TIDMAAS
RNS Number : 0099D
abrdn Asia Focus plc
17 October 2022
ABRDN ASIA FOCUS PLC
Legal Entity Identifier (LEI): 5493000FBZP1J92OQY70
ANNUAL FINANCIAL REPORT FOR THE YEARED 31 JULY 2022
STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS
Performance Highlights
Net asset value total return (diluted)(AB) Net asset value per share (diluted)
-2.0% 295.3p
2021 +41.9% 2021 309.02p
Share price total return(A) Share price
-1.7% 254.0p
2021 +38.2% 2021 266.00p
MSCI AC Asia ex Japan Small Cap Discount to net asset value(AB)
Index total return(C)
-5.1% 14.0%
2021 +39.6% 2021 13.9%
Ongoing charges ratio(A) Dividend increase/(decrease)(D)
0.88% 150.0%
2021 1.10% 2021 -15.8%
(A) Alternative Performance Measure (see below).
(B) Presented on a diluted basis as the Convertible Unsecured Loan
Stock ("CULS") is "in the money" (2021 - same).
(C) Currency adjusted, capital gains basis.
(D) Dividends include special dividends of 1.6p for 2022 (2021 - 0.2p).
(E) Figures for 2021 have been restated to reflect the 5:1 sub-division
as disclosed in note 14.
Financial Calendar, Dividends and Highlights
Financial year end 31 July
======================================== ==================
Announcement of results for year 17 October 2022
ended 31 July 2022
======================================== ==================
Online Shareholder Presentation 16 November 2022
======================================== ==================
Annual General Meeting 30 November 2022
======================================== ==================
CULS Conversion Date 30 November 2022
======================================== ==================
Payment date of first interim for 20 December 2022
2022/2023 and special dividend for
2021/2022
======================================== ==================
Payment date of second interim dividend 21 March 2023
for 2022/2023
======================================== ==================
CULS Conversion Date 31 May 2023
======================================== ==================
Payment date of third interim dividend 23 June 2023
for 2022/2023
======================================== ==================
Payment date of fourth interim dividend 20 September 2023
for 2022/2023
======================================== ==================
Dividends
Rate xd date Record date Payment date
=============== ===== ================ ================ ===============
Interim 2022 3.20p 24 February 2022 25 February 2022 21 March 2022
=============== ===== ================ ================ ===============
Interim 2022 1.60p 26 May 2022 27 May 2022 17 June 2022
=============== ===== ================ ================ ===============
Interim 2022 1.60p 25 August 2022 26 August 2022 16 September
2022
--------------- ----- ---------------- ---------------- ---------------
Special 2022 1.60p 24 November 2022 25 November 2022 20 December
2022
--------------- ----- ---------------- ---------------- ---------------
8.00p
--------------- ----- ---------------- ---------------- ---------------
Final 2021(A) 3.00p 6 January 2022 7 January 2022 2 February 2022
=============== ===== ================ ================ ===============
Special 2021(A) 0.20p 6 January 2022 7 January 2022 2 February 2022
--------------- ----- ---------------- ---------------- ---------------
3.20p
--------------- ----- ---------------- ---------------- ---------------
(A) Figures have been restated to reflect the 5:1 sub-division as
disclosed in note 14.
31/07/2022 31/07/2021 % change
================================================ ============== ============== ========
Total assets GBP532,912,000 GBP557,183,000 -4.4
================================================ ============== ============== ========
Total equity shareholders' funds (net assets) GBP464,396,000 GBP487,958,000 -4.8
================================================ ============== ============== ========
Net asset value per share (basic)(A) 295.88p 310.90p -4.8
================================================ ============== ============== ========
Net asset value per share (diluted)(A) 295.25p 309.02p
================================================ ============== ============== ========
Share price (mid market)(A) 254.00p 266.00p -4.5
================================================ ============== ============== ========
Market capitalisation GBP398,662,000 GBP417,483,000 -4.5
================================================ ============== ============== ========
Discount to net asset value (basic)(B) 14.2% 14.4%
================================================ ============== ============== ========
Discount to net asset value (diluted)(B) 14.0% 13.9%
================================================ ============== ============== ========
MSCI AC Asia ex Japan Small Cap Index (currency
adjusted, capital gains basis) 1,888.43 2,052.64 -8.0
================================================ ============== ============== ========
Net gearing(B) 12.1% 10.0%
================================================ ============== ============== ========
Dividends and earnings
================================================ ============== ============== ========
Total return per share (basic)(AC) (7.02)p 92.34p
================================================ ============== ============== ========
Revenue return per share (basic)(AD) 9.34p 1.66p +462.7
================================================ ============== ============== ========
Dividends per share(AE) 8.00p 3.20p +150.0
================================================ ============== ============== ========
Dividend cover(B) 1.17 0.52
================================================ ============== ============== ========
Revenue reserves(DF) GBP14,964,000 GBP12,868,000 +16.3
================================================ ============== ============== ========
Operating costs
================================================ ============== ============== ========
Ongoing charges ratio(B) 0.88% 1.10%
------------------------------------------------ -------------- -------------- --------
(A) Figures for 2021 have been restated
to reflect the 5:1 sub-division as disclosed
in note 14.
(B) Considered to be an Alternative Performance
Measure. See below.
(C) Measures the total earnings for the year divided by the weighted
average number of Ordinary shares in issue (see note 9).
(D) Prior year restatement as disclosed
in note 22.
(E) The figures for dividends per share
reflect the dividends for the year in which
they were earned.
(F) Prior to payment of final and special
dividends.
Strategic Report
Chairman's Statement
Results
The past year has been difficult for financial markets as the
world emerges unevenly from the pandemic, with global stock markets
suffering from bouts of weakness as investors digest the
implications of a European war while facing inflation and the
rising prospects of a global recession. But amidst this, some of
the stock markets of Asia, in particular those not under the direct
influence of China, have been relatively resilient; India being an
example where headline indices remain relatively unchanged.
In addition, inflation in most parts of Asia has been mild
compared with elsewhere in the world with Asian Central Banks being
more accommodating; commodity prices, with the exception of coal,
have retreated from the highs of earlier in the year and wage
inflationary pressures in Asia are not as great as those
anticipated in Europe. However, Asia has not been immune to the
fallout from Covid, with parts of the Chinese economy still
suffering from lockdowns and there remain pressures in global
supply-chains.
During the period, there was also a significant rotation from
growth to value stocks in Asian markets, as tightening US monetary
policy drove a de-rating in expensive growth stocks with
longer-dated cash-flows. The market volatility was evident in both
smaller companies and their larger counterparts, with, over the
period, the MSCI Asia ex Japan Small Cap index broadly tracking the
larger capitalisation MSCI Asia ex Japan index.
In this environment, your Company's net asset value (NAV) total
return declined 2.0% over the 12 months to 31 July 2022. While this
was a drop in absolute terms, it was ahead of the MSCI Asia ex
Japan Small Cap Index which fell 5.1%. It is also important to
point out that the performance has also benefitted from the
weakness of sterling relative to many Asian currencies and
particularly the US dollar. The share price ended the period at
254p, with the discount to NAV per share to 14.0%.
One of the advantages of serving as Chairman for over a quarter
of a century, is to see how these periodical seismic events might
affect the future prospects of this company- I believe this is the
sixth during my tenure. In this regard, I think the following
points are worth making:
- As we have identified in previous statements and the reports
we published to celebrate our 20th and 25th anniversaries
(available on the website), Asia is the great engine of growth over
the next 25 years and these events will, over time, only be a blip
in that cycle;
- From an Asian perspective, a war in Europe is a long way off
and while it will affect global trade, its impact on domestic
markets and in particularly small companies where we invest, will
have a more limited impact; and
- In times like these, opportunities to rotate out of mature,
well managed businesses into ones where opportunities exist to make
investments with higher growth potential at more attractive
valuations occur and again this time, it is no different. The
greater flexibility we granted the Managers with the lifting of
market cap limit last year has widened the opportunity.
Since Hugh Young, Martin Gilbert and myself started, in 1995, as
the first Directors of the Company with abrdn as the Manager, it
has been immensely rewarding and satisfying to see the Company
capitalise on the growth and dynamism of the Far East's diverse
small-cap companies and economies, growing assets under management
(AUM) from GBP34.0 million at the time of launch in 1995 to
GBP532.9 million (as at 31 July 2022). We have seen the dividends
grow during that period from a low of 0.11p in 1998 to 8.0p, after
the share split, in the year on which we are reporting. I believe
this record on both investment performance and dividend growth is
amongst the best for investment companies quoted on the London
Stock Exchange.
This, in particular, is thanks to Hugh Young. As the inspired
Manager of the Trust since its inception, he has been the key to
shaping the abrdn Far Eastern investment team into one of Asia's
leading on-the-ground investors with exceptional access to
companies, business leaders and policymakers across the region. In
the last few years, he has been ably assisted by Gabriel Sacks and
since last year, with the addition of Flavia Cheong and Neil Sun,
this has further bolstered an already-impressive team.
As I have said, more often than not, in the fifty-three
Chairman's Statements made to shareholders, the key to our success
has been to only invest in companies with strong balance sheets,
good management and excellent prospects. To identify these
companies needs dedication from the Managers to seek out these
investment nuggets; and the performance of the Company bears out
the hard work they have done and continue to do.
It is also easy to forget the multitude of administrative
matters that need attending to on a daily basis to ensure the
smooth running of the Company. Over the years, the staff at abrdn
have provided a seamless and efficient service and I would like to
thank Charles Mearns, who has acted as Company Secretary for over
20 years and William Hemmings, who as head of Investment Trusts for
18 years has been a source of valuable advice together with my
thanks to all the support staff in London, Aberdeen and Singapore
both past and present.
In my last Annual Report as Chairman before stepping down in
November, I am pleased to see the Trust has in place the necessary
measures to take it to even greater strengths in the next 25 years
and beyond.
Overview
Volatility was already creeping into global markets even before
the onset of Russia's war in Ukraine. In 2022, central banks have
been preoccupied with the prospect of recession and fending off
inflation caused by rising commodity prices. Asian markets have
proved more resilient during this unsettling period compared with
other emerging markets. Inflation has been more moderate and, with
post-Covid restrictions lifting, returning tourists and increased
consumer spending from pent-up demand have led to a notable
recovery in Southeast Asia, for example.
China was an exception. The country's 'zero-Covid' policy meant
lockdowns continued to be imposed as authorities tried to contain
new virus outbreaks. This dampened domestic activity and put
further pressure on an economy that was already slowing as a result
of a weak property market and tight regulatory conditions. As a
result, China was among the region's worst performing markets
during the period. It will be interesting to see if the much
heralded 20th Communist Party Congress at the end of this month,
besides extending the term of office of President Xi, signals any
significant changes in policy; there have been hints of Central
Bank easing of policy which the team in Singapore will be
monitoring closely.
The Company's relatively light exposure to China buoyed
performance relative to the index, but we believe the country
remains a great opportunity for diligent stock pickers. With an
indiscriminate sell-off in the market, your Manager added two new
holdings, capitalising on more attractive valuations and reflecting
a desire to gradually increase the Company's exposure to China (you
can read more about this in the Investment Manager's Review section
of this report).
Two changes implemented to your Company this year will help in
this regard. The first is the removal of the US$1.5 billion market
cap limit (at the time of initiation), which was agreed at the
General Meeting in January 2022. This limit was proving a little
restrictive in larger markets - especially China - and the Board
believes that the removal of the cap will give your Manager greater
flexibility to invest in the most compelling smaller companies in
the region.
Secondly, and as referred to above, we have strengthened the
investment team. During the period, we welcomed Flavia Cheong,
abrdn's Head of Equities - Asia Pacific, as joint Manager alongside
Hugh Young and Gabriel Sacks, and Neil Sun, who joins as an
investment manager. These additions add depth and experience to
your Company and will be beneficial as the team considers a
potential increase in allocation to North Asia, leveraging off
abrdn's deeper insights on Chinese small caps built over the past
few years.
Looking elsewhere across the portfolio, there was strong
share-price performance from commodity-related businesses or
markets, such as those in Indonesia, or those more positively
impacted by rising inflation, such as the shipping industry.
Nevertheless, more export-oriented markets fared poorly, especially
those associated with the tech supply-chain, such as Taiwan.
Despite the marked correction in a few of the Trust's holdings,
your Manager remains convinced of the structural growth for these
businesses and would argue that the sell-off has thrown up
opportunities to buy high-quality companies in this space.
We have also benefitted from a low exposure to Chinese domestic
companies. While these have suffered in the pull back of markets,
there will be considerable opportunities in the growing Chinese
markets and this current reduction in values will present
opportunities which will bear fruit in future years.
For a more detailed report of the Company's performance and
portfolio changes, please read the Investment Manager's Review.
Dividend
In accordance with the enhanced dividend policy approved by
shareholders, the Board has achieved the target dividend of 6.4p
per Ordinary Share for the financial year ended 31 July 2022
(adjusted for the five for one share split that occurred on 4
February 2022) (2021 equivalent full-year dividend 3.2p after
adjustment for the five for one share split) representing a 100%
increase on the level of dividend paid in 2021. Dividends of 3.2p,
1.6p and 1.6p were paid in March, June and September 2022.
Furthermore, I am very pleased to report that the strength of
dividend generation from the portfolio has allowed the Company to
declare a further special interim dividend in respect of the year
ended 31 July 2022 of 1.6p per Ordinary share which will be paid on
20 December 2022 to shareholders on the register on the record date
of 25 November 2022 (ex dividend 24 November 2022).
I believe that, in difficult times, this total dividend of 8.0p
per share will be welcomed by shareholders especially as it is 25%
higher than the annual target dividend.
The Board's policy is to maintain the progressive dividend
policy of the last 25 years (including with the flexibility to pay
dividends out of capital reserves where merited in the future) in
order to provide shareholders with a regular level of income
alongside capital growth prospects.
Share Capital and Gearing
A five for one Share split was approved by shareholders on 27
January 2022 and, with effect from 4 February 2022, each Ordinary
share of 25p was sub-divided into five Ordinary shares of 5p
each.
During the period we have not bought back any Ordinary shares in
the market. The Board will continue to consider the use of share
buy backs to both reduce the volatility of any discount and to
modestly enhance the NAV for shareholders.
The Company's net gearing at 31 July 2022 was 12.1% with the
majority of the debt provided by the Loan Notes. Gearing is also
provided by the Convertible Unsecured Loan Stock redeemable in
2025, of which approximately GBP36.6m million remains outstanding.
As at 14 October 2022, the latest practicable date, the net gearing
stood at 14.0%.
Directorate
One of the important duties of the Board is to see that the
members have the necessary skills to ensure that it is able to both
monitor the existing mandate, but also make any necessary changes
to that mandate to reflect the demands of a constantly shifting
investment world. It is therefore my great pleasure to recommend
the finalisation of the following appointments to the Board. Mr
Lindsay Cooper joined on 15 June 2022 and Mr Alex Finn joined on 13
July 2022.
Mr Cooper brings a significant amount of Asian investment and
small cap expertise to the Board and, being based in Singapore, is
perfectly placed to assist in overseeing the execution of the
Company's expanded investment mandate that was approved by
shareholders in January 2022. After working in corporate finance in
Hong Kong in the early 1990s, Lindsay co-founded Arisaig Partners
in 1996, an independent Investment Management business where he had
investment responsibility for the Arisaig Asia Consumer Fund. Since
stepping down from day to day investment responsibility at Arisaig,
Lindsay founded Chic & Unique Pte Ltd, a boutique hotels and
hospitality business with operations in Asia and Europe and, more
recently, founded Chi Tree Health, a preventative healthcare
enterprise in Singapore.
Mr Finn brings significant accounting expertise and
international business experience to the Board. He has been
appointed Chairman of the Audit Committee and was a partner for
twenty seven years in PwC's global financial services practice,
retiring on 30 June 2022. During his career at PwC Mr Finn was
responsible for the services that PwC provided internationally to a
number of its largest global clients, all of which had extensive
operations in Asia. He was also responsible for supporting clients
in large scale accounting and financial change programmes, was
PwC's EMEA insurance leader, sat on its EMEA FS leadership team and
led a number of PwC's largest global audit engagements. The Board
has reviewed the independence of Mr Finn and is satisfied that,
following his retirement from PwC where he had no involvement in
any direct or indirect work for the Company or the Management
Company, Mr Finn is fully independent.
