0 | 130.1 | 122.2 | 162.3 | 195.8 | 194.6 | 205.0 | 197.0 | 238.7 | 241.6 | 234.1 | 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 2013. # NAV and share price total returns, and dividends per share over ten years to 31 August 2023 ![img-7.jpeg](img-7.jpeg) *Source: Morningstar. Rebased to 100 at 31 August 2013. Schroder Oriental Income Fund Limited 13 Introduction Strategic report Governance Financial Other information (unaudited) ### Business Review ### Business model Investment – Manager implements the investment strategy by following an ### Board Strategy investment process – Set objectives, strategy and key – Supported by strong performance indicators (“KPIs”) research and ### Investor risk environment Competitiveness ### value – Regular reporting and Board is focused on ensuring: interaction with the Board – that the vehicle remains Oversight attractive to investors – Appoint Manager and – Oversee portfolio other service providers – that the fees and ongoing management to achieve objectives charges remain competitive – Monitor achievement – Responsible for Promotion of KPIs overall strategy and – Oversee the use of gearing – Marketing and sales oversight including capability of the Manager risk management – Oversee discount/premium management and the – Support from the corporate – Activities centred provision of liquidity broker with secondary on the creation of through share issuance market intervention to shareholder value and repurchase support discount/ premium management of directly holding the relevant underlying equity securities. Such The Company is a listed investment trust that has outsourced its investments may be listed or traded outside the Asia Pacific region. operations to third party service providers. Such investments may subject the Company to credit risk against The Board has appointed the Manager, Schroder Unit Trusts Limited, the issuing entity. The Company may also participate, subject to implement the investment strategy and to manage the Company’s to regulatory and tax implications, in debt-to-equity conversion assets in line with the appropriate restrictions placed on it by the programmes. Board, including limits on the type and relative size of holdings The Investment Manager may consider writing calls over some of the which may be held in the portfolio and on the use of gearing, cash, Company’s holdings, as a low risk way of enhancing the returns from derivatives and other financial instruments as appropriate. the portfolio. The Board has set a limit such that covered calls cannot The terms of the appointment are described more completely in the be written over portfolio holdings representing in excess of 15%, of Directors’ Report including delegation to the portfolio manager and gross assets. However, the Company may only invest in derivatives their team. The Manager also promotes the Company using its sales for the purposes of efficient portfolio management. Investors and marketing teams. The Board and Manager work together to should note that the types of equity-related investments listed in deliver the Company’s investment objective, as demonstrated in the this paragraph are not exhaustive of all of the types of securities diagram above. and financial instruments in which the Company may invest, and the Company will retain the flexibility to make any investments unless ### Investment objective these are prohibited by the investment restrictions applicable to the Company. The investment objective of the Company is to provide a total return for investors primarily through investments in equities and equity- Although the Company has the flexibility to invest in bonds and related investments, of companies which are based in, or which preferred shares as described above, the intention of the directors derive a significant proportion of their revenues from, the Asia Pacific is that the assets of the Company which are invested (that is to say, region and which offer attractive yields. which are not held in cash, money funds, debt securities, interest bearing gilts or treasuries) will predominantly comprise Asia Pacific ### Investment policy equities and equity-related investments. The Company is required to obtain the prior approval of the Ordinary Shareholders to any The investment policy of the Company is to invest in a diversified material change to its published investment policy. portfolio of investments, primarily equities and equity-related investments, of companies which are based in, or derive a significant ### Status proportion of their revenues from, the Asia Pacific region. The portfolio is diversified across a number of industries and a number of The Company carries on business as a Guernsey incorporated, countries in that region. The portfolio may include government, quasi- Guernsey Financial Services Commission authorised, closed-ended government, corporate and high yield bonds and preferred shares. investment company. Its shares are listed and admitted to trading on the premium segment of the main market of the London Stock Equity-related investments which the Company may hold include Exchange. The Company was added to the FTSE 250 index on investments in other collective investment undertakings (including 17 September 2019. real estate investment trusts and related stapled securities), warrants, depository receipts, participation certificates, guaranteed On 1 September 2020, following approval by the Company’s performance bonds, convertible bonds, other debt securities, equity- Shareholders at a general meeting, the Company became tax linked notes and similar instruments (whether or not investment resident in the United Kingdom and since then it has been approved grade) which give the Company access to the performance of by HM Revenue & Customs, by way of a one-off application, as an underlying equity securities, particularly where the Company may investment trust in accordance with section 1158 of the Corporation be restricted from directly investing in such underlying equity Tax Act 2010. It is intended that the Company will continue to conduct securities or where the Investment Manager considers that there its affairs in a manner which will enable it to retain this status. The are benefits to the Company in holding such investments instead Company is not a “close” company for taxation purposes. Schroder Oriental Income Fund Limited14 Introduction Strategic report Governance Financial Other information (unreadable) 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. ## 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 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. ## Key performance indicators ("KPIs") ### 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 75 and 76. The performance against these indicators is reported on page 13. ### 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 managers with them. ### 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. The Board actively used its buyback authorities during the year under review and agreed to request renewal of the authorities to issue and buyback shares as described on page 72. ### 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 It is the Board's policy that, except for 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 6.00 pence per share, the Board has declared a fourth interim dividend of 5.80 pence per share for the year ended 31 August 2023, which is payable on 1 December 2023 to shareholders on the register on 17 November 2023. Thus, dividends for the year amount to 11.80 pence (2022: 11.40 pence) per share. This represents an increase of 3.5% over the rate of dividends payable in respect of the previous year. Total dividends declared in respect of the year amount to £30,059,448, which is 99% of the £30,398,792 revenue profit after taxation available for distribution. Accordingly, the Company will be able to add £339,344 to brought forward revenue reserves. However in accordance with accounting standards, the fourth interim dividend amounting to £14,685,195 will not be accounted for until it has been paid. ### 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. Schroder Oriental Income Fund Limited 15 ### Business Review ### continued ### Investment process The chart below details the Manager’s investment process. Knowledge Insight Discipline Conviction Wide source of investment ideas Non-consensus investment appraisal Portfolio construction Schroders’ locally-based analysts Fundamentals Long term Valuation driven Global and Emerging Market analysts (London) Management Opportunity set 60–80 stock best ideas Change Risk aware Quantitative screens Non-financial factors Income rationale Sell-side research Valuation Portfolio construction Stock selection/portfolio construction Stock selection is at the heart of the investment approach for the When constructing the portfolio for the Company, the Manager Company. A key strength of the Manager is its network of analysts focuses on the following factors: in Asia whose focus is on identifying companies able to grow • conviction on investment thesis; shareholder value in the long term. Although the in-house analysts are the primary source of stock ideas, the portfolio managers also • upside to the internal estimate of fair value; generate stock ideas through their own research and draw on a • any grade awarded by Schroders’ analysts; number of other sources including other investment professionals within Schroders, a proprietary quantitative screen and sell-side • ability to increase or sustain dividend payout; analysts. • relative attractiveness of other available opportunities; The investment approach is primarily bottom-up, driven by an assessment of the financial and non-financial (including ESG) factors • the risks to the investment case; which influence company returns. In addition, there is a top-down • the ESG credentials of that company; and regional allocation review process, carried out on a monthly basis, combining the output of an in-house quantitative model and the • the sustainability of that company’s profits. qualitative views of the Manager. Many of the stocks will already have attractive yields, but the Manager also looks to exploit opportunities in stocks which are set to benefit Stock research from improving capital efficiency, rising returns and increasing The Manager believes that the best way to generate alpha over shareholder distributions. There is no minimum yield requirement the long term is to focus on fundamental bottom-up stock analysis. applied to every stock, but portfolio construction is carried out with In particular, the Manager’s analytical focus is on the future trend reference to the overall portfolio yield as a key part of the Company’s in a company’s return on invested capital (“ROIC”) relative to its total return investment objective. cost of capital, in the belief that this reflects the attractiveness and sustainability of the business model and serves as a predictor of long- ### Integration of ESG into the investment term shareholder returns. ### process Given this focus on fundamental research, it forms a key input ESG is integrated into the investment process through three levels: into the Manager’s stock selection decisions. The Manager has 40 The activities undertaken more widely by the Manager (Schroders), dedicated equity analysts across the Asia Pacific ex Japan region, those undertaken by the Manager in the Asia region, and those who have an average of over 16 years’ investment experience, 8 of undertaken by the Manager on behalf of the Company. which have been gained at Schroders (as at 30 September 2023). 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 2022), 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 Investment Insight Unit teams as well as other equity teams focussed on Global and Emerging markets. Schroder Oriental Income Fund Limited16 Introduction How are ESG factors incorporated into the 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 Strategic report ### Sustainability at Schroders A continuously evolving approach Governance Financial Other information (unaudited) For a long time, the Manager has incorporated into its decision- with regional companies in 2022) as well as voting all proxies where making a thorough assessment of management quality, practically possible. Analysts are directly responsible for assessing environmental, social and governance factors, whether implicitly ESG risks and opportunities as we believe they are best placed to or explicitly. The Manager recognises the importance of appraising understand their companies and determine the impact of ESG issues both financial and non-financial factors when analysing a company on the sustainability of the business. and its security. The Manager believes that integrating an analysis ESG analysis is an integrated and important part of the investment and evaluation of ESG factors in the security valuation and selection process, from initial screening through to final portfolio construction. process is key to enhancing and protecting long-term shareholder ESG analysis impacts the investment process in four direct ways: value. The appraisal of non-financial factors, including ESG considerations, contributes to a better understanding of a company’s 1. Initial screening – ESG helps determine which companies are risk characteristics and return potential. considered to be investable as part of an initial screening. Schroders has a team of more than 50 dedicated ESG professionals 2. Sustainability of earnings – ESG analysis helps assess the impact (as at 30 September 2023) who develop proprietary ESG tools and ESG externalities may have on the future earnings power of the oversee ESG analysis across Schroders. The ESG specialists will also business and with it the Manager’s assessment of the return on engage directly with companies, prioritising those with exposure to invested capital (“ROIC”) and shareholder return classification higher ESG risk and low ESG ratings. They attend company meetings (“SRC”) of the company. with portfolio managers and analysts to discuss specific sustainability 3. Fair Value and recommendation – ESG is an indirect and direct issues directly with company management, in addition to financial input into our fair value estimate of a company. Indirect, to the performance, as well as engaging with company sustainability experts extent that a company’s SRC may influence the assumptions used directly. in establishing the fair value estimate of a company; and direct, to the extent that analysts may apply an additional explicit discount/ Corporate Governance Analysts in the team will also work alongside premium to that fair value estimate. investors, and our internal compliance and legal teams to ensure our voting activities comply with our ESG policy. 4. Portfolio construction – ESG helps shape portfolio construction and may influence position sizes. For example, poor ESG 1 performance or heightened ESG risks may result in a decision Asia ex Japan ESG analysis in practice to underweight a security, hold a smaller position size or avoid As long-term, bottom-up investors, assessing the sustainability of a an investment completely. There is no automatic rule – each company’s returns and financial position has always been at the core investment opportunity is assessed on a case-by-case basis, of research and investment decisions the Manager makes in Asia. with the focus on the materiality of ESG factors on a company’s Consistent with this approach, Schroders engages with company valuation and risk profile. management teams (Schroders conducted over 2,300 meetings 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 (e.g. Australia, India) may differ, but is underpinned by the same broad approach Schroder Oriental Income Fund Limited 17 ### Business Review ### continued In summary, ESG analysis helps determine which companies the Schroders has always engaged with investee companies, and Manager looks at, how their sustainability is assessed and hence direct company contact is an important component of the initial how the Manager values them. While company valuations ultimately due diligence and ongoing monitoring process. The Asia Context drive portfolio construction, ESG insights play a crucial role in the template provides a clearer, and broader, roadmap on the issues investment process and influence how we size position sizes within a requiring engagement. It also helps refresh the team’s focus on ROIC portfolio. Furthermore, ESG analysis is broad-reaching: the Manager is and enhances appreciation of the downside and upside risks to a not only interested in the potential downside risks but also the upside company’s business model. The analysts have the option to apply an return implications. explicit discount or premium to their fair value estimate as a result of their ESG analysis. Asian equity analysts are expected to provide written ESG analysis for all companies under coverage. This identifies and assesses the potential One of the Asian Equities team’s greatest strengths is experienced effect of ESG issues on the investment case. analysts working hand-in-hand with experienced fund managers Schroders uses its proprietary tools such as Context and Sustainex – often involving discussions from the beginning to the end of the Asia Context. The latter of these, which is the principal tool research on a company. Many of Schroders’ fund managers are ex- employed, captures the Manager’s ESG analysis in one template analysts and they are heavily involved in the discussions that underpin using a stakeholder-based framework and is a key step in the overall ESG conclusions – especially given the inherent subjectivity of how assessment of a company. In addition to separate rankings for ‘E’, ‘S’ & certain ESG considerations will impact a company. Analysts are not ‘G’, Asia Context generates an overall score for each company’s ESG expected to score our Asia Context templates in isolation – in many attributes. instances the team builds a consensus on which issues to address and how to score them. The Context Framework: Understanding how a company manages it relationships with stakeholders oyees perform? How What support do you offer your loca motivated is your team? community? Have you committed to protect human rights? e r n a n v c o e G Suppliers Customers How exposed is your supply chain to How is your brand perceived? What’s ### disruption risks? How strong are your Company in your produce pipeline? supplier relationships? G e o c v e n r n a Environment Have you put in place an energy Regulators transition plan? Are you managing How competitive is your market? operating impacts? you paying a fair rate of tax? Source: Schroders To enhance the Asian team’s ESG expertise, two members of the Sustainable Investment team are 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. A Sustainable Equity Analyst on the team brings additional insight and perspective to ESG analysis and engagement. In addition the Asian investment team collaborates with the Sustainable Investment team, both formally and informally participating, for instance, in a monthly ESG conference call together with other investors globally to discuss topical issues as well as ESG best practice. Employees Communities How do your empl l Schroder