TIDMSOI
RNS Number : 8598S
Schroder Oriental Income Fund Ltd
09 November 2023
ANNUAL REPORT AND ACCOUNTS
Schroder Oriental Income Fund Limited (the "Company") hereby
submits its annual report and accounts for the year ended 31 August
2023. The Company's annual report and accounts for the year ended
31 August 2023 are also being published in hard copy format and an
electronic copy will shortly be available to download from the
Company's webpages schroders.co.uk/orientalincome. The annual
report and accounts, containing the notice of annual general
meeting, and the form of proxy will also be uploaded to the
Financial Conduct Authority's National Storage Mechanism in the
coming days, and a separate announcement will be released once this
has taken place.
Please click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/8598S_1-2023-11-8.pdf
Enquiries:
Matthew Riley
Schroder Investment Management Limited
Tel: 020 7658 6000
Chairman's statement
Dear Shareholder, I ended my last Chairman's Statement in the
spring on a note of cautious optimism that the outlook for Asian
equities was starting to brighten. Sadly, in the last six months
anyway, the sun has not shone and the second half of our financial
year saw modest declines in total returns. That brought the Net
Asset Value ("NAV") total return for the full financial year to
-3.5%, with a similar return from the share price. The bright spot
is that this is, once again, a notable outperformance of the
reference index, the MSCI AC Pacific ex Japan in sterling terms,
which fell by 8.1% during the same period. It is also worth noting
that the strength of sterling was a material contributory factor to
the fall. After many years of decline, sterling strengthened
significantly over the year and this erodes our total return once
the local currency is translated back into sterling. Indeed, our
underlying return in local currency terms was positive. We have
cautioned in the past about the potential impact of sterling
movements, which have often been favourable to our total returns.
We do not seek to hedge or mitigate the influence of the sterling
exchange rate; we see our job as investing in good quality Asian
companies, not trading exchange rates. Since the summer, sterling
has begun to weaken once again.
Before moving from performance, I need to commend our Investment
Manager for achieving such consistent and considerable
outperformance over recent years. The reasons for this year's
outperformance are explained in the Investment Manager's Review on
page 6. It is clear to me that Schroders apply considerable
knowledge, experience and skill, as well as keeping a cool head.
This is very valuable. The Board has recently had the benefit of
seeing the substantial resources and expertise of Schroders in Asia
when, for the first time since before the pandemic, we accompanied
the Managers this summer to visit Schroders' offices and some of
our investee companies in Hong Kong and Taiwan.
I hardly need to remind anyone of the various global
macroeconomic and political headwinds which have troubled financial
markets over the last year. Asia is not immune to any of these
effects, especially with China now showing signs of economic
strain. However, with the exception of some geopolitics and private
sector debt issues in China, Asia is not at the epicentre of the
pressures. The region is relatively well placed in terms of
inflation, economic strength, interest rates, indebtedness and
competitiveness. That Asia is vibrant and an economic powerhouse is
something of a hackneyed phrase but the truth of this was brought
home to the Board on our visit. It is too easy to slip into viewing
Asia through a European lens.
Another interesting observation of our visit was the extent of
meaningful implementation around sustainability amongst many of our
portfolio companies. It was genuinely impressive. Perhaps it was,
again, my European perspective but my impression prior to the visit
was that Asia was, generally, lagging Europe and the US in this
regard. This is far from the truth, at least as far as our
portfolio companies are concerned.
In the same vein, shifting political sands in the US, enhanced
regulatory scrutiny in Europe and a tougher economic environment
has seen less enthusiasm from global investors for "pure play"
Environmental, Social and Governance ("ESG") investing. However, as
an integrated input to investment decision making, ESG factors
remain valuable. Schroders has long had many aspects of ESG at the
heart of their process, indeed before anyone thought of combining
three disparate words into one concept and giving it an acronym.
Today, their approach remains as valid as ever. The Company seeks
to buy businesses that have an attractive income proposition as
well as offering the opportunity for capital growth. Schroders'
approach naturally guides us to invest in businesses that are truly
sustainable in the broadest sense of the word, rather than ones
that merely espouse targets for the future. Picking these quality
companies is at the heart of what the team at Schroders seeks to do
and is evidenced in our current portfolio. This integrated approach
to ESG is also, I believe, a meaningful contributor to our strong
long-term performance. More information around Schroders' approach
to ESG can be found on pages 17 to 21.
Some of you will have seen our announcement on 3 August 2023 of
the forthcoming retirement from the Board of Kate Cornish-Bowden.
Schroders are being appointed as investment manager of the
International Biotechnology Trust ("IBT") and her role as chair of
IBT means that she has felt that she should resign from our board
to ensure that perceptions of her independence are not compromised.
We respect this but will really miss Kate, her experience,
knowledge and good humour. I can also assure Shareholders of this
company and of IBT that no one should doubt her independence of
mind. The Board has commenced a succession process and we will make
an announcement in due course.
In line with the broader investment trust industry, the
Company's shares continue to trade at a discount to NAV. The Board
believes that the discount is unwarranted given the Company's
performance and the liquidity of our underlying portfolio. Perhaps,
though, at a time of sharply widening discounts across the
investment trust universe, we may have to be patient before we see
ours eliminated once again. During the course of the year, a total
of 8,010,000 shares were repurchased at an average discount of 5.2%
to NAV, with further purchases of 2,220,000 shares since the
financial year end. Please be assured that we remain committed to
repurchasing shares at a discount when there is a notable imbalance
in the market and it is in Shareholders' best interests.
I have already touched on the impact of sterling on our total
return for the period. It has the same impact on our dividend
receipts which in sterling terms have fallen a little this year,
though were higher in local currency terms. We have continued to
grow our own dividend to Shareholders progressively for 17 years
and the current dividend yield on our share price is approximately
5%. As the global economy begins to slow, we may consequently see
some slowdown in dividend growth from our portfolio companies.
However, it is important to remember that payout ratios in Asia are
modest so our companies are not under financial pressure. Our
Manager is not forecasting notable falls in receipts. The Company
also has considerable revenue reserves. Any slowing in our dividend
receipts is likely to be transitory and we are comfortable, as and
when we need to, to dip into our reserves for a short time to
maintain or grow our own dividend to Shareholders. For this last
financial year we have increased the dividend by 3.5% to 11.80
pence per share.
Finally, I wanted to touch on the merits of an income
orientation to investment in Asia. Many managers seek to find the
next big growth winner in the pursuit of returns. Some will
succeed, for some of the time. I believe that an income orientation
brings natural benefits, that this has contributed to the Company's
strong long-term performance and that attractive income from
growing companies need not come at the cost of reduced total
return. The income universe available to our Managers provides
fertile territory for their true strength - stock selection - and
it is a universe that is less volatile than many of the low
yielding, cyclical and growth areas of the market. The strong
dividend income available in Asia, its low payout ratios and the
current undemanding valuations across the region suggest to me that
the attractive long-term performance achieved for Shareholders to
date is sustainable in the future. Once again, I look forward with
modest optimism. The vagaries of financial markets may prove me
wrong for another six months, perhaps longer. But, eventually, the
fundamentals of the region, its companies and their strong dividend
growth will once again attract international capital. The Company
is well placed to benefit from that trend when it arrives.
Our investment managers, Richard Sennitt and Abbas Barkhordar
will be giving presentations at an investor webinar on Wednesday 29
November 2023 at 2.00 pm (which can be signed up to via the
following link: https://www.schroders.events/SOI23 ).
The Company's Annual General Meeting ("AGM") will be held at 2pm
on Monday 4 December at 1 London Wall Place, London, EC2Y 5AU.
The Company's Investment Managers and the Board will attend to
make a presentation and answer questions from Shareholders. I
encourage all of you to join us, and hope to meet you then. I also
look forward to reporting to you again in the interim financial
statements next spring.
Paul Meader
Chairman
8 November 2023
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).
Asian markets experienced huge swings in sentiment over the 12
months to end August, largely driven by gyrations in expectations
for the Chinese domestic economy, the impact of geopolitics,
including over Ukraine, Taiwan and US-China relations, and the
outlook for the global economy, with the path of US interest rates
of particular importance. Despite this litany of concerns, the
region's markets rose by around 1.9% in local terms, albeit the
strength of sterling meant they finished down some 8.1% over the
period in sterling terms.
However, across the region there were large differences in
returns. China and Hong Kong were very volatile but ended down the
most over the period. We saw large falls in both markets during the
fourth quarter of last year in the run up to, and post, the
Communist Party Congress before seeing a dramatic recovery driven
by the Chinese authorities' move away from 'Zero COVID'. However,
optimism faded when economic data, whilst generally showing an
improvement, disappointed expectations. High-end spending and
services consumption did much better when compared to the wider
economy, but even that was lacklustre. Residential property numbers
continued to disappoint and renewed concerns over the state of the
Local Government Financing Vehicles' ("LGFVs") finances, and some
of the private residential developers' liquidity positions, weighed
on the market. During July, the Chinese market recovered on
expectations of a sizeable stimulus, but measures announced thus
far have been modest.
US-China relations continued to be a driver of sentiment over
the period but, on balance, did see some stabilisation during the
year. Positives included the G-20 meeting in Bali, where presidents
Xi and 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 has more recently been increased dialogue between
the two, with meetings between US and Chinese officials at a number
of levels.
Furthermore, domestically in China, there was a shift in tone
around regulation towards the internet companies, together with
further announcements of government support for the private sector,
leading to hopes that the worst of the regulatory tightening had
been seen.
The best performing markets over the period were Korea and
Taiwan. These are markets that have high weightings in the
information technology ("IT") sector, which was the best performing
sector over the period. Post-COVID, the IT sector had seen a
slowdown as demand for goods faded as people switched to consuming
more services. This slowdown had led to an increase in inventories
and acted as an overhang for the sector. However, this then
elicited a supply-side response by these companies to the lower
demand, seeing them cut both production and capital expenditure
which has seen the inventory imbalance start to correct, lifting
stock prices. More recently, some of these have benefitted from the
hope that artificial intelligence ("AI") would drive a surge in
demand for increased computing power.
Despite the deteriorating outlook for global growth, inflation
pressures remained elevated for much of the year and financial
conditions generally tightened. Of the major markets, Australia and
Singapore proved defensive, with resource companies in Australia
and financials in Singapore performing relatively well. From a
sector perspective, materials were supported by higher-for-longer
commodity prices, with higher interest rates supportive of
financials. Defensive sectors generally underperformed over the
period.
Turning to dividends - last financial year, there was a
broad-based pick up in dividends, but this year has been more
mixed, with dividends in some areas such as the Australian resource
names (and other more cyclical 1 areas) coming down as falls in
underlying commodity prices saw profits retreat from high levels.
Financials, on the other hand, saw the banks benefit as interest
rates rose, helping both margins and earnings and enabling higher
dividends. However, from a Company perspective, the main headwind
for dividends came from the appreciation of sterling during the
course of the year which made gains against most of the region's
currencies, thus impacting the translation from local currencies
back into sterling.
Positioning and Performance
Although the Company's NAV fell over the period, with a NAV
total return of -3.5%, this compared favourably to the fall in the
reference benchmark of -8.1%. Relative performance over the period
was helped by the underweight to, and strong stock selection in,
China. Stocks in the insurance sector there, such as our holdings
in China Pacific Insurance and Ping An, were perceived to be
beneficiaries of the move away from 'Zero COVID', as it would
enable sales agents to conduct more face-to-face meetings which had
been constrained during COVID. Also, although the private sector
residential property developers had been hit hard by the weak
property market, our holding in China Resources Land substantially
outperformed, with its investment properties providing a recurring
income stream which, together with its relatively robust balance
sheet, proved defensive. An absence of the e-commerce names, who
pay little or no dividends, was also a positive, as was not holding
any of the healthcare names, given a large number derated
meaningfully over the year.
Our stock picks in Taiwan added value, led by the IT names.
These included semiconductor packaging company ASE, fabless design
house Novatek, and power electronics company Delta Electronics,
whose products have benefitted from the positive trends in AI and
EVs. There was also a positive contribution from stocks in
Australia, driven by the diversified resource names. The biggest
drag on performance came from the overweight to, and stock
selection in Hong Kong, albeit its negative impact was much smaller
than the positive one derived from our positioning in China. The
two biggest detractors in Hong Kong were our positions in Bank of
China (Hong Kong) and telecom company HK Telecom.
From a sector perspective, stock picks in the financials sector
did well, including banks in Singapore (Oversea-Chinese Banking
Corporation and United Overseas Bank ("UOB")), Bank Mandiri in
Indonesia and our holding in out-of-benchmark SMFG in Japan. Our
underweights to consumer discretionary and some of the more
defensive sectors, such as healthcare, utilities and staples, all
added value. Our overweight to IT names also contributed
positively, as described earlier. Our overweight to real estate was
a negative - although this was almost entirely offset by strong
selection including from our holdings in Singapore, Australia and
China. Our overweight to Hong Kong real estate was a drag, where
our exposure is predominantly to landlords operating in mainland
China as well as Hong Kong. Given their exposure to retail spend
via their malls, disappointment in the consumer recovery weighed on
share prices.
The geographic exposure in the Company's portfolio continues to
be mainly spread between Taiwan, Australia, Singapore, Hong Kong,
Korea and China. Over the period, we did add to positions in China
and Hong Kong, including insurance (China Pacific Insurance
Company) and other financial names (Hong Kong Exchange) which we
believe would benefit from the ending of Chinese 'Zero COVID'
policy, but which were not excessively valued in our view. China
remains a substantial underweight but is, in part, offset by the
overweight to Hong Kong. We believe the Hong Kong market, in
general, looks more attractive from a valuation perspective, with
several names set to benefit from the re-opening of the border with
the mainland. Elsewhere, we reduced Singapore, reducing our
exposure to some of the REIT names there which had performed well
and will see costs rise along with interest rates, as well as
cutting our position in UOB, a bank that had outperformed. However,
we remain overweight the market. We also took some money out of
some of the better performing Taiwanese IT names, as well as
selling out of Far EasTone, a telecom company that had performed
strongly.
We continued in aggregate to add to financials, where we are
overweight, with valuations still looking relatively attractive
given higher interest rates and subdued credit costs. Here, we
added to Chinese names, as described earlier in this report. We
also reduced the overweight to real estate, trimming names that had
performed strongly across the region, and in IT as described above.
Although near term earnings have been seeing downward revisions, we
continue to see some strong long-term drivers for growth around
digitisation, AI adoption, and the roll-out of 5G and 'Internet of
Things'. In IT, our focus remains on the Taiwanese and Korean
companies.
The other area where we have reduced exposure is in the
materials sector. Here, sales have been focussed in the Australian
names earlier in the period after the sector had performed
strongly, in part helped by the surge in commodity prices.