The appointment process for both new Directors was conducted
using the services and expertise of Fletcher Jones, an independent
recruitment consultant.
I would also like to thank Debby Guthrie who resigned from the
Board on 13 April 2022, for her contribution to not only the Board
but also as Chairman of the Audit Committee.
As previously indicated, I will retire from the Board at the
conclusion of the AGM on 30 November 2022. I am pleased to advise
that Krishna Shanmuganathan has accepted an invitation from the
other Directors to succeed me as independent Chairman from the
conclusion of the AGM in November. Krishna's deep ties to Asia and
his experience at the Foreign and Commonwealth Office, Fidelity
International and then subsequently as Managing Partner of Hakluyt
Asia, based in Singapore, will bring considerable knowledge and
benefit to the Board deliberation and I wish him personally, and on
your behalf, every success in his new role.
The Board succession planning will continue in 2023.
Annual General Meeting
The Company's Annual General Meeting is scheduled for 12:30 p.m.
on 30 November 2022 and the intention is for it to be held in
person in London. The AGM will be preceded by a short presentation
from the management team and following the formal business there
will be a shareholder buffet lunch and the opportunity to meet the
Directors. In addition to the usual ordinary business being
proposed at the AGM, as special business the Board is seeking to
renew the authority to issue new shares and sell treasury shares
for cash at a premium without pre-emption rules applying and to
renew the authority to buy back shares and either hold them in
treasury for future resale (at a premium to the prevailing NAV per
share) or cancel them. I would encourage all shareholders to
support the Company and lodge proxy voting forms in advance of the
meeting, regardless of whether they intend to attend in person.
In light of the significant take up from shareholders at the
online presentation held in January 2022, in advance of the AGM,
the Board has decided to hold another interactive Online
Shareholder Presentation which will be held at 11:00 a.m. on 16
November 2022. At the presentation, shareholders will receive
updates from the Chairman and Manager and there will be the
opportunity for an interactive question and answer session.
Following the online presentation, shareholders will still have
time to submit their proxy votes prior to the AGM and I would
encourage all shareholders to lodge their votes in advance in this
manner. Full registration details can be found at:
https://www.workcast.com/register?cpak=4646856687011531.
Outlook
As we look forward, investing in Asia has advantages over both
the short and long term. The region is proving to be less
vulnerable to the current environment than other emerging markets -
inflation is less of an issue, while current account and fiscal
discipline has been more resilient to the deep downturns. In the
longer term, there are several strong trends that should support
economic growth, notably rising affluence, increased urbanisation,
growing infrastructure demand and commitment from policymakers to a
greener and lower-carbon future. Geopolitics, on the other hand,
remain a thorny issue, but diversification might be investors' best
hedge against a polarising world.
Valuations currently appear attractive, with the MSCI AC Asia ex
Japan trading at a forward price-to-earnings ratio of 12.4x (below
its five-year average), with the portfolio trading at similar
multiples. At these levels, your Manager believes many of the
prevailing risks, such as slower growth and higher inflation, could
be largely priced in.
Looking specifically at the Trust's niche, we believe that
Asia's rapidly developing economies continue to provide fertile
ground for quality smaller companies. Asia is home to a wealth of
under-researched yet high-performing companies which are often
family-run, conservative businesses with low debt levels. For the
most part, these companies are leaders in their field, and have
growth rates that can be divorced from global macro conditions.
Over the years, your Manager's strength has been the ability to
select quality companies at a reasonable price; with a focus on
balance sheet resilience and sustainable earnings prospects. I
believe this positions it well to continue delivering healthy
returns for shareholders in these challenging times.
On a personal note, I would like to say what an honour and
delight it has been to serve as your Chairman over so long a
period. It has been a source of great inspiration to not only see
the developments in Asia during this period but also to see the
enormous achievements that this Company has enjoyed. GBP1,000
invested in 1995 is now worth GBP21,052 with dividends reinvested.
I can only wish everyone associated with the Company many thanks
for the huge support they have given me and great success in the
future.
Nigel Cayzer
Chairman
14 October 2022
Overview of Strategy
Business Model
The business of the Company is that of an investment company
which seeks to qualify as an investment trust for UK capital gains
tax purposes.
Investment Objective
From 27 January 2022:
On 27 January 2022 shareholders approved an amended investment
objective. The Company aims to maximise total return to
shareholders over the long term from a portfolio made up
predominantly of quoted smaller companies in the economies of Asia
excluding Japan.
Up to 27 January 2022:
The Company aimed to maximise total return to shareholders over
the long term from a portfolio made up predominantly of smaller
quoted companies (with a market capitalisation of up to
approximately US$1.5 billion at the time of investment) in the
economies of Asia and Australasia, excluding Japan, by following
the investment policy. When it was in shareholders' interests to do
so, the Company reserved the right to participate in the rights
issue of an investee company notwithstanding that the market
capitalisation of that investee may exceed the stated ceiling.
Investment Policy
On 27 January 2022 shareholders approved an amended investment
policy. The Company may invest in a diversified portfolio of
securities (including equity shares, preference shares, convertible
securities, warrants and other equity-related securities)
predominantly issued by quoted smaller companies spread across a
range of industries and economies in the Investment Region. The
Investment Region includes Bangladesh, Cambodia, China, Hong Kong,
India, Indonesia, Korea, Laos, Malaysia, Myanmar, Pakistan, The
Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam,
together with such other economies in Asia as approved by the
Board.
The Company may invest up to 10% of its net assets in collective
investment schemes, and up to 10% of its net assets in unquoted
companies, calculated at the time of investment.
The Company may also invest in companies traded on stock markets
outside the Investment Region provided over 75% of each company's
consolidated revenue, operating income or pre-tax profit is earned
from trading in the Investment Region or the company holds more
than 75% of their consolidated net assets in the Investment
Region.
When the Board considers it in shareholders' interests, the
Company reserves the right to participate in rights issues by an
investee company.
Risk Diversification
The Company will invest no more than 15% of its gross assets in
any single holding including listed investment companies at the
time of investment.
Gearing
The Board is responsible for determining the gearing strategy
for the Company. Gearing is used selectively to leverage the
Company's portfolio in order to enhance returns where and to the
extent this is considered appropriate to do so. Gearing is subject
to a maximum gearing level of 25% of NAV at the time of draw
down.
Delivering the Investment Policy
The Directors are responsible for determining the investment
policy and the investment objective of the Company. Day to day
management of the Company's assets has been delegated, via the
AIFM, to the Investment Manager, abrdn Asia. abrdn Asia invests in
a diversified range of companies throughout the Investment Region
in accordance with the investment policy. abrdn Asia follows a
bottom-up investment process based on a disciplined evaluation of
companies through direct visits by its fund managers. Stock
selection is the major source of added value. No stock is bought
without the fund managers having first met management. abrdn Asia
estimates a company's worth in two stages, quality then price.
Quality is defined by reference to management, business focus, the
balance sheet and corporate governance. Price is calculated by
reference to key financial ratios, the market, the peer group and
business prospects. Top-down investment factors are secondary in
the abrdn Asia's portfolio construction, with diversification
rather than formal controls guiding stock and sector weights.
A detailed description of the investment process and risk
controls employed by abrdn Asia is disclosed on pages 106 to 108 of
the published Annual Report and financial statements for the year
ended 31 July 2022. A comprehensive analysis of the Company's
portfolio is disclosed on pages 30 to 37 of the published Annual
Report and financial statements for the year ended 31 July 2022
including a description of the ten largest investments, the
portfolio investments by value, sector/geographical analysis and
currency/market performance. At the year end the Company's
portfolio consisted of 62 holdings.
Investment Manager and Alternate Investment Fund Manager
The Company's Alternative Investment Fund Manager, appointed as
required by EU Directive 2011/61/EU, is abrdn Fund Managers Limited
("aFML") (previously known as Aberdeen Standard Fund Managers
Limited) which is authorised and regulated by the Financial Conduct
Authority. Day to day management of the portfolio is delegated to
abrdn Asia Limited ("abrdn Asia", the "Manager" or the "Investment
Manager"). aFML and abrdn Asia are wholly owned subsidiaries of
abrdn plc.
Comparative Indices
From 1 August 2021 the Manager has utilised the MSCI AC Asia ex
Japan Small Cap Index (currency adjusted) as well as peer group
comparisons for Board reporting. For periods prior to 1 August
2021, a composite index is used comprising the MSCI AC Asia Pacific
ex Japan Small Cap Index (currency adjusted) up to 31 July 2021 and
the MSCI AC Asia ex Japan Small Cap Index (currency adjusted)
thereafter. It is likely that performance will diverge, possibly
quite dramatically in either direction, from the comparative index.
The Manager seeks to minimise risk by using in-depth research and
does not see divergence from an index as risk.
Promoting the Company's Success
In accordance with corporate governance best practice, the Board
is now required to describe to the Company's shareholders how the
Directors have discharged their duties and responsibilities over
the course of the financial year following the guidelines set out
under section 172 (1) of the Companies Act 2006 (the "s172
Statement"). This Statement, from 'Promoting the Success of the
Company' to "Long Term Investment", provides an explanation of how
the Directors have promoted the success of the Company for the
benefit of its members as a whole, taking into account the likely
long term consequences of decisions, the need to foster
relationships with all stakeholders and the impact of the Company's
operations on the environment.
The purpose of the Company is to act as a vehicle to provide,
over time, financial returns to its shareholders. The Company's
Investment Objective is disclosed on page 12 of the published
Annual Report and financial statements for the year ended 31 July
2022. The activities of the Company are overseen by the Board of
Directors of the Company.
The Board's philosophy is that the Company should operate in a
transparent culture where all parties are treated with respect and
provided with the opportunity to offer practical challenge and
participate in positive debate which is focused on the aim of
achieving the expectations of shareholders and other stakeholders
alike. The Board reviews the culture and manner in which the
Manager operates at its regular meetings and receives regular
reporting and feedback from the other key service providers.
Investment trusts, such as the Company, are long-term investment
vehicles, with a recommended holding period of five or more years.
Typically, investment trusts are externally managed, have no
employees, and are overseen by an independent non-executive board
of directors. Your Company's Board of Directors sets the investment
mandate, monitors the performance of all service providers
(including the Manager) and is responsible for reviewing strategy
on a regular basis. All this is done with the aim of preserving
and, indeed, enhancing shareholder value over the longer term.
Stakeholders
The Company's main stakeholders have been identified as its
shareholders, the Manager (and Investment Manager), service
providers, investee companies and debt providers. More broadly, the
environment and community at large are also stakeholders in the
Company. The Board is responsible for managing the competing
interests of these stakeholders. Ensuring that the Manager delivers
out performance for Ordinary shareholders over the longer term
without adversely affecting the risk profile of the Company which
is known and understood by the loan note holders and CULS holders.
This is achieved by ensuring that the Manager stays within the
agreed investment policy.
Shareholders
Shareholders are key stakeholders in the Company - they look to
the Manager to achieve the investment objective over time. The
following table describes some of the ways we engage with our
shareholders:
AGM The AGM normally provides an opportunity for the
Directors to engage with shareholders, answer
their questions and meet them informally. The
next AGM will take place on 30 November 2022 in
London. We encourage shareholders to lodge their
vote by proxy on all the resolutions put forward.
====================== ===========================================================
Online Shareholder In January 2022 the Board held an online shareholder
Presentation presentation which was attended by over 250 shareholders
and prospective investors.
====================== ===========================================================
Annual Report We publish a full annual report each year that
contains a strategic report, governance section,
financial statements and additional information.
The report is available online and in paper format.
====================== ===========================================================
Company Announcements We issue announcements for all substantive news
relating to the Company. You can find these announcements
on the website.
====================== ===========================================================
Results Announcements We release a full set of financial results at
the half year and full year stage. Updated net
asset value figures are announced on a daily basis.
====================== ===========================================================
Monthly Factsheets The Manager publishes monthly factsheets on the
Company's website including commentary on portfolio
and market performance.
====================== ===========================================================
Website Our website contains a range of information on
the Company and includes a full monthly portfolio
listing of our investments as well as podcasts
by the Investment Manager. Details of financial
results, the investment process and Investment
asia-focus.co.uk
====================== ===========================================================
Investor Relations The Company subscribes to the Manager's Investor
Relations programme (further details are provided
under 'Promoting the Company' below).
====================== ===========================================================
The Manager
The key service provider for the Company is the Alternative
Investment Fund Manager and the performance of the Manager is
reviewed in detail at each Board meeting. The Manager's investment
process is outlined on pages 106 to 108 and further information
about the Manager is given on page 105 of the published Annual
Report and financial statements for the year ended 31 July 2022.
Shareholders are key stakeholders in the Company - they are looking
to the Manager to achieve the investment objective over time and to
deliver a regular growing income together with some capital growth.
The Board is available to meet at least annually with shareholders
at the Annual General Meeting and this includes informal meetings
with them over lunch following the formal business of the AGM. This
is seen as a very useful opportunity to understand the needs and
views of the shareholders. In between AGMs, the Directors and
Manager also conduct programmes of investor meetings with larger
institutional, private wealth and other shareholders to ensure that
the Company is meeting their needs. Such regular meetings may take
the form of joint presentations with the Investment Manager or
meetings directly with a Director where any matters of concern may
be raised directly.
Other Service Providers
The other key stakeholder group is that of the Company's third
party service providers. The Board is responsible for selecting the
most appropriate outsourced service providers and monitoring the
relationships with these suppliers regularly in order to ensure a
constructive working relationship. Our service providers look to
the Company to provide them with a clear understanding of the
Company's needs in order that those requirements can be delivered
efficiently and fairly. The Board, via the Management Engagement
Committee, ensures that the arrangements with service providers are
reviewed at least annually in detail. The aim is to ensure that
contractual arrangements remain in line with best practice,
services being offered meet the requirements and needs of the
Company and performance is in line with the expectations of the
Board, Manager, Investment Manager and other relevant stakeholders.
Reviews include those of the Company's depositary and custodian,
share registrar, broker and auditors.
Principal Decisions
Pursuant to the Board's aim of promoting the long term success
of the Company, the following principal decisions have been taken
during the year:
Portfolio The Investment Manager's Review details the key
investment decisions taken during the year and subsequently. The
Investment Manager has continued to monitor the investment
portfolio throughout the year under the supervision of the Board. A
list of the key portfolio changes can be found in the Investment
Manager's Report.
Board Investment Review During the year the Board concluded its
comprehensive investment review which culminated in the following
changes which were all approved by shareholders at the General
Meeting held on 27 January 2022:
1. amend the Company's Investment Policy;
2. adopt the Company's enhanced New Dividend Policy;
3. amend the Company's Articles in order to provide flexibility
to pay dividends out of capital profits in the future, and refresh
the Articles more generally, including in connection with the
running of Shareholder meetings following the recent pandemic;
4. enact a five for one Share split; and
5. introduce a new five year performance-linked tender.
Long Term Investment
The Investment Manager's investment process seeks to outperform
over the longer term. The Board has in place the necessary
procedures and processes to continue to promote the long term
success of the Company. The Board will continue to monitor,
evaluate and seek to improve these processes as the Company
continues to grow over time, to ensure that the investment
proposition is delivered to shareholders and other stakeholders in
line with their expectations.
Key Performance Indicators (KPIs)
The Board uses a number of financial performance measures to
assess the Company's success in achieving its objective and to
determine the progress of the Company in pursuing its investment
policy. The main KPIs identified by the Board in relation to the
Company, which are considered at each Board meeting, are as
follows:
KPI Description
===================== ============================================================
NAV Return (per The Board considers the Company's NAV total return
share) figures to be the best indicator of performance over
time and is therefore the main indicator of performance
used by the Board. The figures for this year and
for the past 1, 3, 5, 10 years and since inception
are set out on page 24 of the published Annual Report
and financial statements for the year ended 31 July
2022.