Oriental Income Fund Limited18 Are Introduction So what is the outcome for the Company? In the Manager’s view, the Schroders approach to ESG described above results in a portfolio that is less likely to be exposed to areas that could be deemed ‘sensitive' from an ESG perspective. Where there is ’sensitivity’, it is more likely to be in markets that are generally well regulated Strategic report 1 and focused on the better practitioners. It should be noted that the Manager 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. Exposure to the more sensitive areas is limited. Sector Reasons for Caution Our Approach Approx. Fund Exposure | Agribusinesses/ | Environmental, Social, Governance | Avoid; small 1.2% (one stock – branded milk | | | | --- | --- | --- | --- | --- | | Aquaculture | (low barriers of entry, widespread | | company with some upstream | | | | questionable practices) | | supply) | | | Tobacco Social Avoid 0% | | | | Governance Financial | | Gambling Social, Governance. Licence to | | Limited exposure to best-in-class | 0% | | | | operate/ promotional practices | players in well-regulated markets (e.g. | | | Australia, Macau) | Utilities (traditional) Environmental, Governance (national | | Avoid carbon heavy energy providers, | 0% | | --- | --- | --- | --- | | | service obligations, uncertain | focus on hydro and sustainable | | | | regulations/risks of backlash against | energy providers in well-regulated | | | | coal plants, mostly state-owned | markets | | enterprises) | Resources Environmental, Social, Governance | | Avoid except for Australian blue chip | 6.4% (four stocks)* | | --- | --- | --- | --- | | | (questionable practices such as | names, with minimal thermal coal | | | | bribery and poor environmental and | mining exposure | | safety controls concerns in Asia ex Other information (unaudited) Australia) | Oil and Gas Environmental, Governance | | Limited exposure to sector ideally | 2.0% (two stocks) | | --- | --- | --- | --- | | | (regulations, unfavourable taxes, price | with an LNG/gas focus or self-help | | | | takers, big carbon producers) | story | | | Property Environmental, Social, Governance | | Exposure mainly to developed | 11.5% (thirteen stocks) | | | (bribery issues, flooding, land | markets (Hong Kong, Australia and | | | | clearance compensation, labour | Singapore) where we view risks to be | | | | practices) | better managed. | | Defence Monopsony structure, corruption Avoid 0 % Several of these industries are traditionally prominent in income for a transition to a lower carbon world), the exposure to this sector is funds, as they typically contain many companies with high dividend through blue-chip Australian companies, rather than more marginal yields. The portfolio managers’ approach, however, has been to take a miners in emerging countries. Similarly, for the real estate sector, the cautious approach to exposure in those companies which, while they exposure is largely through companies which have a focus on strong may be paying attractive dividends currently, are not always operating governance, operating in the most well-regulated markets in the in a sustainable way which could potentially impact future earnings region. For some sectors (e.g. tobacco or thermal coal), the Manager’s and by extension dividend payments. requirement for operations to be sustainable in the long term is a high hurdle to clear, regardless of the governance or regulatory The Manager has tended, therefore, to take exposure to these frameworks a company is operating under, so exposure has tended industries through the higher quality names, operating in well to be very limited there. regulated markets. For example, while they believe commodity resources will continue to be necessary in future (and indeed crucial 1 Schroders applies group-level exclusions to all Schroders funds that are directly managed. These group-level exclusions relate to controversial weapons and companies that generate more than 20% of their revenues from thermal coal mining. Details can be found at the following link Group exclusions | Schroders global Schroder Oriental Income Fund Limited 19 ### Business Review ### continued Active Ownership Schroders has a long history of engagement and active ownership, engaging with companies on ESG related matters for the past two decades. Active ownership is a key channel of influence on management teams and a mechanism that allows for more sustainable practices to be properly considered in managing the investee companies. Schroders aims to drive change to better protect and enhance the value of clients’ investments. Schroders is committed to leveraging its influence as an investor to change how a company operates for the better. These regular engagements form an important aspect of Schroders’ role as stewards of clients’ capital and allows deployment of capital in businesses with long-term sustainability of returns and shareholder value creation. Influencing corporate behaviour and outcomes We work with companies to help them to recognise the potential impact of these challenges and help them take action in the areas where change may be required Engagement VotingDialogue We speak with companies to We use our voice and rights as understand if an how they are shareholders to make sure preparing for the long-term these changes are effected sustainability challenges Source: Schroders Engagement in practice It should be remembered that the Manager is not an ‘activist’ investor, and in general is looking to buy into companies that are already well-managed with decent governance and attractive distribution profiles. However, this does not mean that there is not still room for engagement, particularly when thinking about sustainability issues and the evolution of a longer-term investment thesis. Where appropriate engagements can focus on a number of different areas, including Climate Change, Diversity and Inclusion, Natural Capital and Biodiversity, Human Rights, Human Capital Management and Corporate Governance. As an illustration, although financial companies don’t necessarily spring to mind when it comes to engagement on areas such as climate change, it is a relevant topic and Schroders engages with banks, for instance on their approach to lending to climate sensitive areas. For example, Schroders started engaging with United Overseas Bank (“UOB”) in Singapore on this topic back in 2019 and the chart on the next page highlights those and other engagements with the company since then. Schroder Oriental Income Fund Limited20 Introduction Engaging across our priority engagement themes Strategic report Themes Objective Format utcomes Email Disclose coal exposure in loan book Company subsequently provided the coal exposure Oct 2019 IR Email Disclose alignment of financing Company completed our survey for deeper analysis Dec 2020 | | Climate Change | | IR | activities to Paris Agreement | | | | --- | --- | --- | --- | --- | --- | --- | | Mar 2021 | | 1x1 call | | Develop fossil fuel financing policies | Communicated objectives based on prior assessment on | | | | | ESG Team | | and set carbon neutral targets | strengths and weaknesses of the firm | Governance Financial | Email Set up board level committee to Communicated the need for increased cybersecurity Sep 2022 Corporate IR oversee cybersecurity and data privacy oversight given growing risks. Directors regularly review Governance post risks cybersecurity measures and initiatives. 1x1 meeting Mar 2023 1x1 call Clarify and address media UOB has engaged Adaro and will also clarify with the media ESG Team controversies on climate commitment to correct misunderstanding. The company does not engage Climate Change in financing of new/expansion of coal mining. | | | | Governance & | Regulators & | | | | --- | --- | --- | --- | --- | --- | --- | | | | Stakeholders | | | Environment | | | | Schroders, as at October 2023. | | Management | Governments | | | | | shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. | addressed in | | | | | | | | | | Customers & | | Local | | recognise that success factors may be subjective, and that Schroders’ influence may not have been the sole | | engagements | Employees | | | | | | | | | Suppliers | communities | | rce for this change. However, we believe it is important to track companies’ progress and measure the of our engagement. Other information (unaudited) ### Further disclosures Investment restrictions and spread of investment risk Risk in relation to the Company’s investments is spread as a result (v) expose more than 20% of its gross assets to the of the Manager monitoring the Company’s portfolio with a view creditworthiness or solvency of any one counterparty; to ensuring that it retains an appropriate balance to meet the (vi) invest in physical commodities; or Company’s investment objective. In order to comply with the Listing Rules, the Company will not invest more than 10%, in aggregate, of (vii) invest in derivatives except for the purposes of efficient portfolio the value of its total assets (calculated at the time of any relevant management. investment) in other investment companies or investment trusts In the event of any breach of the investment restrictions applicable which are listed on the Official List of the Financial Conduct Authority to the Company, shareholders will be informed of the actions to be (the “Official List”) (save to the extent that those investment ## Engaging across our priority engagement themes taken by the Manager by notice sent to the registered addresses companies or investment trusts have stated investment policies to of the shareholders in accordance with the Company’s articles of invest no more than 15% of their gross assets in other investment ## UOB incorporation or by an announcement issued through a regulatory companies or investment trusts which are listed on the Official List). information service approved by the Financial Conduct Authority Additionally, the Company will not: (“FCA”). No breaches of these investment restrictions occurred during sO (i) invest more than 15% of its gross assets in other investment the year ended 31 August 2023. The investment portfolio on page 12 companies or investment trusts which are listed on the Official and the Investment Manager’s Review on pages 6 to 11 demonstrate List; that, as at 31 August 2023, the portfolio was invested in 12 countries and in 10 different industry sectors within such countries. There were (ii) invest, either directly or indirectly, or lend more than 20% 62 holdings in the portfolio at the year end. The Board therefore (calculated at the time of any relevant investment or loan) of believes that the objective of spreading investment risk has been its gross assets to any single underlying issuer (including the achieved. underlying issuer’s subsidiaries or affiliates); (iii) invest more than 20% (calculated at the time of any relevant Use of Gearing investment) of its gross assets in one or more collective The Company has a £100 million multi-currency revolving credit investment undertakings which may invest more than 20% of its facility with Bank of Nova Scotia which was US$50.0 million gross assets in other collective investment undertakings; (£39.5 million) drawn at the end of the financial year. The facility was (iv) invest more than 40% (calculated at the time of any relevant taken out on 18 July 2022, renewed on 20 July 2023, and expires on investment) of its gross assets in another collective investment 18 July 2024. undertaking; The Company’s policy is to permit net borrowings (including foreign currency borrowings) of up to 25% of the Company’s net assets Source: Securities We Schroder Oriental Income Fund Limited 21 driving fo outcomes ### Business Review ### continued (measured when new borrowings are incurred). It is intended that the all types of investors. This includes maintaining close relationships with Manager should have the flexibility to utilise this power to leverage adviser and execution-only platforms, advertising in the trade press, the Company’s portfolio in order to enhance returns where and to the maintaining relationships with financial journalists and the provision of extent that this is considered appropriate by the directors. Full details digital information on Schroders’ website. of the gearing employed by the Company are set out in note 20 on Shareholder relations are given high priority by both the Board and page 67. the Manager. The Board also seeks active engagement with investors and meetings with the Chairman are offered where appropriate. In Promotion and shareholder relations addition to the engagement and meetings held during the year the The Company promotes its shares to a broad range of investors chairs of the Board and committees, as well as the other directors, including discretionary wealth managers, private investors, financial attend the AGM and are available to respond to queries and concerns advisers and institutions which have the potential to be long-term from Shareholders. supporters of the investment strategy. The Board seeks to achieve Shareholders are also encouraged to sign up to the Manager’s this through its Manager and corporate broker, which promote the Investment Trusts update, to receive information on the Company shares of the Company through regular contact with both current and directly. https://www.schroders.com/en/uk/private-investor/ potential shareholders. These activities consist of investor lunches, fundcentre/funds-in-focus/investment-trusts/schroders- one-on-one meetings, webinars, regional road shows and attendances investmenttrusts/never-miss-an-update at conferences. In addition, the Company’s shares are supported by the Manager’s wider marketing of investment companies targeted at Diversity The below tables set out the gender and ethnic diversity composition of the Board (as at 31 August 2023 and at the date of this report). 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 – – – Asian/Asian British 1 20% 0 Black/African/Caribbean/Black British – – – Other ethnic group, including Arab – – – Not specied/prefer not to say – – – 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 Not specied/prefer not to say – – – Given that the Company is an investment trust with no executive Greenhouse gas emissions and energy usage board members, the columns and references regarding executive As the Company outsources its operations to third parties, it management have not been included. consumed less than 40,000 kWh during the year and so has no The Board has adopted a diversity and inclusion policy. Appointments greenhouse gas emissions, energy consumption or energy efficiency and succession plans will always be based on merit and objective action to report under the Streamlined Energy and Carbon Reporting criteria and, within this context, the Board seeks to promote diversity requirements. of gender, social and ethnic backgrounds, cognitive and personal strengths. The Board will encourage any recruitment agencies it Taskforce for Climate-Related Financial Disclosures engages to find a range of candidates that meet the objective criteria On 30 June 2023, the Company's AIFM produced a product level agreed for each appointment. Candidates for Board vacancies are disclosure consistent with the Task Force on Climate-Related selected based on their skills and experience, which are matched Financial Disclosures ("TCFD") for the period 1 January 2022 to against the balance of skills and experience of the overall Board 31 December 2022. This can be found here: https://mybrand. taking into account the criteria for the role being offered. schroders.com/m/27644d68e529db89/original/TCFD-Schroder- Oriental-Income-20221231.pdf. The Board met with representatives The Board also considers the diversity and inclusion policies of its key from the Manager to review this report. service providers. Responsible investment Financial crime policy The Company delegates to its Manager the responsibility for taking The Company continues to be committed to carrying out its business ESG issues into account when assessing the selection, retention and fairly, honestly and openly operates a financial crime policy, covering realisation of investments. The Board expects the Manager to engage bribery and corruption, tax evasion, money laundering, terrorist with investee companies on social, environmental and business ethics financing and sanctions, as well as seeking confirmations that the issues and to promote best practice. The Board also expects the Company’s service providers’ policies are operating soundly. Manager to exercise the Company’s voting rights in consideration of these issues. Schroder Oriental Income Fund Limited22 Introduction Further detail on engagement and stewardship can be found on affecting investment performance are set out in the Investment pages 17 to 21. Managers’ Review on pages 6 to 11. In addition to the description of the Manager’s integration of ESG The Management Engagement Committee reviews the performance Strategic report into the investment process and the details in this Business Review, a of the Manager, its remuneration and the discharge of its contractual description of the Manager’s policy on these matters can be found on obligations at least annually. During the year, the Board visited the Schroders website at www.schroders.com. The Board notes that the Manager’s teams based in Hong Kong and Taiwan and was Schroders believes that companies with good ESG management impressed with the depth of resource and experience represented often perform better and deliver superior returns over time. Engaging within the Manager’s teams based in the region. with companies to understand how they approach ESG management is an integral part of the investment process. Schroders has The Company’s lender committed to the UN Global Compact, amongst codes and standards, During the year under review, the Board renewed its revolving and information about the application of Schroders’ sustainability credit facility agreement with The Bank of Nova Scotia. The Board and responsible investment policies can be found at: https://www. Governance Financial is responsible for ensuring that the Company adheres to all loan schroders.com/en/sustainability/corporate-responsibility/. covenants. The Board has received reporting from the Manager on the application of its policy. Other service providers The Board maintains regular contact with its key service providers, ### Stakeholder engagement, section 172 both at the Board and committee meetings, and through ad hoc communication throughout the year. The need to foster business During the year under review, the Board discharged its duty under relationships with key service providers is central to the directors’ section 172 of the Companies Act 2006 to promote the success of the decision-making as the Board of an externally managed investment Company for the benefit of its members as a whole, having regard to trust. the interests of all stakeholders. As an externally managed investment trust, the Company has no employees, operations or premises. During the period, the Management Engagement Committee The Board has identified its key stakeholders as the Company’s undertook reviews of the third-party service providers and agreed that Shareholders, the