Investment Outlook
The euphoria seen in markets at the beginning of 2023 over
China's move away from its 'Zero COVID' policy feels like a distant
memory, as China's long awaited post-COVID recovery has proved
weaker than expected. Economic data out of China, and a lack of
forceful policy response, has been disappointing, reigniting
concerns over local government debts and the wider residential
property sector. This has overshadowed more positive global
developments stemming from more favourable US inflation data, its
knock-on to the US interest rate cycle, and potential for a soft
landing in the US. There are some signs that the inventory cycle
has started to bottom, potentially pointing to a more favourable
demand outlook. Rising demand for Asian manufactured product has
historically led to a resurgence in Asian markets. However, as
already highlighted, geopolitics remains 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.
Although we did not have an optimistic view on the growth
outlook for China, it has still managed to disappoint. This has
brought renewed focus back on to the residential property sector,
where private sector developers have seen a liquidity squeeze, as
sales have continued to disappoint impacting cashflow for the whole
sector. The recent negative headlines around Chinese property
developers such as Country Garden could cause further deterioration
in homebuyers' sentiment and financing capabilities for other
private sector developers, indirectly raising the risk of more
defaults in the industry going forward. We expect policy easing,
both on the demand and supply sides, to intensify to avoid more
defaults and any wider impact on the financial sector. Our
long-term concerns around the structural headwinds for the
residential sector remain - property is likely to be less of a
driver for the economy than in the past, given the already high
levels of residential investment combined with an ageing
demographic. Near term, we believe it is a lack of consumer
confidence that is the problem rather than an inability to spend
due to high borrowings. In fact, household balance sheets have only
strengthened over the last two years, due to high levels of
precautionary savings, and it is measures to address this, such as
progress on reforms, rather than a massive fiscal stimulus which is
needed to give the consumer greater confidence to spend more.
Nevertheless, in our view it is likely we will see further
government stimulus, on top of the piecemeal measures we have seen
so far. More positively, the regulatory backdrop doesn't appear to
be getting worse and there are even tentative signs of
re-engagement between the US and China. Despite this, we remain
very underweight combined Hong Kong and China, albeit we have been
selectively looking to add to holdings in both markets where
valuations have come back. We are more positive on Hong Kong, where
valuations are lower and the SAR should see a recovery as the
border with the mainland has reopened. Although visitor numbers to
Hong Kong and Macau have picked-up materially, one needs to remain
cognisant of the potential for tighter capital controls by the
Chinese government should external balances become too wide.
Sector-wise, IT stocks, where we have been overweight, are still
trading at relatively attractive levels from a valuation
perspective, in our view. While the visibility of demand remains
low, the supply side adjustment is starting to take place as
announcements on production and capital expenditure cuts have
started to be seen and inventories appear to be peaking. Otherwise,
we remain overweight to financials - a diverse sector spanning not
only banks, but also insurers and exchange companies. Although we
saw concern over banks earlier in the year following the Silicon
Valley Bank and Credit Suisse collapses, the banks we own are
generally well-capitalised with strong deposit franchises and fall
into two camps: those that are benefitting from increased credit
penetration, such as in Indonesia, and the more
domestically-focussed retail names in more mature markets, such as
Singapore, that in general trade at attractive valuations and
decent dividend yields.
We remain overweight real estate with our broad thesis around
our holdings here remaining unchanged, focusing on landlords,
rather than developers, and those names with strong recurring
income growth and thus dividend appeal. We have, however, cut the
size of our overweight during the year and we have roughly half our
exposure coming from Hong Kong and China names, with the rest from
a few other countries including Singapore and Australia. We do not
own any of the Chinese private sector residential developers.
Underweights remain in those areas of the market generally
perceived as more defensive, including consumer staples, healthcare
and utilities, where valuations in our view still remain relatively
full.
Near term, it is likely that we will see further downward
revisions to earnings as global growth slows, and an ongoing period
of inventory adjustment amongst companies to reflect this slower
growth, which will hopefully put them in a position to start to
grow earnings once more when demand recovers. Positively, we are
starting to see early indicators of a potential bottoming in the
global goods cycle with -purchasing managers' indices showing
tentative signs of improvement in inventories and new orders which
historically, with a lag, have been a good lead indicator of
exports. The distortion in the goods cycle from COVID was
significant, with goods demand collapsing, post its surge in 2020,
as services recovered, meaning that the goods cycle is much
progressed when compared to that of services. Given overall
aggregate valuations for the region are now trading at or below
long-term averages, this does set up a more constructive backdrop
for Asian markets in the coming year, barring a global hard landing
or a more extreme geopolitical risk event.
As we have discussed previously, it is our belief that Asia
remains an attractive source of equity income, potentially
providing diversification for some UK investors seeking income, as
we saw through the initial wave of COVID. 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.
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 -
---------
*Borrowings used for investment purposes, less cash, expressed
as a percentage of net assets.
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
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.
GBP'000 %
Australia
------- -----
BHP Billiton(1) 18,837 2.8
------- -----
Telstra 17,919 2.6
------- -----
National Australia Bank 16,782 2.5
------- -----
Rio Tinto(1) 14,729 2.2
------- -----
Westpac Banking 9,026 1.3
------- -----
Mirvac 7,840 1.2
------- -----
Suncorp 7,809 1.2
------- -----
Australia & New Zealand Banking 7,697 1.1
------- -----
ASX 7,178 0.9
------- -----
Orica 6,231 0.9
------- -----
Deterra Royalties 4,396 0.6
------- -----
Woodside Energy 4,015 0.6
------- -----
Coles Group 3,783 0.6
------- -----
Total Australia 126,242 18.5
------- -----
Taiwan
------- -----
Taiwan Semiconductor Manufacturing 61,645 9.2
------- -----
Hon Hai Precision Industry 12,583 1.9
------- -----
ASE Technology 11,831 1.7
------- -----
Delta Electronics 11,635 1.7
------- -----
MediaTek 11,129 1.6
------- -----
Uni-President Enterprises 6,852 1.0
------- -----
CTBC Financial 5,317 0.8
------- -----
Novatek Microelectronics 2,762 0.4
------- -----
Total Taiwan 123,754 18.3
------- -----
Singapore
------- -----
Oversea-Chinese Banking 20,388 3.0
------- -----
Singapore Telecom 18,755 2.8
------- -----
DBS Group 12,886 1.9
------- -----
Singapore Exchange 10,254 1.5
------- -----
CapitaLand Integrated Commercial Trust (REIT^) 8,700 1.3
------- -----
Venture 7,686 1.1
------- -----
Mapletree Logistics Trust (REIT^) 7,120 1.1
------- -----
United Overseas Bank 6,765 1.0
------- -----
Mapletree Industrial Trust (REIT^) 6,433 1.0
------- -----
Total Singapore 98,987 14.7
------- -----
South Korea
------- -----
Samsung Electronics (including preference
shares) 54,740 8.1
------- -----
Samsung Fire and Marine Insurance (including
preference shares) 11,445 1.7
------- -----
SK Telecom 9,619 1.4
------- -----
LG Chemical preference shares 7,667 1.1
------- -----
KB Financial 6,357 0.9
------- -----
Total South Korea 89,828 13.2
------- -----
Mainland China
------- -----
Midea Group warrants 08/07/2024(2) and A shares 19,944 3.0
------- -----
Ping An Insurance H shares(3) 11,028 1.6
------- -----
China Petroleum & Chemical H shares(3) 10,015 1.5
------- -----
Shenzhou International(3) 8,851 1.3
------- -----
China Pacific Insurance(3) 8,095 1.2
------- -----
Sany Heavy Industry A shares 7,880 1.2
------- -----
China Resources Land(3) 7,573 1.1
------- -----
China Construction Bank(3) 6,062 0.9
------- -----
China Merchants Bank(3) 5,439 0.8
------- -----
Total Mainland China 84,887 12.6
------- -----
Hong Kong (SAR)
------- -----
BOC Hong Kong 19,420 2.9
------- -----
HKT Trust and HKT 13,092 1.9
------- -----
HK Exchanges & Clearing 10,851 1.6
------- -----
Kerry Properties 7,388 1.1
------- -----
Link REIT^ 6,347 0.9
------- -----
Swire Properties 5,821 0.9
------- -----
Hang Lung Properties 4,741 0.7
------- -----
Hang Lung Group 4,094 0.6
------- -----
Fortune REIT^ 3,228 0.5
------- -----
Swire Pacific B 3,170 0.5
------- -----
Total Hong Kong (SAR) 78,152 11.6
------- -----
Indonesia
------- -----
Bank Mandiri 19,393 2.9
------- -----
Telekomunikasi Indonesia 8,040 1.2
------- -----
Total Indonesia 27,433 4.1
------- -----
Thailand
------- -----
Kasikornbank NVDR* 7,298 1.1
------- -----
Land and Houses NVDR* 6,590 1.0
------- -----
Total Thailand 13,888 2.1
------- -----
Japan
------- -----
Sumitomo Mitsui Financial Group 13,065 1.9
------- -----
Total Japan 13,065 1.9
------- -----
Vietnam
------- -----
Vietnam Dairy Products 8,586 1.3
------- -----
Total Vietnam 8,586 1.3
------- -----
Philippines
------- -----
International Container Terminal Services 7,910 1.2
------- -----
Total Philippines 7,910 1.2
------- -----
New Zealand
------- -----
Fletcher Building 3,591 0.5
------- -----
Total New Zealand 3,591 0.5
------- -----
Total Investments(4) 676,323 100.0
------- -----
1 Listed in UK
2 Listed in Luxembourg
3 Listed in Hong Kong
4 Total investments comprises:
GBP'000 %
Equities and NVDR 600,695 88.7
------- -----
Preference shares 55,684 8.2
------- -----
Warrants 19,944 3.0
------- -----
Total investments 676,323 100.0
------- -----
*NVDR means non-voting depositary receipts
^REIT means real estate investment trust
Ten-Year Financial Record
Investment Portfolio At 31 August 2023
At
31
August 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Shareholders'
funds
(GBP'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
(GBP'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.
Business Review
Business model
The Company is a listed investment trust that has outsourced its
operations to third party service providers.
The Board has appointed the Manager, Schroder Unit Trusts
Limited, to implement the investment strategy and to manage the
Company's assets in line with the appropriate restrictions placed
on it by the Board, including limits on the type and relative size
of holdings which may be held in the portfolio and on the use of
gearing, cash, derivatives and other financial instruments as
appropriate.
The terms of the appointment are described more completely in
the Directors' Report including delegation to the portfolio manager
and their team. The Manager also promotes the Company using its
sales and marketing teams. The Board and Manager work together to
deliver the Company's investment objective, as demonstrated in the
diagram above.
Investment objective
The investment objective of the Company is to provide a total
return for investors primarily through investments in equities and
equity-related investments, of companies which are based in, or
which derive a significant proportion of their revenues from, the
Asia Pacific region and which offer attractive yields.
Investment policy
The investment policy of the Company is to invest in a
diversified portfolio of investments, primarily equities and
equity-related investments, of companies which are based in, or
derive a significant proportion of their revenues from, the Asia
Pacific region. The portfolio is diversified across a number of
industries and a number of countries in that region. The portfolio
may include government, quasi-government, corporate and high yield
bonds and preferred shares.
Equity-related investments which the Company may hold include
investments in other collective investment undertakings (including
real estate investment trusts and related stapled securities),
warrants, depository receipts, participation certificates,
guaranteed performance bonds, convertible bonds, other debt
securities, equity-linked notes and similar instruments (whether or
not investment grade) which give the Company access to the
performance of underlying equity securities, particularly where the
Company may be restricted from directly investing in such
underlying equity securities or where the Investment Manager
considers that there are benefits to the Company in holding such
investments instead of directly holding the relevant underlying
equity securities. Such investments may be listed or traded outside
the Asia Pacific region. Such investments may subject the Company
to credit risk against the issuing entity. The Company may also
participate, subject to regulatory and tax implications, in
debt-to-equity conversion programmes.
The Investment Manager may consider writing calls over some of
the Company's holdings, as a low risk way of enhancing the returns
from the portfolio. The Board has set a limit such that covered
calls cannot be written over portfolio holdings representing in
excess of 15%, of gross assets. However, the Company may only
invest in derivatives for the purposes of efficient portfolio
management. Investors should note that the types of equity-related
investments listed in this paragraph are not exhaustive of all of
the types of securities and financial instruments in which the
Company may invest, and the Company will retain the flexibility to
make any investments unless these are prohibited by the investment
restrictions applicable to the Company.
Although the Company has the flexibility to invest in bonds and
preferred shares as described above, the intention of the directors
is that the assets of the Company which are invested (that is to
say, which are not held in cash, money funds, debt securities,
interest bearing gilts or treasuries) will predominantly comprise
Asia Pacific equities and equity-related investments. The Company
is required to obtain the prior approval of the Ordinary
Shareholders to any material change to its published investment
policy.
Status
The Company carries on business as a Guernsey incorporated,
Guernsey Financial Services Commission authorised, closed-ended
investment company. Its shares are listed and admitted to trading
on the premium segment of the main market of the London Stock
Exchange. The Company was added to the FTSE 250 index on 17
September 2019.
On 1 September 2020, following approval by the Company's
Shareholders at a general meeting, the Company became tax resident
in the United Kingdom and since then it has been approved by HM
Revenue & Customs, by way of a one-off application, as an
investment trust in accordance with section 1158 of the Corporation
Tax Act 2010. It is intended that the Company will continue to
conduct its affairs in a manner which will enable it to retain this
status. The Company is not a "close" company for taxation
purposes.
It is not intended that the Company should have a limited life,
and the articles of incorporation do not contain any provisions for
review of the future of the Company at specified intervals.
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
GBP30,059,448, which is 99% of the GBP30,398,792 revenue profit
after taxation available for distribution. Accordingly, the Company
will be able to add GBP339,344 to brought forward revenue reserves.
However in accordance with accounting standards, the fourth interim
dividend amounting to GBP14,685,195 will not be accounted for until
it is 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.
Investment process
The chart below details the Manager's investment process.
Portfolio construction
Stock selection is at the heart of the investment approach for
the Company. A key strength of the Manager is its network of
analysts in Asia whose focus is on identifying companies able to
grow shareholder value in the long term. Although the in-house
analysts are the primary source of stock ideas, the portfolio
managers also generate stock ideas through their own research and
draw on a number of other sources including other investment
professionals within Schroders, a proprietary quantitative screen
and sell-side analysts.
The investment approach is primarily bottom-up, driven by an
assessment of the financial and non-financial (including ESG)
factors which influence company returns. In addition, there is a
top-down regional allocation review process, carried out on a
monthly basis, combining the output of an in-house quantitative
model and the qualitative views of the Manager.
Stock research
The Manager believes that the best way to generate alpha over
the long term is to focus on fundamental bottom-up stock analysis.
In particular, the Manager's analytical focus is on the future
trend in a company's return on invested capital ("ROIC") relative
to its cost of capital, in the belief that this reflects the
attractiveness and sustainability of the business model and serves
as a predictor of long-term shareholder returns.