===================== ============================================================
Performance against The Board also measures performance against the MSCI
comparative indices AC Asia ex Japan Small Cap Index (currency adjusted)
as well as peer group comparisons for Board reporting.
For periods prior to 1 August 2021, a composite index
is used comprising the MSCI AC Asia Pacific ex Japan
Small Cap Index (currency adjusted) up to 31 July
2021 and the MSCI AC Asia ex Japan Small Cap Index
(currency adjusted) thereafter. Graphs showing performance
are shown on pages 26 and 27 of the published Annual
Report and financial statements for the year ended
31 July 2022. At its regular Board meetings the Board
also monitors share price performance relative to
competitor investment trusts over a range of time
periods, taking into consideration the differing
investment policies and objectives employed by those
companies.
===================== ============================================================
Share price The Board also monitors the price at which the Company's
(on a total return shares trade relative to the MSCI Asia ex Japan Small
basis) Cap Index (sterling adjusted) on a total return basis
over time. A graph showing the total NAV return and
the share price performance against the comparative
index is shown on pages 26 and 27 of the published
Annual Report and financial statements for the year
ended 31 July 2022.
===================== ============================================================
Discount/Premium The discount/premium relative to the NAV per share
to NAV represented by the share price is closely monitored
by the Board. The objective is to avoid large fluctuations
in the discount relative to similar investment companies
investing in the region by the use of share buy backs
subject to market conditions. A graph showing the
share price premium/(discount) relative to the NAV
is also shown on page 25 of the published Annual
Report and financial statements for the year ended
31 July 2022.
===================== ============================================================
Dividend The Board has set a target dividend of 6.4p per share
and the aim is to maintain or increase the Ordinary
dividend so that shareholders can rely on a consistent
stream of income. Dividends paid over the past 10
years are set out on page 24 of the published Annual
Report and financial statements for the year ended
31 July 2022.
===================== ============================================================
Principal Risks and Uncertainties
There are a number of risks which, if realised, could have a
material adverse effect on the Company and its financial condition,
performance and prospects. Risks are identified and documented
through a risk management framework and further details on the risk
matrix are provided in the Directors' Report. The Board has
undertaken a robust review of the principal risks and uncertainties
facing the Company including those that would threaten its business
model, future performance, solvency or liquidity. Those principal
risks are disclosed in the table below together with a description
of the mitigating actions taken by the Board. The principal risks
associated with an investment in the Company's Shares are published
monthly on the Company's factsheet or they can be found in the
pre-investment disclosure document published by the Manager, both
of which are available on the Company's website.
The Board also has a process to review longer term risks and
consider emerging risks and if any of these are deemed to be
significant these risks are categorised, rated and added to the
risk matrix.
The Board notes that there are a number of contingent risks
stemming from the Covid-19 pandemic and the conflict in Ukraine
that may impact the operation of the Company. These include
investment risks surrounding the companies in the portfolio such as
employee absence, reduced demand, reduced turnover and global
supply chain breakdowns. The Investment Manager will continue to
review carefully the composition of the Company's portfolio and to
be pro-active in taking investment decisions where necessary.
Operationally, third party services have continued to be supplied
seamlessly to the Company throughout the Covid-19 pandemic and the
Board will continue to monitor arrangements in the form of periodic
updates from the Manager and Investment Manager.
In addition to the risks listed below, the Board is also very
conscious of the risks emanating from increased environmental,
social and governance challenges. The recent scrutiny by western
governments of human rights violations in Xinjiang is an example of
the need for continued vigilance regarding the supply chain
exposure of investee companies and the fair and humane treatment of
workers. Likewise, as climate change pressures mount, the Board
continues to monitor, through its Manager, the potential risk that
investee companies may fail to keep pace with the appropriate rates
of change and adaption.
In all other respects, the Company's principal risks and
uncertainties have not changed materially since the date of this
Annual Report and are not expected to change materially for the
current financial year.
Description Mitigating Action
========================================== ===========================================
Investment strategy and objectives The Board keeps the level of discount
- the setting of an unattractive at which the Company's shares trade
strategic proposition to the market as well as the investment objective
and the failure to adapt to changes and policy under review and in particular
in investor demand may lead to the holds an annual strategy meeting
Company becoming unattractive to where the Board reviews updates
investors, a decreased demand for from the Investment Manager, investor
shares and a widening discount. relations reports and the Broker
on the market. In particular, the
Risk Unchanged during Year Board is updated at each Board meeting
on the make-up of and any movements
in the shareholder register.
========================================== ===========================================
Investment portfolio and investment The Board sets, and monitors, its
management : investing outside of investment restrictions and guidelines,
the investment restrictions and and receives regular board reports
guidelines set by the Board could which include performance reporting
result in poor performance and inability on the implementation of the investment
to meet the Company's objectives, policy, the investment process and
as well as a weakening discount. application of the guidelines. The
Investment Manager is in attendance
Risk Unchanged during Year at all Board meetings. The Board
also monitors the Company's share
price relative to the NAV.
========================================== ===========================================
Financial obligations (Gearing): The Board sets a gearing limit and
the requirement for the Company receives regular updates on the
to meet its financial obligations, actual gearing levels the Company
or increasing the level of gearing, has reached from the Investment
could result in the Company becoming Manager together with the assets
over-geared or unable to take advantage and liabilities of the Company and
of potential opportunities and result reviews these at each Board meeting.
in a loss of value to the Company's In addition, abrdn Fund Managers
shares. It could also result in Limited, as alternative investment
the Company being unable to meet fund manager, has set an overall
the interest repayments due on the leverage limit of 2x on a commitment
CULS and Loan Note holders. basis (2.5x on a gross notional
basis) and includes updates in its
Risk Unchanged during Year reports to the Board.
========================================== ===========================================
Financial and regulatory: the financial The financial risks associated with
risks associated with the portfolio the Company include market risk,
could result in losses to the Company. liquidity risk and credit risk,
In addition, failure to comply with all of which are mitigated by the
relevant regulation (including the Investment Manager. Further details
Companies Act, the Financial Services of the steps taken to mitigate the
and Markets Act, the Alternative financial risks associated with
Investment Fund Managers Directive, the portfolio are set out in note
Accounting Standards and the listing 19 to the financial statements.
rules, disclosure and prospectus The Board relies upon the abrdn
rules) may have an impact on the Group to ensure the Company's compliance
Company. with applicable regulations and
from time to time employs external
Risk Unchanged during Year advisors to advise on specific concerns.
========================================== ===========================================
Operational: the Company is dependent The Board receives reports from
on third parties for the provision the Manager on internal controls
of all systems and services (in and risk management at each Board
particular, those of abrdn) and meeting. It receives assurances
any control failures and gaps in from all its significant service
these systems and services could providers, as well as back to back
result in a loss or damage to the assurances where activities are
Company. themselves sub-delegated to other
third party providers with which
Disruption, including that caused the Company has no direct contractual
by information technology breakdown relationship. The assurance reports
or another cyber-related issue, include an independent assessment
could prevent, for example, the of the effectiveness of risks and
functioning of the Company; accurate internal controls at the service
reporting to the Board or shareholders; providers including their planning
or payment of dividends in accordance for business continuity and disaster
with the announced timetable recovery scenarios, together with
their policies and procedures designed
Risk Unchanged during Year to address the risks posed to the
Company's operations by cyber-crime.
Further details of the internal
controls which are in place are
set out in the Directors' Report.
========================================== ===========================================
Investing in unlisted securities: The Board recognises that investing
the Company has the ability to invest in unlisted securities carries a
in unlisted securities, although higher risk/reward profile. Accordingly
no such investments have been made it seeks to mitigate this risk by
to date. Unquoted investments are limiting investment into such securities
long-term in nature and they may to 10% of the Company's net assets
take a considerable period to be (calculated at the time of investment).
realised. Unquoted investments are For the year ended 31 July 2022
less readily realisable than quoted no unlisted investments were made.
securities. Such investments may
therefore carry a higher degree
of risk than quoted securities.
In valuing investments the Company
may rely to a significant extent
on the accuracy of financial and
other information provided to the
Manager as well as the performance
of listed peer multiples which may
impact unquoted valuations negatively.
Risk Unchanged during Year
========================================== ===========================================
Market and F/X: insufficient oversight The Manager's risk department reviews
or controls over financial risks, investment risk and a review of
including market risk, foreign currency credit worthiness of counterparties
risk, liquidity risk and credit is undertaken by its Counterparty
risk could result in a loss to the Credit Risk team. The Company does
Company. not hedge foreign currency exposure
but it may, from time to time, partially
Risk Increased during Year mitigate it by borrowing in foreign
currencies.
========================================== ===========================================
Major market event or geo-political External risks over which the Company
risk - The Company is exposed to has no control are always a risk.
stockmarket volatility or illiquidity The Manager monitors the Company's
as a result of a major market shock portfolio and is in close communication
due to a national or global crisis. with the underlying investee companies
The impact of such risks, associated in order to navigate and guide the
with the portfolio or the Company Company through macroeconomic and
itself, could result in disruption geopolitical risks. The Manager
to the operations of the Company continues to assess and review the
and losses. investment risks arising from the
resurgence of Covid-19 and the impact
Risk Increased during Year of events in Ukraine on companies
in the portfolio and takes the necessary
investment decisions. The Manager
monitors the potential for increased
military tensions in East Asia,
and other potential regional conflict.
========================================== ===========================================
Promoting the Company
The Board recognises the importance of promoting the Company to
prospective investors both for improving liquidity and enhancing
the value and rating of the Company's shares. The Board believes an
effective way to achieve this is through subscription to and
participation in the promotional programme run by the Manager on
behalf of a number of investment trusts under its management. The
Company's financial contribution to the programme is matched by the
Manager. The Manager reports quarterly to the Board giving analysis
of the promotional activities as well as updates on the shareholder
register and any changes in the make-up of that register.
The purpose of the programme is both to communicate effectively
with existing shareholders and to gain new shareholders with the
aim of improving liquidity and enhancing the value and rating of
the Company's shares. Communicating the long-term attractions of
your Company is key and therefore the Company also supports the
Manager's investor relations programme which involves regional
roadshows, promotional and public relations campaigns.
Board Diversity
The Board recognises the importance of having a range of
skilled, experienced individuals with the right knowledge
represented on the Board in order to allow the Board to fulfil its
obligations. The Board also recognises the benefits and is
supportive of the principle of diversity in its recruitment of new
Board members. The Board will not display any bias for age, gender,
race, sexual orientation, religion, ethnic or national origins, or
disability in considering the appointment of its Directors.
Although the Board does not set diversity targets, it is mindful of
best practice in this area, and the Board will continue to evolve
in 2023, with the stated aim of improving its diversity. At 31 July
2022, there were five male Directors and one female Director on the
Board.
Environmental, Social and Governance ("ESG") Engagement
Whilst the management of the Company's investments is not
undertaken with any specific instructions to exclude certain asset
types or classes, the Investment Manager embeds ESG into the
research of each asset class as part of the investment process. ESG
investment is about active engagement, with the goal of improving
the performance of assets held around the world.
The Investment Manager aims to make the best possible
investments for the Company, by understanding the whole picture of
the investments - before, during and after an investment is made.
That includes understanding the environmental, social and
governance risks and opportunities they present - and how these
could affect longer-term performance. Environmental, social and
governance considerations underpin all investment activities. With
1,000+ investment professionals, the Investment Manager is able to
take account of ESG factors in its company research, stock
selection and portfolio construction - supported by more than 40
ESG specialists around the world. Please refer to pages 109 to 111
of the published Annual Report and financial statements for the
year ended 31 July 2022 for further detail on the Investment
Manager's ESG policies applicable to the Company.
The Company has no employees as the Board has delegated day to
day management and administrative functions to abrdn Fund Managers
Limited. There are therefore no disclosures to be made in respect
of employees. The Company's socially responsible investment policy
is outlined above.
Due to the nature of the Company's business, being a company
that does not offer goods and services to customers, the Board
considers that it is not within the scope of the Modern Slavery Act
2015 because it has no turnover. The Company is therefore not
required to make a slavery and human trafficking statement. The
Board considers the Company's supply chains, dealing predominantly
with professional advisors and service providers in the financial
services industry, to be low risk in relation to this matter.
The Company has no greenhouse gas emissions to report from the
operations of its business, nor does it have responsibility for any
other emissions producing sources under the Companies Act 2006
(Strategic Report and Directors' Reports) Regulations 2013.
Viability Statement
The Company does not have a formal fixed period strategic plan
but the Board formally considers risks and strategy at least
annually. The Board considers the Company, with no fixed life, to
be a long term investment vehicle, but for the purposes of this
viability statement has decided that a period of three years is an
appropriate period over which to report. The Board considers that
this period reflects a balance between looking out over a long term
horizon and the inherent uncertainties of looking out further than
three years.
In assessing the viability of the Company over the review period
the Directors have conducted a robust review of the principal
risks, focusing upon the following factors:
- The principal risks detailed in the Strategic Report;
- The ongoing relevance of the Company's investment objective in the current environment;
- The demand for the Company's Shares evidenced by the
historical level of premium and or discount;
- The level of income generated by the Company;
- The level of gearing and flexibility of the Company's Loan Stock and Loan Notes; and
- The liquidity of the Company's portfolio including the results
of stress test analysis performed by the Manager under a wide
number of market scenarios.
In making this assessment, the Board has examined scenario
analysis showing the impact of historic large economic shocks on
the value and level of liquidity of the portfolio. This included
modelling a further global pandemic and the global financial crisis
of 2008 and how these factors might affect the Company's prospects
and viability in the future.
Accordingly, taking into account the Company's current position,
the fact that the Company's investments are mostly liquid and the
potential impact of its principal risks and uncertainties, the
Directors have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they fall
due for a period of three years from the date of this Report. In
making this assessment, the Board has considered that matters such
as significant economic or stock market volatility, a substantial
reduction in the liquidity of the portfolio or changes in investor
sentiment could have an impact on its assessment of the Company's
prospects and viability in the future.
Future
The Board's view on the general outlook for the Company can be
found in the Chairman's Statement whilst the Investment Manager's
views on the outlook for the portfolio are included in the
Investment Manager's Review.
The Strategic Report has been approved by the Board and signed
on its behalf by:
Nigel Cayzer,
Chairman
14 October 2022
Investment Manager's Review
Performance review
Asian equities fared well during the first half of the period as
vaccine programmes led to an easing of lockdown restrictions and an
economic recovery. However, there has been a pronounced risk-off
trade in place since the turn of the year, with investors rattled
by disruption to global supply chains, soaring inflation, rising
interest rates and Russia's invasion of Ukraine. This has
manifested itself in investors rotating away from more expensive
areas of the market - such as high-growth companies - towards
value. When market conditions are as volatile and the macroeconomic
backdrop as uncertain as they are currently, sticking to our
investment process becomes even more important. The rigour that is
central to our process has stood us in good stead this year,
enabling us to deliver solid outperformance for shareholders.
Your Company benefitted from being overweight Indonesia, as the
market was among the strongest in the Asian region. The Indonesian
economy rebounded as the country emerged from Covid-related
restrictions and commodity prices surged. Further, stock selection
was good, with AKR Corporindo among the standouts after announcing
consecutive record quarters for earnings. This was thanks to lower
expenses and sustained strength in margins in its transmission and
distribution division. The company is a beneficiary of a commodity
upcycle, as it provides a boost to fuel sales and chemical-price
inflation improves profitability as the company has
fixed-percentage distribution margins. Medikaloka Hermina's share
price also fared well. The company is rapidly increasing its
network of hospitals to meet growing demand for medical services
across the country, and profits more than doubled in 2021. The
stock was also supported in the latter part of the period by major
Indonesian conglomerate Astra International raising its stake in
the company.