Manager, other service providers, the Investee their continued appointment remained in the best interests of the companies and the Company’s Lender. Company and its Shareholders. The Committee periodically reviews the market rates for services received, to ensure that the Company The below explains how the directors have engaged with all Other information (unaudited) continues to receive high quality service at a competitive cost. stakeholders and outlines key activities undertaken during the reporting period. During the year, directors attended a meeting to assess the internal controls of certain service providers including the Company’s Shareholders Depositary and Custodian HSBC, the Designated Administrator, The Company welcomes attendance and participation from Registrar and Schroder’s Group Internal Audit. These meetings Shareholders at the Annual General Meeting, details of which enable the Board to conduct due diligence on operations and IT risks are on page 73 of this report. This will provide an opportunity for amongst service providers; and to receive up to date information on Shareholders to engage with the Board and hear from the Portfolio changes in regulation and market practice in the industry. The Board Managers, Richard Sennitt and Abbas Barkhordar. Shareholders also engaged with its service providers on their own commitments on unable to attend the AGM are invited to submit questions to the ESG, Financial Crime, Modern Slavery, Whistleblowing, Diversity and Company Secretary in advance of the meeting, and will be able to Inclusion, Business Continuity and Cybersecurity. view a presentation from the Manager online. Investee companies The annual and half year results presentations, as well as monthly The Board believes that it is in the interests of all stakeholders to updates are available on the Company’s webpage with results consider ESG factors. The Board supports and encourages the policy announced via a regulatory news service. of engagement on ESG matters which the Schroders investment The directors receive regular updates on the shareholder register, team has implemented as part of the investment decision making trading activity, and feedback received from investor meetings held process, details of which can be found on pages 16 to 21. by the Manager and Broker, as well as meeting with interested The Manager has discretionary powers to exercise voting rights current and prospective Shareholders. on behalf of the Company and it reports on voting decisions to the The Board is responsible for discount and premium management Board. The Board monitors investment decisions and questions and is alert to the value Shareholders place on maintaining as low the Portfolio Managers’ rationale for exposures taken and voting a level of discount volatility as possible. During the financial year, a decisions made. total of 8,010,000 shares were bought back and a further 2,220,000 In addition to regular discussions with the Manager regarding the have been bought back since the period end. The Board will continue ESG aspects of portfolio companies, the Board met with Schroders to buy back shares when it judges it is in the best interests of engagement team to gain a more in depth understanding of the Shareholders to do so. Manager’s active engagement with investee companies. The Board also met with certain investee companies on its visit to the region. 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 Schroder Oriental Income Fund Limited 23 ### Principal risks and uncertainties ### Principal and emerging risks Actions taken by the Board and, where appropriate, its committees, to manage and mitigate the Company’s principal risks and uncertainties The Board is responsible for the Company’s system of risk are set out in the table below. management and internal control and for reviewing its effectiveness. The Board has adopted a detailed matrix of principal risks affecting During the year, the Board also discussed and monitored a number the Company’s business as an investment trust and has established of risks that could potentially impact the Company’s ability to meet associated policies and processes designed to manage and, where its strategic objectives. The Board recognised that there continues to possible, mitigate those risks, which are monitored by the Audit and be an elevated geopolitical risk relating to the region, which is closely Risk Committee on an ongoing basis. This system assists the Board monitored. in determining the nature and extent of the risks it is willing to take in The Board considered in detail whether there were any material achieving the Company’s strategic objectives. emerging risks and concluded that there were none at present. Although the Board believes that it has a robust framework of internal *The “Change” column on the right highlights at a glance the Board’s controls in place this can provide only reasonable, and not absolute, assessment of any increases or decreases in risk during the year after assurance against material financial misstatement or loss and is mitigation and management. The arrows show the risks as increased, designed to manage, not eliminate, risk. decreased, or stable. Both the principal risks and the monitoring system are also subject to robust review at least annually. The last assessment took place in October 2023. Change (post mitigation and Risk Mitigation and management management)* Geopolitical risk The Board monitored news coverage of global events with follow up email correspondence when particular Political developments globally might materially affect issues or concerns arose. The Board also visited Hong the ability of the Company to achieve its investment Kong and Taiwan and met with investee companies and objective. analysts to understand the tensions and opportunities in the region better. The Board recognises that there continues to be an elevated geopolitical risk relating to the region and continued to monitor key political developments in the region including US/China tension, the political situation in Hong Kong, Taiwan, and Singapore, and domestic political developments in mainland China, in addition to the Ukraine war and the conflict between Israel and Hamas. The Manager also ensured that the portfolio is adequately diversified in the context of the investment policy. Market risk The Board continues to monitor the market volatility caused by current geo-political issues and will continue The Company is exposed to the effect of market to do so on an ongoing basis. The Board also monitors fluctuations due to the nature of its business. A macroeconomic and market factors, including the significant fall in regional equity markets could have an impact of inflation. adverse impact on the market value of the Company’s underlying investments. The risk profile of the portfolio, including the potential impact of changes in currency, is discussed with the The Board notes the impact of inflation on Manager. macroeconomic and market factors. The Manager seeks to invest in companies with strong balance sheets and sustainable business models. Gearing is maintained at relatively low levels. Schroder Oriental Income Fund Limited24 Introduction Change (post mitigation and Risk Mitigation and management management)* Strategic report Currency/exchange rate risk The Board recognises that there continues to be an elevated currency / exchange rate risk relating to the The Company is exposed to the effect of currency region and monitored it carefully during the period. fluctuations due to the nature of its business. The Company invests predominantly in assets which are The risk profile of the portfolio, including the potential denominated in a range of currencies. Its exposure to impact of changes in currency, is discussed with the changes in the exchange rate between sterling and Manager. other currencies has the potential to have significant The Company has no formal policy of hedging currency impact on returns and the sterling value of dividend risk but may use foreign currency borrowings or forward income from underlying investments. Governance Financial foreign currency contracts to limit exposure. The The Board notes that the variability in inflation and Company does not hedge against sterling. interest rates would in turn lead to volatility in exchange rates. Investment Performance The appropriateness of the Company’s investment mandate and the long-term investment strategy is The Company’s investment objectives may become out periodically reviewed and the success of the Company in of line with the requirements of investors, resulting in a meeting its stated objectives is monitored. wide discount of the share price to underlying NAV per share. The investment mandate and the long-term investment strategy are monitored by the Board. 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 buyback authorities is considered regularly. The Manager and corporate broker monitor market feedback and the Other information (unaudited) Board considers this at each quarterly meeting. Proactive engagement with Shareholders takes place via the AGM, feedback from Shareholder presentations, and ad hoc meetings with the Board. The Manager’s investment strategy and levels of The Board sets overall investment strategy and resourcing, if inappropriate, may result in the Company guidelines for use of derivatives and leverage, amongst underperforming the market and/or peer group other metrics. It also monitors investment performance companies, leading to the Company and its objectives and risk against objectives and strategy, and conducts becoming unattractive to investors. an annual review of the Manager’s ongoing suitability. The directors attend a presentation by the Manager’s risk and internal audit functions at least annually. The Board also reviews the Manager’s compliance with agreed investment restrictions, relative performance, the portfolio’s risk profile, and whether appropriate strategies are employed to mitigate any negative impact of substantial changes in markets. Climate Change The Manager has integrated ESG considerations, including climate change, into the investment process The Company's investments, and shareholder returns, and reports on its ESG engagement at regular could be affected by climate change. Investors and board meetings. The Manager has implemented a regulators are increasingly questioning how the comprehensive ESG policy which is outlined in detail on Company’s investments and performance could be pages 16 to 21.The Board ensures that ESG factors are affected by climate change, environmental, social and incorporated into reports to Shareholders. governance factors. Schroder Oriental Income Fund Limited 25 ### Principal risks and uncertainties ### continued Change (post mitigation and Risk Mitigation and management management)* Service provider performance Service providers are appointed subject to due diligence processes and with material service providers having The Company has no employees and has delegated clearly documented contractual arrangements. certain functions to a number of service providers. Failure of controls, including as a result of fraud, and Regular reports are provided by key service providers poor performance of any service provider, could lead to and the quality of their services is monitored, including disruption, reputational damage or loss. 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. Cyber The Company has outsource arrangements with service providers who report on cyber risk mitigation The Company’s service providers are all exposed to the and management at least annually, which includes risk of cyber attacks. Cyber attacks could lead to loss confirmation of business continuity capability in the of personal or confidential information, unauthorised event of a cyber attack and appoints a custodian/ payments or inability to carry out operations in a timely depositary in respect of assets. manner. In addition, the Board receives presentations from the Manager, the registrar, and the safekeeping agent and custodian on cyber risk. Risk assessment and internal controls review by the Board In its assessment of the viability of the Company, the directors have considered each of the Company’s principal risks and uncertainties Risk assessment includes consideration of the scope and quality of detailed on pages 24 to 26 and in particular the impact of a significant the systems of internal control operating within key service providers, fall in regional equity markets on the value of the Company’s and ensures regular communication of the results of monitoring investment portfolio. The directors have also considered the by such providers to the Audit and Risk Committee, including the Company’s income and expenditure projections and the fact that the incidence of significant control failings or weaknesses that have been Company’s investments comprise readily realisable securities which identified at any time and the extent to which they have resulted in can be sold to meet funding requirements if necessary. unforeseen outcomes or contingencies that may have a material impact on the Company’s performance or condition. The directors have also considered a stress test which represents a severe but plausible scenario along with movement in foreign No significant control failings or weaknesses were identified from exchange rates. This scenario assumes a severe stock market the Audit and Risk Committee’s ongoing risk assessment which has collapse and/or exchange rate movements at the beginning of the been in place throughout the financial year and up to the date of five year period, resulting in a 50% fall in the value of the Company’s this report. The Board is satisfied that it has undertaken a detailed investments and investment income and no subsequent recovery in review of the risks facing the Company and that the internal control either prices or income in the following five years. It is assumed that environment continues to operate effectively. the Company continues to pay an annual dividend in line with current A full analysis of the financial risks facing the Company is set out in levels and that the borrowing facility remains available and remains note 20 to the accounts on pages 65 to 69. drawn, subject to the gearing limit. The Company’s investments comprise highly liquid, large, listed Viability statement companies and so its assets are readily realisable securities and The directors have assessed the viability of the Company over a five could be sold to meet funding requirements or the repayment of the year period, taking into account the Company’s position at 31 August gearing facility should the need arise. There is no expectation that the 2023 and 7 November 2023 and the potential impact of the principal nature of the investments held within the portfolio will be materially risks and uncertainties it faces for the review period. The directors different in the future. have assessed the Company’s operational resilience and they are satisfied that the Company’s outsourced service providers will The operating costs of the Company are predictable and modest in continue to operate effectively, following the implementation of their comparison with the assets and there are no capital commitments business continuity plans. foreseen which would alter that position. Furthermore, the Company has no employees and consequently has no redundancy or other A period of five years has been chosen as the Board believes that employment related liabilities. this reflects a suitable time horizon for strategic planning, taking into account the investment policy, liquidity of investments, potential The Board reviews the performance of the Company’s service impact of economic cycles, nature of operating costs, dividends and providers regularly, including the Manager, along with internal availability of funding. This time period also reflects the average hold controls reports to provide assurance regarding the effective period of an investment. operation of internal controls as reported on by their reporting Schroder Oriental Income Fund Limited26 Introduction 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 Strategic report 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 also notes that certain geopolitical risks, if they materialise, would have a serious effect on the viability of the Company, but that it was not appropriate to conclude that the Company was not viable on the basis of these. The Board has assumed that the business model of a closed Governance Financial 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. The directors have not identified any material Other information (unaudited) 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 30 November 2024 which is at least 12 months from the date the financial statements were authorised for issue. By order of the Board Schroder Investment Management Limited Company Secretary 8 November 2023 Schroder Oriental Income Fund Limited 27 28 ## Gove rnance Governance Board of Directors 30 Directors’ report 32 Audit and Risk Committee report 35 Management Engagement Committee report 38 Nomination and Remuneration Committee report 39 Directors’ Remuneration Report 41 Statement of Directors’ responsibilities 44 29 29 ### Board of Directors Paul Meader Alexa Coates Status: independent non-executive Status: independent non-executive chairman director | Length of service: 7 years – appointed a | Length of service: 5 years – appointed a | | --- | --- | | director in January 2016 | director in February 2018 | | Experience: Paul Meader is an independent | Experience: Alexa Coates is a chartered | | director of investment companies, insurers | accountant who brings 30 years of significant | | and investment funds. Until 2012 he was | financial expertise to the Board. Alexa was | | Head of Portfolio Management for Canaccord | a senior executive of HSBC for nine years, | | Genuity based in Guernsey, prior to which | where she served as the global CFO for the | | he was Chief Executive of Corazon Capital. | group’s asset management business and | | He has over 35 years’ experience in financial | then led the finance function for commercial | | markets in London, Dublin and Guernsey, | banking operations in Europe. Prior to joining | | holding senior positions in portfolio | HSBC, Alexa worked in senior roles in retail, | | management and trading. Prior to joining | healthcare and professional services at J | | Corazon he was Managing Director of | Sainsbury plc, BUPA, Williams Lea Group Ltd | | Rothschild’s Swiss private-banking subsidiary | and CIT Bank. She started her career at Ernst | | in Guernsey. He is a Chartered Fellow of | & Young, where she worked in the UK and | | the Chartered Institute for Securities & | France. Alexa is a non-executive director and | | Investments, a former Commissioner of the | audit committee chair of Marsh Limited, the | | Guernsey Financial Services Commission and | insurance broker, Aviva Investors and its UK | | past chairman of the Guernsey International | fund services company as well as a | | Business Association. He is a graduate of | non-executive director and chair of the audit | | Hertford College, Oxford. Paul also holds a | and risk committee of Polar Capital Holdings | | number of directorships in other companies, | plc, a publicly quoted company. | one of which is publicly quoted: ICG-Longbow Committee membership: Audit and Risk Senior Secured UK Property Debt Investments (chair), Management Engagement, and Limited. Nomination and Remuneration Committees Committee membership: Audit and Risk, Remuneration for the reporting period: Management Engagement (chair), and £42,000 per annum Nomination and Remuneration Committees Number of shares held: 10,000* Remuneration for the reporting period: £47,000 per annum Number of shares held: 11,000* 30 Schroder Oriental Income Fund Limited Introduction Strategic report Kate Cornish-Bowden Isabel Liu Nick Winsor Governance Financial Status: senior independent Status: independent non-executive Status: independent non-executive non-executive director director director | Length of service: 5 years – appointed in | Length of service: 2 years – appointed in | Length of service: 3 years – appointed in | | --- | --- | --- | | December 2018 | November 2021 | March 2020 | | Experience: Kate Cornish-Bowden is the | Experience: Isabel has 25 years’ global | Experience: Nick is an independent | | chair of International Biotechnology Trust | experience investing equity in infrastructure. | consultant and non-executive director. | | plc and a non-executive director of Finsbury | She started her investment career in Asia with | He has more than 35 years of retail and | | Growth & Income Trust plc and CC Japan | the $1 billion AIG Asian Infrastructure Fund. | commercial banking experience with HSBC | | Income & Growth Trust plc where she is chair | She was Managing Director of the Asia Pacific | Group in a number of international markets: | | of the audit committee. Kate worked for 12 | investment business of John Laing plc. After | Brunei; Channel Islands; Hong Kong; India; | | years as a fund manager for Morgan Stanley | relocating from Hong Kong to London, she | Japan; Qatar; Singapore; Taiwan; UAE and | | Investment Management, where she was | was Investment Director for the €1 billion | the UK. He was CEO of HSBC’s businesses | | managing director and head of the global | ABN AMRO Global Infrastructure Fund. Most | in the Channel Islands and Isle of Man, CEO | | equity team. Prior to Morgan Stanley she | recently Isabel served as Board Director at | and VP of HSBC Bank (Taiwan) Limited and a | Other information (unaudited) worked as a research analyst at M&G. Kate is Pensions Infrastructure Platform, sponsored Director of HSBC Bank Middle East Limited. a member of the Chartered Financial Analyst by UK pension schemes. She has also Before this, he was Head of Personal Financial Institute (CFA), holds a Masters in Business been Chair of the Audit Risk Assurance and Services for the Asia Pacific Region. Nick is Administration (MBA), and has completed Remuneration Committee as a Board Member a non-executive director of Metro Bank plc the Financial Times Non-Executive Director of Transport Focus. Isabel is a non-executive and Metro Bank Holdings plc and a member Diploma. director of Utilico Emerging Markets Trust plc of the latter’s Risk Oversight Committee. He and Gresham House Energy Storage Fund Plc. is also the senior independent director of Committee membership: Audit and Risk, Isabel holds a BA in Economics from the Ohio the States of Jersey Development Company, Management Engagement, and Nomination State University, a Masters in Public Policy Chair of the Remuneration and Nomination and Remuneration Committees | | from Harvard Kennedy School, and an MBA | Committee and member of the Audit and | | --- | --- | --- | | Remuneration for the reporting period: | from the University of Chicago Booth School | Risk Committee. Nick is a non-executive | | £37,000 per annum | of Business. | director of Bankers without Boundaries, a | not for profit investment bank, and the Chair Number of shares held: 29,000* Committee membership: Audit and Risk, of Autism Jersey. He was awarded an MBE Management Engagement, and Nomination in the Queen’s 2020 Birthday Honours list and Remuneration Committees for services to the community. Nick holds a | Remuneration for the reporting period: | Masters in Physics from Oxford University and | | --- | --- | | £37,000 per annum | is a Fellow of the Institute of Directors. | | Number of shares held: 18,634* | Committee membership: Audit and Risk, | Management Engagement, and Nomination and Remuneration (chair) Committees Remuneration for the reporting period: £37,000 per annum Number of shares held: 20,000* *Shareholdings are as at 7 November 2023, full details of directors’ shareholdings are set out in the Remuneration Report on page 43. Schroder Oriental Income Fund Limited 31 ### Directors’ Report ### Directors and officers Committees In order to assist the Board in fulfilling its governance responsibilities, Chairman it has delegated certain functions to committees. The roles and The Chairman is an independent non-executive director who responsibilities of these committees, together with details of work is responsible for leadership of the Board and ensuring its undertaken during the year under review, is outlined over the next effectiveness in all aspects of its role. The Chairman’s other significant few pages. commitments are detailed on page 30. He has no conflicting The reports of the Audit and Risk Committee, Management relationships. Engagement Committee and Nomination and Remuneration Committee are incorporated into and form part of the Directors’ Senior Independent Director (“SID”) Report. Each committee’s effectiveness was assessed, and judged to The SID is responsible for the evaluation of the Chairman, and also be satisfactory, as part of the Board’s annual review of the Board and serves as a secondary point of contact for Shareholders. its committees. Company Secretary ### Key service providers Schroder Investment Management Limited provides company The Board has adopted an outsourced business model and has secretarial support to the Board and is responsible for assisting appointed the following key service providers: the Chairman with Board meetings and advising the Board with respect to governance. The Company Secretary also manages the Manager relationship with the Company’s service providers, except for the Manager. Shareholders wishing to lodge questions in advance of the The Company is an alternative investment fund as defined by the AGM are invited to do so by writing to the Company Secretary at the AIFM Directive and has appointed Schroder Unit Trusts Limited address given on the outside back cover. (“SUTL”) as the Manager in accordance with the terms of an alternative investment fund manager (“AIFM”) agreement. The AIFM ### Role and operation of the Board agreement, which is governed by the laws of England and Wales, can be terminated by either party on 12 months’ notice or on immediate The Board is the Company’s governing body; it sets the Company’s notice in the event of certain breaches or the insolvency of either strategy and is collectively responsible to Shareholders for its party. As at the date of this report no such notice had been given by long-term success. The Board is responsible for appointing and either party. subsequently monitoring the activities of the Manager and other service providers to seek to ensure that the investment objective of SUTL is authorised and regulated by the FCA and provides portfolio the Company continues to be met. The Board also ensures that the management, risk management, accounting and company secretarial Manager adheres to the investment restrictions set by the Board services to the Company under the AIFM agreement. Part of and acts within the parameters set by it in respect of any gearing. the fund accounting and administration activities are currently The Business Review on pages 14 to 29 sets out further detail of how performed by HSBC Securities Services (UK) Limited. The Manager the Board reviews the Company’s strategy, risk management and also provides general marketing support for the Company and internal controls and also includes other information required for the manages relationships with key investors, in conjunction with Directors’ Report and is incorporated by reference. the Chairman, other Board members or the corporate broker as appropriate. The Manager has delegated investment management, A formal schedule of matters specifically reserved for decision by the marketing, administrative, accounting and company secretarial Board has been defined and a procedure adopted for directors, in the services to another wholly owned subsidiary of Schroders plc, furtherance of their duties, to take independent professional advice at Schroder Investment Management Limited. The Manager has in place the expense of the Company. appropriate professional indemnity cover. The Chairman ensures that all directors receive relevant The Schroders Group manages £726.1 billion (as at 30 June 2023) on management, regulatory and financial information in a timely manner behalf of institutional and retail investors, financial institutions and and that they are provided, on a regular basis, with key information high net worth clients from around the world, invested in a broad on the Company’s policies, regulatory requirements and internal range of asset classes across equities, fixed income, multi-asset and controls. alternatives. The Board meets at least quarterly and receives and considers The Manager is entitled to receive a management fee of an amount reports regularly from the Manager and other key advisers and ad equivalent to 0.75% per annum of the net assets of the Company, hoc reports and information are supplied to the Board as required. reducing to 0.70% per annum on net assets above £250 million Four Board meetings are usually scheduled each year to deal with and 0.65% per annum on net assets above £750 million. The fee is matters including: the setting and monitoring of investment strategy, payable quarterly in arrears and calculated as at the last business day approval of borrowings and/or cash positions, review of investment in February, May, August and November in each year. performance, the level of discount of the Company’s shares to NAV, The Manager is also entitled to receive a performance fee based promotion of the Company, and services provided by third parties. on the performance of the Company’s NAV per ordinary share. Additional meetings of the Board are arranged as required. The performance fee is 10% of the amount in pounds sterling of The Board has approved a policy on directors’ conflicts of interest. any gains, being the amount by which the closing adjusted NAV Under this policy, directors are required to disclose all actual per ordinary share (adjusted as described below) at the end of the and potential conflicts of interest to the board as they arise for relevant calculation period exceeds the highest of: consideration and approval. The Board may impose restrictions or (i) A hurdle, being 108% of the NAV per ordinary share, taken from refuse to authorise such conflicts if deemed appropriate. No directors the audited balance sheet at the end of the previous calculation have any connections with the Manager, shared directorships period; with other directors or material interests in any contract which is significant to the Company’s business. 32 Schroder Oriental Income Fund Limited Introduction (ii) The highest closing NAV per ordinary share (unadjusted) as per Registrar the audited accounts for any previous financial year in which a Computershare Investor Services (Guernsey) Limited performance fee has been paid; and (“Computershare”) has been appointed as the Company’s registrar. Strategic report (iii) 100p Computershare’s services to the Company include share register maintenance (including the issuance, transfer and cancellation Closing Adjusted NAV per ordinary share is the NAV per share on of shares as necessary), acting as agent for the payment of any the last day of the financial year in respect of which the performance dividends, management of company meetings (including the fee is being calculated, adjusted to add back any performance fee registering of proxy votes and scrutineer services as necessary), accrued during the year but not crystallised; to adjust for the deemed handling shareholder queries and correspondence and processing reinvestment of any dividends paid by the Company during the corporate actions. period; and to remove the impact on NAV per share due to any share buy-backs and issues. ### Corporate Governance Statement The total amount of any performance fee payable in respect of any Governance Financial The Board of the Company has chosen to adopt the principles and one accounting period has been capped at 0.65% of the net asset provisions of the AIC Code of Corporate Governance (the “AIC Code”). value, calculated at the end of the relevant accounting period. The Code addresses the Principles and Provisions set out in the UK Corporate Governance Code (the “UK Code”), as well as setting out Any investment management fees payable to the Manager or to additional Provisions on issues that are of specific relevance to the other subsidiaries of Schroders plc in respect of investments by Company as an investment company. the Company in collective investment schemes and investment companies managed or advised by the Schroders Group are The Board considers that reporting against the Principles and deducted from the fee payable to the Manager under the AIFM Provisions of the AIC Code, which has been endorsed by the Financial agreement. There were no such investments during the year ended Reporting Council and the Guernsey Financial Services Commission, 31 August 2023. provides more relevant information to Shareholders. The management and performance fees payable in respect The Financial Conduct Authority requires all UK listed companies of the year ended 31 August 2023 amounted to £4,838,000 to disclose how they have complied with the provisions of the (2022: £5,149,000) and £nil (2022: nil) respectively. The Manager is Code. This statement, together with the Statement of Directors’ also entitled to a fee for providing administrative, accounting and Responsibilities, viability statement and going concern statement set company secretarial services to the Company. For these services, it out on pages 26 and 27 respectively indicates how the Company has Other information (unaudited) receives an annual fee, payable quarterly in arrears, of £150,000. complied with the principles of good governance of the Code and its requirements on internal control. The Strategic Report and Directors’ Details of all amounts payable to the Manager are set out in note 17 Report provide further details on the Company’s risk management, on page 64. governance and diversity policies. The Board has reviewed the performance of the Manager, and fees The Company complied with the Principles and Provisions of the AIC paid to it, during the year under review and continues to consider Code during the year under review and to date. that it has the appropriate depth and quality of resource to achieve above-average returns in the longer term. Thus, the Board considers The AIC Code is available on the AIC website (www.theaic.co.uk). It that the Manager’s appointment under the terms of the AIFM includes an explanation of how the AIC Code adapts the Principles agreement, is in the best interests of Shareholders as a whole. and Provisions set out in the UK Code to make them relevant for investment companies. Safekeeping and cashflow monitoring agent The Guernsey Financial Services Commission’s Finance Sector Code HSBC Bank plc (“HSBC Bank”), which is authorised by the Prudential of Corporate Governance (the “GFSC Code”) provides a framework Regulation Authority and regulated by the FCA and the Prudential which applies to all companies in the regulated finance sector in Regulation Authority, has been appointed to carry out certain duties Guernsey. The Company reports against the AIC Code, which meets of a safekeeping and cashflow monitoring agent specified in the AIFM the requirements of the GFSC Code. 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. Schroder Oriental Income Fund Limited 33 ## Directors' Report continued ### Share capital and substantial share interests As at 7 November 2023, the Company had 271,233,024 ordinary shares of 1p in issue. 20,260,000 shares were held in treasury. 8,010,000 shares were bought back during the year ended 31 August 2023. 2,220,000 shares were bought back in the period from the year-end until 7 November 2023. Accordingly, the total number of voting rights in the Company at 7 November 2023 is 250,973,024. Details of changes to the Company's share capital during the year under review are given in note 13 to the accounts on page 62. 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 at 31 August 2023 | % total voting rights | | --- | --- | | Evelyn Partners Limited | 10.20% | | Investec Wealth & Investment Limited | 9.91% | Since the year end and at the date of this report, Rathbones Investment Management Limited has on 22 September 2023 notified an increase in their notified holding to 38,128,821 ordinary shares and 15.08% of total voting rights, as driven by the all-share combination of Rathbones Group Plc with Investec Wealth & Investment Limited which completed on 21 September 2023. Subsequent to this, on 11 October 2023 Rathbones Investment Management Limited notified a decrease in their notified holding to 37,800,104 ordinary shares and 14.97% of total voting rights as at 6 October 2023. ### 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. | | Board | Audit and Risk Committee | Nomination and Remuneration Committee | Management Engagement Committee | | --- | --- | --- | --- | --- | | Alexa Coates | 5/5 | 3/3 | 2/2 | 2/2 | | Kate Cornish-Bowden | 5/5 | 3/3 | 2/2 | 2/2 | | Isabel Liu | 5/5 | 3/3 | 2/2 | 2/2 | | Paul Meader | 5/5 | 3/3 | 2/2 | 2/2 | | Nick Winsor | 5/5 | 3/3 | 2/2 | 2/2 | ### 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 Alexa Coates Director 8 November 2023 34 Schroder Oriental Income Fund Limited ### Audit and Risk Committee Report Introduction ## Review of Strategic report ## Accounting Interim and ## Risk Internal external ## policies and annual ## management controls auditors and ## judgements report ## their work 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, Governance Financial 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. The AIC Code permits the Chairman of the Board to be a member of the audit committee of an investment trust. Recognising Paul Meader’s significant experience, it is considered appropriate for the Chairman to be a member of the Audit and Risk Committee. Approach The committee’s key roles and responsibilities are set out below. Risks and Internal Controls Financial Reporting Audit Principal risks Accounting policies Audit results To establish a process for identifying, To oversee the accounting policies adopted To discuss any matters arising from the Other information (unaudited) assessing, managing and monitoring by the Company. audit and recommendations made by the emerging and principal risks of the Company. auditors. Risks and uncertainties Financial statements Auditors‘ appointment, independence To ensure a robust assessment of the To monitor the integrity of the nancial and performance Company’s emerging and principal risks statements of the Company and any formal To make recommendations to the and procedures are in place to identify announcements relating to the Company’s Board, in relation to the appointment, emerging risks, and an explanation of how nancial performance and valuation. To re‑appointment, eectiveness and removal these are being managed or mitigated. review the annual and half year reports of the external auditors, to review their and to advise the Board on whether independence, and to approve their the annual report is fair, balanced and remuneration and terms of engagement. understandable. Reviewing the audit plan and engagement letter. Formulating policies on non audit The Financial Reporting Council carried out services. a review of the company’s annual report and accounts for the year ended 31 August 2022 in accordance with Part 2 of the FRC Corporate Reporting Review Operating 1 Procedures . There were no ndings or matters brought to the attention of the Board as a result of this review. Internal controls Going concern To keep under review the adequacy and To review the position and make eectiveness of the Company’s systems recommendations to the Board in relation of internal control and risk management, to whether it considers it appropriate and review the annual report disclosures to adopt the going concern basis of relating to this. To monitor the Company’s accounting in preparing its annual and accounting and nancial internal half‑yearly nancial statements. control systems, and to consider the appropriateness of having an internal auditor. 