Given this focus on fundamental research, it forms a key input
into the Manager's stock selection decisions. The Manager has 40
dedicated equity analysts across the Asia Pacific ex Japan region,
who have an average of over 16 years' investment experience, 8 of
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.
Stock selection/portfolio construction
When constructing the portfolio for the Company, the Manager
focuses on the following factors:
-- conviction on investment thesis;
-- upside to the internal estimate of fair value;
-- any grade awarded by Schroders' analysts;
-- ability to increase or sustain dividend payout;
-- relative attractiveness of other available opportunities;
-- the risks to the investment case;
-- the ESG credentials of that company; and
-- the sustainability of that company's profits.
Many of the stocks will already have attractive yields, but the
Manager also looks to exploit opportunities in stocks which are set
to benefit from improving capital efficiency, rising returns and
increasing shareholder distributions. There is no minimum yield
requirement applied to every stock, but portfolio construction is
carried out with reference to the overall portfolio yield as a key
part of the Company's total return investment objective.
Integration of ESG into the investment process
ESG is integrated into the investment process through three
levels: The activities undertaken more widely by the Manager
(Schroders), those undertaken by the Manager in the Asia region,
and those undertaken by the Manager on behalf of the Company.
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
For a long time, the Manager has incorporated into its
decision-making a thorough assessment of management quality,
environmental, social and governance factors, whether implicitly or
explicitly. The Manager recognises the importance of appraising
both financial and non-financial factors when analysing a company
and its security. The Manager believes that integrating an analysis
and evaluation of ESG factors in the security valuation and
selection process is key to enhancing and protecting long-term
shareholder value. The appraisal of non-financial factors,
including ESG considerations, contributes to a better understanding
of a company's risk characteristics and return potential.
Schroders has a team of more than 50 dedicated ESG professionals
(as at 30 September 2023) who develop proprietary ESG tools and
oversee ESG analysis across Schroders. The ESG specialists will
also engage directly with companies, prioritising those with
exposure to higher ESG risk and low ESG ratings. They attend
company meetings with portfolio managers and analysts to discuss
specific sustainability issues directly with company management, in
addition to financial performance, as well as engaging with company
sustainability experts directly.
Corporate Governance Analysts in the team will also work
alongside investors, and our internal compliance and legal teams to
ensure our voting activities comply with our ESG policy.
Asia ex Japan ESG analysis in practice 2
As long-term, bottom-up investors, assessing the sustainability
of a company's returns and financial position has always been at
the core of research and investment decisions the Manager makes in
Asia. Consistent with this approach, Schroders engages with company
management teams (Schroders conducted over 2,300 meetings with
regional companies in 2022) as well as voting all proxies where
practically possible. Analysts are directly responsible for
assessing ESG risks and opportunities as we believe they are best
placed to understand their companies and determine the impact of
ESG issues on the sustainability of the business.
ESG analysis is an integrated and important part of the
investment process, from initial screening through to final
portfolio construction. ESG analysis impacts the investment process
in four direct ways:
1. Initial screening - ESG helps determine which companies are
considered to be investable as part of an initial screening.
2. Sustainability of earnings - ESG analysis helps assess the
impact ESG externalities may have on the future earnings power of
the business and with it the Manager's assessment of the return on
invested capital ("ROIC") and shareholder return classification
("SRC") of the company.
3. Fair Value and recommendation - ESG is an indirect and direct
input into our fair value estimate of a company. Indirect, to the
extent that a company's SRC may influence the assumptions used in
establishing the fair value estimate of a company; and direct, to
the extent that analysts may apply an additional explicit
discount/premium to that fair value estimate.
4. Portfolio construction - ESG helps shape portfolio
construction and may influence position sizes. For example, poor
ESG performance or heightened ESG risks may result in a decision to
underweight a security, hold a smaller position size or avoid an
investment completely. There is no automatic rule - each investment
opportunity is assessed on a case-by-case basis, with the focus on
the materiality of ESG factors on a company's valuation and risk
profile.
In summary, ESG analysis helps determine which companies the
Manager looks at, how their sustainability is assessed and hence
how the Manager values them. While company valuations ultimately
drive portfolio construction, ESG insights play a crucial role in
the investment process and influence how we size position sizes
within a portfolio. Furthermore, ESG analysis is broad-reaching:
the Manager is not only interested in the potential downside risks
but also the upside return implications.
Asian equity analysts are expected to provide written ESG
analysis for all companies under coverage. This identifies and
assesses the potential effect of ESG issues on the investment
case.
Schroders uses its proprietary tools such as Context and
Sustainex Asia Context. The latter of these, which is the principal
tool employed, captures the Manager's ESG analysis in one template
using a stakeholder-based framework and is a key step in the
overall assessment of a company. In addition to separate rankings
for 'E', 'S' & 'G', Asia Context generates an overall score for
each company's ESG attributes.
Schroders has always engaged with investee companies, and direct
company contact is an important component of the initial due
diligence and ongoing monitoring process. The Asia Context template
provides a clearer, and broader, roadmap on the issues requiring
engagement. It also helps refresh the team's focus on ROIC and
enhances appreciation of the downside and upside risks to a
company's business model. The analysts have the option to apply an
explicit discount or premium to their fair value estimate as a
result of their ESG analysis.
One of the Asian Equities team's greatest strengths is
experienced analysts working hand-in-hand with experienced fund
managers - often involving discussions from the beginning to the
end of the research on a company. Many of Schroders' fund managers
are ex-analysts and they are heavily involved in the discussions
that underpin ESG conclusions - especially given the inherent
subjectivity of how certain ESG considerations will impact a
company. Analysts are not expected to score our Asia Context
templates in isolation - in many 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
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.
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 and focused on the better
practitioners. It should be noted that the Manager does not screen
out all companies in sensitive sectors(1) , 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, Avoid; small 1.2% (one stock
Aquaculture Social, Governance - branded milk
(low barriers company with some
of entry, widespread upstream supply)
questionable practices)
------------------------ ----------------------------- --------------------------- ---------------------
Tobacco Social Avoid 0%
------------------------ ----------------------------- --------------------------- ---------------------
Limited exposure
to best-in-class
Social, Governance. players in well-regulated
Licence to operate/ markets (e.g.
Gambling promotional practices Australia, Macau) 0%
------------------------ ----------------------------- --------------------------- ---------------------
Environmental, Avoid carbon heavy
Governance (national energy providers,
service obligations, focus on hydro
uncertain regulations/risks and sustainable
of backlash against energy providers
coal plants, mostly in well-regulated
Utilities (traditional) state-owned enterprises) markets 0%
------------------------ ----------------------------- --------------------------- ---------------------
Resources Environmental, Avoid except for 6.4% (four stocks)*
Social, Governance Australian blue
(questionable chip names, with
practices such minimal thermal
as bribery and coal mining exposure
poor environmental
and safety controls
concerns in Asia
ex Australia)
------------------------ ----------------------------- --------------------------- ---------------------
Oil and Gas Environmental, Limited exposure 2.0% (two stocks)
Governance (regulations, to sector ideally
unfavourable taxes, with an LNG/gas
price takers, focus or self-help
big carbon producers) story
------------------------ ----------------------------- --------------------------- ---------------------
Property Environmental, Exposure mainly 11.5% (thirteen
Social, Governance to developed markets stocks)
(bribery issues, (Hong Kong, Australia
flooding, land and Singapore)
clearance compensation, where we view
labour practices) risks to be better
managed.
------------------------ ----------------------------- --------------------------- ---------------------
Monopsony structure,
Defence corruption Avoid 0%
------------------------ ----------------------------- --------------------------- ---------------------
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
Several of these industries are traditionally prominent in
income funds, as they typically contain many companies with high
dividend yields. The portfolio managers' approach, however, has
been to take a cautious approach to exposure in those companies
which, while they may be paying attractive dividends currently, are
not always operating in a sustainable way which could potentially
impact future earnings and by extension dividend payments.
The Manager has tended, therefore, to take exposure to these
industries through the higher quality names, operating in well
regulated markets. For example, while they believe commodity
resources will continue to be necessary in future (and indeed
crucial for a transition to a lower carbon world), the exposure to
this sector is through blue-chip Australian companies, rather than
more marginal miners in emerging countries. Similarly, for the real
estate sector, the exposure is largely through companies which have
a focus on strong governance, operating in the most well-regulated
markets in the region. For some sectors (e.g. tobacco or thermal
coal), the Manager's requirement for operations to be sustainable
in the long term is a high hurdle to clear, regardless of the
governance or regulatory frameworks a company is operating under,
so exposure has tended to be very limited there.
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.
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.
Further disclosures
Investment restrictions and spread of investment risk
Risk in relation to the Company's investments is spread as a
result of the Manager monitoring the Company's portfolio with a
view to ensuring that it retains an appropriate balance to meet the
Company's investment objective. In order to comply with the Listing
Rules, the Company will not invest more than 10%, in aggregate, of
the value of its total assets (calculated at the time of any
relevant investment) in other investment companies or investment
trusts which are listed on the Official List of the Financial
Conduct Authority (the "Official List") (save to the extent that
those investment companies or investment trusts have stated
investment policies to invest no more than 15% of their gross
assets in other investment companies or investment trusts which are
listed on the Official List). Additionally, the Company will
not:
(i) invest more than 15% of its gross assets in other investment
companies or investment trusts which are listed on the Official
List;
(ii) invest, either directly or indirectly, or lend more than
20% (calculated at the time of any relevant investment or loan) of
its gross assets to any single underlying issuer (including the
underlying issuer's subsidiaries or affiliates);
(iii) invest more than 20% (calculated at the time of any
relevant investment) of its gross assets in one or more collective
investment undertakings which may invest more than 20% of its gross
assets in other collective investment undertakings;
(iv) invest more than 40% (calculated at the time of any
relevant investment) of its gross assets in another collective
investment undertaking;
(v) expose more than 20% of its gross assets to the
creditworthiness or solvency of any one counterparty;
(vi) invest in physical commodities; or
(vii) invest in derivatives except for the purposes of efficient portfolio management.
In the event of any breach of the investment restrictions
applicable to the Company, shareholders will be informed of the
actions to be taken by the Manager by notice sent to the registered
addresses of the shareholders in accordance with the Company's
articles of incorporation or by an announcement issued through a
regulatory information service approved by the Financial Conduct
Authority ("FCA"). No breaches of these investment restrictions
occurred during the year ended 31 August 2023. The investment
portfolio on page 12 and the Investment Manager's Review on pages 6
to 11 demonstrate that, as at 31 August 2023, the portfolio was
invested in 12 countries and in 10 different industry sectors
within such countries. There were 62 holdings in the portfolio at
the year end. The Board therefore believes that the objective of
spreading investment risk has been achieved.
Use of Gearing
The Company has a GBP100 million multi-currency revolving credit
facility with Bank of Nova Scotia which was US$50.0 million
(GBP39.5 million) drawn at the end of the financial year. The
facility was taken out on 18 July 2022, renewed on 20 July 2023,
and expires on 18 July 2024.
The Company's policy is to permit net borrowings (including
foreign currency borrowings) of up to 25% of the Company's net
assets (measured when new borrowings are incurred). It is intended
that the Manager should have the flexibility to utilise this power
to leverage the Company's portfolio in order to enhance returns
where and to the extent that this is considered appropriate by the
directors. Full details of the gearing employed by the Company are
set out in note 20 on page 67.
Promotion and shareholder relations
The Company promotes its shares to a broad range of investors
including discretionary wealth managers, private investors,
financial advisers and institutions which have the potential to be
long-term supporters of the investment strategy. The Board seeks to
achieve this through its Manager and corporate broker, which
promote the shares of the Company through regular contact with both
current and potential shareholders. These activities consist of
investor lunches, one-on-one meetings, webinars, regional road
shows and attendances at conferences. In addition, the Company's
shares are supported by the Manager's wider marketing of investment
companies targeted at all types of investors. This includes
maintaining close relationships with adviser and execution-only
platforms, advertising in the trade press, maintaining
relationships with financial journalists and the provision of
digital information on Schroders' website.
Shareholder relations are given high priority by both the Board
and the Manager. The Board also seeks active engagement with
investors and meetings with the Chairman are offered where
appropriate. In addition to the engagement and meetings held during
the year the chairs of the Board and committees, as well as the
other directors, attend the AGM and are available to respond to
queries and concerns from Shareholders.
Shareholders are also encouraged to sign up to the Manager's
Investment Trusts update, to receive information on the Company
directly.
https://www.schroders.com/en/uk/private-investor/fundcentre/funds-in-focus/investment-trusts/schroders-investmenttrusts/never-miss-an-update
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 specified/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 specified/prefer
not to say - - -
-------------- ------------- -----------------
Given that the Company is an investment trust with no executive
board members, the columns and references regarding executive
management have not been included.
The Board has adopted a diversity and inclusion policy.
Appointments and succession plans will always be based on merit and
objective criteria and, within this context, the Board seeks to
promote diversity of gender, social and ethnic backgrounds,
cognitive and personal strengths. The Board will encourage any
recruitment agencies it engages to find a range of candidates that
meet the objective criteria agreed for each appointment. Candidates
for Board vacancies are selected based on their skills and
experience, which are matched against the balance of skills and
experience of the overall Board taking into account the criteria
for the role being offered.
The Board also considers the diversity and inclusion policies of
its key service providers.
Financial crime policy
The Company continues to be committed to carrying out its
business fairly, honestly and openly operates a financial crime
policy, covering bribery and corruption, tax evasion, money
laundering, terrorist financing and sanctions, as well as seeking
confirmations that the Company's service providers' policies are
operating soundly.
Greenhouse gas emissions and energy usage
As the Company outsources its operations to third parties, it
consumed less than 40,000 kWh during the year and so has no
greenhouse gas emissions, energy consumption or energy efficiency
action to report under the Streamlined Energy and Carbon Reporting
requirements.
Taskforce for Climate-Related Financial Disclosures
On 30 June 2023, the Company's AIFM produced a product level
disclosure consistent with the Task Force on Climate-Related
Financial Disclosures ("TCFD") for the period 1 January 2022 to 31
December 2022. This can be found here:
https://mybrand.schroders.com/m/27644d68e529db89/original/TCFD-Schroder-Oriental-Income-20221231.pdf.
The Board met with representatives from the Manager to review this
report.
Responsible investment
The Company delegates to its Manager the responsibility for
taking ESG issues into account when assessing the selection,
retention and realisation of investments. The Board expects the
Manager to engage with investee companies on social, environmental
and business ethics issues and to promote best practice. The Board
also expects the Manager to exercise the Company's voting rights in
consideration of these issues.
Further detail on engagement and stewardship can be found on
pages 17 to 21.
In addition to the description of the Manager's integration of
ESG into the investment process and the details in this Business
Review, a description of the Manager's policy on these matters can
be found on the Schroders website at www.schroders.com.The Board
notes that Schroders believes that companies with good ESG
management often perform better and deliver superior returns over
time. Engaging with companies to understand how they approach ESG
management is an integral part of the investment process. Schroders
has committed to the UN Global Compact, amongst codes and
standards, and information about the application of Schroders'
sustainability and responsible investment policies can be found at:
https://www.schroders.com/en/sustainability/corporate-responsibility/
.