Elsewhere in Southeast Asia, stock selection in Malaysia and our
exposure to Vietnam further contributed to performance. In Vietnam,
IT-services business FPT Corp benefitted from the continued need
for corporates to transition to the cloud and adapt their systems
to newer technologies. Property developer Nam Long benefitted from
a period of relatively loose monetary policy as well as from a
housing recovery - although inflation pressure in recent months has
turned Vietnam's central bank more cautious. Turning to North Asia,
the fund's underweight to China served us well, given the raft of
headwinds facing companies there, including macro and regulatory
challenges, Beijing's zero-Covid policy and accumulated stress in
the property sector. Chinese equities sold-off further this year in
response to China's temporary lockdown of major cities like
Shanghai to curb the spread of Covid-19.
Hong Kong-listed dry-bulk shipper Pacific Basin , on the other
hand, was among the top contributors to performance. The company
continues to enjoy a period of higher profits and better earnings
visibility, given tight industry supply, resulting in large
dividend payouts that have significantly enhanced shareholder
returns. Elsewhere, shares in M.P. Evans , which operates
plantations in Indonesia, traded higher due to the sharp rise in
palm-oil prices, while Indian digital-advertising business Affle
rose as revenue growth continues to exceed expectations. In
addition, the firm is well positioned to increase profitability in
other emerging markets, as underlined by its recent acquisition in
Latin America.
Your Company's exposure elsewhere in India dragged on
performance. Elevated energy and commodity prices earlier this year
contributed to inflation pressure that prompted the Reserve Bank of
India to embark on raising interest rates. Higher prices combined
with wavering outlook for global growth weighed on shares. Towards
the end of the review period, Indian equities rebounded sharply,
but the fund's underweight position relative to the comparative
index proved costly. The Trust's holding in Vijaya Diagnostic
Centre sold off amid growing concerns over competition in the
diagnostics sector. In our view, the market has overestimated the
importance of price and underappreciated more important business
drivers such as branding, trust and service quality. Godrej Agrovet
also lagged and we decided to divest the position to pursue other
investments with greater earnings visibility
Further, the rotation away from technology stocks impacted the
Trust's performance, with holdings in the tech-heavy markets of
Taiwan and South Korea not immune from the broader sell-off in the
sector globally. This included the likes of Taiwan Union
Technology, Park Systems, Koh Young Technology and Douzone Bizon .
Also in Taiwan, momo.com underperformed after a strong period of
outperformance, as investors gravitated away from high-growth
companies, despite the company reporting strong quarterly
results.
Your Company's exposure to Sri Lanka, through its holding in
conglomerate John Keells, hurt performance given the country's
turbulent economic and political backdrop. This manifested itself
primarily via a devaluation of the currency, as the company's
operations continue to recover from Covid-induced challenges and
the share price in local currency terms has been relatively stable.
Despite the undoubted challenges Sri Lanka faces, we believe there
is value in John Keell's shares and feel the company is in a
comfortable enough position to continue investing in its
businesses, which is likely to strengthen its competitive moat over
the long-term.
Portfolio activity
We think market volatility has created a price disconnect that
is best exploited through a focus on company fundamentals. In line
with this view, we took the opportunity to introduce some quality
businesses that are well placed to ride on structurally growing
themes, such as health care and technology. This should also help
us mitigate the downside risks to growth from inflation. In a
similar vein, we sold-out of some companies where we were less
convinced of their long-term prospects, either due to disappointing
execution or as a result of a rapidly changing macroeconomic
environment.
As referenced in the Chairman's statement, we decided to
increase the Trust's exposure to China following a sharp pullback
in valuations This included introducing Sinoma Science and
Technology , one of the largest wind-turbine blade producers in
China and the third largest battery separator maker. Sinoma
operates with the entrepreneurial culture of a private enterprise
but, as a state-owned enterprise, has better access to resources,
capital and research and development capabilities. We view the
stock as a proxy for rising demand for renewable energy, including
both wind and lithium batteries. Therefore, as well as being a
high-quality operator, it has strong ESG credentials. We also added
Joinn Laboratories, which offers drug safety assessment services on
the mainland. Being an early mover in innovative drugs, Joinn has a
solid track record, while its services cover the discovery,
pre-clinical and clinical trial stages, underpinned by research
excellence and experienced management.
We also purchased shares in South Korea's Leeno Industrial ,
which designs and manufactures equipment that is vital in the
testing process of most electronic products. It is the global
market leader in an industry where barriers to entry are high due
to the considerable upfront investment required. Leeno supplies the
largest semiconductor manufacturers globally and has a
well-diversified customer base, spanning over a thousand clients.
We are also positive about its longer-term prospects thanks to
strong growth in end markets driven by 5G, artificial intelligence,
medical devices and autonomous driving and electric vehicles. This
is all backed by excellent financials. Its healthy free cash flow
and net-cash balance sheet enables it to fund its capex and working
capital internally and it consistently generates a return on equity
in the high teens. Other additions to the Trust during the period
include Andes Technology, MapmyIndia, IPH and Vijaya Diagnostic
Centre.
Meanwhile, we divested the position in Singapore's Raffles
Medical Group. Despite the firm announcing a good full-year result
in February, we were concerned about the sustainability of
Covid-related revenue and expect the business to see earnings
recede for a period of time. Other exits include Aeon Credit
Service Asia, Aeon Thana Sinsap, Goodyear, Orix Leasing, Ujjivan
Financial Services, Yantai China Pet Foods and YNH Property.
Outlook
We expect Asian markets to remain volatile as the prevailing
stress points of rising inflation - aggravated by the Ukraine
conflict - and monetary policy normalisation continue to raise the
probability of a global economic recession. China's economy also
remains weak and although Beijing has adopted a more pro-growth
stance of late, continued monetary and fiscal support will be
required to revive economic activity and much will depend on the
extent to which the government decides to loosen its 'zero-Covid'
measures. Elsewhere across the region, the recovery in Southeast
Asia is gathering pace amid further progress in the reopening of
economies.
Despite serious macroeconomic and geopolitical pressures, we
have yet to see significant deterioration in company fundamentals
across the region, and the operating performance of the Trust's
holdings has proven to be resilient. Corporate Asia will continue
to battle the twin challenges of higher input costs and rising
interest rates, but we remain encouraged about your companies'
pricing power and debt-free balance sheets.
Despite the more uncertain near-term outlook, our confidence in
the long-term growth prospects for the Asian region remains
undimmed. The opportunities for growth are plentiful, especially
within the smaller companies' space, and we remain positioned
around structural growth themes like domestic consumption,
technology and green energy. Indeed, the turbulence in markets has
resulted in more palatable valuations, creating enticing
opportunities for investors like us who are here for the long
run.
Flavia Cheong, Gabriel Sacks, Neil Sun & Hugh Young
abrdn Asia Limited
14 October 2022
Results
Performance (total return)
1 year 3 year 5 year 10 year Since
% return % return % return % return inception
====================================== ======== ======== ======== ======== =========
Share price(A) -1.7 +18.0 +31.9 +102.8 +2005.2
====================================== ======== ======== ======== ======== =========
Net asset value per Ordinary share
- diluted(AB) -2.0 +20.2 +34.8 +130.6 +2115.6
====================================== ======== ======== ======== ======== =========
MSCI AC Asia ex Japan Small Cap Index
(currency adjusted) -5.1 +31.9 +32.6 +125.3 n/a
====================================== ======== ======== ======== ======== =========
(A) Considered to be an Alternative Performance Measure (see below
for more information).
(B) 1 year return calculated on a diluted basis as CULS is "in the
money". All other returns are calculated on a diluted basis.
Source: abrdn, Morningstar, Lipper & MSCI
Ten Year Financial Record
Year to 31 July 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
======================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total revenue (GBP'000) 11,512 11,427 14,746 10,992 13,896 14,673 14,632 13,595 9,624 18,071
------------------------ ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Per share (p)(A)
======================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Net revenue return(B) 2.77 2.29 3.64 1.84 3.86 3.85 4.33 4.29 1.66 9.34
======================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return 55.09 (6.29) (10.03) 33.08 34.46 7.36 15.64 (36.51) 92.34 (7.02)
======================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Net ordinary dividends
paid/proposed 2.00 2.00 2.10 2.10 2.40 2.60 2.80 2.90 3.00 6.40
======================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Net special dividends
paid/proposed 0.60 0.60 0.90 - 0.80 0.80 1.00 0.90 0.20 1.60
------------------------ ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value per
share (p)(A)
======================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Basic 202.76 193.78 181.23 213.78 247.09 246.37 260.11 221.29 310.90 295.88
======================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Diluted 198.56 190.50 179.26 208.60 238.50 n/a n/a n/a 309.02 295.25
------------------------ ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Shareholders' funds
(GBP'000) 382,932 369,118 343,967 383,735 430,105 433,706 441,010 358,956 487,958 464,396
------------------------ ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(A) Figures for 2013-2021 have been restated to reflect the 5:1 sub-division
as disclosed in note 14.
(B) Figure for 2021 adjusted as disclosed in note 22.
Ten Largest Investments
As at 31 July 2022
3.5% Affle India 3.5% AKR Corporindo
Total assets Total assets
A consumer technology AKR is one of the main
business operating a players in industrial
data platform that helps fuel in Indonesia, which
direct digital advertising. has a high entry barrier.
It is dominant in India Its key strength is
where digitalisation its extensive infrastructure
has reached an inflection and logistic facilities
point. This should support throughout the country.
growth for several years.
--------------- ------------------------------ --------------- --------------------------------
3.3% 3.2% Park Systems Corporation
Total assets AEM Holdings Total assets
A Singapore-based provider The Korean company is
of advanced semiconductor the leading developer
chip testing services of atomic force microscopes,
that has embedded itself a nascent technology
in chipmaker Intel's that could have broad
global supply chain. industrial application
in sectors such as chip-making
and biotechnology. The
company's financials
are sound, despite significant
upfront sales and distribution
costs. This provides
a solid base for earnings
to grow when orders
return.
--------------- ------------------------------ --------------- --------------------------------
3.2% Pacific Basin Shipping 3.0% MOMO.com
Total assets Total assets
Pacific Basin is a Hong Momo, the largest online
Kong-based dry bulk shipping retailer in Taiwan,
group with a favourable serves as a nice proxy
demand outlook, supported for consumer growth
by an improving global in the country, as it
economy and reopening is benefiting from the
prospects. shift to online from
both consumers and vendors.
--------------- ------------------------------ --------------- --------------------------------
3.0% Sinoma Science & Technology 2.9% FPT Corporation
Total assets - A Total assets
One of the largest wind FPT is a diversified
turbine blade producers technology group with
in China and the third a fast-growing software
largest battery separator outsourcing business.
maker, which is backed It also owns a telecoms
by strong R&D capability unit, an electronics
and support from its retailing company, and
parent group. We view has interests in other
the stock as a proxy sectors, such as education.
for the growth of wind We are upbeat about
energy. the profitability prospects
of the various segments,
given its entrepreneurial
management.
--------------- ------------------------------ --------------- --------------------------------
2.8% 2.8% Medikaloka Hermina
Total assets Nam Long Invst Corporation Total assets
A reputable Vietnamese Medikaloka Hermina is
developer in Ho Chi Minh the leading hospital
City that focuses on chain in Indonesia built
the affordable housing for the mass market,
segment, with decent being the lowest cost
land bank and promising operator that has been
project pipeline. able to make decent
margins at lower charges.
It is well positioned
for the growing penetration
and awareness of health
care in the country.
Portfolio
As at 31 July 2022
===========================================================================================================
Valuation Total Valuation
2022 assets 2021
Company Industry Country GBP'000 % GBP'000
============================ ============================== =============== ========= ====== =========
Affle India Media India 18,847 3.5 17,554
============================ ============================== =============== ========= ====== =========
Oil, Gas & Consumable
AKR Corporindo Fuels Indonesia 18,389 3.5 9,589
============================ ============================== =============== ========= ====== =========
Semiconductors &
AEM Holdings Semiconductor Equipment Singapore 17,802 3.3 14,267
============================ ============================== =============== ========= ====== =========
Electronic Equipment,
Park Systems Corporation Instruments & Components South Korea 17,120 3.2 21,736
============================ ============================== =============== ========= ====== =========
Pacific Basin Shipping Marine Hong Kong 17,104 3.2 24,170
============================ ============================== =============== ========= ====== =========
Internet & Direct
MOMO.com Marketing Retail Taiwan 16,160 3.0 33,767
============================ ============================== =============== ========= ====== =========
Sinoma Science & Technology
- A Chemicals China 15,756 3.0 -
============================ ============================== =============== ========= ====== =========
FPT Corporation IT Services Vietnam 15,444 2.9 12,894
============================ ============================== =============== ========= ====== =========
Real Estate Management
Nam Long Invest Corporation & Development Vietnam 15,030 2.8 15,279
============================ ============================== =============== ========= ====== =========
Health Care Providers
Medikaloka Hermina & Services Indonesia 14,656 2.8 11,704
---------------------------- ------------------------------ --------------- --------- ------ ---------
Top ten investments 166,308 31.2
---------------------------- ------------------------------ --------------- --------- ------ ---------
Cyient Software India 14,016 2.6 17,445
============================ ============================== =============== ========= ====== =========
M.P. Evans Group Food Products United Kingdom 13,857 2.6 11,660
============================ ============================== =============== ========= ====== =========
Oil, Gas & Consumable
Aegis Logistics Fuels India 13,716 2.6 13,799
============================ ============================== =============== ========= ====== =========
Dah Sing Financial
Holdings Banks Hong Kong 13,682 2.6 11,709
============================ ============================== =============== ========= ====== =========
Mega Lifesciences (Foreign) Pharmaceuticals Thailand 13,524 2.6 10,578
============================ ============================== =============== ========= ====== =========
Bank OCBC NISP Banks Indonesia 13,356 2.5 13,593
============================ ============================== =============== ========= ====== =========
Joinn Laboratories Life Sciences Tools
China & Services China 12,745 2.4 -
============================ ============================== =============== ========= ====== =========
UIE Food Products Denmark 12,352 2.3 10,157
============================ ============================== =============== ========= ====== =========
Oriental Holdings Automobiles Malaysia 12,281 2.3 8,792
============================ ============================== =============== ========= ====== =========
Precision Tsugami China
Corporation Machinery China 11,973 2.2 12,403
---------------------------- ------------------------------ --------------- --------- ------ ---------
Top twenty investments 297,810 55.9
---------------------------- ------------------------------ --------------- --------- ------ ---------
Sunonwealth Electric
Machinery Industry Machinery Taiwan 11,071 2.1 10,423
============================ ============================== =============== ========= ====== =========
Asian Terminals Transportation Infrastructure Philippines 10,161 1.9 9,852
============================ ============================== =============== ========= ====== =========
Millennium & Copthorne Hotels, Restaurants
Hotels New Zealand(A) & Leisure New Zealand 9,808 1.8 10,626
============================ ============================== =============== ========= ====== =========
AEON Credit Service
(M) Consumer Finance Malaysia 9,701 1.8 7,553
============================ ============================== =============== ========= ====== =========
Real Estate Management
Cebu Holdings & Development Philippines 9,664 1.8 12,069
============================ ============================== =============== ========= ====== =========
Real Estate Management
Bukit Sembawang Estates & Development Singapore 9,322 1.7 9,186
============================ ============================== =============== ========= ====== =========
Sporton International Professional Services Taiwan 9,123 1.7 9,619
============================ ============================== =============== ========= ====== =========
Ultrajaya Milk Industry
& Trading Food Products Indonesia 9,030 1.7 8,525
============================ ============================== =============== ========= ====== =========
Hana Microelectronics Electronic Equipment,
(Foreign) Instruments & Components Thailand 8,736 1.7 14,304
============================ ============================== =============== ========= ====== =========
IPH Professional Services Australia 7,940 1.5 -
---------------------------- ------------------------------ --------------- --------- ------ ---------
Top thirty investments 392,366 73.6
---------------------------- ------------------------------ --------------- --------- ------ ---------
John Keells Holdings Industrial Conglomerates Sri Lanka 7,640 1.4 13,941
============================ ============================== =============== ========= ====== =========
Real Estate Management
Prestige Estates Projects & Development India 7,162 1.3 5,521
============================ ============================== =============== ========= ====== =========
Sanofi India Pharmaceuticals India 6,770 1.3 9,243
============================ ============================== =============== ========= ====== =========
Life Sciences Tools
Syngene International & Services India 6,521 1.2 3,976
============================ ============================== =============== ========= ====== =========
Semiconductors &
LEENO Industrial Semiconductor Equipment South Korea 6,322 1.2 -
============================ ============================== =============== ========= ====== =========
Real Estate Management
Yoma Strategic Holdings & Development Myanmar 5,943 1.1 5,392
============================ ============================== =============== ========= ====== =========
Hotels, Restaurants
Shangri-La Hotels Malaysia & Leisure Malaysia 5,867 1.1 5,740
============================ ============================== =============== ========= ====== =========
United Plantations Food Products Malaysia 5,815 1.1 5,097
============================ ============================== =============== ========= ====== =========
Electronic Equipment,
Taiwan Union Instruments & Components Taiwan 5,778 1.1 10,693
============================ ============================== =============== ========= ====== =========
Health Care Providers
Vijaya Diagnostic Centre & Services India 5,645 1.1 -
---------------------------- ------------------------------ --------------- --------- ------ ---------
Top forty investments 455,829 85.5
---------------------------- ------------------------------ --------------- --------- ------ ---------
Independent Power
Absolute Clean Energy and Renewable Electricity
(Foreign) Producers Thailand 5,115 1.0 7,313
============================ ============================== =============== ========= ====== =========
Semiconductors &
Koh Young Technology Semiconductor Equipment South Korea 4,879 0.9 8,347
============================ ============================== =============== ========= ====== =========
Nanofilm Technologies
International Chemicals Singapore 4,856 0.9 13,347
============================ ============================== =============== ========= ====== =========
Semiconductors &
Pentamaster International Semiconductor Equipment Malaysia 4,850 0.9 4,271
============================ ============================== =============== ========= ====== =========
Tisco Financial Group
(Foreign) Banks Thailand 4,827 0.9 5,154
============================ ============================== =============== ========= ====== =========
KMC Kuei Meng International Leisure Products Taiwan 4,560 0.9 3,315
============================ ============================== =============== ========= ====== =========
Convenience Retail
Asia Food & Staples Retailing Hong Kong 4,314 0.8 3,467
============================ ============================== =============== ========= ====== =========
NZX Capital Markets New Zealand 4,253 0.8 6,427
============================ ============================== =============== ========= ====== =========
Semiconductors &
Aspeed Technology Semiconductor Equipment Taiwan 3,652 0.7 5,543
============================ ============================== =============== ========= ====== =========
Tatva Chintan Pharma Chemicals India 3,565 0.7 2,132
---------------------------- ------------------------------ --------------- --------- ------ ---------
Top fifty investments 500,700 94.0
---------------------------- ------------------------------ --------------- --------- ------ ---------
Semiconductors &
Andes Technology Semiconductor Equipment Taiwan 3,470 0.6 -
============================ ============================== =============== ========= ====== =========
Nazara Technologies Entertainment India 3,434 0.6 5,583
============================ ============================== =============== ========= ====== =========
Credit Bureau Asia Professional Services Singapore 3,228 0.6 3,778
============================ ============================== =============== ========= ====== =========
Ecloudvalley Digital
Technology IT Services Taiwan 3,180 0.6 5,142
============================ ============================== =============== ========= ====== =========
Douzone Bizon Software South Korea 3,108 0.6 4,157
============================ ============================== =============== ========= ====== =========
Thai Stanley Electric
(Foreign) Auto Components Thailand 2,912 0.5 4,680
============================ ============================== =============== ========= ====== =========
CE Info Systems Software India 2,421 0.5 -
============================ ============================== =============== ========= ====== =========
Manulife Holdings Insurance Malaysia 1,675 0.3 1,561
============================ ============================== =============== ========= ====== =========
AEON Stores Hong Kong Multiline Retail Hong Kong 279 0.1 473
============================ ============================== =============== ========= ====== =========
First Sponsor Group Real Estate Management
(Warrants 21/03/2029) & Development Singapore 276 0.1 303
---------------------------- ------------------------------ --------------- --------- ------ ---------
Top sixty investments 524,683 98.5
---------------------------- ------------------------------ --------------- --------- ------ ---------
First Sponsor Group Real Estate Management
(Warrants 30/05/2024) & Development Singapore 158 - 32
============================ ============================== =============== ========= ====== =========
G3 Exploration Oil, Gas & Consumable China - - -
Fuels
---------------------------- ------------------------------ --------------- --------- ------ ---------
Total investments 524,841 98.5
---------------------------- ------------------------------ --------------- --------- ------ ---------
Net current assets 8,071 1.5
---------------------------- ------------------------------ --------------- --------- ------ ---------
Total assets(B) 532,912 100.0
---------------------------- ------------------------------ --------------- --------- ------ ---------
(A) Holding includes investment in both common and preference lines.