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 34. An evaluation of the committee’s effectiveness and review of its terms of reference were completed during the year. 1 The Financial Reporting Council has asked us to draw readers’ attention to the fact that the review was based solely on the annual report and accounts and did not benefit from detailed knowledge of the Company’s business or an understanding of the underlying transactions entered into. It was, however, conducted by staff of the FRC who have an understanding of the relevant legal and accounting framework. Schroder Oriental Income Fund Limited 35 ### Audit and Risk Committee Report ### continued Application during the year Risks and Internal Controls Financial Reporting Audit Principal and emerging risks Valuation and existence of holdings Meetings with the auditors Reviewed the principal and emerging risks Ensured that portfolio holdings and Met the auditors without representatives faced by the Company and the systems, assurance reports were reviewed by the of the Manager present. Representatives processes and oversight in place to Board. of the auditors attended the committee manage and mitigate them. meeting at which the draft annual report and accounts were considered. | Internal controls and risk mitigation | Calculation of the investment | Auditors’ independence | | --- | --- | --- | | Consideration of several key aspects of | management fee and performance fee | PricewaterhouseCoopers CI LLP were | | internal control and risk management | Consideration of the methodology | appointed as auditors on 25 May 2018. The | | operating within the Manager, depositary | used to calculate the fees, matched | auditors are required to rotate the senior | | and registrar, including assurance reports. | against the criteria set out in the AIFM | statutory auditor every ve years. There are | | | agreement. | no contractual obligations restricting the | choice of external auditors. 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 ecient 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 | Recognition of investment income | Effectiveness of the independent audit | | --- | --- | --- | | Reviewed the operational controls | Considered dividends received against | process and auditors performance | | maintained by the Manager, depositary | forecast and the allocation of special | Evaluated the eectiveness of the | | and registrar in July 2023 at an annual | dividends to income or capital. | independent audit rm and process prior | | review meeting. Received quarterly reports | | to making a recommendation that it should | | covering the operation of the service | | be re-appointed at the forthcoming AGM. | | providers. | | Evaluated the auditors’ performance against | agreed criteria including: qualication; knowledge, expertise and resources; independence policies; eectiveness 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 conrmation 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 satised that the auditors are independent. Professional scepticism of the auditors was questioned and the committee was satised with the auditors’ replies. 36 Schroder Oriental Income Fund Limited Introduction Significant issues that the committee considered in relation to the financial statements, and how these issues were addressed, are outlined below. Strategic report Application during the year Risks and Internal Controls Financial Reporting Audit | Compliance with the investment | Overall accuracy of the annual report | Audit results | | | --- | --- | --- | --- | | trust qualifying rules in S1158 of the | and accounts | Met with and reviewed a comprehensive | | | Corporation Tax Act 2010 | Consideration of the draft annual report | report from the auditors which detailed | | | Consideration of the Manager’s report | and accounts and the letter from the | the results of the audit, compliance with | | | conrming compliance. | Manager in support of the letter of | regulatory requirements, safeguards that | | | | representation to the auditors. | have been established, and on their own | | | | | internal quality control procedures. | Governance Financial | | Internal audit | Fair, balanced and understandable | Provision of non-audit services by the | | | Considered the need for an internal audit | Reviewed the annual report and accounts | auditors | | | function and concluded that this would not | to ensure that it was fair, balanced and | The committee has reviewed the FRC’s | | | be appropriate, given the Company’s size | understandable. | Guidance on Audit Committees and has | | | and outsourced business model. | | 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 nancial 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. Other information (unaudited) The auditors did not provide any non audit services to the Company during the year. | Going concern and viability | Consent to continue as auditors | | --- | --- | | Reviewed the impact of risks on going | PricewaterhouseCoopers LLP has indicated | | concern and longer-term viability, as | to the committee their willingness to | | described further on pages 26 and 27. | continue to act as auditors. | 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 2023, 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 44. 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. Alexa Coates Audit and Risk Committee chair 8 November 2023 Schroder Oriental Income Fund Limited 37 ### 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 Oversight of the Manager Oversight of other service providers The committee: The committee reviews the performance and competitiveness of the following service providers on at least an annual basis: • reviews the Manager’s performance, over the short and long term, against the reference index, peer group and the market; • Safekeeping agent • considers the reporting it has received from the Manager • Corporate broker throughout the year, and the reporting from the Manager to the • Registrar Shareholders; • Lender • assesses management fees on an absolute and relative basis, receiving input from the Company’s broker, including peer group The committee also receives a report from the Company and industry figures, as well as the structure of the fees; Secretary on ancillary service providers, and considers any recommendations. • reviews the appropriateness of the Manager’s contract, including terms such as notice period. The committee noted the Audit and Risk Committee’s review of the auditors. • 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. Application during the year The committee met with senior management, as well as The committee conducted a detailed review of each of the representatives from various business functions supporting the Company’s key service providers, including their anti-modern portfolio manager, including in the Manager’s teams based in slavery, anti-bribery, sustainability, diversity and inclusion policies, Hong Kong and Taiwan. and concluded that their continued appointment was appropriate. The committee undertook a detailed review of the Manager’s The committee noted that the Audit and Risk Committee had performance and agreed that it has the appropriate depth and undertaken a detailed evaluation of the Manager, registrar, and quality of resource to deliver superior returns over the longer safekeeping agents’ internal controls. term. The committee also reviewed the terms of the AIFM agreement and agreed they remained t for purpose. 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. 38 Schroder Oriental Income Fund Limited ### Nomination and Remuneration Committee Report Introduction Strategic report ## Annual ## Application ## Annual review of ## Selection Induction of succession ## evaluation succession ## policy ## policy 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 Governance Financial the committee. Its terms of reference are available on the Company’s webpages, www.schroders.co.uk/orientalincome. Approach Selection and induction Board evaluation and directors’ fees Succession • Committee prepares a job specification • Committee assesses each director • The Board’s succession policy is that for each role. Proposals are sought annually. directors’ tenure will be for no longer from independent search firms, which than nine years, except in exceptional • Evaluation focuses on whether each are evaluated by the Board and a firm circumstances, and that each director director continues to demonstrate selected. will be subject to annual re-election at commitment to their role and provides AGMs. • Such a specification is prepared for the a valuable contribution to the Board chairman and the chairs of committees, during the year, taking into account time • Committee reviews the Board’s current Other information (unaudited) the committee also considers current commitment, independence, conflicts and future needs at least annually. board members. and training needs. Should any need be identified, the committee will initiate the selection • Job specification outlines the knowledge, • Following the evaluation, the committee process. professional skills, personal qualities and provides a recommendation to experience requirements. Shareholders with respect to the annual • Committee oversees the handover re-election of directors at the AGM. process for retiring directors. • A search firm sources a long list of potential candidates, who are assessed • Committee reviews directors’ fees, against the job specification. taking into account comparative data and reports to Shareholders in the • Committee discusses the long list, invites remuneration report. a number of candidates for interview and makes a recommendation to the • Proposed changes to the remuneration Board. policy for directors are discussed and then reported to Shareholders. • Committee reviews the induction and training of new directors. For application see page 40 Schroder Oriental Income Fund Limited 39 ### Nomination and Remuneration Committee Report ### continued ### Application during the year ### Board evaluation and directors’ | | | Selection and induction | | | fees Succession | | | | --- | --- | --- | --- | --- | --- | --- | --- | | • In anticipation of Ms Kate Cornish | | | • The Board evaluation, including | | | • The committee reviewed the succession | | | | Bowden’s departure, the committee | | | evaluation of its committees, was | | | policy and agreed it was still fit for | | | discussed the need to appoint a suitable | | | undertaken between April and | | | purpose. | | | replacement. | | | August 2023. | | | | • As announced by the Company on | • A skills matrix for the Board was | | • The committee also reviewed each | | 3 August 2023, Ms Kate Cornish | | --- | --- | --- | --- | --- | | | reviewed and a job specification was | | director’s time commitment and | Bowden has advised the Board that | | | agreed for the role. | | independence by reviewing a complete | she will resign on 17 November as | | | | | list of appointments, including pro bono | a director of the Company prior to | • Search firms were approached to not for profit roles, to ensure that each Schroders’ appointment as the AIFM of provide suitable proposals. director remained free from conflict and International Biotechnology Trust plc, had sufficient time available to discharge of which she is Chair. The Board has each of their duties effectively. initiated a selection process. • 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 30 and 31. • 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. Recommendations made to, and approved by, the Board: • 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, noting that Ms Cornish-Bowden has advised the Board that she does not intend to stand for re-election. • That directors’ fees per annum be increased to the following levels effective from 1 September 2023: chairman £50,000, Audit and Risk Committee chair: £45,000 and other directors: £40,000, with the senior independent director to receive an additional £2,000. 40 Schroder Oriental Income Fund Limited ### Directors’ Remuneration Report Introduction ### Introduction promote the success of the Company in reaching its short and long- term strategic objectives. 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 Board and its committees exclusively comprise non-executive Strategic report the forthcoming AGM and the current policy provisions will apply directors. No director past or present has an entitlement to a pension until that date. The below directors’ annual report on remuneration is from the Company, and the Company has not, and does not intend subject to an annual advisory vote. An ordinary resolution to approve to, operate a share scheme for directors or to award any share this report will be put to Shareholders at the forthcoming AGM. options or long-term performance incentives to any director. No director has a service contract with the Company, although directors At the AGM held on 11 December 2020 when the policy was last have a letter of appointment. Directors do not receive exit payments voted on by Shareholders, 99.69% of the votes cast (including and are not provided with any compensation for loss of office. No votes cast at the chairman’s discretion) in respect of approval of other payments are made to directors other than the reimbursement the directors’ remuneration policy were in favour, while 0.31% were of reasonable out-of-pocket expenses incurred in attending to the against. 112,388 votes were withheld. Company’s business. Governance Financial At the AGM held on 6 December 2022, 99.81% of the votes cast ### (including votes cast at the chairman’s discretion) in respect of Implementation of policy approval of the directors’ remuneration report for the year ended The terms of directors’ letters of appointment are available for 31 August 2022 were in favour, while 0.17% were against. 33,468 inspection at the Company’s registered office address during normal votes were withheld. business hours and during the AGM at the location of such meeting. ### Directors’ remuneration policy The Board did not seek the views of Shareholders in setting this remuneration policy. Any comments on the remuneration policy The determination of the directors’ fees is a matter dealt with by the received from Shareholders would be considered on a case-by-case Nomination and Remuneration Committee and the Board. basis. It is the Nomination and Remuneration Committee’s policy to As the Company does not have any employees, no employee pay determine the level of directors’ remuneration having regard to and employment conditions were taken into account when setting amounts payable to non-executive directors in the industry generally, this remuneration policy and no employees were consulted in its the role that individual directors fulfil in respect of Board and construction. committee responsibilities, and time committed to the Company’s Other information (unaudited) affairs, taking into account the aggregate limit of fees set out in the Directors’ fees are reviewed annually and take into account research Company’s articles of incorporation (currently £300,000). Any increase from third parties on the fee levels of directors of peer group in the level set out therein requires approval by the Board and the companies, as well as industry norms and factors affecting the time Company’s Shareholders. commitment expected of the directors. New directors are subject to the provisions set out in this remuneration policy. The chairman of the Board, the chair of the Audit and Risk Committee, and the senior independent director each receives fees at a higher ### Directors’ annual report on remuneration rate than the other directors to reflect their additional responsibilities. The fees payable to directors are not performance related. They are This report sets out how the remuneration policy was implemented set at a level to recruit and retain individuals of sufficient calibre, during the year ended 31 August 2023. with the level of knowledge, experience and expertise necessary to Schroder Oriental Income Fund Limited 41 ### Directors’ Remuneration Report ### continued ### Remuneration Report for the year ended 31August 2023 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 2023 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 13. | | Fees Taxable benets | | | | | | | 1 | | Total Change over year ended 31 August | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2023 | | 2022 | | 2023 | | 2022 | 2023 | | 2022 | | 2023 | 2022 | 2021 | | Director | | | £ | | £ | | £ | £ | | £ | | £ | % | % | % | Paul Meader 47,000 45,000 2,254 3,127 49,254 48,127 2.3 13.9 20.7 Alexa Coates 42,000 40,000 119 563 42,119 40,563 3.8 1.4 0.0 Kate Cornish-Bowden 37,000 35,000 109 467 37,109 35,467 4.6 1.3 0.0 2 lsabel Liu 37,000 28,839 275 356 37,275 29,195 27.7 n/a n/a Nick Winsor 37,000 35,000 109 467 37,109 35,467 4.6 1.3 n/a Total 200,000 183,839 2,866 4,980 202,866 188,819 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 a director on 4 November 2021. The information in the above table has been audited. Consideration of matters relating to directors’ remuneration Directors’ remuneration was last reviewed by the Board in July 2023. The members of the Board at the time that remuneration levels were considered were as set out on pages 30 to 31. 