The Board has received reporting from the Manager on the
application of its policy.
Stakeholder engagement, section 172
During the year under review, the Board discharged its duty
under section 172 of the Companies Act 2006 to promote the success
of the Company for the benefit of its members as a whole, having
regard to the interests of all stakeholders. As an externally
managed investment trust, the Company has no employees, operations
or premises. The Board has identified its key stakeholders as the
Company's Shareholders, the Manager, other service providers, the
Investee companies and the Company's Lender.
The below explains how the directors have engaged with all
stakeholders and outlines key activities undertaken during the
reporting period.
Shareholders
The Company welcomes attendance and participation from
Shareholders at the Annual General Meeting, details of which are on
page 73 of this report. This will provide an opportunity for
Shareholders to engage with the Board and hear from the Portfolio
Managers, Richard Sennitt and Abbas Barkhordar. Shareholders unable
to attend the AGM are invited to submit questions to the Company
Secretary in advance of the meeting, and will be able to view a
presentation from the Manager online.
The annual and half year results presentations, as well as
monthly updates are available on the Company's webpage with results
announced via a regulatory news service.
The directors receive regular updates on the shareholder
register, trading activity, and feedback received from investor
meetings held by the Manager and Broker, as well as meeting with
interested current and prospective Shareholders.
The Board is responsible for discount and premium management and
is alert to the value Shareholders place on maintaining as low a
level of discount volatility as possible. During the financial
year, a total of 8,010,000 shares were bought back and a further
2,220,000 have been bought back since the period end. The Board
will continue to buy back shares when it judges it is in the best
interests of Shareholders to do so.
The Manager
The Board maintains a constructive and collaborative
relationship with the Manager, encouraging open discussion.
The Board invites the Portfolio Managers to attend all Board and
certain committee meetings and receives regular reports on the
performance of the investments and the implementation of the
investment strategy, policy and objective. The portfolio activities
undertaken by the Portfolio Managers and the impact of decisions
affecting investment performance are set out in the Investment
Managers' Review on pages 6 to 11.
The Management Engagement Committee reviews the performance of
the Manager, its remuneration and the discharge of its contractual
obligations at least annually. During the year, the Board visited
the Manager's teams based in Hong Kong and Taiwan and was impressed
with the depth of resource and experience represented within the
Manager's teams based in the region.
The Company's lender
During the year under review, the Board renewed its revolving
credit facility agreement with The Bank of Nova Scotia. The Board
is responsible for ensuring that the Company adheres to all loan
covenants.
Other service providers
The Board maintains regular contact with its key service
providers, both at the Board and committee meetings, and through ad
hoc communication throughout the year. The need to foster business
relationships with key service providers is central to the
directors' decision-making as the Board of an externally managed
investment trust.
During the period, the Management Engagement Committee undertook
reviews of the third-party service providers and agreed that their
continued appointment remained in the best interests of the Company
and its Shareholders. The Committee periodically reviews the market
rates for services received, to ensure that the Company continues
to receive high quality service at a competitive cost.
During the year, directors attended a meeting to assess the
internal controls of certain service providers including the
Company's Depositary and Custodian HSBC, the Designated
Administrator, Registrar and Schroder's Group Internal Audit. These
meetings enable the Board to conduct due diligence on operations
and IT risks amongst service providers; and to receive up to date
information on changes in regulation and market practice in the
industry. The Board also engaged with its service providers on
their own commitments on ESG, Financial Crime, Modern Slavery,
Whistleblowing, Diversity and Inclusion, Business Continuity and
Cybersecurity.
Investee companies
The Board believes that it is in the interests of all
stakeholders to consider ESG factors. The Board supports and
encourages the policy of engagement on ESG matters which the
Schroders investment team has implemented as part of the investment
decision making process, details of which can be found on pages 16
to 21.
The Manager has discretionary powers to exercise voting rights
on behalf of the Company and it reports on voting decisions to the
Board. The Board monitors investment decisions and questions the
Portfolio Managers' rationale for exposures taken and voting
decisions made.
In addition to regular discussions with the Manager regarding
the ESG aspects of portfolio companies, the Board met with
Schroders engagement team to gain a more in depth understanding of
the Manager's active engagement with investee companies. The Board
also met with certain investee companies on its visit to the
region.
Principal risks and uncertainties
Principal and emerging risks
The Board is responsible for the Company's system of risk
management and internal control and for reviewing its
effectiveness. The Board has adopted a detailed matrix of principal
risks affecting the Company's business as an investment trust and
has established associated policies and processes designed to
manage and, where possible, mitigate those risks, which are
monitored by the Audit and Risk Committee on an ongoing basis. This
system assists the Board in determining the nature and extent of
the risks it is willing to take in achieving the Company's
strategic objectives.
Although the Board believes that it has a robust framework of
internal controls in place this can provide only reasonable, and
not absolute, assurance against material financial misstatement or
loss and is designed to manage, not eliminate, risk.
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.
Actions taken by the Board and, where appropriate, its
committees, to manage and mitigate the Company's principal risks
and uncertainties are set out in the table below.
During the year, the Board also discussed and monitored a number
of risks that could potentially impact the Company's ability to
meet its strategic objectives. The Board recognised that there
continues to be an elevated geopolitical risk relating to the
region, which is closely monitored.
The Board considered in detail whether there were any material
emerging risks and concluded that there were none at present.
*The "Change" column on the right highlights at a glance the
Board's assessment of any increases or decreases in risk during the
year after mitigation and management. The arrows show the risks as
increased, decreased, or stable.
Risk Mitigation and management Change (post mitigation
and management)*
---------------------------- ------------------------------- -----------------------
Geopolitical risk The Board monitored Increased
Political developments news coverage of global
globally might materially events with follow
affect the ability up email correspondence
of the Company to achieve when particular issues
its investment objective. or concerns arose.
The Board also visited
Hong Kong and Taiwan
and met with investee
companies and 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 Increased
The Company is exposed to monitor the market
to the effect of market volatility caused by
fluctuations due to current geo-political
the nature of its business. issues and will continue
A significant fall to do so on an ongoing
in regional equity basis. The Board also
markets could have monitors macroeconomic
an adverse impact on and market factors,
the market value of including the impact
the Company's underlying of inflation.
investments. The risk profile of
The Board notes the the portfolio, including
impact of inflation the potential impact
on macroeconomic and of changes in currency,
market factors. is discussed with the
Manager.
The Manager seeks
to invest in companies
with strong balance
sheets and sustainable
business models.
Gearing is maintained
at relatively low levels.
---------------------------- ------------------------------- -----------------------
Risk Mitigation and management Change (post mitigation
and management)*
--------------------------------- ----------------------------- -----------------------
Currency/exchange The Board recognises Stable
rate risk that there continues
The Company is exposed to be an elevated currency
to the effect of currency / exchange rate risk
fluctuations due to relating to the region
the nature of its business. and monitored it carefully
The Company invests during the period.
predominantly in assets The risk profile of
which are denominated the portfolio, including
in a range of currencies. the potential impact
Its exposure to changes of changes in currency,
in the exchange rate is discussed with the
between sterling and Manager.
other currencies has The Company has no
the potential to have formal policy of hedging
significant impact currency risk but may
on returns and the use foreign currency
sterling value of dividend borrowings or forward
income from underlying foreign currency contracts
investments. to limit exposure.
The Board notes that The Company does not
the variability in hedge against sterling.
inflation and interest
rates would in turn
lead to volatility
in exchange rates.
--------------------------------- ----------------------------- -----------------------
Investment Performance The appropriateness Stable
The Company's investment of the Company's investment
objectives may become mandate and the long-term
out of line with the investment strategy
requirements of investors, is periodically reviewed
resulting in a wide and the success of
discount of the share the Company in meeting
price to underlying its stated objectives
NAV per share. is monitored.
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 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 The Board sets overall Stable
strategy and levels investment strategy
of resourcing, if inappropriate, and guidelines for
may result in the Company use of derivatives
underperforming the and leverage, amongst
market and/or peer other metrics. It also
group companies, leading monitors investment
to the Company and performance and risk
its objectives becoming against objectives
unattractive to investors. and strategy, and conducts
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 Stable
The Company's investments, ESG considerations,
and shareholder returns, including climate change,
could be affected by into the investment
climate change. Investors process and reports
and regulators are on its ESG engagement
increasingly questioning at regular board meetings.
how the Company's investments The Manager has implemented
and performance could a comprehensive ESG
be affected by climate policy which is outlined
change, environmental, in detail on pages
social and governance 16 to 21.The Board
factors. ensures that ESG factors
are incorporated into
reports to Shareholders.
--------------------------------- ----------------------------- -----------------------
Risk Mitigation and management Change (post mitigation
and management)*
---- ------------------------- -----------------------
Service provider performance Service providers are Stable
The Company has no appointed subject to
employees and has delegated due diligence processes
certain functions to and with material service
a number of service providers having clearly
providers. Failure documented contractual
of controls, including arrangements.
as a result of fraud, Regular reports are
and poor performance provided by key service
of any service provider, providers and the quality
could lead to disruption, of their services is
reputational damage monitored, including
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 Increased
The Company's service arrangements with service
providers are all exposed providers who report
to the risk of cyber on cyber risk mitigation
attacks. Cyber attacks and management at least
could lead to loss annually, which includes
of personal or confidential confirmation of business
information, unauthorised continuity capability
payments or inability in the event of a cyber
to carry out operations attack and appoints
in a timely manner. a custodian/depositary
in respect of assets.
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
Risk assessment includes consideration of the scope and quality
of the systems of internal control operating within key service
providers, and ensures regular communication of the results of
monitoring by such providers to the Audit and Risk Committee,
including the incidence of significant control failings or
weaknesses that have been identified at any time and the extent to
which they have resulted in unforeseen outcomes or contingencies
that may have a material impact on the Company's performance or
condition.
No significant control failings or weaknesses were identified
from the Audit and Risk Committee's ongoing risk assessment which
has been in place throughout the financial year and up to the date
of this report. The Board is satisfied that it has undertaken a
detailed review of the risks facing the Company and that the
internal control environment continues to operate effectively.
A full analysis of the financial risks facing the Company is set
out in note 20 to the accounts on pages 65 to 69.
Viability statement
The directors have assessed the viability of the Company over a
five year period, taking into account the Company's position at 31
August 2023 and 7 November 2023 and the potential impact of the
principal risks and uncertainties it faces for the review period.
The directors have assessed the Company's operational resilience
and they are satisfied that the Company's outsourced service
providers will continue to operate effectively, following the
implementation of their business continuity plans.
A period of five years has been chosen as the Board believes
that this reflects a suitable time horizon for strategic planning,
taking into account the investment policy, liquidity of
investments, potential impact of economic cycles, nature of
operating costs, dividends and availability of funding. This time
period also reflects the average hold period of an investment.
In its assessment of the viability of the Company, the directors
have considered each of the Company's principal risks and
uncertainties detailed on pages 24 to 26 and in particular the
impact of a significant fall in regional equity markets on the
value of the Company's investment portfolio. The directors have
also considered the Company's income and expenditure projections
and the fact that the Company's investments comprise readily
realisable securities which can be sold to meet funding
requirements if necessary.
The directors have also considered a stress test which
represents a severe but plausible scenario along with movement in
foreign exchange rates. This scenario assumes a severe stock market
collapse and/or exchange rate movements at the beginning of the
five year period, resulting in a 50% fall in the value of the
Company's investments and investment income and no subsequent
recovery in either prices or income in the following five years. It
is assumed that the Company continues to pay an annual dividend in
line with current levels and that the borrowing facility remains
available and remains drawn, subject to the gearing limit.
The Company's investments comprise highly liquid, large, listed
companies and so its assets are readily realisable securities and
could be sold to meet funding requirements or the repayment of the
gearing facility should the need arise. There is no expectation
that the nature of the investments held within the portfolio will
be materially different in the future.
The operating costs of the Company are predictable and modest in
comparison with the assets and there are no capital commitments
foreseen which would alter that position. Furthermore, the Company
has no employees and consequently has no redundancy or other
employment related liabilities.
The Board reviews the performance of the Company's service
providers regularly, including the Manager, along with internal
controls reports to provide assurance regarding the effective
operation of internal controls as reported on by their reporting
accountants. The Board also considers the business continuity
arrangements of the Company's key service providers.
The Board monitors the portfolio risk profile, limits imposed on
gearing, counterparty exposure, liquidity risk and financial
controls at its quarterly meetings.
Although there continue to be regulatory changes which could
increase costs or impact revenue, the directors do not believe that
this would be sufficient to affect its viability. The Board 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 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 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
Board of Directors
Paul Meader
Status: independent non-executive chairman
Length of service: 7 years - appointed a director in January
2016
Experience: Paul Meader is an independent director of investment
companies, insurers and investment funds. Until 2012 he was Head of
Portfolio Management for Canaccord Genuity based in Guernsey, prior
to which he was Chief Executive of Corazon Capital. He has over 35
years' experience in financial markets in London, Dublin and
Guernsey, holding senior positions in portfolio management and
trading. Prior to joining Corazon he was Managing Director of
Rothschild's Swiss private-banking subsidiary in Guernsey. He is a
Chartered Fellow of the Chartered Institute for Securities &
Investments, a former Commissioner of the Guernsey Financial
Services Commission and past chairman of the Guernsey International
Business Association. He is a graduate of Hertford College, Oxford.
Paul also holds a number of directorships in other companies, one
of which is publicly quoted: ICG-Longbow Senior Secured UK Property
Debt Investments Limited.
Committee membership: Audit and Risk, Management Engagement
(chair), and Nomination and Remuneration Committees
Remuneration for the reporting period: GBP47,000 per annum
Number of shares held: 11,000*
Alexa Coates
Status: independent non-executive director
Length of service: 5 years - appointed a director in February
2018
Experience: Alexa Coates is a chartered accountant who brings 30
years of significant financial expertise to the Board. Alexa was a
senior executive of HSBC for nine years, where she served as the
global CFO for the group's asset management business and then led
the finance function for commercial banking operations in Europe.
Prior to joining HSBC, Alexa worked in senior roles in retail,
healthcare and professional services at J Sainsbury plc, BUPA,
Williams Lea Group Ltd and CIT Bank. She started her career at
Ernst & Young, where she worked in the UK and France. Alexa is
a non-executive director and audit committee chair of Marsh
Limited, the insurance broker, Aviva Investors and its UK fund
services company as well as a non-executive director and chair of
the audit and risk committee of Polar Capital Holdings plc, a
publicly quoted company.