(B) Total assets less current liabilities.
Directors' Report
The Directors present their Report and the audited financial
statements for the year ended 31 July 2022.
Change of Name
On 4 April 2022 the Company changed its name from Aberdeen
Standard Asia Focus PLC to abrdn Asia Focus plc.
Results and Dividends
Details of the Company's results and proposed dividends are
shown above.
Investment Trust Status
The Company (registered in England & Wales No. 03106339) has
been accepted by HM Revenue & Customs as an investment trust
subject to the Company continuing to meet the relevant eligibility
conditions of Section 1158 of the Corporation Tax Act 2010 and the
ongoing requirements of Part 2 Chapter 3 Statutory Instrument
2011/2999 for all financial years commencing on or after 1 August
2012. The Directors are of the opinion that the Company has
conducted its affairs for the year ended 31 July 2022 so as to
enable it to comply with the ongoing requirements for investment
trust status.
Individual Savings Accounts
The Company has conducted its affairs so as to satisfy the
requirements as a qualifying security for Individual Savings
Accounts. The Directors intend that the Company will continue to
conduct its affairs in this manner.
Capital Structure, Buybacks and Issuance
The Company's capital structure is summarised in note 14 to the
financial statements. On 4 February 2022 the Company completed a
five for one share split and shareholders received five New
Ordinary Shares of 5p each in exchange for each existing Ordinary
Share of 25p held as at the close of business on 3 February 2022.
The new Ordinary shares of 5p each retained the Stock Exchange
ticker (AAS) but were assigned a new ISIN and SEDOL as follows:
New ISIN: GB00BMF19B58
New SEDOL: BMF19B5
At 31 July 2022, there were 156,953,631 fully paid Ordinary
shares of 5p each (2021 - 31,189,684 Ordinary shares of 25p each)
in issue with a further 51,744,590 Ordinary shares of 5p held in
treasury (2021 - 10,348,918 Ordinary shares of 25p each held in
treasury). During the year no Ordinary shares were purchased in the
market for treasury (2021 - 1,055,000 Ordinary shares of 25p each
purchased for treasury). During the period and up to the date of
this report no new Ordinary shares were issued for cash and no
shares were sold from or purchased into treasury.
On 14 December 2021, 13,764 units of Convertible Unsecured Loan
Stock 2025 were converted into 935 new Ordinary shares of 25p each.
On 14 June 2022 1,579 units of Convertible Unsecured Loan Stock
2025 were converted into 536 new Ordinary shares of 5p each. In
accordance with the terms of the CULS Issue, (subsequently adjusted
to reflect the share split in February 2022), the conversion price
of the CULS for the December conversion was determined at 1465.0p
nominal of CULS for one Ordinary share of 25p and the conversion
price for the June conversion was determined at 293.0p nominal of
CULS for one Ordinary share of 5p.
Voting Rights
Ordinary shareholders are entitled to vote on all resolutions
which are proposed at general meetings of the Company. The Ordinary
shares carry a right to receive dividends. On a winding up, after
meeting the liabilities of the Company, the surplus assets will be
paid to Ordinary shareholders in proportion to their
shareholdings.
CULS holders have the right to attend but not vote at general
meetings of the Company. A separate resolution of CULS holders
would be required to be passed before any modification or
compromise of the rights attaching to the CULS can be made.
Gearing
On 1 December 2020 the Company issued a GBP30 million 15 year
Senior Unsecured Loan Note (the "Loan Note") at an annualised
interest rate of 3.05%. The Loan Note is unsecured, unlisted and
denominated in sterling. The Loan Note ranks pari passu with the
Company's other unsecured and unsubordinated financial
indebtedness. The Company used the proceeds of the Loan Note issue
to repay, and cancel in full, the Company's loan facility with RBS
and the remainder was invested in the portfolio by the Investment
Manager.
Management Agreement
The Company has appointed abrdn Fund Managers Limited ("aFML"),
a wholly owned subsidiary of abrdn plc, as its alternative
investment fund manager. aFML has been appointed to provide
investment management, risk management, administration and company
secretarial services and promotional activities to the Company. The
Company's portfolio is managed by abrdn Asia Limited ("abrdn Asia")
by way of a group delegation agreement in place between aFML and
abrdn Asia. In addition, aFML has sub-delegated administrative and
secretarial services to Aberdeen Asset Management PLC and
promotional activities to Aberdeen Asset Managers Limited
("AAML").
Management Fee
With effect from 1 August 2021 the annual management fee has
been charged at 0.85% for the first GBP250,000,000, 0.60% for the
next GBP500,000,000 and 0.50% over GBP750,000,000 . Previously, the
monthly management fee was charged at 0.08%. Investment management
fees are charged 25% to revenue and 75% to capital.
The management agreement may be terminated by either the Company
or the Manager on the expiry of three months' written notice
(reduced from 12 months). On termination, the Manager would be
entitled to receive fees which would otherwise have been due to
that date.
The Management Engagement Committee reviews the terms of the
management agreement on a regular basis and have confirmed that,
due to the long-term relative performance, investment skills,
experience and commitment of the investment management team, in
their opinion the continuing appointment of aFML and abrdn Asia is
in the interests of shareholders as a whole.
Political and Charitable Donations
The Company does not make political donations (2021 - nil) and
has not made any charitable donations during the year (2021 -
nil).
Risk Management
Details of the financial risk management policies and objectives
relative to the use of financial instruments by the Company are set
out in note 19 to the financial statements.
The Board
The current Directors, N K Cayzer, Randal Dunluce (The Earl of
Antrim), C Black, K Shanmuganathan, L Cooper (appointed 15 June
2022) and A Finn (appointed 13 July 2022), together with D Guthrie
who resigned on 13 April 2022, were the only Directors who served
during the year. During the period Viscount Dunluce succeeded to
the title Earl of Antrim following the death of his father.
Pursuant to Principle 23 of the AIC's Code of Corporate Governance
which recommends that all directors should be subject to annual
re-election by shareholders, all the members of the Board will
retire at the AGM scheduled for 30 November 2022 and will offer
themselves for re-election. Details of each Director's contribution
to the long term success of the Company are provided on page 50 of
the published Annual Report and financial statements for the year
ended 31 July 2022.
The Board considers that there is a balance of skills and
experience within the Board relevant to the leadership and
direction of the Company and that all the Directors contribute
effectively.
In common with most investment trusts, the Company has no
employees. Directors' & Officers' liability insurance cover has
been maintained throughout the year at the expense of the
Company.
The Role of the Chairman
The Chairman is responsible for providing effective leadership
to the Board, by setting the tone of the Company, demonstrating
objective judgement and promoting a culture of openness and debate.
The Chairman facilitates the effective contribution, and encourages
active engagement, by each Director. In conjunction with the
Company Secretary, the Chairman ensures that Directors receive
accurate, timely and clear information to assist them with
effective decision-making. The Chairman leads the evaluation of the
Board and individual Directors, and acts upon the results of the
evaluation process by recognising strengths and addressing any
weaknesses. The Chairman also engages with major shareholders and
ensures that all Directors understand shareholder views.
The Company has not appointed a senior independent director.
Accordingly the Audit Committee Chairman in combination with the
other independent Directors fulfils the duties of the senior
independent director, acting as a sounding board for the Chairman
and acting as an intermediary for other directors as applicable.
The Audit Committee Chairman is also available to shareholders to
discuss any concerns they may have.
Corporate Governance
The Company is committed to high standards of corporate
governance. The Board is accountable to the Company's shareholders
for good governance and this statement describes how the Company
has applied the principles identified in the UK Corporate
Governance Code as published in July 2018 (the "UK Code"), which is
available on the Financial Reporting Council's (the "FRC") website:
frc.org.uk.
The Board has also considered the principles and provisions of
the AIC Code of Corporate Governance as published in February 2019
(the "AIC Code"). The AIC Code addresses the principles and
provisions set out in the UK Code, as well as setting out
additional provisions on issues that are of specific relevance to
the Company. The AIC Code is available on the AIC's website:
theaic.co.uk.
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the FRC
provides more relevant information to shareholders.
The Board confirms that, during the year, the Company complied
with the principles and provisions of the AIC Code and the relevant
provisions of the UK Code, except as set out below.
1. Interaction with the workforce (provisions 2, 5 and 6);
2. the role and responsibility of the chief executive (provisions 9 and 14);
3. previous experience of the chairman of a remuneration committee (provision 32);
4. executive directors' remuneration (provisions 33 and 36 to 40);
5. senior independent director (provision 12); and
6. tenure of the Chairman (provision 19).
For the reasons set out in the AIC Code, and as explained in the
UK Corporate Governance Code, the Board considers that provisions 1
to 4 above are not relevant to the position of the Company, being
an externally-managed investment company. In particular, all of the
Company's day-to-day management and administrative functions are
outsourced to third parties. As a result, the Company has no
executive directors, employees or internal operations. The Company
has therefore not reported further in respect of provisions 1 to 4
above. The tenure of the Chairman is discussed further under
'Policy on Tenure', below. The full text of the Company's Corporate
Governance Statement can be found on the Company's website:
asia-focus.co.uk.
During the year ended 31 July 2022, the Board had six scheduled
meetings. In addition, the Audit Committee met twice and the
Management Engagement Committee met once and there has been a
number of ad hoc Board meetings to discuss investment strategy.
Between meetings the Board maintains regular contact with the
Manager. Directors have attended the following scheduled Board
meetings and Committee meetings during the year ended 31 July 2022
(with their eligibility to attend the relevant meeting in
brackets):
Director Board Audit Nomination Management
Com Com Engagement
Com
================= ===== ===== ========== ===========
N Cayzer
(A) 6 (6) n/a 3 (3) 1 (1)
================= ===== ===== ========== ===========
C Black 6 (6) 2 (2) 3 (3) 1 (1)
================= ===== ===== ========== ===========
Earl of Antrim 6 (6) 2 (2) 3 (3) 1 (1)
================= ===== ===== ========== ===========
D Guthrie
(B) 4 (4) 2 (2) 2 (2) 1 (1)
================= ===== ===== ========== ===========
K Shanmuganathan 5 (5) 2 (2) 3 (3) 1 (1)
================= ===== ===== ========== ===========
L. Cooper
(C) 1 (1) 0 (0) 1 (1) 0 (0)
================= ===== ===== ========== ===========
A Finn (D) 1 (1) 0 (0) 0 (0) 0 (0)
================= ===== ===== ========== ===========
(A) Mr Cayzer is not a member of
the Audit Committee
(B) Ms Guthrie resigned from the
Board on 13 April 2022
(C) Mr Cooper was appointed to
the Board on 15 June 2022
(D) Mr Finn was appointed to the
Board on 13 July 2022
Policy on Tenure - Chairman
The Company's policy, which is kept under very regular review,
is in line with the Listing Rules, the Chairman must remain
independent of the Manager and the Company. The independent
Directors believe that the independence of the Chairman should be
judged by the degree to which the interests of the shareholders and
stakeholders as a whole are being served. The Directors note that
Mr Cayzer will be retiring from the Board at the conclusion of the
Annual General Meeting on 30 November 2022 and Mr Shanmuganathan
has accepted the Board's invitation to become Chairman from that
date.
Policy on Tenure - Directors
The Board's policy on tenure is that Directors need not serve on
the Board for a limited period of time only. The Board does not
consider that the length of service of a Director is as important
as the contribution he or she has to make, and therefore the length
of service will be determined on a case-by-case basis. In
accordance with corporate governance best practice, all Directors,
including those who have served for more than nine years or who are
non-independent, voluntarily offer themselves for re-election on an
annual basis.