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 2023 to the following levels: chairman: £50,000, Audit and Risk Committee chair: £45,000, the senior independent director: £42,000, and other directors: £40,000. Directors’ fees were last increased from 1 September 2022. The Board will continue to review fee levels on an annual basis. ### 10year performance of the share price total return versus the MSCI All Countries Pacific 3 ### exJapan Index, with net dividends reinvested, in sterling terms 300.0 280.0 Share price total return 260.0 MSCI All Countries Pacific ex Japan Index with net dividends reinvested, sterling adjusted 240.0 220.0 200.0 180.0 160.0 140.0 120.0 100.0 80.0 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19Aug-20Aug-21Aug-22 Aug-23 3 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. 42 Schroder Oriental Income Fund Limited Introduction ### 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. | | | | | Strategic report | | --- | --- | --- | --- | --- | --- | | | Year ended | | Year ended | | | | | 31 August | | 31 August | | | | | | 2023 | | 2022 Change | | £000 £000 % Remuneration payable to Directors 203 189 +7.4 Distributions paid to Shareholders: Dividends 29,901 27,968 Share buybacks 20,022 17,172 Governance Financial Total distributions paid to Shareholders 49,923 45,140 +10.6 ### 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 | | | | 2023 | | 2022 | Paul Meader 11,000 11,000 Alexa Coates 10,000 10,000 Kate Cornish-Bowden 29,000 24,780 Nick Winsor 20,000 20,000 Other information (unaudited) Isabel Liu 17,386 8,918 The information in the above table has been audited. Since the year end, the shares held by Isabel Liu, including those of connected persons, has increased to 18,634. Alexa Coates Director 8 November 2023 Schroder Oriental Income Fund Limited 43 ### Statement of Directors’ Responsibilities ### in respect of the Annual Report and Accounts ### The directors are responsible for preparing the financial statements Directors’ Statement in accordance with applicable Guernsey law and generally accepted Each of the directors, whose names and functions are listed on pages accounting principles. 30 and 31, confirms that, to the best of their knowledge: Guernsey company law requires the directors to prepare financial • the financial statements, which have been prepared in accordance statements for each financial year which give a true and fair view of with IFRS as adopted by the European Union and with The the state of affairs of the Company and of the profit or loss of the Companies (Guernsey) Law, 2008 (as amended) and in accordance Company for that period. In preparing these financial statements, the with the requirements set out above, and give a true and fair view directors should: of the assets, liabilities, financial position and the net return of the • select suitable accounting policies, and apply them consistently; Company; • present information, including accounting policies, in a manner • the Strategic Review includes a fair review of the development and that provides relevant, reliable, comparable and understandable performance of the business and the position of the Company, information; together with a description of the principal risks and uncertainties that it faces; and • provide additional disclosures when compliance with the specific requirements in International Financial Reporting Standards • the Annual Report and Accounts, taken as a whole, are fair, (“IFRS”) as adopted by the European Union is insufficient to balanced and understandable and provide the information enable users to understand the impact of particular transactions, necessary for Shareholders to assess the Company’s position and other events and conditions on the entity’s financial position and performance, business model and strategy. financial performance; So far as each of the directors are aware, there is no relevant audit • state that the Company has complied with IFRS as adopted by the information of which the Company’s auditors are unaware, and each European Union, subject to any material departures disclosed and director has taken all the steps that he or she ought to have taken as explained in the financial statements; a director in order to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors is • prepare the financial statements on the going concern basis aware of that information. unless it is inappropriate to presume that the Company will continue in business; and On behalf of the Board • make judgements and estimates that are reasonable and prudent. Alexa Coates The directors are responsible for keeping proper accounting records Director that disclose with reasonable accuracy at any time the financial 8 November 2023 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. 44 Schroder Oriental Income Fund Limited ## Financial Financial Independent Auditors’ Report 46 Statement of Comprehensive Income 52 Statement of Changes in Equity 53 Balance sheet 54 Cash ow statement 55 Notes to the Accounts 56 45 45 ### 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 2023 and of its loss 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 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 and accounts (the “Annual Report”), which comprise: Balance Sheet as at 31 August 2023; 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. ### 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. ### 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 company engages Schroder Unit Trusts Limited (the “Manager”) to manage the company’s assets. • The company 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 Manager and HSS, and adopted a fully substantive testing approach using reports obtained from HSS. Key audit matters • Income from and losses on investments • Valuation and existence of investments at fair value through profit or loss Materiality • Overall materiality: £6,482,000 (2022: £7,241,000) based on 1% of net assets. • Performance materiality: £4,861,000 (2022: £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. 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; Schroder Oriental Income Fund Limited46 Introduction 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. Strategic report 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 and losses on investments We assessed and found that the accounting policies implemented were in accordance with IFRS and the AIC SORP, and that income Refer to the Note 1 Accounting Policies, Note 2 Gains/(losses) on (revenue and capital gains and losses on investments) has been investments held at fair value through profit or loss, and Note 3 accounted for in accordance with the stated accounting policy. Income. Governance Financial We understood and assessed the design and implementation of key We focused on the accuracy, occurrence and completeness of controls surrounding income recognition. both net capital gains/losses on investments and dividend income. We assessed the presentation of income in the Statement of Dividend Income Comprehensive Income in accordance with the requirements of The Association of Investment Companies’ Statement of Recommended We tested the accuracy of all dividend receipts by agreeing the Practice (the “AIC SORP”). 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 Other information (unaudited) 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. 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 and losses on investments was not materially misstated. Valuation and existence of investments at fair value through We tested the valuation of the listed investments by agreeing the profit or loss prices used in the valuation to independent third party sources. Refer to Note 1 Accounting Policies and Note 10 Investments at fair We tested the existence of listed investments by agreeing the value through profit or loss. holdings to an independent confirmation from the Custodian, as at 31 August 2023. The investment portfolio at 31 August 2023 comprised listed equity investments. We focused on the valuation and existence of No material misstatements were identified from this testing. investments because investments represent the principal element of the net asset value as disclosed in the Balance Sheet in the financial statements. Schroder Oriental Income Fund Limited 47 ### Independent Auditors’ Report ### to the members of Schroder Oriental Income Fund Limited ### continued ### 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 it operates. The company is a standalone authorised, closed ended investment company that has outsourced the management and safekeeping of its assets to Schroders and HSBC respectively. The company’s accounting is delegated to the Administrator who maintains the company’s accounting records and who has implemented controls over those accounting records. We applied professional judgement to determine the extent of testing required over each balance in the financial statements and obtained our audit evidence which was substantive in nature from the manager and the administrator. ### The impact of climate risk on our audit In conducting our audit, we made enquiries of the Directors and the Investment Manager to understand the extent of the potential impact of climate change risk on the company’s financial statements. The Directors and Investment Manager concluded that the impact on the measurement and disclosures within the financial statements is not material because the company’s investment portfolio is 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: Overall company materiality £6,482,000 (2022: £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. We use performance materiality to reduce to an appropriately low level the 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% (2022: 75%) of overall materiality, amounting to £4,861,000 (2022: £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 those charged with governance that we would report to them misstatements identified during our audit above £324,000 (2022: £362,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. ### 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; • 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. Schroder Oriental Income Fund Limited48 Introduction 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 Strategic report 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 Governance Financial 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 Other information (unaudited) 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; • 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. Schroder Oriental Income Fund Limited 49 ### Independent Auditors’ Report ### to the members of Schroder Oriental Income Fund Limited ### continued ### 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; • 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. Schroder Oriental Income Fund Limited50 Introduction ### Other required reporting The Companies (Guernsey) Law, 2008 exception reporting Strategic report 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 by the company; or • the financial statements are not in agreement with the accounting records. We have no exceptions to report arising from this responsibility. Colleen Local Governance Financial for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Recognised Auditor London 8 November 2023 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 auditor does not involve consideration of these matters and, accordingly, the auditor accepts 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. Other information (unaudited) Schroder Oriental Income Fund Limited 51 ## Statement of Comprehensive Income for the year ended 31 August 2023 | | Note | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Losses on investments at fair value through profit or loss | 2 | – | (55,772) | (55,772) | – | (7,810) | (7,810) | | Net foreign currency gains/(losses) | | – | 3,262 | 3,262 | – | (6,572) | (6,572) | | Income from investments | 3 | 36,430 | 386 | 36,816 | 39,047 | 1,448 | 40,495 | | Other income | 3 | 142 | – | 142 | 24 | – | 24 | | Total income/(loss) | | 36,572 | (52,124) | (15,552) | 39,071 | (12,934) | 26,137 | | Management fee | 4 | (1,935) | (2,903) | (4,838) | (1,545) | (3,604) | (5,149) | | Other administrative expenses | 5 | (1,130) | (3) | (1,133) | (1,114) | (4) | (1,118) | | Profit/(loss) before finance costs and taxation | | 33,507 | (55,030) | (21,523) | 36,412 | (16,542) | 19,870 | | Finance costs | 6 | (854) | (1,280) | (2,134) | (161) | (376) | (537) | | Profit/(loss) before taxation | | 32,653 | (56,310) | (23,657) | 36,251 | (16,918) | 19,333 | | Taxation | 7 | (2,254) | – | (2,254) | (2,146) | – | (2,146) | | Net Profit/(loss) and total comprehensive income/(expenses) | | 30,399 | (56,310) | (25,911) | 34,105 | (16,918) | 17,187 | | Earnings/(loss) per share | 9 | 11.81p | (21.88)p | (10.07)p | 12.94p | (6.42)p | 6.52p | 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/(loss) for the year. Accordingly the "Net profit/(loss)" for the year is also the "Total comprehensive income/(expenses)" 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 56 to 70 form an integral part of these accounts. 52 Schroder Oriental Income Fund Limited ### Statement of Changes in Equity ### for the year ended 31August 2023 Introduction | | | Treasury | | | Capital | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share | | share | redemption | | Special | Capital | Revenue | | | | | | capital | reserve | | | reserve | reserve | reserves | reserve | | Total | | | Note | £’000 | | £’000 | | £’000 | £’000 | £’000 | | £’000 | £’000 | Strategic report | 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) /prot and total comprehensive income/(expenses) – – – – (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 Issue of ordinary shares – – – – – – – Governance Financial Repurchase of ordinary shares into treasury – (20,127) – – – – (20,127) Net (loss) /prot and total comprehensive income/(expenses) – – – – (56,310) 30,399 (25,911) Dividends paid in the year 8 – – – – – (29,901) (29,901) At 31 August 2023 234,347 (46,118) 39 150,374 272,701 36,865 648,208 The notes on pages 56 to 70 form an integral part of these accounts. Other information (unaudited) Schroder Oriental Income Fund Limited 53 # Balance Sheet at 31 August 2023 | | Note | 2023 £'000 | 2022 £'000 | | --- | --- | --- | --- | | Non current assets | | | | | Investments at fair value through profit or loss | 10 | 676,323 | 750,372 | | Current assets | 11 | | | | Receivables | | 4,271 | 4,355 | | Cash and cash equivalents | | 11,000 | 14,155 | | | | 15,271 | 18,510 | | Total assets | | 691,594 | 768,882 | | Current liabilities | | | | | Payables | 12 | (43,386) | (44,735) | | Net assets | | 648,208 | 724,147 | | Equity attributable to equity holders | | | | | Share capital | 13 | 234,347 | 234,347 | | Treasury share reserve | 14 | (46,118) | (25,991) | | Capital redemption reserve | 14 | 39 | 39 | | Special reserve | 14 | 150,374 | 150,374 | | Capital reserves | 14 | 272,701 | 329,011 | | Revenue reserve | 14 | 36,865 | 36,367 | | Total equity Shareholders' funds | | 648,208 | 724,147 | | Net asset value per share | 15 | 256.01p | 277.24p | The financial statements on pages 52 to 55 were approved by the Board of Directors on 8 November 2023 and signed on its behalf by: Alexa Coates Director The notes on pages 56 to 70 form an integral part of these accounts. Registered in Guernsey as a public company limited by shares Company registration number: 43298 54 Schroder Oriental Income Fund Limited ### Cash Flow Statement ### for the year ended 31August 2023 Introduction | | 2023 | 2022 | | | --- | --- | --- | --- | | | £’000 | £’000 | | | Operating activities | | | Strategic report | (Loss) /prot before nance costs and taxation (21,523) 19,870 Add back net foreign currency (gains) /losses (3,262) 6,572 Losses on investments at fair value through prot or loss 55,772 7,810 Net sales of investments at fair value through prot or loss 20,161 16,211 Decrease in receivables 274 1,032 Increase/(decrease) in payables 10 (5,676) Overseas taxation paid (2,247) (2,229) Netcashinowfromoperatingactivitiesbeforeinterest 49,185 43,590 Governance Financial Interest paid (2,168) (509) Netcashinowfromoperatingactivities 47,017 43,081 Financing activities Repurchase of ordinary shares into treasury (20,022) (17,172) Dividends paid (29,901) (27,968) Net cash outowfromnancingactivities (49,923) (45,140) Decrease in cash and cash equivalents (2,906) (2,059) Cash and cash equivalents at the start of the year 14,155 16,147 Eect of foreign exchange rates on cash and cash equivalents (249) 67 Cash and cash equivalents at the end of the year 11,000 14,155 Dividends received during the year amounted to £37,004,000 (2022: £41,682,000) and bond and deposit interest receipts amounted to £117,000 (2022: £15,000) . The notes on pages 56 to 70 form an integral part of these accounts. Other information (unaudited) Schroder Oriental Income Fund Limited 55 ### Notes to the accounts ### for the year ended 31 August 2023 ### 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 International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) as 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 30 November 2024, which is at least 12 months from the date of approval of these accounts. 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 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 Principal and emerging risks heading on page 24. 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. (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. Schroder Oriental Income Fund Limited56 Introduction ### 1. Accounting Policies continued (f) Income Strategic report 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 40% to revenue and 60% to capital in line with the board’s expected long-term split of revenue and Governance Financial 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 61. (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 cost are 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. (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 Other information (unaudited) 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 is the total of both current taxation and deferred taxation. Current taxation comprises of the tax withheld at the source on foreign income, with adjustments for any amounts recoverable under tax treaties. The taxation is recorded in the revenue section of the Statement of Comprehensive Income, except when it pertains to capital related items where it will be accounted for in the capital section of the statement. Deferred taxation represents the taxation liability or asset arising from anticipated variations in the treatment of items for accounting purposes compared to tax purposes. The calculation is based on tax rates that have been officially approved or are highly likely for the period when the tax becomes payable. Deferred tax assets are recognised when there is an expectation of having future taxable profits. (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. (n) Dividends payable to Shareholders Interim dividends to Shareholders are recorded in the Financial Statements when paid. Schroder Oriental Income Fund Limited 57 ## Notes to the accounts continued ### 2. Gains/(losses) on investments held at fair value through profit or loss | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Gains/(losses) on sales of investments based on historic cost | 20,618 | (923) | | Amounts recognised in investment holding losses in the previous year in respect of investments sold in the year | (24,198) | (2,532) | | Losses on sales of investments based on the carrying value at the previous balance sheet date | (3,580) | (3,455) | | Net movement in investment holding losses | (52,192) | (4,355) | | Losses on investments held at fair value through profit or loss | (55,772) | (7,810) | ### 3. Income | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Income from investments: | | | | Overseas dividends | 36,430 | 39,047 | | Other income: | | | | Deposit interest | 142 | 24 | | Total income | 36,572 | 39,071 | | Capital: | | | | Special dividend allocated to capital | 386 | 1,448 | ### 4. Management fee | | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Management fee | 1,935 | 2,903 | 4,838 | 1,545 | 3,604 | 5,149 | The basis for calculating the investment management fee and any performance fee is set out in the Directors' Report on pages 32 and 33. With effect from 1 September 2022, the board determined that the management fee 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. ### 5. Other administrative expenses | | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Administration expenses | 717 | 3 | 720 | 722 | 4 | 726 | | Directors' fees | 203 | – | 203 | 189 | – | 189 | | Secretarial fee | 150 | – | 150 | 150 | – | 150 | | Auditors' remuneration for audit services^{1} | 60 | – | 60 | 53 | – | 53 | | | 1,130 | 3 | 1,133 | 1,114 | 4 | 1,118 | $^{1}$No amounts are payable to the auditor for non-audit services ### 6. Finance costs | | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Interest on bank loans and overdrafts | 854 | 1,280 | 2,134 | 161 | 376 | 537 | With effect from 1 September 2022, the board determined that the 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. 