Committee membership: Audit and Risk (chair), Management
Engagement, and Nomination and Remuneration Committees
Remuneration for the reporting period: GBP42,000 per annum
Number of shares held: 10,000*
Kate Cornish-Bowden
Status: senior independent non -- executive director
Length of service: 5 years - appointed in December 2018
Experience: Kate Cornish-Bowden is the chair of International
Biotechnology Trust plc and a non-executive director of Finsbury
Growth & Income Trust plc and CC Japan Income & Growth
Trust plc where she is chair of the audit committee. Kate worked
for 12 years as a fund manager for Morgan Stanley Investment
Management, where she was managing director and head of the global
equity team. Prior to Morgan Stanley she worked as a research
analyst at M&G. Kate is a member of the Chartered Financial
Analyst Institute (CFA), holds a Masters in Business Administration
(MBA), and has completed the Financial Times Non-Executive Director
Diploma.
Committee membership: Audit and Risk, Management Engagement, and
Nomination and Remuneration Committees
Remuneration for the reporting period: GBP37,000 per annum
Number of shares held: 29,000*
Isabel Liu
Status: independent non-executive director
Length of service: 2 years - appointed in November 2021
Experience: Isabel has 25 years' global experience investing
equity in infrastructure. She started her investment career in Asia
with the $1 billion AIG Asian Infrastructure Fund. She was Managing
Director of the Asia Pacific investment business of John Laing plc.
After relocating from Hong Kong to London, she was Investment
Director for the EUR1 billion ABN AMRO Global Infrastructure Fund.
Most recently Isabel served as Board Director at Pensions
Infrastructure Platform, sponsored by UK pension schemes. She has
also been Chair of the Audit Risk Assurance and Remuneration
Committee as a Board Member of Transport Focus. Isabel is a
non-executive director of Utilico Emerging Markets Trust plc and
Gresham House Energy Storage Fund Plc. Isabel holds a BA in
Economics from the Ohio State University, a Masters in Public
Policy from Harvard Kennedy School, and an MBA from the University
of Chicago Booth School of Business.
Committee membership: Audit and Risk, Management Engagement, and
Nomination and Remuneration Committees
Remuneration for the reporting period: GBP37,000 per annum
Number of shares held: 18,634*
Nick Winsor
Status: independent non-executive director
Length of service: 3 years - appointed in March 2020
Experience: Nick is an independent consultant and non-executive
director. He has more than 35 years of retail and commercial
banking experience with HSBC Group in a number of international
markets: Brunei; Channel Islands; Hong Kong; India; Japan; Qatar;
Singapore; Taiwan; UAE and the UK. He was CEO of HSBC's businesses
in the Channel Islands and Isle of Man, CEO and VP of HSBC Bank
(Taiwan) Limited and a Director of HSBC Bank Middle East Limited.
Before this, he was Head of Personal Financial Services for the
Asia Pacific Region. Nick is a non-executive director of Metro Bank
plc and Metro Bank Holdings plc and a member of the latter's Risk
Oversight Committee. He is also the senior independent director of
the States of Jersey Development Company, Chair of the Remuneration
and Nomination Committee and member of the Audit and Risk
Committee. Nick is a non-executive director of Bankers without
Boundaries, a not for profit investment bank, and the Chair of
Autism Jersey. He was awarded an MBE in the Queen's 2020 Birthday
Honours list for services to the community. Nick holds a Masters in
Physics from Oxford University and is a Fellow of the Institute of
Directors.
Committee membership: Audit and Risk, Management Engagement, and
Nomination and Remuneration (chair) Committees
Remuneration for the reporting period: GBP37,000 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.
Directors' Report
Directors and officers
Chairman
The Chairman is an independent non-executive director who is
responsible for leadership of the Board and ensuring its
effectiveness in all aspects of its role. The Chairman's other
significant commitments are detailed on page 30. He has no
conflicting relationships.
Senior Independent Director ("SID")
The SID is responsible for the evaluation of the Chairman, and
also serves as a secondary point of contact for Shareholders.
Company Secretary
Schroder Investment Management Limited provides company
secretarial support to the Board and is responsible for assisting
the Chairman with Board meetings and advising the Board with
respect to governance. The Company Secretary also manages the
relationship with the Company's service providers, except for the
Manager. Shareholders wishing to lodge questions in advance of the
AGM are invited to do so by writing to the Company Secretary at the
address given on the outside back cover.
Role and operation of the Board
The Board is the Company's governing body; it sets the Company's
strategy and is collectively responsible to Shareholders for its
long-term success. The Board is responsible for appointing and
subsequently monitoring the activities of the Manager and other
service providers to seek to ensure that the investment objective
of the Company continues to be met. The Board also ensures that the
Manager adheres to the investment restrictions set by the Board and
acts within the parameters set by it in respect of any gearing. The
Business Review on pages 14 to 29 sets out further detail of how
the Board reviews the Company's strategy, risk management and
internal controls and also includes other information required for
the Directors' Report and is incorporated by reference.
A formal schedule of matters specifically reserved for decision
by the Board has been defined and a procedure adopted for
directors, in the furtherance of their duties, to take independent
professional advice at the expense of the Company.
The Chairman ensures that all directors receive relevant
management, regulatory and financial information in a timely manner
and that they are provided, on a regular basis, with key
information on the Company's policies, regulatory requirements and
internal controls.
The Board meets at least quarterly and receives and considers
reports regularly from the Manager and other key advisers and ad
hoc reports and information are supplied to the Board as
required.
Four Board meetings are usually scheduled each year to deal with
matters including: the setting and monitoring of investment
strategy, approval of borrowings and/or cash positions, review of
investment performance, the level of discount of the Company's
shares to NAV, promotion of the Company, and services provided by
third parties. Additional meetings of the Board are arranged as
required.
The Board has approved a policy on directors' conflicts of
interest. Under this policy, directors are required to disclose all
actual and potential conflicts of interest to the board as they
arise for consideration and approval. The Board may impose
restrictions or refuse to authorise such conflicts if deemed
appropriate. No directors have any connections with the Manager,
shared directorships with other directors or material interests in
any contract which is significant to the Company's business.
Committees
In order to assist the Board in fulfilling its governance
responsibilities, it has delegated certain functions to committees.
The roles and responsibilities of these committees, together with
details of work undertaken during the year under review, is
outlined over the next few pages.
The reports of the Audit and Risk Committee, Management
Engagement Committee and Nomination and Remuneration Committee are
incorporated into and form part of the Directors' Report. Each
committee's effectiveness was assessed, and judged to be
satisfactory, as part of the Board's annual review of the Board and
its committees.
Key service providers
The Board has adopted an outsourced business model and has
appointed the following key service providers:
Manager
The Company is an alternative investment fund as defined by the
AIFM Directive and has appointed Schroder Unit Trusts Limited
("SUTL") as the Manager in accordance with the terms of an
alternative investment fund manager ("AIFM") agreement. The AIFM
agreement, which is governed by the laws of England and Wales, can
be terminated by either party on 12 months' notice or on immediate
notice in the event of certain breaches or the insolvency of either
party. As at the date of this report no such notice had been given
by either party.
SUTL is authorised and regulated by the FCA and provides
portfolio management, risk management, accounting and company
secretarial services to the Company under the AIFM agreement. Part
of the fund accounting and administration activities are currently
performed by HSBC Securities Services (UK) Limited. The Manager
also provides general marketing support for the Company and manages
relationships with key investors, in conjunction with the Chairman,
other Board members or the corporate broker as appropriate. The
Manager has delegated investment management, marketing,
administrative, accounting and company secretarial services to
another wholly owned subsidiary of Schroders plc, Schroder
Investment Management Limited. The Manager has in place appropriate
professional indemnity cover.
The Schroders Group manages GBP726.1 billion (as at 30 June
2023) on behalf of institutional and retail investors, financial
institutions and high net worth clients from around the world,
invested in a broad range of asset classes across equities, fixed
income, multi-asset and alternatives.
The Manager is entitled to receive a management fee of an amount
equivalent to 0.75% per annum of the net assets of the Company,
reducing to 0.70% per annum on net assets above GBP250 million and
0.65% per annum on net assets above GBP750 million. The fee is
payable quarterly in arrears and calculated as at the last business
day in February, May, August and November in each year.
The Manager is also entitled to receive a performance fee based
on the performance of the Company's NAV per ordinary share. The
performance fee is 10% of the amount in pounds sterling of any
gains, being the amount by which the closing adjusted NAV per
ordinary share (adjusted as described below) at the end of the
relevant calculation period exceeds the highest of:
(i) A hurdle, being 108% of the NAV per ordinary share, taken
from the audited balance sheet at the end of the previous
calculation period;
(ii) The highest closing NAV per ordinary share (unadjusted) as
per the audited accounts for any previous financial year in which a
performance fee has been paid; and
(iii) 100p
Closing Adjusted NAV per ordinary share is the NAV per share on
the last day of the financial year in respect of which the
performance fee is being calculated, adjusted to add back any
performance fee accrued during the year but not crystallised; to
adjust for the deemed reinvestment of any dividends paid by the
Company during the period; and to remove the impact on NAV per
share due to any share buy-backs and issues.
The total amount of any performance fee payable in respect of
any one accounting period has been capped at 0.65% of the net asset
value, calculated at the end of the relevant accounting period.
Any investment management fees payable to the Manager or to
other subsidiaries of Schroders plc in respect of investments by
the Company in collective investment schemes and investment
companies managed or advised by the Schroders Group are deducted
from the fee payable to the Manager under the AIFM agreement. There
were no such investments during the year ended 31 August 2023.
The management and performance fees payable in respect of the
year ended 31 August 2023 amounted to GBP4,838,000 (2022:
GBP5,149,000) and GBPnil (2022: nil) respectively. The Manager is
also entitled to a fee for providing administrative, accounting and
company secretarial services to the Company. For these services, it
receives an annual fee, payable quarterly in arrears, of
GBP150,000.
Details of all amounts payable to the Manager are set out in
note 17 on page 64.
The Board has reviewed the performance of the Manager, and fees
paid to it, during the year under review and continues to consider
that it has the appropriate depth and quality of resource to
achieve above-average returns in the longer term. Thus, the Board
considers that the Manager's appointment under the terms of the
AIFM agreement, is in the best interests of Shareholders as a
whole.
Safekeeping and cashflow monitoring agent
HSBC Bank plc ("HSBC Bank"), which is authorised by the
Prudential Regulation Authority and regulated by the FCA and the
Prudential Regulation Authority, has been appointed to carry out
certain duties of a safekeeping and cashflow monitoring agent
specified in the AIFM Directive for the Company, including:
- safekeeping of the assets of the Company which are entrusted to it;
- cash monitoring; and
- oversight of the Company and the Manager to the extent described in the AIFM Directive.
HSBC Bank is liable to the Company for losses suffered by it as
a result of any negligence, wilful default, fraud or fraudulent
misrepresentation on its part.
The Company, the Manager and HSBC Bank may terminate the
safekeeping and cashflow monitoring agent services agreement
pursuant to which HSBC Bank provides these services at any time by
giving 90 days' notice in writing. HSBC Bank may only be removed
from office when a new safekeeping and cashflow monitoring agent is
appointed by the Company.
Registrar
Computershare Investor Services (Guernsey) Limited
("Computershare") has been appointed as the Company's registrar.
Computershare's services to the Company include share register
maintenance (including the issuance, transfer and cancellation of
shares as necessary), acting as agent for the payment of any
dividends, management of company meetings (including the
registering of proxy votes and scrutineer services as necessary),
handling shareholder queries and correspondence and processing
corporate actions.
Corporate Governance Statement
The Board of the Company has chosen to adopt the principles and
provisions of the AIC Code of Corporate Governance (the "AIC
Code"). The Code addresses the Principles and Provisions set out in
the UK Corporate Governance Code (the "UK Code"), as well as
setting out additional Provisions on issues that are of specific
relevance to the Company as an investment company.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council and the Guernsey Financial Services
Commission, provides more relevant information to Shareholders.
The Financial Conduct Authority requires all UK listed companies
to disclose how they have complied with the provisions of the Code.
This statement, together with the Statement of Directors'
Responsibilities, viability statement and going concern statement
set out on pages 26 and 27 respectively indicates how the Company
has complied with the principles of good governance of the Code and
its requirements on internal control. The Strategic Report and
Directors' Report provide further details on the Company's risk
management, governance and diversity policies.
The Company complied with the Principles and Provisions of the
AIC Code during the year under review and to date.
The AIC Code is available on the AIC website (www.theaic.co.uk).
It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them
relevant for investment companies.
The Guernsey Financial Services Commission's Finance Sector Code
of Corporate Governance (the "GFSC Code") provides a framework
which applies to all companies in the regulated finance sector in
Guernsey. The Company reports against the AIC Code, which meets the
requirements of the GFSC Code.
Share capital and substantial share interests
As at 7 November 2023, the Company had 271,233,024 ordinary
shares of 1p in issue. 20,110,000 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.
% total
voting
Ordinary shares as at 31 August 2023 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.
Nomination Management
Audit and and Remuneration Engagement
Board Risk Committee Committee 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
Audit and Risk Committee Report
The responsibilities and work carried out by the Audit and Risk
Committee during the year under review are set out in the following
report. The duties and responsibilities of the committee, which
include monitoring the integrity of the Company's financial
reporting and internal controls, are set out in further detail
below, and may be found in the terms of reference which are set out
on the Company's webpages, www.schroders.co.uk/orientalincome .
All directors are members of the committee. Alexa Coates is the
chair of the committee. The Board has satisfied itself that at
least one of the committee's members has recent and relevant
financial experience and that the committee as a whole has
competence relevant to the sector in which the company operates.
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 Financial Reporting Audit
Controls
------------------------------- ------------------------------- ------------------------------
Principal risks Accounting policies Audit results
To establish a process To oversee the accounting To discuss any matters
for identifying, assessing, policies adopted by arising from the audit
managing and monitoring the Company. and recommendations
emerging and principal made by the auditors.
risks of the Company.
------------------------------- ------------------------------- ------------------------------
Risks and uncertainties Financial statements Auditors' appointment,
To ensure a robust To monitor the integrity independence and performance
assessment of the Company's of the financial statements To make recommendations
emerging and principal of the Company and to the Board, in relation
risks and procedures any formal announcements to the appointment,
are in place to identify relating to the Company's re -- appointment,
emerging risks, and financial performance effectiveness and removal
an explanation of how and valuation. To review of the external auditors,
these are being managed the annual and half to review their independence,
or mitigated. year reports and to and to approve their
advise the Board on remuneration and terms
whether the annual of engagement. Reviewing
report is fair, balanced the audit plan and
and understandable.(1) engagement letter.
Formulating policies
The Financial Reporting on non audit services.
Council carried out
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 Procedures(1)
. There were no findings
or matters brought
to the attention of
the Board as a result
of this review.
------------------------------- ------------------------------- ------------------------------
Internal controls Going concern
To keep under review To review the position
the adequacy and effectiveness and make recommendations
of the Company's systems to the Board in relation
of internal control to whether it considers
and risk management, it appropriate
and review the annual to adopt the going
report disclosures concern basis of accounting
relating to this. To in preparing its annual
monitor the Company's and half-yearly financial
accounting and financial statements.
internal control systems,
and to consider the
appropriateness of
having an internal
auditor.