Board Committees
Audit Committee
The Audit Committee Report is on pages 61 to 63 of of the
published Annual Report and financial statements for the year ended
31 July 2022.
Nomination Committee
All appointments to the Board of Directors are considered by the
Nomination Committee which comprises all of the Directors. The
Board's overriding priority in appointing new Directors to the
Board is to identify the candidate with the best range of skills
and experience to complement existing Directors. The Board also
recognises the benefits of diversity and its policy on diversity is
referred to in the Strategic Report.
During the year the Nomination Committee conducted a search for
two new non executive Directors using the services of Fletcher
Jones Limited, an independent recruitment consultant. As part of
the search a specification of desired attributes and qualities was
prepared and the recruitment process culminated in the appointment
of Mr Lindsay Cooper on 15 June 2022 and the appointment of Mr Alex
Finn on 13 July 2022.
The Board undertakes an annual evaluation of the Board,
Directors, the Chairman and the Audit Committee which is conducted
by questionnaires. The 2022 evaluation highlighted certain areas of
further focus such as continuing professional development which
will be addressed with input where necessary from the Company's
advisors. Overall, the Committee has concluded that the Board has
an excellent balance of experience, knowledge of investment
markets, legal regulation and financial accounting and continues to
work in a collegiate and effective manner.
The Nomination Committee has reviewed the contributions of each
Director ahead of their proposed election and re-elections at the
AGM on 30 November 2022. Notwithstanding that Mr Cayzer intends to
retire from the Board at the AGM on 30 November 2022, the Committee
wishes to reiterate its belief that Mr Cayzer remains independent
of the Manager. Ms Black has brought significant financial
promotion and marketing expertise to the Board and has been closely
involved in the redevelopment of the Company's website during the
year; the Earl of Antrim has continued to bring detailed wealth
management investment experience and insight to the Board; and Mr
Shanmuganathan has continued to bring his deep experience of Asia
as well as significant strategic and financial vision to the Board.
Although Mr Cooper and Mr Finn were appointed to the Board
immediately prior to the Company's year end they have already
settled into their roles seamlessly and, respectively, are bringing
excellent regional/investment experience and expert relevant and
recent accounting and financial experience to the Board. For the
foregoing reasons, the independent members of the Nomination
Committee have no hesitation in recommending the
election/re-election of each Director who will be submitting
themselves for re-election at the AGM on 30 November 2022.
Management Engagement Committee
The Management Engagement Committee comprises all of the
Directors and was chaired by Ms Guthrie up to her resignation in
April 2022 and subsequently by the Chairman. The Committee is now
chaired by Mr Finn following his appointment to the Board on 13
July 2022. The Committee is responsible for reviewing the
performance of the Investment Manager and its compliance with the
terms of the management and secretarial agreement. The terms and
conditions of the Investment Manager's appointment, including an
evaluation of fees, are reviewed by the Committee on an annual
basis. The Committee believes that the continuing appointment of
the Manager on the terms agreed is in the interests of shareholders
as a whole.
Remuneration Committee
Under the UK Listing Authority rules, where an investment trust
has only non-executive directors, the Code principles relating to
directors' remuneration do not apply. Accordingly, matters relating
to remuneration are dealt with by the full Board, which acts as the
Remuneration Committee, and is chaired by the Chairman.
The Company's remuneration policy is to set remuneration at a
level to attract individuals of a calibre appropriate to the
Company's future development. Further information on remuneration
is disclosed in the Directors' Remuneration Report on pages 56 to
59 of the published Annual Report and financial statements for the
year ended 31 July 2022.
Terms of Reference
The terms of reference of all the Board Committees may be found
on the Company's website asia-focus.co.uk and copies are available
from the Company Secretary upon request. The terms of reference are
reviewed and re-assessed by the Board for their adequacy on an
annual basis.
Internal Control
In accordance with the Disclosure and Transparency Rules (DTR
7.2.5), the Board is ultimately responsible for the Company's
system of internal control and for reviewing its effectiveness and
confirms that there is an ongoing process for identifying,
evaluating and managing the significant risks faced by the Company.
This process has been in place for the year under review and up to
the date of approval of this Annual Report and Financial
Statements. It is regularly reviewed by the Board and accords with
the FRC Guidance.
The Board has reviewed the effectiveness of the system of
internal control. In particular, it has reviewed and updated the
process for identifying and evaluating the significant risks
affecting the Company and policies by which these risks are
managed.
The Directors have delegated the investment management of the
Company's assets to the abrdn Group within overall guidelines, and
this embraces implementation of the system of internal control,
including financial, operational and compliance controls and risk
management. Internal control systems are monitored and supported by
the abrdn Group's internal audit function which undertakes periodic
examination of business processes, including compliance with the
terms of the management agreement, and ensures that recommendations
to improve controls are implemented.
Risks are identified and documented through a risk management
framework by each function within the abrdn Group's activities.
Risk includes financial, regulatory, market, operational and
reputational risk. This helps the internal audit risk assessment
model identify those functions for review. Any weaknesses
identified are reported to the Board, and timetables are agreed for
implementing improvements to systems. The implementation of any
remedial action required is monitored and feedback provided to the
Board.
The significant risks faced by the Company have been identified
as being financial; operational; and compliance-related.
The key components of the process designed by the Directors to
provide effective internal control are outlined below:
- the Manager prepares forecasts and management accounts which
allow the Board to assess the Company's activities and review its
performance;
- the Board and Manager have agreed clearly defined investment
criteria, specified levels of authority and exposure limits.
Reports on these issues, including performance statistics and
investment valuations, are regularly submitted to the Board and
there are meetings with the Manager and Investment Manager as
appropriate;
- as a matter of course the Manager's compliance department
continually reviews abrdn's operations and reports to the Board on
a six monthly basis;
- written agreements are in place which specifically define the
roles and responsibilities of the Manager and other third party
service providers and, where relevant, ISAE3402 Reports, a global
assurance standard for reporting on internal controls for service
organisations, or their equivalents are reviewed;
- the Board has considered the need for an internal audit
function but, because of the compliance and internal control
systems in place within abrdn, has decided to place reliance on the
Manager's systems and internal audit procedures; and
- at its September 2022 meeting, the Audit Committee carried out
an annual assessment of internal controls for the year ended 31
July 2022 by considering documentation from the Manager, Investment
Manager and the Depositary, including the internal audit and
compliance functions and taking account of events since 31 July
2022. The results of the assessment, that internal controls are
satisfactory, were then reported to the Board at the next Board
meeting.
Internal control systems are designed to meet the Company's
particular needs and the risks to which it is exposed. Accordingly,
the internal control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives and by
their nature can only provide reasonable and not absolute assurance
against mis-statement and loss.
Going Concern
In accordance with the Financial Reporting Council's guidance
the Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern. The Company's assets
consist of equity shares in companies listed on recognised stock
exchanges and are considered by the Board to be realisable within a
relatively short timescale under normal market conditions. The
Board has set overall limits for borrowing and reviews regularly
the Company's level of gearing, cash flow projections and
compliance with banking covenants. The Board has also reviewed
stress testing and liquidity analysis covering the impact of
significant historical market events such as the 1997 Asian Crisis
and 2008 Global Financial Crisis on the liquidity of the portfolio
to ensure that even in significant negative markets the Company
would still be able to raise sufficient capital to repay its
liabilities.
The Directors are mindful of the Principal Risks and
Uncertainties disclosed in the Strategic Report and they believe
that the Company has adequate financial resources to continue its
operational existence for a period of not less than 12 months from
the date of approval of this Annual Report. They have arrived at
this conclusion having confirmed that the Company's diversified
portfolio of realisable securities is sufficiently liquid and could
be used to meet short-term funding requirements were they to arise,
including in current market conditions caused by the Covid-19
pandemic and the conflict in Ukraine. The Directors have also
reviewed the revenue and ongoing expenses forecasts for the coming
year. Accordingly, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the
financial statements.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation
where a Director has a conflict of interest. As part of this
process, the Directors prepare a list of other positions held and
all other conflict situations that may need to be authorised either
in relation to the Director concerned or his connected persons. The
Board considers each Director's situation and decides whether to
approve any conflict, taking into consideration what is in the best
interests of the Company and whether the Director's ability to act
in accordance with his or her wider duties is affected. Each
Director is required to notify the Company Secretary of any
potential, or actual, conflict situations that will need
authorising by the Board. Authorisations given by the Board are
reviewed at each Board meeting.
No Director has a service contract with the Company although
Directors are issued with letters of appointment upon appointment.
The Directors' interests in contractual arrangements with the
Company are as shown in note 18 to the financial statements. No
other Directors had any interest in contracts with the Company
during the period or subsequently.
The Board has adopted appropriate procedures designed to prevent
bribery. The Company receives periodic reports from its service
providers on the anti-bribery policies of these third parties. It
also receives regular compliance reports from the Manager.
The Criminal Finances Act 2017 introduced a new corporate
criminal offence of "failing to take reasonable steps to prevent
the facilitation of tax evasion". The Board has confirmed that it
is the Company's policy to conduct all of its business in an honest
and ethical manner. The Board takes a zero-tolerance approach to
facilitation of tax evasion, whether under UK law or under the law
of any foreign country.
Accountability and Audit
The respective responsibilities of the Directors and the
auditors in connection with the financial statements are set out on
pages 60 and 71 of the published Annual Report and financial
statements for the year ended 31 July 2022, respectively.
Each Director confirms that:
- so far as he or she 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 they could
reasonably be expected to have taken as a Director in order to make
themselves aware of any relevant audit information and to establish
that the Company's auditors are aware of that information.
Additionally there have been no important events since the year
end that impact this Annual Report.
The Directors have reviewed the independent auditors' procedures
in connection with the provision of non-audit services. No non
audit services were provided by the independent auditors during the
year and the Directors remain satisfied that the auditors'
objectivity and independence has been safeguarded.
Independent Auditors
At the January 2022 AGM shareholders approved the re-appointment
of PricewaterhouseCoopers LLP ("PwC") as independent auditors to
the Company. PwC has expressed its willingness to continue to be
the Company's auditors and a Resolution to re-appoint PwC as the
Company's auditors and to authorise the Directors to fix the
auditors' remuneration will be put to the forthcoming Annual
General Meeting.
Substantial Interests
The Board has been advised that the following shareholders owned
3% or more of the issued Ordinary share capital of the Company at
31 July 2022:
Shareholder No. of % held
Ordinary
shares
held
============================= ========== ======
City of London Investment
Management Company 35,545,725 22.7
============================= ========== ======
Allspring Global Investments 17,499,145 11.2
============================= ========== ======
Interactive Investor
(non-beneficial) 12,730,109 8.1
============================= ========== ======
abrdn Savings Scheme
(non-beneficial) 12,603,327 8.0
============================= ========== ======
Hargreaves Lansdown
(non-beneficial) 11,495,052 7.3
============================= ========== ======
Funds managed by abrdn 6,506,327 4.2
============================= ========== ======
Charles Stanley 5,643,336 3.6
============================= ========== ======
1607 Capital Partners 5,139,291 3.3
============================= ========== ======
On 16 September 2022 the Company received notice that City of
London Investment Management Company had increased its interest to
36,113,225 Ordinary shares, representing 23.0% of the issued
capital. There have been no other significant changes notified in
respect of the above holdings between 31 July 2022 and 14 October
2022.
The UK Stewardship Code and Proxy Voting
Responsibility for actively monitoring the activities of
portfolio companies has been delegated by the Board to the AIFM
which has sub-delegated that authority to the Manager.
The Manager is a tier 1 signatory of the UK Stewardship Code
which aims to enhance the quality of engagement by investors with
investee companies in order to improve their socially responsible
performance.
Relations with Shareholders
The Directors place a great deal of importance on communication
with shareholders. The Annual Report is widely distributed to other
parties who have an interest in the Company's performance.
Shareholders and investors may obtain up to date information on the
Company through the Manager's freephone information service and the
Company's website asia-focus.co.uk. The Company responds to letters
from shareholders on a wide range
of issues.
The Board's policy is to communicate directly with shareholders
and their representative bodies without the involvement of the
abrdn Group (either the Company Secretary or the Manager) in
situations where direct communication is required and usually a
representative from the Board meets with major shareholders on an
annual basis in order to gauge their views.
The Notice of the Annual General Meeting, included within the
Annual Report and financial statements, is sent out at least 20
working days in advance of the meeting. All shareholders have the
opportunity to put questions to the Board or the Manager, either
formally at the Company's Annual General Meeting or, where
possible, at the subsequent buffet luncheon for shareholders. The
Company Secretary is available to answer general shareholder
queries at any time throughout the year.
Special Business at the Annual
General Meeting
Directors' Authority to Allot Relevant Securities
Approval is sought in Resolution 10, an ordinary resolution, to
renew the Directors' existing general power to allot securities but
will also, provide a further authority (subject to certain limits),
to allot shares under a fully pre-emptive rights issue. The effect
of Resolution 10 is to authorise the Directors to allot up to a
maximum of 104,635,754 shares in total (representing approximately
2/3 of the existing issued capital of the Company), of which a
maximum of 52,317,877 shares (approximately 1/3 of the existing
issued share capital) may only be applied to fully pre-emptive
rights issues. This authority is renewable annually and will expire
at the conclusion of the next Annual General Meeting. The Board has
no present intention to utilise this authority.
Disapplication of Pre-emption Rights
Resolution 11 is a special resolution that seeks to renew the
Directors' existing authority until the conclusion of the next
Annual General Meeting to make limited allotments of shares for
cash of up to 10% of the issued share capital other than according
to the statutory pre-emption rights which require all shares issued
for cash to be offered first to all existing shareholders. This
authority includes the ability to sell shares that have been held
in treasury (if any), having previously been bought back by the
Company. The Board has established guidelines for treasury shares
and will only consider buying in shares for treasury at a discount
to their prevailing NAV and selling them from treasury at or above
the then prevailing NAV.
New shares issued in accordance with Resolution 11 and subject
to the authority to be conferred by Resolution 10 will always be
issued at a premium to the NAV per Ordinary share at the time of
issue. The Board will issue new Ordinary shares or sell Ordinary
shares from treasury for cash when it is appropriate to do so, in
accordance with its current policy. It is therefore possible that
the issued share capital of the Company may change between the date
of this document and the Annual General Meeting and therefore the
authority sought will be in respect of 10% of the issued share
capital as at the date of the Annual General Meeting rather than
the date of this document.
Purchase of the Company's Shares
Resolution 12 is a special resolution proposing to renew the
Directors' authority to make market purchases of the Company's
shares in accordance with the provisions contained in the Companies
Act 2006 and the Listing Rules of the Financial Conduct Authority.
The minimum price to be paid per Ordinary share by the Company will
not be less than 5p per share (being the nominal value) and the
maximum price should not be more than the higher of (i) 5% above
the average of the middle market quotations for the shares for the
preceding five business days; and (ii) the higher of the last
independent trade and the current highest independent bid on the
trading venue where the purchase is carried out.
The Directors do not intend to use this authority to purchase
the Company's Ordinary shares unless to do so would result in an
increase in NAV per share and would be in the interests of
shareholders generally. The authority sought will be in respect of
14.99% of the issued share capital as at the date of the Annual
General Meeting rather than the date of this document.
The authority being sought in Resolution 12 will expire at the
conclusion of the next Annual General Meeting unless it is renewed
before that date. Any Ordinary shares purchased in this way will
either be cancelled and the number of Ordinary shares will be
reduced accordingly or under the authority granted in Resolution 11
above, may be held in treasury. During the year the Company has not
bought back any Ordinary shares for Treasury.
If Resolutions 10 to 12 are passed then an announcement will be
made on the date of the Annual General Meeting which will detail
the exact number of Ordinary shares to which each of these
authorities relate.
These powers will give the Directors additional flexibility
going forward and the Board considers that it will be in the
interests of the Company that such powers be available. Such powers
will only be implemented when, in the view of the Directors, to do
so will be to the benefit of shareholders as a whole.