58 Schroder Oriental Income Fund Limited Introduction Strategic report Governance Financial Other information (unaudited) ## 7. Taxation ### (a) Analysis of tax charge for the year | | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Irrecoverable overseas tax | 2,254 | – | 2,254 | 2,146 | – | 2,146 | | Taxation for the year | 2,254 | – | 2,254 | 2,146 | – | 2,146 | The Company became resident in the United Kingdom for tax taxation purposes, with effect from 1 September 2020. The Company has no corporation tax liability for the year ended 31 August 2023 (2022: the same). ### (b) Factors affecting tax charge for the year The tax assessed for the year ended 31 August 2023 is higher (2022: lower) than the Company's applicable rate of corporation tax for that year of 21.5% (2022:19%). The factors affecting the tax charge for the year are as follows: | | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Net return/(loss) before taxation | 32,653 | (56,310) | (23,657) | 36,251 | (16,918) | 19,333 | | Net return/(loss) before taxation multiplied by the Company's applicable rate of corporation tax for the year of 21.5% (2022:19%) | 7,020 | (12,107) | (5,087) | 6,888 | (3,215) | 3,673 | | Effects of: | | | | | | | | Capital losses on investments | – | 11,290 | 11,290 | – | 2,732 | 2,732 | | Revenue not chargeable to corporation tax | (6,917) | (83) | (7,000) | (6,406) | (275) | (6,681) | | Expenses disallowed | – | 1 | 1 | – | 1 | 1 | | Unrelieved expenses | – | 899 | 899 | – | 316 | 316 | | Marginal Tax Relief | – | – | – | (267) | 267 | – | | Double Tax Relief | (103) | – | (103) | (215) | 174 | (41) | | Irrecoverable overseas tax | 2,254 | – | 2,254 | 2,146 | – | 2,146 | | Taxation for the year | 2,254 | – | 2,254 | 2,146 | – | 2,146 | ### (c) Deferred taxation The Company has an unrecognised deferred tax asset of £3,713,000 (2022: £2,745,000) 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 accounts. 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. Schroder Oriental Income Fund Limited 59 ## Notes to the accounts continued ### 8. Dividends #### (a) Dividends paid and declared | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | 2022 fourth interim dividend of 5.60p (2021: 4.80p) | 14,527 | 12,727 | | First interim dividend of 2.00p (2022: 1.90p) | 5,165 | 5,013 | | Second interim dividend of 2.00p (2022: 1.90p) | 5,124 | 4,997 | | Third interim dividend of 2.00p (2022: 2.00p) | 5,085 | 5,231 | | Total dividends paid in the year | 29,901 | 27,968 | | | 2023 £'000 | 2022 £'000 | | Fourth interim dividend declared of 5.80p (2022: 5.60p) | 14,685 | 14,627 | 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 2022 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 £30,399,000 (2022: £34,105,000). | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | First interim dividend of 2.00p (2022: 1.90p) | 5,165 | 5,013 | | Second interim dividend of 2.00p (2022: 1.90p) | 5,124 | 4,997 | | Third interim dividend of 2.00p (2022: 2.00p) | 5,085 | 5,231 | | Fourth interim dividend of 5.80p (2022: 5.60p) | 14,685 | 14,627 | | Total dividends of 11.80p (2022: 11.40p) | 30,059 | 29,868 | ### 9. Earnings/(loss) per share | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Revenue profit | 30,399 | 34,105 | | Capital loss | (56,310) | (16,918) | | Total (loss)/profit | (25,911) | 17,187 | | Weighted average number of Ordinary shares in issue during the year | 257,369,408 | 263,653,736 | | Revenue earnings per share | 11.81p | 12.94p | | Capital loss per share | (21.88)p | (6.42)p | | Total (loss)/earnings per share | (10.07)p | 6.52p | 60 Schroder Oriental Income Fund Limited Introduction Strategic report Governance Financial Other information (unaudited) ## 10. Investments at fair value through profit or loss | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Opening book cost | 621,849 | 639,015 | | Opening investment holding gains | 128,523 | 135,410 | | Opening fair value | 750,372 | 774,425 | | Analysis of transactions made during the year | | | | Purchases at cost | 124,788 | 130,731 | | Sales proceeds | (143,065) | (146,974) | | Losses on investments held at fair value through profit or loss | (55,772) | (7,810) | | Closing fair value | 676,323 | 750,372 | | Closing book cost | 624,190 | 621,849 | | Closing investment holding gains | 52,133 | 128,523 | | Closing fair value | 676,323 | 750,372 | All investments are listed on a recognised stock exchange. The Company received £143,065,000 (2022: £146,974,000) from disposal of investments in the year. The book cost of these investments when they were purchased was £122,447,000 (2022: £147,897,000). 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: | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | On acquisitions | 114 | 90 | | On disposals | 221 | 247 | | | 335 | 337 | ## 11. Current assets | Receivables | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Dividends and interest receivable | 3,992 | 4,207 | | Securities sold awaiting settlement | 199 | 2 | | Other receivables | 80 | 146 | | | 4,271 | 4,355 | 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. Schroder Oriental Income Fund Limited 61 ## Notes to the accounts continued ### 12. Current liabilities | Payables | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Bank loan | 39,459 | 42,970 | | Securities purchased awaiting settlement | 2,081 | – | | Repurchase of ordinary shares into treasury awaiting settlement | 367 | 262 | | Other payables and accruals | 1,479 | 1,503 | | | 43,386 | 44,735 | The bank loan comprises US$50 million drawn down on the Company's £100 million multicurrency credit facility with the 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)i on page 67. The bank loan at the prior year end comprised US$50 million drawn down on the Company's £100 million multicurrency credit facility with Bank of Nova Scotia. ### 13. Share capital | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Ordinary shares of 1p each, allotted, called-up and fully paid: | | | | Opening balance of 261,203,024 (2022: 267,468,024) shares, excluding shares held in treasury | 208,356 | 224,847 | | Repurchase of 8,010,000 (2022: 6,265,000) shares into treasury | (20,127) | (16,491) | | Subtotal of 253,193,024 (2022: 261,203,024) shares, excluding shares held in treasury | 188,229 | 208,356 | | 18,040,000 (2022: 10,030,000) shares held in treasury | 46,118 | 25,991 | | Closing balance of 271,233,024 (2022: 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 8,010,000 of its own shares, nominal value £80,100 to hold in treasury for a total consideration of £20,127,000 representing 3.1% 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. 62 Schroder Oriental Income Fund Limited Introduction ### 14. Reserves Capital reserves Strategic report Gains and | | | | | | | | losses on | | Investment | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Treasury | | | Capital | | | | sales | | holding | | | | Share | | share | redemption | | Special | | | of | gains and | | Revenue | | | capital | reserve | | | reserve | reserve | investments | | | | losses | reserve | | | £’000 | | £’000 | | £’000 | £’000 | | | £’000 | | £’000 | | £’000 | At 1 September 2022 234,347 (25,991) 39 150,374 202,408 126,603 36,367 Losses on sales of investments based on the carrying value at the previous balance sheet date – – – – (3,580) – – Movement in investment holding gains and losses – – – – – (52,192) – Transfer on disposal of investments – – – – 24,198 (24,198) – Governance Financial Realised exchange losses on cash and short-term deposits – – – – (249) – – Exchange gains on foreign currency credit facility – – – – – 3,511 – Repurchase of ordinary shares into treasury – (20,127) – – – – – Management fee, nance costs and other expenses charged to capital – – – – (4,186) – – Dividends allocated to capital – – – – 386 – – Dividends paid in the year – – – – – – (29,901) Net revenue prot for the year – – – – – – 30,399 At 31 August 2023 234,347 (46,118) 39 150,374 218,977 53,724 36,865 Capital reserves Gains and | | | | | | | | losses on | | Investment | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Treasury | | | Capital | | | | sales | | holding | | | Other information (unaudited) | | Share | | share | redemption | | Special | | | of | gains and | | Revenue | | | | capital | reserve | | | reserve | reserve | investments | | | | losses | reserve | | | | £’000 | | £’000 | | £’000 | £’000 | | | £’000 | | £’000 | | £’000 | | At 1 September 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, nance costs and other expenses charged to capital – – – – (3,984) – – Dividends allocated to capital – – – – 1,448 – – Dividends paid in the year – – – – – – (27,968) Net revenue prot for the year – – – – – – 34,105 At 31 August 2022 234,347 (25,991) 39 150,374 202,408 126,603 36,367 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. ### 15. Net asset value per share 2023 2022 Net assets attributable to Shareholders (£’000) 648,208 724,147 Shares in issue at the year end 253,193,024 261,203,024 Net asset value per share 256.01p 277.24p ### 16. Contingent liabilities and capital commitments There were no contingent liabilities or capital commitments at the balance sheet date (2022: none) . Schroder Oriental Income Fund Limited 63 ## Notes to the accounts continued ### 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 pages 32 and 33. The management fee payable in respect of the year amounted to £4,838,000 (2022: £5,149,000), of which £1,148,000 (2022: £1,276,000) was outstanding at the year end. The company secretarial fee payable to the Manager amounted to £150,000 (2022: £150,000) of which £37,500 (2022: £37,500) was outstanding at the year end. No performance fee is payable in respect of the year (2022: nil 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 42 and details of directors' shareholdings are given in the Directors' Remuneration Report on page 41. Details of transactions with the Manager are given in note 17 above. There have been no other transactions with related parties during the year (2022: 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 56. At 31 August 2023, the Company's investment portfolio was categorised as follows: | | 2023 | | | | | --- | --- | --- | --- | --- | | | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 | | Investments in equities and equity linked securities | 658,116 | 18,207 | – | 676,323 | | Total | 658,116 | 18,207 | – | 676,323 | Level 2 investments comprise one holding in Midea Group warrants 08/07/2024. There were no transfers between Levels 1, 2 or 3 during the year ended 31 August 2023. | | 2022 | | | | | --- | --- | --- | --- | --- | | | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'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. 64 Schroder Oriental Income Fund Limited Introduction ### 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 Strategic report 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; Governance Financial – 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 Other information (unaudited) 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. Schroder Oriental Income Fund Limited 65 ### Notes to the accounts ### continued ### 20. Financial instruments’ exposure to risk and risk management policies continued 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. 2023 New | Japanese | | Hong 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 – 991 1,585 1,881 668 143 – 1,213 493 6,974 Current liabilities – (150) (702) (1,380) – – – (39,466) – (41,698) Foreign currency exposure on net monetary items – 841 883 501 668 143 – (38,253) 493 (34,724) Investments at fair value 1 through prot or loss 13,065 135,215 88,660 98,987 123,753 13,888 3,591 18,207 143,375 638,741 Total net foreign currency exposure 13,065 136,056 89,543 99,488 124,421 14,031 3,591 (20,046) 143,868 604,017 2022 New | Japanese | | Hong 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 1 through prot or loss 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 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% (2022: 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: 2023 2022 £’000 £’000 Statement of Comprehensive Income – net prot/(loss) Net revenue prot/(loss) 3,346 3,676 Net capital prot/(loss) (3,562) (3,786) Net assets (216) (110) Conversely if sterling had strengthened by 10% this would have had the following effect: 2023 2022 £’000 £’000 Statement of Comprehensive Income – net prot/(loss) Net revenue prot/(loss) (3,346) (3,676) Net capital prot/(loss) 3,562 3,786 Net assets 216 110 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 68. Schroder Oriental Income Fund Limited66 Introduction ### 20. Financial instruments’ exposure to risk and risk management policies continued (ii) Interest rate risk Strategic report 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. Governance Financial 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: 2023 2022 £’000 £’000 Exposure to oating interest rates: Cash and cash equivalents 11,000 14,155 Other payables: drawings on the credit facility (39,459) (42,970) Total exposure (28,459) (28,815) Cash deposits at call, earn interest based on the Sterling Overnight Interest Average (“SONIA”) (2022: SONIA) rates. The Company has arranged a £100 million credit facility with The Bank of Nova Scotia, effective from 20 July 2023. 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 Other information (unaudited) down on the facility for a one month period, at the end of which it may be rolled over or adjusted. At 31 August 2023, the Company had drawn down US$50.0 million (£39.5 million) for a one month period, at an interest rate of 6.6% per annum. 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: 2023 2022 £’000 £’000 Maximum interest rate exposure during the year - net debt (36,718) (32,379) Minimum interest rate exposure during the year - net debt (28,459) (12,713) Interest rate sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 1.0% (2022: 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. 2023 2022 | 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 prot Net revenue prot/(loss) (48) 48 13 (13) Net capital prot/(loss) (237) 237 (301) 301 Net total prot/(loss) (285) 285 (288) 288 Net assets (285) 285 (288) 288 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. Schroder Oriental Income Fund Limited 67 ### Notes to the accounts ### continued ### 20. Financial instruments’ exposure to risk and risk management policies continued (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: 2023 2022 £’000 £’000 Investments at fair value through prot or loss 676,323 750,372 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 page 12. 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% (2022: 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. 2023 2022 | 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 prot/(loss) Net revenue prot/(loss) (379) 379 (315) 315 Net capital prot/(loss) 134,696 (134,696) 149,339 (149,339) Net total prot/(loss) for the year and net assets 134,317 (134,317) 149,024 (149,024) (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 months | | Three months | | | --- | --- | --- | --- | | | or less | | or less | | | 2023 | | 2022 | | | £’000 | | £’000 | Other payables Bank loan – including interest 39,680 43,086 Securities purchased awaiting settlement 2,081 – Other payables and accruals 1,479 1,469 43,240 44,555 Schroder Oriental Income Fund Limited68 Introduction ### 20. Financial instruments’ exposure to risk and risk management policies continued (c) Credit risk Strategic report 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 Governance Financial 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 A1 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. 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. Other information (unaudited) 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. 2023 2022 | Balance | Maximum | | Balance | Maximum | | | --- | --- | --- | --- | --- | --- | | sheet | exposure | | sheet | exposure | | | £’000 | | £’000 | £’000 | | £’000 | Current assets Receivables – dividends and interest 3,992 3,992 4,207 4,207 Securities sold awaiting settlement 199 199 2 2 Cash and cash equivalents 11,000 11,000 14,155 14,155 15,191 15,191 18,364 18,364 No items included in “Receivables” are past their due date and none have been provided for. Schroder Oriental Income Fund Limited 69 Notes to the accounts continued ## 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: | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Debt | | | | Bank loan | 39,459 | 42,970 | | Equity | | | | Share capital | 234,347 | 234,347 | | Reserves | 413,861 | 489,800 | | | 648,208 | 724,147 | | Total debt and equity | 687,667 | 767,117 | 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. | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Borrowings used for investment purposes, less cash | 28,459 | 28,815 | | Net assets | 648,208 | 724,147 | | Gearing | 4.4% | 4.0% | 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. 70 Schroder Oriental Income Fund Limited ## Other ## information ## (unaudited) Other Information (unaudited) Annual General Meeting – Recommendations 72 Notice of Annual General Meeting 73 Explanatory Notes to the Notice of Meeting 74 Definitions of Terms and Performance Measures 75 Shareholder Information 77 Information about the Company IBC 71 71 # Annual General Meeting – Recommendations The Annual General Meeting (“AGM”) of the Company will be held on Monday, 4 December 2023 at 2.00 pm. The formal Notice of Meeting is set out on page 73. 