------------------------------- ------------------------------- ------------------------------
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.
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.
Application during the year
---------------------------------------------------------------------------------------------------
Risks and Internal Financial Reporting Audit
Controls
---------------------------- -------------------------- -----------------------------------------
Principal and emerging Valuation and existence Meetings with the
risks of holdings auditors
Reviewed the principal Ensured that portfolio Met the auditors without
and emerging risks holdings and assurance representatives of
faced by the Company reports were reviewed the Manager present.
and the systems, processes by the Board. Representatives of
and oversight in place the auditors attended
to manage and mitigate the committee meeting
them. at which the draft
annual report and accounts
were considered.
---------------------------- -------------------------- -----------------------------------------
Internal controls Calculation of the Auditors' independence
and risk mitigation investment management PricewaterhouseCoopers
Consideration of several fee and performance CI LLP were appointed
key aspects of internal fee as auditors on 25 May
control and risk management Consideration of the 2018. The auditors
operating within the methodology are required to rotate
Manager, depositary used to calculate the senior statutory
and registrar, including the fees, matched auditor every five
assurance reports. against the criteria years. There are no
set out in the AIFM contractual obligations
agreement. 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 efficient audit
process and therefore
reduce costs to Shareholders.
The Company is compliant
with the provisions
of the September 2014
Competition and Markets
Authority Order, which
requires that FTSE
350 companies put their
audit out to tender
at least every ten
years.
---------------------------- -------------------------- -----------------------------------------
Service provider control Recognition of investment Effectiveness of the
reviews income independent audit process
Reviewed the operational Considered dividends and auditors performance
controls maintained received against forecast Evaluated the effectiveness
by the Manager, depositary and the allocation of the independent
and registrar in July of special dividends audit firm and process
2023 at an annual review to income or capital. prior to making a recommendation
meeting. Received quarterly that it should be re-appointed
reports covering the at the forthcoming
operation of the service AGM. Evaluated the
providers. auditors' performance
against agreed criteria
including: qualification;
knowledge, expertise
and resources; independence
policies; effectiveness
of audit planning;
adherence to auditing
standards; and overall
competence; alongside
feedback from the Manager
on the audit process.
Assessed all relationships
with the auditors and
received confirmation
from the auditors that
they remained independent
and that it had implemented
policies and procedures
to meet the requirements
of the Auditing Practices
Board's Ethical Standards.
The Committee is therefore
satisfied that the
auditors are independent.
Professional scepticism
of the auditors was
questioned and the
committee was satisfied
with the auditors'
replies.
---------------------------- -------------------------- -----------------------------------------
Significant issues that the committee considered in relation to
the financial statements, and how these issues were addressed, are
outlined below.
Application during the year
-----------------------------------------------------------------------------------------
Risks and Internal Financial Reporting Audit
Controls
---------------------------- --------------------------- ------------------------------
Compliance with the Overall accuracy of Audit results
investment trust qualifying the annual report and Met with and reviewed
rules in S1158 of the accounts a comprehensive report
Corporation Tax Act Consideration of the from the auditors which
2010 draft annual report detailed the results
Consideration of the and accounts and the of the audit, compliance
Manager's report confirming letter from the Manager with regulatory requirements,
compliance. in support of the letter safeguards that have
of representation to been established, and
the auditors. on their own internal
quality control procedures.
---------------------------- --------------------------- ------------------------------
Internal audit Fair, balanced and Provision of non-audit
Considered the need understandable services by the auditors
for an internal audit Reviewed the annual The committee has
function and concluded report and accounts reviewed the FRC's
that this would not to ensure that it was Guidance on Audit Committees
be appropriate, given fair, balanced and and has formulated
the Company's size understandable. a policy on the provision
and outsourced business of non-audit services
model. by the Company's auditors.
The committee has determined
that the Company's
appointed auditors
will not be considered
for the provision of
certain non-audit services,
such as accounting
and preparation of
the financial statements,
internal audit and
custody. The auditors
may, if required, provide
other non-audit services
which will be judged
on a case-by-case basis.
The auditors did not
provide any non audit
services to the Company
during the year.
---------------------------- --------------------------- ------------------------------
Going concern and Consent to continue
viability as auditors
Reviewed the impact PricewaterhouseCoopers
of risks on going concern LLP has indicated to
and longer-term viability, the committee their
as described further willingness to continue
on pages 26 and 27. 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
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
-- reviews the Manager's performance, and competitiveness of the following
over the short and long term, service providers on at least
against the reference index, an annual basis:
peer group and the market; -- Safekeeping agent
-- considers the reporting it -- Corporate broker
has received from the Manager -- Registrar
throughout the year, and the -- Lender
reporting from the Manager to The committee also receives
the Shareholders; a report from the Company Secretary
-- assesses management fees on ancillary service providers,
on an absolute and relative basis, and considers any recommendations.
receiving input from the Company's The committee noted the Audit
broker, including peer group and Risk Committee's review of
and industry figures, as well the auditors.
as the structure of the fees;
-- reviews the appropriateness
of the Manager's contract, including
terms such as notice period.
-- visits the Manager's Asian
and London offices periodically
to meet with relevant investment
and controls functions; and
-- assesses if the Company receives
appropriate administrative, accounting,
company secretarial and marketing
support from the Manager.
------------------------------------------ -------------------------------------
Application during the year
----------------------------------------------------------------------------------
The committee met with senior The committee conducted a detailed
management, as well as representatives review of each of the Company's
from various business functions key service providers, including
supporting the portfolio manager, their anti-modern slavery, anti-bribery,
including in the Manager's teams sustainability, diversity and
based in Hong Kong and Taiwan. inclusion policies, and concluded
The committee undertook a detailed that their continued appointment
review of the Manager's performance was appropriate.
and agreed that it has the appropriate The committee noted that the
depth and quality of resource Audit and Risk Committee had
to deliver superior returns over undertaken a detailed evaluation
the longer term. of the Manager, registrar, and
The committee also reviewed safekeeping agents' internal
the terms of the AIFM agreement controls.
and agreed they remained fit
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.
Nomination and Remuneration Committee Report
The Nomination and Remuneration Committee is responsible for (1)
the recruitment, selection, induction and remuneration of all
directors, (2) their assessment during their tenure, and (3) the
Board's succession. All directors are members of the committee.
Nick Winsor is the chair of the committee. Its terms of reference
are available on the Company's webpages,
www.schroders.co.uk/orientalincome .
Approach
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Selection and induction Board evaluation and Succession
directors' fees
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
* Committee prepares a job specification for each role. * Committee assesses each director annually. * The Board's succession policy is that directors'
Proposals are sought from independent search firms, tenure will be for no longer than nine years, except
which are evaluated by the Board and a firm selected. in exceptional circumstances, and that each director
* Evaluation focuses on whether each director continues will be subject to annual re-election at AGMs.
to demonstrate commitment to their role and provides
* Such a specification is prepared for the chairman and a valuable contribution to the Board during the year,
the chairs of committees, the committee also taking into account time commitment, independence, * Committee reviews the Board's current and future
considers current board members. conflicts and training needs. needs at least annually. Should any need be
identified, the committee will initiate the selection
process.
* Job specification outlines the knowledge, * Following the evaluation, the committee provides a
professional skills, personal qualities and recommendation to Shareholders with respect to the
experience requirements. annual re-election of directors at the AGM. * Committee oversees the handover process for retiring
directors.
* A search firm sources a long list of potential * Committee reviews directors' fees, taking into
candidates, who are assessed against the job account comparative data and reports to Shareholders
specification. in the remuneration report.
* Committee discusses the long list, invites a number * Proposed changes to the remuneration policy for
of candidates for interview and makes a directors are discussed and then reported to
recommendation to the Board. Shareholders.
* Committee reviews the induction and training of new
directors.
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
For application see page 40
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Application during the year
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Selection and induction Board evaluation and Succession
directors' fees
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
* In anticipation of Ms Kate Cornish Bowden's departure, * The Board evaluation, including evaluation of its * The committee reviewed the succession policy and
the committee discussed the need to appoint a committees, was undertaken between April and August agreed it was still fit for purpose.
suitable replacement. 2023.
* As announced by the Company on 3 August 2023, Ms Kate
* A skills matrix for the Board was reviewed and a job * The committee also reviewed each director's time Cornish Bowden has advised the Board that she will
specification was agreed for the role. commitment and independence by reviewing a complete resign on 17 November as a director of the Company
list of appointments, including pro bono not for prior to Schroders' appointment as the AIFM of
profit roles, to ensure that each director remained International Biotechnology Trust plc, of which she
* Search firms were approached to provide suitable free from conflict and had sufficient time available is Chair. The Board has initiated a selection
proposals. to discharge each of their duties effectively. 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 GBP50,000, Audit
and Risk Committee chair: GBP45,000 and other directors: GBP40,000,
with the senior independent director to receive an additional
GBP2,000.
Directors' Remuneration
Introduction
The following remuneration policy is currently in force and is
subject to a binding vote every three years. The next vote will
take place at the forthcoming AGM and the current policy provisions
will apply until that date. The below directors' annual report on
remuneration is subject to an annual advisory vote. An ordinary
resolution to approve this report will be put to Shareholders at
the forthcoming AGM.
At the AGM held on 11 December 2020 when the policy was last
voted on by Shareholders, 99.69% of the votes cast (including votes
cast at the chairman's discretion) in respect of approval of the
directors' remuneration policy were in favour, while 0.31% were
against. 112,388 votes were withheld.
At the AGM held on 6 December 2022, 99.81% of the votes cast
(including votes cast at the chairman's discretion) in respect of
approval of the directors' remuneration report for the year ended
31 August 2022 were in favour, while 0.17% were against. 33,468
votes were withheld.
Directors' remuneration policy
The determination of the directors' fees is a matter dealt with
by the Nomination and Remuneration Committee and the Board.
It is the Nomination and Remuneration Committee's policy to
determine the level of directors' remuneration having regard to
amounts payable to non-executive directors in the industry
generally, the role that individual directors fulfil in respect of
Board and committee responsibilities, and time committed to the
Company's affairs, taking into account the aggregate limit of fees
set out in the Company's articles of incorporation (currently
GBP300,000). Any increase in the level set out therein requires
approval by the Board and the Company's Shareholders.
The chairman of the Board, the chair of the Audit and Risk
Committee, and the senior independent director each receives fees
at a higher rate than the other directors to reflect their
additional responsibilities. The fees payable to directors are not
performance related. They are set at a level to recruit and retain
individuals of sufficient calibre, with the level of knowledge,
experience and expertise necessary to promote the success of the
Company in reaching its short and long-term strategic
objectives.
The Board and its committees exclusively comprise non-executive
directors. No director past or present has an entitlement to a
pension from the Company, and the Company has not, and does not
intend to, operate a share scheme for directors or to award any
share options or long-term performance incentives to any director.
No director has a service contract with the Company, although
directors have a letter of appointment. Directors do not receive
exit payments and are not provided with any compensation for loss
of office. No other payments are made to directors other than the
reimbursement of reasonable out-of-pocket expenses incurred in
attending to the Company's business.
Implementation of policy
The terms of directors' letters of appointment are available for
inspection at the Company's registered office address during normal
business hours and during the AGM at the location of such
meeting.
The Board did not seek the views of Shareholders in setting this
remuneration policy. Any comments on the remuneration policy
received from Shareholders would be considered on a case-by-case
basis.
As the Company does not have any employees, no employee pay and
employment conditions were taken into account when setting this
remuneration policy and no employees were consulted in its
construction.
Directors' fees are reviewed annually and take into account
research from third parties on the fee levels of directors of peer
group companies, as well as industry norms and factors affecting
the time commitment expected of the directors. New directors are
subject to the provisions set out in this remuneration policy.
Directors' annual report on remuneration
This report sets out how the remuneration policy was implemented
during the year ended 31 August 2023.
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.
Change over year
Fees Taxable benefits(1) Total ended 31 August
2023 2022 2023 2022 2023 2022 2023 2022 2021
Director GBP GBP GBP GBP GBP GBP % % %
------- ------- ---------- --------- ------- ------- ------- ----- ----
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
------- ------- ---------- --------- ------- ------- ------- ----- ----
lsabel
Liu(2) 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: GBP50,000, Audit and Risk Committee chair:
GBP45,000, the senior independent director: GBP42,000, and other
directors: GBP40,000. Directors' fees were last increased from 1
September 2022. The Board will continue to review fee levels on an
annual basis.
Expenditure by the Company on remuneration and distributions to
Shareholders
The table below compares the remuneration payable to directors
to distributions paid to Shareholders during the year under review
and the prior financial year. In considering these figures,
Shareholders should take into account the Company's investment
objective.
Year ended Year ended
31 August 31 August
2023 2022 Change
---------- ---------- ------
GBP000 GBP000 %
---------- ---------- ------
Remuneration payable to Directors 203 189 +7.4
Distributions paid to Shareholders:
---------- ---------- ------
Dividends 29,901 27,968
---------- ---------- ------
Share buybacks 20,022 17,172
---------- ---------- ------
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 of 1p
each 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
---------- ----------
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
Statement of Directors' Responsibilities in respect of the
Annual Report and Accounts
The directors are responsible for preparing the financial
statements in accordance with applicable Guernsey law and generally
accepted accounting principles.
Guernsey company law requires the directors to prepare financial
statements for each financial year which give a true and fair view
of the state of affairs of the Company and of the profit or loss of
the Company for that period. In preparing these financial
statements, the directors should:
-- select suitable accounting policies, and apply them consistently;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in International Financial Reporting
Standards ("IFRS") as adopted by the European Union is insufficient
to enable users to understand the impact of particular
transactions, other events and conditions on the entity's financial
position and financial performance;
-- state that the Company has complied with IFRS as adopted by
the European Union, subject to any material departures disclosed
and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
-- make judgements and estimates that are reasonable and prudent.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with The Companies (Guernsey) Law,
2008 (as amended). They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Directors' Statement
Each of the directors, whose names and functions are listed on
pages 30 and31, confirms that, to the best of their knowledge:
-- the financial statements, which have been prepared in
accordance with IFRS as adopted by the European Union and with The
Companies (Guernsey) Law, 2008 (as amended) and in accordance with
the requirements set out above, and give a true and fair view of
the assets, liabilities, financial position and the net return of
the Company;
-- the Strategic Review includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that it faces; and
-- the Annual Report and Accounts, taken as a whole, are fair,
balanced and understandable and provide the information necessary
for Shareholders to assess the Company's position and performance,
business model and strategy.
So far as each of the directors are aware, there is no relevant
audit information of which the Company's auditors are unaware, and
each director has taken all the steps that he or she ought to have
taken as a director in order to make himself or herself aware of
any relevant audit information and to establish that the Company's
auditors is aware of that information.