Notice of Meetings
Resolution 13 is a special resolution seeking to authorise the
Directors to call general meetings of the Company (other than
Annual General Meetings) on 14 days' notice. This approval will be
effective until the Company's next Annual General Meeting in 2023.
In order to utilise this shorter notice period, the Company is
required to ensure that shareholders are able to vote
electronically at the general meeting called on such short notice.
The Directors confirm that, in the event that a general meeting is
called, they will give as much notice as practicable and will only
utilise the authority granted by Resolution 13 in limited and time
sensitive circumstances.
Dividend Policy
As a result of the timing of the payment of the Company's
quarterly dividends, the Company's Shareholders are unable to
approve a final dividend each year. In line with good corporate
governance, the Board therefore proposes to put the Company's
dividend policy to Shareholders for approval at the Annual General
Meeting and on an annual basis thereafter.
The Company's dividend policy shall be that dividends on the
Ordinary Shares are payable quarterly in relation to periods ending
October, January, April and July. It is intended that the Company
will pay quarterly dividends consistent with the expected annual
underlying portfolio yield. The Company has the flexibility in
accordance with its Articles to make distributions from capital.
Resolution 3, an ordinary resolution, will seek shareholder
approval for the dividend policy.
Recommendation
Your Board considers Resolutions 10 to 13 to be in the best
interests of the Company and its members as a whole and most likely
to promote the success of the Company for the benefit of its
members as a whole. Accordingly, your Board unanimously recommends
that shareholders should vote in favour of Resolutions 10 to 13 to
be proposed at the AGM, as they intend to do in respect of their
own beneficial shareholdings amounting to 14,060 Ordinary
shares.
By order of the Board
Aberdeen Asset Management PLC -Secretaries
Bow Bells House, 1 Bread Street
London EC4M 9HH
14 October 2022
Statement of Comprehensive Income
Year ended 31 July Year ended 31 July
2022 2021
============================== ===== =========================== =================================
(*Restated) (*Restated)
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ===== ======= ======== ======== =========== =========== =======
(Losses)/gains on investments 10 - (22,324) (22,324) - 148,078 148,078
============================== ===== ======= ======== ======== =========== =========== =======
Income 3 18,071 - 18,071 9,624 - 9,624
============================== ===== ======= ======== ======== =========== =========== =======
Exchange gains/(losses) - 72 72 - (425) (425)
============================== ===== ======= ======== ======== =========== =========== =======
Investment management
fees 4 (801) (2,403) (3,204) (3,570) - (3,570)
============================== ===== ======= ======== ======== =========== =========== =======
Administrative expenses(A) 5,22 (1,163) (398) (1,561) (1,136) (250) (1,386)
------------------------------ ----- ------- -------- -------- ----------- ----------- -------
Net return before finance
costs and taxation 16,107 (25,053) (8,946) 4,918 147,403 152,321
============================== ===== ======= ======== ======== =========== =========== =======
Finance costs 6 (499) (1,497) (1,996) (1,732) - (1,732)
------------------------------ ----- ------- -------- -------- ----------- ----------- -------
Net return before taxation 15,608 (26,550) (10,942) 3,186 147,403 150,589
============================== ===== ======= ======== ======== =========== =========== =======
Taxation 7 (956) 876 (80) (550) (3,556) (4,106)
------------------------------ ----- ------- -------- -------- ----------- ----------- -------
Net return after taxation 14,652 (25,674) (11,022) 2,636 143,847 146,483
------------------------------ ----- ------- -------- -------- ----------- ----------- -------
Return per share (pence)(B) 9
:
------------------------------ ----- ------- -------- -------- ----------- ----------- -------
Basic 9.34 (16.36) (7.02) 1.66 90.68 92.34
------------------------------ ----- ------- -------- -------- ----------- ----------- -------
Diluted 8.75 n/a n/a n/a 84.04 85.95
------------------------------ ----- ------- -------- -------- ----------- ----------- -------
(A) Further details of the restatement can be found in note 22.
(B) Figures for 2021 have been restated to reflect the 5:1 sub-division
as disclosed in note 14.
For the year ended 31 July 2022 the conversion option for potential
Ordinary shares within the Convertible Unsecured Loan Stock was dilutive
to the revenue return per Ordinary share but non-dilutive to the capital
return per Ordinary share (2021 - non-dilutive to revenue but dilutive
to capital).
The total column of this statement represents the profit and loss account
of the Company. There is no other comprehensive income and therefore
the net return after taxation is also the total comprehensive income
for the year.
All revenue and capital items in the above statement derive from continuing
operations.
The accompanying notes are an integral part of the financial statements.
Statement of Financial Position
As at
As at 31 July 2021
31 July 2022 (*Restated)
Notes GBP'000 GBP'000
=========================================== ====== ============ ============
Fixed assets
=========================================== ====== ============ ============
Investments at fair value through profit
or loss 10 524,841 540,921
------------------------------------------- ------ ------------ ------------
Current assets
=========================================== ====== ============ ============
Debtors and prepayments 11 1,464 5,107
=========================================== ====== ============ ============
Cash and short term deposits 9,471 14,577
------------------------------------------- ------ ------------ ------------
10,935 19,684
------------------------------------------- ------ ------------ ------------
Creditors: amounts falling due within
one year
=========================================== ====== ============ ============
Other creditors 12 (2,864) (3,422)
------------------------------------------- ------ ------------ ------------
Net current assets 8,071 16,262
------------------------------------------- ------ ------------ ------------
Total assets less current liabilities 532,912 557,183
=========================================== ====== ============ ============
Non-current liabilities
=========================================== ====== ============ ============
2.25% Convertible Unsecured Loan Stock
2025 13 (35,940) (35,708)
=========================================== ====== ============ ============
3.05% Senior Unsecured Loan Note 2035 13 (29,892) (29,886)
=========================================== ====== ============ ============
Deferred tax liability on Indian capital
gains 13 (2,684) (3,631)
------------------------------------------- ------ ------------ ------------
(68,516) (69,225)
------------------------------------------- ------ ------------ ------------
Net assets 464,396 487,958
------------------------------------------- ------ ------------ ------------
Capital and reserves
=========================================== ====== ============ ============
Called up share capital 14 10,435 10,435
=========================================== ====== ============ ============
Capital redemption reserve 2,062 2,062
=========================================== ====== ============ ============
Share premium account 60,428 60,412
=========================================== ====== ============ ============
Equity component of 2.25% Convertible
Unsecured Loan Stock 2025 13 1,057 1,057
=========================================== ====== ============ ============
Capital reserve (*restated)(A) 15,22 375,450 401,124
=========================================== ====== ============ ============
Revenue reserve (*restated)(A) 22 14,964 12,868
------------------------------------------- ------ ------------ ------------
Total shareholders' funds 464,396 487,958
------------------------------------------- ------ ------------ ------------
Net asset value per share (pence)(B)
:
------------------------------------------- ------ ------------ ------------
Basic 16 295.88 310.90
------------------------------------------- ------ ------------ ------------
Diluted 16 295.25 309.02
------------------------------------------- ------ ------------ ------------
(A) Further details of the restatement can be found in note 22.
(B) Figures for 2021 have been restated to reflect the 5:1 sub-division
as disclosed in note 14.
The financial statements were approved by the Board of Directors and
authorised for issue on 14 October 2022 and were signed on behalf of
the Board by:
Nigel Cayzer
Chairman
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Equity
For the year ended 31 July 2022
==========================================================================================================
Capital Share Equity Capital Revenue
Share redemption premium Component reserve reserve
capital reserve account CULS 2025 (*Restated) (*Restated) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======================= ==== ======= ========== ======= ========= =========== =========== ========
Balance at 1 August
2021 (*restated) 22 10,435 2,062 60,412 1,057 401,124 12,868 487,958
======================= ==== ======= ========== ======= ========= =========== =========== ========
Conversion of 2.25%
CULS 2025 13 - - 16 - - - 16
======================= ==== ======= ========== ======= ========= =========== =========== ========
Return after taxation - - - - (25,674) 14,652 (11,022)
======================= ==== ======= ========== ======= ========= =========== =========== ========
Dividends paid 8 - - - - - (12,556) (12,556)
----------------------- ---- ------- ---------- ------- --------- ----------- ----------- --------
Balance at 31 July
2022 10,435 2,062 60,428 1,057 375,450 14,964 464,396
----------------------- ---- ------- ---------- ------- --------- ----------- ----------- --------
For the year ended 31 July 2021
==========================================================================================================
Capital Share Equity Capital Revenue
Share redemption premium Component reserve reserve
capital reserve account CULS 2025 (*Restated) (*Restated) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======================= ==== ======= ========== ======= ========= =========== =========== ========
Balance at 1 August
2020 10,434 2,062 60,377 1,057 268,750 16,276 358,956
======================= ==== ======= ========== ======= ========= =========== =========== ========
Conversion of 2.25%
CULS 2025 13 1 - 35 - - - 36
======================= ==== ======= ========== ======= ========= =========== =========== ========
Purchase of own shares
to treasury 14 - - - - (11,473) - (11,473)
======================= ==== ======= ========== ======= ========= =========== =========== ========
Return after taxation
(*restated)(A) 22 - - - - 143,847 2,636 146,483
======================= ==== ======= ========== ======= ========= =========== =========== ========
Dividends paid 8 - - - - - (6,044) (6,044)
----------------------- ---- ------- ---------- ------- --------- ----------- ----------- --------
Balance at 31 July
2021 10,435 2,062 60,412 1,057 401,124 12,868 487,958
----------------------- ---- ------- ---------- ------- --------- ----------- ----------- --------
(A) Further details of the restatement can be found in note 22.
The accompanying notes are an integral part of the financial statements.
Statement of Cash Flows
Year ended Year ended
31 July 2022 31 July 2021
Notes GBP'000 GBP'000
============================================ ===== ============ ============
Cash flows from operating activities
============================================ ===== ============ ============
Return before finance costs and tax (8,946) 152,321
============================================ ===== ============ ============
Adjustments for:
============================================ ===== ============ ============
Dividend income 3 (18,057) (9,620)
============================================ ===== ============ ============
Interest income 3 (14) -
============================================ ===== ============ ============
Dividends received 18,307 9,880
============================================ ===== ============ ============
Interest received 10 -
============================================ ===== ============ ============
Interest paid (1,742) (1,346)
============================================ ===== ============ ============
Losses/(gains) on investments 10 22,324 (148,078)
============================================ ===== ============ ============
Foreign exchange movements (72) 425
============================================ ===== ============ ============
Decrease/(increase) in prepayments 18 (20)
============================================ ===== ============ ============
Decrease in other debtors 11 5
============================================ ===== ============ ============
Increase in other creditors 1,439 113
============================================ ===== ============ ============
Stock dividends included in investment
income (174) (233)
============================================ ===== ============ ============
Overseas withholding tax suffered 7 (1,439) (690)
-------------------------------------------- ----- ------------ ------------
Net cash inflow from operating activities 11,665 2,757
============================================ ===== ============ ============
Cash flows from investing activities
============================================ ===== ============ ============
Purchase of investments (81,319) (81,406)
============================================ ===== ============ ============
Sales of investments 77,032 81,562
============================================ ===== ============ ============
Indian capital gains tax rebate on
sales - 101
-------------------------------------------- ----- ------------ ------------
Net cash (outflow)/inflow from investing
activities (4,287) 257
============================================ ===== ============ ============
Cash flows from financing activities
============================================ ===== ============ ============
Purchase of own shares for treasury - (11,570)
============================================ ===== ============ ============
Repayment of loan - (11,200)
============================================ ===== ============ ============
Drawdown of 3.05% Senior Unsecured
Loan Note 2035 13 - 29,882
============================================ ===== ============ ============
Equity dividends paid 8 (12,556) (6,043)
-------------------------------------------- ----- ------------ ------------
Net cash (outflow)/inflow from financing
activities (12,556) 1,069
-------------------------------------------- ----- ------------ ------------
(Decrease)/increase in cash and cash
equivalents (5,178) 4,083
-------------------------------------------- ----- ------------ ------------
Analysis of changes in cash and short
term deposits
============================================ ===== ============ ============
Opening balance 14,577 10,919
============================================ ===== ============ ============
(Decrease)/increase in cash and short
term deposits (5,178) 4,083
============================================ ===== ============ ============
Foreign exchange movements 72 (425)
-------------------------------------------- ----- ------------ ------------
Closing balance 9,471 14,577
-------------------------------------------- ----- ------------ ------------
The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements
For the year ended 31 July 2022
1. Principal activity
The Company is a closed-end investment company, registered in
England & Wales No 03106339, with its Ordinary shares being listed
on the London Stock Exchange.
2. Accounting policies
(a) Basis of preparation and going concern . The financial statements
have been prepared in accordance with Financial Reporting
Standard 102, the Companies Act 2006 and the AIC's Statement
of Recommended Practice 'Financial Statements of Investment
Trust Companies and Venture Capital Trusts' issued in April
2021. The financial statements are prepared in Sterling which
is the functional currency of the Company and rounded to the
nearest GBP'000. They have also been prepared on a going concern
basis and on the assumption that approval as an investment
trust will continue to be granted by HMRC.
In accordance with the Financial Reporting Council's guidance
the Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern. The Company's assets
consist of equity shares in companies listed on recognised
stock exchanges and are considered by the Board to be realisable
within a relatively short timescale under normal market conditions.
The Board has set overall limits for borrowing and reviews
regularly the Company's level of gearing, cash flow projections
and compliance with banking covenants. The Board has also
reviewed stress testing and liquidity analysis covering the
impact of significant historical market events such as the
1997 Asian Crisis and 2008 Global Financial Crisis on the
liquidity of the portfolio to ensure that even in significant
negative markets the Company would still be able to raise
sufficient capital to repay its liabilities.
The Directors are mindful of the Principal Risks and Uncertainties
disclosed in the Strategic Report and they believe that the
Company has adequate financial resources to continue its operational
existence for a period of not less than 12 months from the
date of approval of this Annual Report. They have arrived
at this conclusion having confirmed that the Company's diversified
portfolio of realisable securities is sufficiently liquid
and could be used to meet short-term funding requirements
were they to arise, including in current market conditions
caused by the Covid-19 pandemic and the conflict in Ukraine.
The Directors have also reviewed the revenue and ongoing expenses
forecasts for the coming year. Accordingly, the Directors
believe that it is appropriate to continue to adopt the going
concern basis in preparing the financial statements.
Significant accounting judgements, estimates and assumptions
. The preparation of financial statements requires the use
of certain significant accounting judgements, estimates and
assumptions which requires management to exercise its judgement
in the process of applying the accounting policies and are
continually evaluated. Special dividends are assessed and
credited to capital or revenue according to their circumstances
and are considered to require significant judgement. The Directors
do not consider there to be any significant estimates within
the financial statements.
(b) Valuation of investments . The Company has chosen to apply
the recognition and measurement provisions of IAS 39 Financial
Instruments: Recognition and Measurement and investments have
been designated upon initial recognition at fair value through
profit or loss. Investments are recognised and de-recognised
at trade date where a purchase or sale is under a contract
whose terms require delivery within the time frame established
by the market concerned, and are initially measured at fair
value. Subsequent to initial recognition, investments are
measured at fair value. For listed investments, this is deemed
to be bid market prices. Gains and losses arising from changes
in fair value and disposals are included as a capital item
in the Statement of Comprehensive Income and are ultimately
recognised in the capital reserve.
(c) Borrowings . Bank loans are initially recognised at cost,
being the fair value of the consideration received, net of
any issue expenses. Subsequently, they are measured at amortised
cost using the effective interest method. Finance charges
are accounted for on an accruals basis using the effective
interest rate method. With effect from 1 August 2021, the
Company charges 25% of finance charges to revenue and 75%
to capital (previously 100% to revenue).
(d) Income . Dividends, including taxes deducted at source, are
included in revenue by reference to the date on which the
investment is quoted ex-dividend. Special dividends are reviewed
on a case-by-case basis and may be credited to capital, if
circumstances dictate. Dividends receivable on equity shares
where no ex-dividend date is quoted are brought into account
when the Company's right to receive payment is established.