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. Resolutions 2 and 3 concern the Directors’ Remuneration Policy and Report, on pages 41 to 43. Resolutions 4 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 39 to 40 (their biographies are set out on pages 30 and 31). 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 35 to 37. ## 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 4 December 2022, the Company was granted authority to make market purchases of up to 38,886,762 ordinary shares for cancellation or holding in treasury. 7,955,000 ordinary shares were bought back under this authority and the Company therefore has remaining authority to purchase up to 30,931,762 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 as at 7 November 2023 (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 2023 AGM will lapse at the conclusion of the AGM in 2024 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 £250,973 (being 10% of the issued share capital ex treasury as at 7 November 2023) 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 £250,973 (being 10% of the Company’s issued share capital ex treasury as at 7 November 2023). 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 2024 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. 72 Schroder Oriental Income Fund Limited ### Notice of Annual General Meeting Introduction NOTICE is hereby given that the annual general meeting of (b) the maximum price (exclusive of expenses) which may be Schroder Oriental Income Fund Limited will be held on 4 December paid for a Share shall not exceed the higher of 2023 at 2.00 pm at 1 London Wall Place, London EC2Y 5AU to (i) 105% of the average of the middle market quotations Strategic report consider and, if thought fit, to pass the following resolutions, of for the Shares as taken from the London Stock which resolutions 1 to 10 will be proposed as ordinary resolutions. Exchange Daily Official List for the five business days Resolution 11 will be proposed as a special resolution and immediately preceding the date of purchase; and resolution 12 will be proposed as an extraordinary resolution: (ii) the higher of the last independent bid and the 1. To receive the Directors’ Report and the audited accounts for highest current independent bid on the London Stock the year ended 31 August 2023. Exchange; 2. To approve the Directors’ Remuneration Policy (c) the minimum price which may be paid for a Share is 1p, 3. To approve the Directors’ Remuneration Report for the year being the nominal value per Share; ended 31 August 2023. Governance Financial (d) the authority hereby conferred shall expire at the 4. To approve the re-election of Paul Meader as a director of the conclusion of the next annual general meeting of the Company. Company in 2024 (unless previously renewed, varied or revoked prior to such date); 5. To approve the re-election of Alexa Coates as a director of the Company. (e) the Company may make a contract to purchase Shares under the authority hereby conferred which will or may 6. To approve the re-election of Isabel Liu as a director of the be executed wholly or partly after the expiration of such Company. authority and may make a purchase of Shares pursuant to 7. To approve the re-election of Nick Winsor as a director of the any such contract; and Company. (f) Any Shares so purchased will be held in treasury or 8. To re-appoint PricewaterhouseCoopers LLP as the Company’s cancelled.” auditors. 12. To consider and, if thought fit pass the following as an 9. To authorise the directors to determine the remuneration of extraordinary resolution: PricewaterhouseCoopers LLP as auditors to the Company. “That the Board be and is hereby authorised in accordance Other information (unaudited) with Section 291 of The Companies (Guernsey) Law, 2008 10. To approve the Company’s dividend policy as set out on (as amended) to allot ordinary shares for cash and/or sell page 15 of the Annual Report and Accounts. treasury shares up to 25,097,302 ordinary shares of 1p each 11. To consider and, if thought fit, to pass the following resolution in aggregate, representing 10% of the share capital in issue as a special resolution: (ex treasury) on 7 November 2023, for cash and the right of Shareholders to receive a pre-emptive offer in respect of such “That the Company be and is hereby generally and ordinary shares shall be excluded pursuant to Article 3.24 unconditionally authorised in accordance with section 315 of of the Company’s articles of incorporation, provided that The Companies (Guernsey) Law, 2008 (as amended), to make this authority shall expire (unless previously renewed, varied market purchases of ordinary shares of 1p each in the capital or revoked by the Company in general meeting) from the of the Company (“Share”) at whatever discount the prevailing conclusion of the annual general meeting of the Company to market price represents to the prevailing net asset value per be held in 2024 save that the Board may allot ordinary shares share, provided that: for cash or sell treasury shares after the expiry of this authority (a) the maximum number of Shares hereby authorised to be in pursuance of an offer or agreement made by the Company purchased shall be 37,620,856, representing 14.99% of the before such expiry that would or might require ordinary shares | | issued share capital (ex treasury) as at 7 November 2023; | to be allotted or treasury shares to be sold after such expiry.” | | | --- | --- | --- | --- | | By order of the Board | | | PO Box 208 | | For and on behalf of | | | Arnold House | St Julian’s Avenue St Peter Port Guernsey GY1 3NF Schroder Investment Management Limited Company Secretary Registered number: 43298 8 November 2023 Schroder Oriental Income Fund Limited 73 ### Explanatory Notes to the Notice of 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 30 and 31 of the annual report and accounts for the year ended 31 August 2023. 3. As at 7 November 2023, the Company had 271,233,024 ordinary shares of 1p each in issue (20,260,000 shares were held in treasury). Accordingly, the total number of voting rights in the Company on 7 November 2023 was 250,973,024. 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. Schroder Oriental Income Fund Limited74 ## Definitions of Terms and Performance Measures The terms and performance measures below are those commonly used by investment companies to assess values, investment performance and operating costs. Some of the financial measures below are classified Alternative Performance Measures as defined by the European Securities and Markets Authority, and some numerical calculations are given for those. ### Net asset value ("NAV") per share The NAV per share of 256.01p (2022: 277.24p) represents the net assets attributable to equity Shareholders of £648,208,000 (2022: £724,147,000) divided by the number of shares in issue of 253,193,024 (2022: 261,203,024). The change in the NAV amounted to -7.7% (2022: -1.3%) 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 2023 is calculated as follows: | NAV at 31/8/22 | 277.24p | | --- | --- | | NAV at 31/8/23 | 256.01p | | Dividend | XD date | NAV on XD date | Factor | Cumulative factor | | --- | --- | --- | --- | --- | | 5.6p | 10/11/22 | 250.92p | 1.0223 | 1.0223 | | 2.0p | 26/01/23 | 286.60p | 1.0070 | 1.0296 | | 2.0p | 20/04/23 | 271.96p | 1.0077 | 1.0370 | | 2.0p | 03/08/23 | 264.36p | 1.0076 | 1.0449 | NAV total return, being the closing NAV, multiplied by the cumulative factor, expressed as a percentage increase in the opening NAV -3.5% 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 | | Dividend | XD date | NAV on XD date | Factor | Cumulative 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 share price total return for the year ended 31 August 2023 is calculated as follows: | Share price at 31/8/22 | 264.00p | | --- | --- | | Share price at 31/8/23 | 244.50p | | Dividend | XD date | Share price on XD date | Factor | Cumulative Factor | | --- | --- | --- | --- | --- | | 5.6p | 10/11/22 | 248.00p | 1.0226 | 1.0226 | | 2.0p | 26/01/23 | 277.50p | 1.0072 | 1.0300 | | 2.0p | 20/04/23 | 260.00p | 1.0077 | 1.0379 | | 2.0p | 03/08/23 | 252.50p | 1.0079 | 1.0461 | Share price total return, being the closing share price, multiplied by the cumulative factor, expressed as a percentage increase in the opening share price -3.1% 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 | | Dividend | XD date | Share price on XD date | Factor | Cumulative 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% Schroder Oriental Income Fund Limited 75 Introduction Strategic report Governance Financial Other information (unaudited) ## Definitions of Terms and Performance Measures continued ### Discount/premium The amount by which the share price of an investment trust is lower (discount) or higher (premium) than the NAV per share. The discount or premium is expressed as a percentage of 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 at the year end amounted to 4.5% (2022: discount of 4.8%), as the closing share price at 244.50p (2022: 264.00p) was lower than the closing NAV of 256.01p (2022: 277.24p). ### 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: | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Borrowings used for investment purposes, less cash | 28,459 | 28,815 | | Net assets | 648,208 | 724,147 | | Gearing | 4.4% | 4.0% | ### 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. 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 2023 are presented on page 71 under Shareholder Information. ### Ongoing Charges Ongoing Charges 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 £5,971,000 (2022: £6,267,000), expressed as a percentage of the average daily net asset values during the year of £678,708,000 (2022: £731,663,000). 76 Schroder Oriental Income Fund Limited ### Shareholder Information Introduction ### Webpages and share price information Alternative Investment Fund Managers ### Directive (“AIFMD”) disclosures The Company has dedicated webpages, which may be found Strategic report at www.schroders.co.uk/orientalincome. The webpages are The AIFMD, as transposed into the FCA Handbook in the UK, the Company’s primary method of electronic communication requires that certain pre-investment information be made available with Shareholders. They contain details of the Company’s share to investors in Alternative Investment Funds (such as the Company) price and copies of the annual report and accounts and other and also that certain regular and periodic disclosures are made. documents published by the Company as well as information This information and these disclosures may be found either on the directors, terms of reference of committees and other below, elsewhere in this annual report, or in the Company’s AIFMD governance arrangements. In addition, the webpages contain information disclosure document published on the Company’s links to announcements made by the Company to the market and webpages. Schroders’ website. There is also a section entitled “How to Invest”. The Company releases its NAV per share on both a cum and Governance Financial ### ex-income basis to the market on a daily basis. Leverage Share price information may also be found in the Financial Times The Company’s leverage policy and details of its leverage ratio and on the Company’s webpages. calculation and exposure limits as required by the AIFMD are published on the Company’s webpages and within this report. The The Manager publishes monthly and quarterly updates on the Company is also required to periodically publish its actual leverage Company and other Schroders investment trusts, which may be exposures. As at 31 August 2023 these were: found under the “Literature” section on the Company’s webpages. | | | Maximum | Actual | | --- | --- | --- | --- | | | Leverage exposure | exposure | exposure | | Association of Investment Companies | Gross Method 200.0% 112.1% | | | Commitment Method 200.0% 110.9% 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. ### Illiquid assets Other information (unaudited) As at the date of this report, none of the Company’s assets are ### Individual Savings Account (“ISA”) status subject to special arrangements arising from their illiquid nature. The Company’s shares are eligible for stocks and shares ISAs. ### Remuneration disclosures ### Non-Mainstream Pooled Investments status Quantitative remuneration disclosures to be made in this annual The Company currently conducts its affairs so that its shares can be report in accordance with FCA Handbook rule FUND3.3.5 may be recommended by independent financial advisers to ordinary retail found in the Company’s AIFMD information disclosure document investors in accordance with the FCA’s rules in relation to non- published on the Company’s webpages. 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 Publication of Key Information Document products because they are shares in an investment trust. ### (“KID”) by the AIFM Pursuant to the Packaged Retail and Insurance Based Investment Products Regulation, the Manager, as the Company’s AIFM, is ### Financial calendar required to publish a short KID on the Company. KIDs are designed First interim dividend paid February to provide certain prescribed information to retail investors, Second interim dividend paid May including details of potential returns under different performance Half year results announced April/May scenarios and a risk/reward indicator. The Company’s KID is available on its webpages. Third interim dividend paid August Financial year end 31 August Annual results announced November ### How to invest Fourth interim dividend paid November/December There are a number of ways to easily invest in the Company. Annual General Meeting December The Manager has set these out at www.schroders.com/invest-in-a-trust/. Schroder Oriental Income Fund Limited 77 ### Shareholder Information ### continued ### Warning to Shareholders Companies are aware that their shareholders have received unsolicited telephone calls or correspondence concerning investment matters. These are typically from overseas-based ‘brokers’ who target UK shareholders, offering to sell them what often turn out to be worthless or high risk shares or investments. These operations are commonly known as ‘boiler rooms’. These ‘brokers’ can be very persistent and extremely persuasive. Shareholders are advised to be wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports. If you receive any unsolicited investment advice: • Make sure you get the correct name of the person and organisation • Check that they are properly authorised by the FCA before getting involved by visiting register.fca.org.uk • Report the matter to the FCA by calling 0800 111 6768 or visiting fca.org.uk/consumers/report-scam-unauthorised-firm • Do not deal with any firm that you are unsure about If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme. The FCA provides a list of unauthorised firms of which it is aware, which can be accessed at fca.org.uk/consumers/unauthorised- firmsindividualslist. More detailed information on this or similar activity can be found on the FCA website at fca.org.uk/consumers/protect-yourself-scams. ### Dividends Paying dividends into a bank or building society account helps reduce the risk of fraud and will provide you with quicker access to your funds than payment by cheque. Applications for an electronic mandate can be made by contacting the Registrar. If your dividend is paid directly into your bank or building society account, you will receive an annual consolidated dividend confirmation, which will be sent to you in September each year at the time the interim dividend is paid. Dividend confirmations are available electronically at investorcentre.co.uk to those Shareholders who have their payments mandated to their bank or building society accounts and who have expressed a preference for electronic communications. Schroder Oriental Income Fund Limited78 ### Information about the Company Introduction Independent auditors ### Directors | Paul Meader | PricewaterhouseCoopers LLP | | | --- | --- | --- | | Alexa Coates | 7 More London Riverside | Strategic report | | Kate Cornish-Bowden | London SE1 2RT | | Isabel Liu Nick Winsor Registrar Computershare Investor Services (Guernsey) Limited 1st Floor ### Advisers Tudor House Le Bordage St Peter Port Alternative investment fund manager (the Guernsey “Manager”) GY1 1DB Schroder Unit Trusts Limited Governance Financial Communications with Shareholders are mailed to the address 1 London Wall Place held on the register. Any notifications and enquiries relating to London shareholdings, including a change of address or other amendment EC2Y 5AU should be directed to Computershare Investor Services (Guernsey) United Kingdom Limited at the address set out above. Investment Manager and Company Secretary Designated administrator Schroder Investment Management Limited HSBC Securities Services (Guernsey) Limited 1 London Wall Place Arnold House London EC2Y 5AU St Julian’s Avenue United Kingdom St Peter Port Telephone: 020 7658 6596 Guernsey GY1 3NF Registered office PO Box 208 Shareholder enquiries Arnold House Other information (unaudited) General enquiries about the Company should be addressed to the St Julian’s Avenue company secretary at the address set out above. St Peter Port Guernsey GY1 3NF Dealing codes ISIN: GB00B0CRWN59 Safekeeping and cashflow SEDOL: B0CRWN5 monitoring agent (including custodian) Ticker: SOI HSBC Bank plc Global intermediary identification number (GIIN) 8 Canada Square London E14 5HQ 1TVP6A.99999.SL.83 United Kingdom Legal entity identifier (LEI) Lending bank 5493001U9X6P8SS0PK40 The Bank of Nova Scotia 201 Bishopsgate Privacy notice London EC2M 3NS The Company’s privacy notice is available on its webpages United Kingdom Corporate broker Deutsche Numis 45 Gresham Street London EC2V 7BF United Kingdom Schroder Oriental Income Fund Limited ### Schroder Investment Management Limited ### 1 London Wall Place, London EC2Y 5AU, United Kingdom ### T +44 (0) 20 7658 6000 ## schroders.com ## @schroders Important information: This document is intended to be for information purposes investment and/or strategic decisions. Past performance is not a reliable indicator of only and it is not intended as promotional material in any respect. The material future results, prices of shares and the income from them may fall as well as rise and is not intended as an oer or solicitation for the purchase or sale of any nancial investors may not get back the amount originally invested. Schroders has expressed instrument. The material is not intended to provide, and should not be relied on for, its own views in this document and these may change. Issued by Schroder Investment accounting, legal or tax advice, or investment recommendations. Information herein Management Limited, 1 London Wall Place, London EC2Y 5AU, which is authorised is believed to be reliable but Schroders does not warrant its completeness or accuracy. and regulated by the Financial Conduct Authority. For your security, communications No responsibility can be accepted for errors of fact or opinion. Reliance should not may be taped or monitored. be placed on the views and information in the document when taking individual