On behalf of the Board
Alexa Coates
Director
8 November 2023
Independent Auditor's 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: GBP6,482,000 (2022: GBP7,241,000) based on 1% of net assets.
-- Performance materiality: GBP4,861,000 (2022: GBP5,430,000).
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; and directing the efforts of the
engagement team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters.
This is not a complete list of all risks identified by our
audit.
The key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key
audit matter
-------------------------------------- -------------------------------------------
Income from and losses on investments We assessed and found that the
Refer to the Note 1 Accounting accounting policies implemented
Policies, Note 2 Gains/(losses) were in accordance with IFRS
on investment held at fair value and the AIC SORP, and that income
through profit and loss, and (revenue and capital gains and
Note 3 Income. losses on investments) has been
We focused on the accuracy, accounted for in accordance with
occurrence and completeness of the stated accounting policy.
both net capital gains/losses We understood and assessed the
on investments and dividend income. design and implementation of
We assessed the presentation key controls surrounding income
of income in the Statement of recognition.
Comprehensive Income in accordance Dividend Income
with the requirements of The We tested the accuracy of all
Association of Investment Companies' dividend receipts by agreeing
Statement of Recommended Practice the dividend rates for investments
(the "AIC SORP"). to independent market data.
We tested occurrence by testing
that all dividends recorded in
the year had been declared in
the market by investment holdings,
and we traced a sample of dividends
received to bank statements.
To test for completeness, we
tested that the appropriate dividends
had been received in the year
by reference to independent data
of dividends declared for all
dividends during the year.
We tested the allocation and
presentation of dividend income
between the revenue and capital
return columns of the Statement
of Comprehensive Income in line
with the requirements set out
in the AIC SORP by determining
the reasons behind dividend distributions.
Gains/losses on investments
at fair value through profit
or loss
The gains/losses on investments
held at fair value comprise realised
and unrealised gains/losses.
For unrealised gains and losses,
we tested the valuation of the
portfolio at the year-end, together
with testing the reconciliation
of opening and closing investments,
thereby we have assessed the
accuracy of the gains/losses
recorded.
We have also verified the occurrence
of the gains/losses through our
testing of the existence of investments.
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 We tested the valuation of the
at fair value through profit listed investments by agreeing
or loss the prices used in the valuation
Refer to Note 1 Accounting Policies to independent third party sources.
and Note 10 Investments at fair We tested the existence of listed
value through profit or loss. investments by agreeing the holdings
The investment portfolio at to an independent confirmation
31 August 2023 comprised listed from the Custodian, as at 31
equity investments. We focused August 2023.
on the valuation and existence No material misstatements were
of investments because investments identified from this testing.
represent the principal element
of the net asset value as disclosed
in the Balance Sheet in the financial
statements.
-------------------------------------- -------------------------------------------
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 GBP6,482,000 (2022: GBP7,241,000).
------------------------------- -----------------------------------
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 GBP4,861,000 (2022: GBP5,430,000)
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
GBP324,000 (2022: GBP362,000) 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.
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the company's
ability to continue as a going concern.
In relation to the directors' reporting on how they have applied
the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the directors' statement in the
financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our auditors'
report thereon. The directors are responsible for the other
information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we
identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact. We have nothing to report based on these
responsibilities.
Corporate governance statement
ISAs (UK) require us to review the directors' statements in
relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the company's
compliance with the provisions of the UK Corporate Governance Code,
which the Listing Rules of the Financial Conduct Authority specify
for review by auditors of premium listed companies. Our additional
responsibilities with respect to the corporate governance statement
as other information are described in the Reporting on other
information section of this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit, and we have
nothing material to add or draw attention to in relation to:
-- The directors' confirmation that they have carried out a
robust assessment of the emerging and principal risks;
-- The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or
mitigated;
-- The directors' statement in the financial statements about
whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of
any material uncertainties to the company's ability to continue to
do so over a period of at least twelve months from the date of
approval of the financial statements;
-- The directors' explanation as to their assessment of the
company's prospects, the period this assessment covers and why the
period is appropriate; and
-- The directors' statement as to whether they have a reasonable
expectation that the company will be able to continue in operation
and meet its liabilities as they fall due over the period of its
assessment, including any related disclosures drawing attention to
any necessary qualifications or assumptions.
Our review of the directors' statement regarding the longer-term
viability of the company was substantially less in scope than an
audit and only consisted of making inquiries and considering the
directors' process supporting their statement; checking that the
statement is in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether the statement is
consistent with the financial statements and our knowledge and
understanding of the company and its environment obtained in the
course of the audit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the
financial statements and our knowledge obtained during the
audit:
-- The directors' statement that they consider the Annual
Report, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the
company's position, performance, business model and strategy;
-- The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems;
and
-- The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to
report when the directors' statement relating to the company's
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors'
Responsibilities in respect of the Annual Report and Accounts, the
directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for
being satisfied that they give a true and fair view. The directors
are also responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditors' responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors' report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud, is detailed below.
Based on our understanding of the company and industry, we
identified that the principal risks of non-compliance with laws and
regulations related to breaches of section 1158 of the Corporation
Tax Act 2010, and we considered the extent to which non-compliance
might have a material effect on the financial statements. We also
considered those laws and regulations that have a direct impact on
the financial statements such as Section 262 of The Companies
(Guernsey) Law, 2008. We evaluated management's incentives and
opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and
determined that the principal risks were related to posting
inappropriate journal entries to increase revenue (investment
income and capital gains) or to increase net asset value. Audit
procedures performed by the engagement team included:
-- discussions with the Manager and the Audit and Risk
Committee, including specific enquiry of known or suspected
instances of non-compliance with laws and regulation and fraud
where applicable;
-- reviewing relevant meeting minutes, including those of the Audit and Risk Committee;
-- assessment of the company's compliance with the requirements
of section 1158 of the Corporation Tax Act 2010, including
recalculation of numerical aspects of the eligibility
conditions;
-- identifying and testing journal entries, in particular any
material or revenue-impacting manual journal entries posted as part
of the Annual Report preparation process; and
-- designing audit procedures to incorporate unpredictability
around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely
related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through
collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC's website at:
www.frc.org.uk/auditorsresponsibilities . This description forms
part of our auditors' report.
Use of this report
This report, including the opinions, has been prepared for and
only for the company's members as a body in accordance with Section
262 of The Companies (Guernsey) Law, 2008 and for no other purpose.
We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Other required reporting
The Companies (Guernsey) Law, 2008 exception reporting
Under The Companies (Guernsey) Law, 2008 we are required to
report to you if, in our opinion:
-- we have not obtained all the information and explanations we require for our audit; or
-- proper accounting records have not been kept 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
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.
Statement of Comprehensive Income for the year ended 31 August
2023
2023 2022
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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.
Statement of Changes in Equity for the year ended 31 August
2023
Treasury Capital
Share share redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At
31
August
2021 234,347 (9,500) 39 150,374 345,929 30,230 751,419
---- -------- -------- ----------- -------- --------- -------- --------
Repurchase
of
ordinary
shares
into
treasury - (16,491) - - - - (16,491)
---- -------- -------- ----------- -------- --------- -------- --------
Net
(loss)/profit
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 - - - - - - -
---- -------- -------- ----------- -------- --------- -------- --------
Repurchase
of
ordinary
shares
into
treasury - (20,127) - - - - (20,127)
---- -------- -------- ----------- -------- --------- -------- --------
Net
(loss)/profit
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.
Balance Sheet at 31 August 2023
2023 2022
Note GBP'000 GBP'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
Cash Flow Statement for the year ended 31 August 2023
2023 2022
GBP'000 GBP'000
Operating activities
-------- --------
(Loss)/profit before finance 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
profit or loss 55,772 7,810
-------- --------
Net sales of investments at fair value through
profit 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 inflow from operating activities
before interest 49,185 43,590
-------- --------
Interest paid (2,168) (509)
-------- --------
Net cash inflow 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 outflow from financing 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
-------- --------
Effect 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 GBP37,004,000
(2022: GBP41,682,000) and bond and deposit interest receipts
amounted to GBP117,000 (2022: GBP15,000).
The notes on pages 56 to 70 form an integral part of these
accounts.
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 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.
(f) Income
Dividends receivable from equity shares are included in revenue
on an ex-dividend basis except where, in the opinion of the board,
the dividend is capital in nature, in which case it is included in
capital.
Income from fixed interest debt securities is recognised using
the effective interest method.
Deposit interest outstanding at the year end is calculated and
accrued on a time apportionment basis using market rates of
interest.
(g) Expenses
All expenses are accounted for on an accruals basis. Expenses
are allocated wholly to revenue with the following exceptions:
- The management fee is allocated 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.
- 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
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.
2. Gains/(losses) on investments held at fair value through profit or loss
2023 2022
GBP'000 GBP'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 2022
GBP'000 GBP'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 Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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.
7. Taxation
(a) Analysis of tax charge for the year
2023 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP3,713,000 (2022: GBP2,745,000) 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.
8. Dividends
(a) Dividends paid and declared
2023 2022
GBP'000 GBP'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 2022
GBP'000 GBP'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 GBP30,399,000 (2022: GBP34,105,000).
2023 2022
GBP'000 GBP'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 2022
GBP'000 GBP'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
----------- -----------
10. Investments at fair value through profit or loss
2023 2022
GBP'000 GBP'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 GBP143,065,000 (2022: GBP146,974,000) from
disposal of investments in the year. The book cost of these
investments when they were purchased was GBP122,447,000 (2022:
GBP147,897,000). 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 2022
GBP'000 GBP'000
On acquisitions 114 90
-------- --------
On disposals 221 247
-------- --------
335 337
-------- --------
11. Current assets
2023 2022
Receivables GBP'000 GBP'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.
12. Current liabilities
2023 2022
Payables GBP'000 GBP'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 GBP100 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)ii on
page 67.
The bank loan at the prior year end comprised US$50 million
drawn down on the Company's GBP100 million multicurrency credit
facility with Bank of Nova Scotia.
13. Share capital
2023 2022
GBP'000 GBP'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 GBP80,100 to hold in treasury for a total
consideration of GBP20,127,000 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.
14. Reserves
Capital reserves
Investment
Gains and holding
Treasury Capital losses gains
Share share redemption Special on sales and Revenue
capital reserve reserve reserve of investments losses reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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) -
-------- -------- ----------- -------- --------------- ---------- --------
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,
finance
costs
and
other
expenses
charged
to capital - - - - (4,186) - -
-------- -------- ----------- -------- --------------- ---------- --------
Dividends
allocated
to capital - - - - 386 - -
-------- -------- ----------- -------- --------------- ---------- --------
Dividends
paid
in the
year - - - - - - (29,901)
-------- -------- ----------- -------- --------------- ---------- --------
Net
revenue
profit
for
the
year - - - - - - 30,399
-------- -------- ----------- -------- --------------- ---------- --------
At
31 August
2023 234,347 (46,118) 39 150,374 218,977 53,724 36,865
-------- -------- ----------- -------- --------------- ---------- --------
Capital reserves
Investment
Gains and holding
Treasury Capital losses gains
Share share redemption Special on sales and Revenue
capital reserve reserve reserve of investments losses reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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,
finance
costs
and
other
expenses
charged
to capital - - - - (3,984) - -
-------- -------- ----------- -------- --------------- ---------- --------
Dividends
allocated
to capital - - - - 1,448 - -
-------- -------- ----------- -------- --------------- ---------- --------
Dividends
paid
in the
year - - - - - - (27,968)
-------- -------- ----------- -------- --------------- ---------- --------
Net
revenue
profit
for
the
year - - - - - - 34,105
-------- -------- ----------- -------- --------------- ---------- --------
At
31 August
2022 234,347 (25,991) 39 150,374 202,408 126,603 36,367
-------- -------- ----------- -------- --------------- ---------- --------
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 (GBP'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).
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
GBP4,838,000 (2022: GBP5,149,000), of which GBP1,148,000 (2022:
GBP1,276,000) was outstanding at the year end. The company
secretarial fee payable to the Manager amounted to GBP150,000
(2022: GBP150,000) of which GBP37,500 (2022: GBP37,500) 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 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'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 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'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.
20. Financial instruments' exposure to risk and risk management policies
The Company's investment objective is to provide a total return
for investors primarily through investments in equities and
equity-related investments, of companies which are based in, or
which derive a significant proportion of their revenues from, the
Asia Pacific region and which offer attractive yields. In pursuing
this objective, the Company is exposed to a variety of risks that
could result in a reduction in the Company's net assets. These
risks include market risk (comprising currency risk, interest rate
risk and market price risk), liquidity risk and credit risk. The
directors' policy for managing these risks is set out below. The
board coordinates the Company's risk management policy.
The objectives, policies and processes for managing the risks
and the methods used to measure the risks that are set out below,
have not changed from those applying in the comparative year.
The Company's classes of financial instruments are as
follows:
- investments in equities and equity-related securities of
companies in the Asia Pacific region which are held in accordance
with the Company's investment objective;
- short-term receivables, payables and cash arising directly from its operations; and
- a multicurrency credit facility with Bank of Nova Scotia, the
purpose of which is to assist in financing the Company's
operations.
(a) Market risk
The fair value or future cash flows of a financial instrument
held by the Company may fluctuate because of changes in market
prices. This market risk comprises three elements - currency risk,
interest rate risk and market price risk. Information to enable an
evaluation of the nature and extent of these three elements of
market risk is given in parts (i) to (iii) of this note, together
with sensitivity analysis where appropriate. The board reviews and
agrees policies for managing these risks and these policies have
remained unchanged from those applying in the comparative year. The
Manager assesses the exposure to market risk when making each
investment decision and monitors the overall level of market risk
on the whole of the investment portfolio on an ongoing basis.
(i) Currency risk
The majority of the Company's assets, liabilities and income are
denominated in currencies other than sterling, which is the
Company's functional currency and the presentational currency of
the accounts. As a result, movements in exchange rates will affect
the sterling value of those items.
Management of currency risk
The Manager monitors the Company's exposure to foreign
currencies and regularly reports to the board. The Manager measures
the risk to the Company of the foreign currency exposure by
considering the effect on the Company's net asset value and income
of a movement in the rates of exchange to which the Company's
assets, liabilities, income and expenses are exposed. The Company
may use foreign currency borrowings or forward foreign currency
contracts to limit the exposure to anticipated changes in exchange
rates which might otherwise affect the value of the portfolio of
investments.
Income denominated in foreign currencies is converted into
sterling on receipt.
Foreign currency exposure
The fair value of the Company's monetary items that have foreign
currency exposure at 31 August are shown below. The Company's
investments (which are not monetary items) have been included
separately in the analysis so as to show the overall level of
exposure.
2023
Hong New
Japanese Kong Australian Singapore Taiwan Thai Zealand US
yen dollars dollars dollars dollars baht dollars dollars Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
through profit
or loss(1) 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
Hong New
Japanese Kong Australian Singapore Taiwan Thai Zealand US
yen dollars dollars dollars dollars baht dollars dollars Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current assets 2 1,075 1,096 459 568 150 16 128 555 4,049
-------- -------- ---------- --------- -------- -------- -------- -------- -------- --------
Current
liabilities - - - - - - - (42,977) - (42,977)
-------- -------- ---------- --------- -------- -------- -------- -------- -------- --------
Foreign
currency
exposure on
net monetary
items 2 1,075 1,096 459 568 150 16 (42,849) 555 (38,928)
-------- -------- ---------- --------- -------- -------- -------- -------- -------- --------
Investments
at fair value
through profit
or loss(1) 9,982 153,099 100,532 116,588 148,905 14,878 4,671 19,749 135,370 703,774
-------- -------- ---------- --------- -------- -------- -------- -------- -------- --------
Total net
foreign
currency
exposure 9,984 154,174 101,628 117,047 149,473 15,028 4,687 (23,100) 135,925 664,846
-------- -------- ---------- --------- -------- -------- -------- -------- -------- --------
(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
GBP'000 GBP'000
Statement of Comprehensive Income - net profit/(loss)
-------- --------
Net revenue profit/(loss) 3,346 3,676
-------- --------
Net capital profit/(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
GBP'000 GBP'000
Statement of Comprehensive Income - net profit/(loss)
-------- --------
Net revenue profit/(loss) (3,346) (3,676)
-------- --------
Net capital profit/(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.
(ii) Interest rate risk
Interest rate movements may affect the level of income
receivable on cash deposits and the interest payable on variable
rate borrowings when interest rates are re-set.
Management of interest rate risk
Liquidity and borrowings are managed with the aim of increasing
returns to Shareholders. The Company's gearing policy is to limit
gearing to 25% where gearing is defined as borrowings used for
investment purposes, less cash, expressed as a percentage of net
assets.
The possible effects on cash flows that could arise as a result
of changes in interest rates are taken into account when the
Company draws on the credit facility. However, amounts drawn down
on this facility are for short-term periods and therefore exposure
to interest rate risk is not significant.
Interest rate exposure
The exposure of financial assets and financial liabilities to
floating interest rates, giving cash flow interest rate risk when
rates are re-set, is shown below:
2023 2022
GBP'000 GBP'000
Exposure to floating 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 GBP100 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 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 (GBP39.5 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
GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'000
Statement of Comprehensive
Income - net profit
------------- ------------- ------------- -------------
Net revenue profit/(loss) (48) 48 13 (13)
------------- ------------- ------------- -------------
Net capital profit/(loss) (237) 237 (301) 301
------------- ------------- ------------- -------------
Net total profit/(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.
(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
GBP'000 GBP'000
Investments at fair value through profit 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 in fair in fair in fair
value value value value
GBP'000 GBP'000 GBP'000 GBP'000
Statement of Comprehensive
Income - net profit/(loss)
------------ ------------ ------------ ------------
Net revenue profit/(loss) (379) 379 (315) 315
------------ ------------ ------------ ------------
Net capital profit/(loss) 134,696 (134,696) 149,339 (149,339)
------------ ------------ ------------ ------------
Net total profit/(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
GBP'000 GBP'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
------------ ------------
(c) Credit risk
Credit risk is the risk that the failure of the counterparty to
a transaction to discharge its obligations under that transaction
could result in loss to the Company.
Management of credit risk
This risk is managed as follows:
Portfolio dealing
The Company invests almost entirely in markets that operate a
"Delivery Versus Payment" settlement process which mitigates the
risk of losing the principal of a trade during settlement. The
Manager continuously monitors dealing activity to ensure best
execution, which involves measuring various indicators including
the quality of trade settlement and incidence of failed trades.
Counterparties must be pre-approved by the Manager's credit
committee.
The Company may sometimes invest in equity linked securities,
such as low exercise price options, warrants, participatory notes
and depositary receipts, which provide synthetic equity exposure
where the Company may otherwise find it problematic to invest in
the underlying assets directly. They have the same economic risks
as a direct investment, except that there is a counterparty risk to
the issuing investment bank. Counterparties must be approved by the
Manager's Credit Risk Team based on a list of criteria and are
monitored on an ongoing basis by Schroders' Portfolio Compliance
Team.
Exposure to the Custodian
The Custodian of the Company's assets is HSBC Bank plc which has
Long-Term Credit Ratings of AA- with Fitch and 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.
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
GBP'000 GBP'000 GBP'000 GBP'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.
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 2022
GBP'000 GBP'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 2022
GBP'000 GBP'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.
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 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 GBP250,973 (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
GBP250,973 (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.
Notice of Annual General Meeting
NOTICE is hereby given that the annual general meeting of
Schroder Oriental Income Fund Limited will be held on 4 December
2023 at 2.00 pm at 1 London Wall Place, London EC2Y 5AU to consider
and, if thought fit, to pass the following resolutions, of which
resolutions 1 to 10 will be proposed as ordinary resolutions.
Resolution 11 will be proposed as a special resolution and
resolution 12 will be proposed as an extraordinary resolution:
1. To receive the Directors' Report and the audited accounts for
the year ended 31 August 2023.
2. To approve the Directors' Remuneration Policy
3. To approve the Directors' Remuneration Report for the year ended 31 August 2023.
4. To approve the re-election of Paul Meader as a director of the Company.
5. To approve the re-election of Alexa Coates as a director of the Company.
6. To approve the re-election of Isabel Liu as a director of the Company.
7. To approve the re-election of Nick Winsor as a director of the Company.
8. To re-appoint PricewaterhouseCoopers LLP as the Company's auditors.
9. To authorise the directors to determine the remuneration of
PricewaterhouseCoopers LLP as auditors to the Company.
10. To approve the Company's dividend policy as set out on page
15 of the Annual Report and Accounts.
11. To consider and, if thought fit, to pass the following resolution as a special resolution:
"That the Company be and is hereby generally and unconditionally
authorised in accordance with section 315 of The Companies
(Guernsey) Law, 2008 (as amended), to make market purchases of
ordinary shares of 1p each in the capital of the Company ("Share")
at whatever discount the prevailing market price represents to the
prevailing net asset value per share, provided that:
(a) the maximum number of Shares hereby authorised to be
purchased shall be 37,620,856, representing 14.99% of the issued
share capital (ex treasury) as at 7 November 2023;
(b) the maximum price (exclusive of expenses) which may be paid
for a Share shall not exceed the higher of
(i) 105% of the average of the middle market quotations for the
Shares as taken from the London Stock Exchange Daily Official List
for the five business days immediately preceding the date of
purchase; and
(ii) the higher of the last independent bid and the highest
current independent bid on the London Stock Exchange;
(c) the minimum price which may be paid for a Share is 1p, being the nominal value per Share;
(d) the authority hereby conferred shall expire at the
conclusion of the next annual general meeting of the Company in
2024 (unless previously renewed, varied or revoked prior to such
date);
(e) the Company may make a contract to purchase Shares under the
authority hereby conferred which will or may be executed wholly or
partly after the expiration of such authority and may make a
purchase of Shares pursuant to any such contract; and
(f) Any Shares so purchased will be held in treasury or cancelled."
12. To consider and, if thought fit pass the following as an extraordinary resolution:
"That the Board be and is hereby authorised in accordance with
Section 291 of The Companies (Guernsey) Law, 2008 (as amended) to
allot ordinary shares for cash and/or sell treasury shares up to
25,097,302 ordinary shares of 1p each in aggregate, representing
10% of the share capital in issue (ex treasury) on 7 November 2023,
for cash and the right of Shareholders to receive a pre-emptive
offer in respect of such ordinary shares shall be excluded pursuant
to Article 3.24 of the Company's articles of incorporation,
provided that this authority shall expire (unless previously
renewed, varied or revoked by the Company in general meeting) from
the conclusion of the annual general meeting of the Company to be
held in 2024 save that the Board may allot ordinary shares for cash
or sell treasury shares after the expiry of this authority in
pursuance of an offer or agreement made by the Company before such
expiry that would or might require ordinary shares to be allotted
or treasury shares to be sold after such expiry."
PO Box 208
By order of the Board Arnold House
For and on behalf of St Julian's Avenue St
Peter Port Guernsey GY1
Schroder Investment Management Limited 3NF
Company Secretary
8 November 2023 Registered number: 43298
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 271,223,024 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 is 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.
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 GBP648,208,000 (2022:
GBP724,147,000) 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
NAV on Cumulative
Dividend XD date XD date Factor 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
NAV on Cumulative
Dividend XD date XD date Factor factor
4.8p 11/11/21 277.66p 1.0173 1.0173
1.9p 27/01/22 279.27p 1.0068 1.0242
1.9p 28/04/22 279.68p 1.0068 1.0312
2.0p 04/08/22 270.27p 1.0074 1.0388
NAV total return, being the closing NAV, multiplied
by the cumulative factor, expressed as a percentage
increase in the opening NAV +2.5%
The 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
Share
price
on XD Cumulative
Dividend XD date date Factor 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
Share
price
on XD Cumulative
Dividend XD date date Factor Factor
4.8p 11/11/21 262.50p 1.0183 1.0183
1.9p 27/01/22 270.00p 1.0070 1.0255
1.9p 28/04/22 262.00p 1.0073 1.0329
2.0p 04/08/22 255.00p 1.0078 1.0410
Share price total return, being the closing share price,
multiplied by the cumulative factor, expressed as a
percentage increase in the opening share price +1.2%
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 2022
GBP'000 GBP'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 GBP5,971,000 (2022:
GBP6,267,000), expressed as a percentage of the average daily net
asset values during the year of GBP678,708,000 (2022:
GBP731,663,000).
Shareholder Information
Webpages and share price information
The Company has dedicated webpages, which may be found at
www.schroders.co.uk/orientalincome. The webpages are the Company's
primary method of electronic communication with Shareholders. They
contain details of the Company's share price and copies of the
annual report and accounts and other documents published by the
Company as well as information on the directors, terms of reference
of committees and other governance arrangements. In addition, the
webpages contain links to announcements made by the Company to the
market and Schroders' website. There is also a section entitled
"How to Invest".
The Company releases its NAV per share on both a cum and ex --
income basis to the market on a daily basis.
Share price information may also be found in the Financial Times
and on the Company's webpages.
The Manager publishes monthly and quarterly updates on the
Company and other Schroders investment trusts, which may be found
under the "Literature" section on the Company's webpages.
Association of Investment Companies
The Company is a member of the Association of Investment
Companies. Further information on the Association can be found on
its website, www.theaic.co.uk.
Individual Savings Account ("ISA") status
The Company's shares are eligible for stocks and shares
ISAs.
Non-Mainstream Pooled Investments status
The Company currently conducts its affairs so that its shares
can be recommended by independent financial advisers to ordinary
retail investors in accordance with the FCA's rules in relation to
non-mainstream investment products and intends to continue to do so
for the foreseeable future. The Company's shares are excluded from
the FCA's restrictions which apply to non-mainstream investment
products because they are shares in an investment trust.
Financial calendar
First interim dividend paid February
Second interim dividend paid May
Half year results announced April/May
Third interim dividend paid August
Financial year end 31 August
Annual results announced November
Fourth interim dividend paid November/December
Annual General Meeting December
Alternative Investment Fund Managers Directive ("AIFMD")
disclosures
The AIFMD, as transposed into the FCA Handbook in the UK,
requires that certain pre-investment information be made available
to investors in Alternative Investment Funds (such as the Company)
and also that certain regular and periodic disclosures are made.
This information and these disclosures may be found either below,
elsewhere in this annual report, or in the Company's AIFMD
information disclosure document published on the Company's
webpages.
Leverage
The Company's leverage policy and details of its leverage ratio
calculation and exposure limits as required by the AIFMD are
published on the Company's webpages and within this report. The
Company is also required to periodically publish its actual
leverage exposures. As at 31 August 2023 these were:
Maximum Actual
Leverage exposure exposure exposure
Gross Method 200.0% 112.1%
Commitment Method 200.0% 110.9%
Illiquid assets
As at the date of this report, none of the Company's assets are
subject to special arrangements arising from their illiquid
nature.
Remuneration disclosures
Quantitative remuneration disclosures to be made in this annual
report in accordance with FCA Handbook rule FUND3.3.5 may be found
in the Company's AIFMD information disclosure document published on
the Company's webpages.
Publication of Key Information Document ("KID") by the AIFM
Pursuant to the Packaged Retail and Insurance Based Investment
Products Regulation, the Manager, as the Company's AIFM, is
required to publish a short KID on the Company. KIDs are designed
to provide certain prescribed information to retail investors,
including details of potential returns under different performance
scenarios and a risk/reward indicator. The Company's KID is
available on its webpages.
How to invest
There are a number of ways to easily invest in the Company.
The Manager has set these out at
www.schroders.com/invest-in-a-trust/ .
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.
Information about the Company
Directors
Paul Meader
Alexa Coates
Kate Cornish-Bowden
Isabel Liu
Nick Winsor
Advisers
Alternative investment fund manager (the "Manager")
Schroder Unit Trusts Limited
1 London Wall Place
London
EC2Y 5AU
United Kingdom
Investment Manager and Company Secretary
Schroder Investment Management Limited
1 London Wall Place
London EC2Y 5AU
United Kingdom
Telephone: 020 7658 6596
Registered office
PO Box 208
Arnold House
St Julian's Avenue
St Peter Port
Guernsey
GY1 3NF
Safekeeping and cashflow monitoring agent (including
custodian)
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
Lending bank
The Bank of Nova Scotia
201 Bishopsgate
London EC2M 3NS
United Kingdom
Corporate broker
Deutsche Numis
45 Gresham Street
London EC2V 7BF
United Kingdom
Independent auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
Registrar
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House Le Bordage
St Peter Port
Guernsey
GY1 1DB
Communications with Shareholders are mailed to the address held
on the register. Any notifications and enquiries relating to
shareholdings, including a change of address or other amendment
should be directed to Computershare Investor Services (Guernsey)
Limited at the address set out above.
Designated administrator
HSBC Securities Services (Guernsey) Limited
Arnold House
St Julian's Avenue
St Peter Port
Guernsey
GY1 3NF
Shareholder enquiries
General enquiries about the Company should be addressed to the
company secretary at the address set out above.
Dealing codes
ISIN: GB00B0CRWN59
SEDOL: B0CRWN5
Ticker: SOI
Global intermediary identification number (GIIN)
1TVP6A.99999.SL.83
Legal entity identifier (LEI)
5493001U9X6P8SS0PK40
Privacy notice
The Company's privacy notice is available on its webpages
1 Cyclical stocks: a stock whose price is affected by
macroeconomic or systematic changes in the overall economy.
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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
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END
FR FSFFUAEDSELF
(END) Dow Jones Newswires
November 09, 2023 02:00 ET (07:00 GMT)
Grafico Azioni Schroder Oriental Income (LSE:SOI)
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Da Apr 2024 a Mag 2024
Grafico Azioni Schroder Oriental Income (LSE:SOI)
Storico
Da Mag 2023 a Mag 2024