Fixed returns on non-equity shares are recognised on a time
apportioned basis so as to reflect the effective yield on
shares. Other returns on non-equity shares are recognised
when the right to return is established. Where the Company
has elected to receive its dividends in the form of additional
shares rather than cash, the amount of the cash dividend is
recognised as income. Any excess in the value of the shares
received over the amount of the cash dividend is recognised
in capital reserves. Interest receivable on bank balances
is dealt with on an accruals basis.
(e) Expenses . Expenses are accounted for on an accruals basis.
Expenses are charged through the revenue column of the Statement
of Comprehensive Income except as follows:
- expenses directly relating to the acquisition or disposal
of an investment, which are charged to the capital column
of the Statement of Comprehensive Income and are separately
identified and disclosed in note 10; and
- with effect from 1 August 2021, the Company charges 25%
of investment management fees and finance costs to the revenue
column and 75% to the capital column of the Statement of Comprehensive
Income, in accordance with the Board's expected long term
return in the form of revenue and capital gains respectively
from the investment portfolio of the Company. Previously the
allocation was 100% to revenue.
(f) Taxation . The tax expense represents the sum of tax currently
payable and deferred tax. Any tax payable is based on the
taxable profit for the year. Taxable profit differs from net
profit as reported in the Statement of Comprehensive Income
because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items
that are never taxable or deductible. The Company's liability
for current tax is calculated using tax rates that were applicable
at the Statement of Financial Position date.
Deferred taxation is recognised in respect of all timing differences
that have originated but not reversed at the Statement of
Financial Position date, where transactions or events that
result in an obligation to pay more tax in the future or right
to pay less tax in the future have occurred at the Statement
of Financial Position date. This is subject to deferred tax
assets only being recognised if it is considered more likely
than not that there will be suitable profits from which the
future reversal of the underlying timing differences can be
deducted. Timing differences are differences arising between
the Company's taxable profits and its results as stated in
the financial statements which are capable of reversal in
one or more subsequent periods. Deferred tax is measured on
a non-discounted basis at the tax rates that are expected
to apply in the periods in which timing differences are expected
to reverse, based on tax rates and laws enacted or substantively
enacted at the Statement of Financial Position date.
The tax effect of different items of income/gain and expenditure/loss
is allocated between capital and revenue within the Statement
of Comprehensive Income on the same basis as the particular
item to which it relates using the Company's effective rate
of tax for the year, based on the marginal basis.
(g) Foreign currency . Assets and liabilities in foreign currencies
are translated at the rates of exchange ruling on the Statement
of Financial Position date. Transactions involving foreign
currencies are converted at the rate ruling on the date of
the transaction. Gains and losses on dividends receivable
are recognised in the Statement of Comprehensive Income and
are reflected in the revenue reserve. Gains and losses on
the realisation of investments in foreign currencies and unrealised
gains and losses on investments in foreign currencies are
recognised in the Statement of Comprehensive Income and are
then transferred to the capital reserve.
(h) Convertible Unsecured Loan Stock . Convertible Unsecured Loan
Stock ("CULS") issued by the Company is regarded as a compound
instrument, comprising of a liability component and an equity
component. At the date of issue, the fair value of the liability
component of the 2.25% CULS 2025 was estimated by assuming
that an equivalent non-convertible obligation of the Company
would have an effective interest rate of 3.063%. The fair
value of the equity component, representing the option to
convert liability into equity, is derived from the difference
between the issue proceeds of the CULS and the fair value
assigned to the liability. The liability component is subsequently
measured at amortised cost using the effective interest rate
and the equity component remains unchanged.
Direct expenses associated with the CULS issue are allocated
to the liability and equity components in proportion to the
split of the proceeds of the issue. Expenses allocated to
the liability component are amortised over the life of the
instrument using the effective interest rate.
(i) Cash and cash equivalents . Cash comprises cash in hand and
short term deposits. Cash equivalents includes bank overdrafts
repayable on demand and short term, highly liquid investments,
that are readily convertible to known amounts of cash and
that are subject to an insignificant risk of change in value.
(j) Nature and purpose of reserves
Capital redemption reserve. The capital redemption reserve
arose when Ordinary shares were redeemed and cancelled, at
which point an amount equal to the par value of the Ordinary
share capital was transferred from the share capital account
to the capital redemption reserve. This is not a distributable
reserve.
Share premium account. The balance classified as share premium
includes the premium above nominal value from the proceeds
on issue of any equity share capital comprising Ordinary shares
of 5p (2021 - 25p). This is not a distributable reserve.
Capital reserve. This reserve reflects any gains or losses
on investments realised in the period along with any movement
in the fair value of investments held that have been recognised
in the Statement of Comprehensive Income. These include gains
and losses from foreign currency exchange differences arising
on monetary assets and liabilities except for dividend income
receivable. Share buybacks to be held in treasury, which is
considered to be a distribution to shareholders, is also deducted
from this reserve. The realised gains part of this reserve
is also distributable for the purpose of funding dividends.
Revenue reserve. This reserve reflects all income and costs
which are recognised in the revenue column of the Statement
of Comprehensive Income. The revenue reserve is distributable
by way of dividend. The amount of the revenue reserve as at
31 July 2022 may not be available at the time of any future
distribution due to movements between 31 July 2022 and the
date of distribution.
(k) Treasury shares. When the Company purchases the Company's
equity share capital as treasury shares, the amount of the
consideration paid, which includes directly attributable costs
is recognised as a deduction from equity. When these shares
are sold or reissued subsequently, the amount received is
recognised as an increase in equity, and the resulting surplus
or deficit on the transaction is transferred to or from the
capital reserve.
(l) Dividends payable. Final dividends are recognised in the
financial statements in the period in which Shareholders approve
them.
(m) Segmental reporting. The Directors are of the opinion that
the Company is engaged in a single segment of business activity,
being investment business. Consequently, no business segmental
analysis is provided however an analysis of the geographic
exposure of the Company's investments is provided on page
36 of the published Annual Report and financial statements
for the year ended 31 July 2022 .
3. Income
======================================= =========== ===========
2022 2021
GBP'000 GBP'000
======================================= =========== ===========
Income from investments
======================================= =========== ===========
Overseas dividends 17,292 9,015
======================================= =========== ===========
UK dividend income 591 372
======================================= =========== ===========
Stock dividends 174 233
--------------------------------------- ----------- -----------
18,057 9,620
--------------------------------------- ----------- -----------
======================================= =========== ===========
Other income
======================================= =========== ===========
Deposit interest 14 -
======================================= =========== ===========
Other income - 4
--------------------------------------- ----------- -----------
14 4
--------------------------------------- ----------- -----------
Total income 18,071 9,624
--------------------------------------- ----------- -----------
4. Investment management fees
======================================================================================
2022 2021
============================= ============================ =========================
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================= ======== ======== ======== ======= ======= =======
Investment management fees 801 2,403 3,204 3,570 - 3,570
----------------------------- -------- -------- -------- ------- ------- -------
The Company has an agreement with abrdn Fund Managers Limited
("aFML") for the provision of management services, under which
investment management services have been delegated to abrdn Asia
Limited ("abrdn Asia").
With effect from 1 August 2021, the management fee has been payable
monthly in arrears, on a tiered basis, exclusive of VAT where
applicable, based on market capitalisation at an annual rate of
0.85% for the first GBP250 million, 0.6% for the next GBP500 million
and 0.5% thereafter. It was previously set at 0.96% per annum
of market capitalisation. Market capitalisation is defined as
the Company's closing Ordinary share price quoted on the London
Stock Exchange multiplied by the number of Ordinary shares in
issue (excluding those held in Treasury), as determined on the
last business day of the calendar month to which the remuneration
relates. The balance due to the Manager at the year end was GBP2,138,000
(2021 - GBP663,000) which represents nine months' fees (2021 -
two months).
The management agreement may be terminated by either the Company
or the Manager on the expiry of three months' written notice.
On termination, the Manager would be entitled to receive fees
which would otherwise have been due to that date.
With effect from 1 August 2021, management fees are charged 25%
to revenue and 75% to capital (previously 100% to revenue).
5. Administrative expenses
=========================================== ===== ============= =============
2022 2021
GBP'000 GBP'000
=========================================== ===== ============= =============
Administration fees(A) 103 99
=========================================== ===== ============= =============
Directors' fees(B) 144 157
=========================================== ===== ============= =============
Promotional activities(C) 219 219
=========================================== ===== ============= =============
Auditors' remuneration:
=========================================== ===== ============= =============
- fees payable to the auditors for
the audit of the annual financial
statements 42 44
=========================================== ===== ============= =============
Custodian charges 293 276
=========================================== ===== ============= =============
Depositary fees 49 47
=========================================== ===== ============= =============
Registrar fees 51 44
=========================================== ===== ============= =============
Legal and professional fees (D) 87 331
=========================================== ===== ============= =============
Other expenses 175 169
------------------------------------------- ----- ------------- -------------
1,163 1,386
------------------------------------------- ----- ------------- -------------
(A) The Company has an agreement with aFML for the provision
of administration services. The administration fee is payable
quarterly in advance and is adjusted annually to reflect the movement
in the Retail Prices Index. The balance due to aFML at the year
end was GBP52,000 (2021 - GBP25,000). The agreement is terminable
on six months' notice.
(B) No pension contributions were made in respect of any of the
Directors.
(C) Under the management agreement, the Company has also appointed
aFML to provide promotional activities to the Company by way of
its participation in the abrdn Investment Trust Share Plan and
ISA. aFML has delegated this role to abrdn plc. The total fee
paid and payable under the agreement in relation to promotional
activities was GBP219,000 (2021 - GBP219,000). There was a GBP73,000
(2021 - GBP73,000) balance due to abrdn plc at the year end.
(D) As per note 22, the Statement of Comprehensive Income, the
Statement of Financial Position and the Statement of Changes in
Equity for the year ended 31 July 2021 have been restated to reallocate
costs of GBP250,000 incurred during that period in relation to
the long-term investment strategy review from revenue to capital.
There has been no change to the overall charge for the year ended
31 July 2021 of GBP331,000.
6. Finance costs
=========================================================================================
2022 2021
=================================== ========================= =========================
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=================================== ======= ======= ======= ======= ======= =======
Loans repayable in less than
one year - - - 50 - 50
=================================== ======= ======= ======= ======= ======= =======
Interest on 3.05% Senior Unsecured
Loan Note 2035 230 691 921 611 - 611
=================================== ======= ======= ======= ======= ======= =======
Interest on 2.25% CULS 2025 207 620 827 824 - 824
=================================== ======= ======= ======= ======= ======= =======
Notional interest on 2.25% CULS
2025 39 115 154 153 - 153
=================================== ======= ======= ======= ======= ======= =======
Amortisation of 2.25% CULS 2025
issue expenses 23 71 94 94 - 94
----------------------------------- ------- ------- ------- ------- ------- -------
499 1,497 1,996 1,732 - 1,732
----------------------------------- ------- ------- ------- ------- ------- -------
With effect from 1 August 2021, finance costs have been charged
25% to revenue and 75% to capital (previously 100% to revenue).
7. Taxation
2022 2021
================================== ======= ======== ======== =========== =========== ========
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================== ======= ======== ======== =========== =========== ========
(a) Analysis of charge for the
year
================================== ======= ======== ======== =========== =========== ========
Indian capital gains tax
rebate on sales - - - - (101) (101)
================================== ======= ======== ======== =========== =========== ========
Overseas taxation 956 71 1,027 550 26 576
---------------------------------- ------- -------- -------- ----------- ----------- --------
Total current tax charge
for the year 956 71 1,027 550 (75) 475
================================== ======= ======== ======== =========== =========== ========
Deferred tax charge on Indian
capital gains - (947) (947) - 3,631 3,631
---------------------------------- ------- -------- -------- ----------- ----------- --------
Total tax charge for the
year 956 (876) 80 550 3,556 4,106
---------------------------------- ------- -------- -------- ----------- ----------- --------
The Company has recognised a deferred tax liability of GBP2,684,000
(2021 - GBP3,631,000) on capital gains which may arise if Indian
investments are sold.
At 31 July 2022 the Company had surplus management expenses
and loan relationship deficits of GBP70,420,000 (2021 - GBP64,205,000)
in respect of which a deferred tax asset has not been recognised.
This is due to the Company having sufficient excess management
expenses available to cover the potential liability and the
Company is not expected to generate taxable income in the future
in excess of deductible expenses. The Finance Act 2021 received
Royal Assent on 10 June 2021 and the rate of Corporation Tax
of 25% effective from 1 April 2023 has been used to calculate
the potential deferred tax asset of GBP17,605,000 (2021 - GBP16,051,000).
(b) Factors affecting the tax charge for the year. The tax assessed
for the year is higher (2021 - lower) than the current standard
rate of corporation tax in the UK for a large company of 19%
(2021 - 19%). The differences are explained below:
================================== ======= ======== ======== =========== =========== ========
2022 2021
================================== ======= ======== ======== =========== =========== ========
(*Restated) (*Restated)
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================== ======= ======== ======== =========== =========== ========
Return before taxation(A) 15,608 (26,550) (10,942) 3,186 147,403 150,589
================================== ======= ======== ======== =========== =========== ========
================================== ======= ======== ======== =========== =========== ========
Return multiplied by the
standard tax rate of corporation
tax of 19%(A) 2,966 (5,045) (2,079) 605 28,007 28,612
================================== ======= ======== ======== =========== =========== ========
Effects of:
================================== ======= ======== ======== =========== =========== ========
Losses/(gains) on investments
not taxable - 4,242 4,242 - (28,135) (28,135)
================================== ======= ======== ======== =========== =========== ========
Exchange (gains)/losses - (14) (14) - 81 81
================================== ======= ======== ======== =========== =========== ========
Overseas tax 956 71 1,027 550 26 576
================================== ======= ======== ======== =========== =========== ========
Indian capital gains tax
rebate on sales - - - - (101) (101)
================================== ======= ======== ======== =========== =========== ========
Movement in deferred tax
liability on Indian capital
gains - (947) (947) - 3,631 3,631
================================== ======= ======== ======== =========== =========== ========
UK dividend income (112) - (112) (71) - (71)
================================== ======= ======== ======== =========== =========== ========
Non-taxable dividend income (3,319) - (3,319) (1,757) - (1,757)
================================== ======= ======== ======== =========== =========== ========
Expenses not deductible
for tax purposes 25 76 101 25 - 25
================================== ======= ======== ======== =========== =========== ========
Movement in unutilised management
expenses(A) 345 457 802 869 47 916
================================== ======= ======== ======== =========== =========== ========
Movement in unutilised loan
relationship deficits 95 284 379 329 - 329
---------------------------------- ------- -------- -------- ----------- ----------- --------
Total tax charge for the
year 956 (876) 80 550 3,556 4,106
---------------------------------- ------- -------- -------- ----------- ----------- --------
(A) Further details of the restatement can be found in note
22.
8. Dividends
=============================================== ============= =============
2022 2021
GBP'000 GBP'000
=============================================== ============= =============
Final dividend for 2021 - 3.0p (2020
- 2.9p) 4,708 4,612
=============================================== ============= =============
Special dividend for 2021 - 0.2p (2020
- 0.9p) 314 1,431
=============================================== ============= =============
Interim dividend for 2022 - 3.2p (2021
- nil) 5,023 -
=============================================== ============= =============
Interim dividend for 2022 - 1.6p (2021
- nil) 2,511 -
=============================================== ============= =============
Write off 2018 dividend debtor - 1
----------------------------------------------- ------------- -------------
12,556 6,044
----------------------------------------------- ------------- -------------
Proposed final and special dividends are subject to approval
by shareholders at the Annual General Meeting and are not included
as a liability in the financial statements.
We set out below the total dividends paid and proposed in respect
of the financial year, which is the basis on which the requirements
of Sections 1158 - 1159 of the Corporation Tax Act 2010 are considered.
The revenue available for distribution by way of dividend for
the current year is GBP14,652,000 (2021 (*restated- GBP2,636,000).
=============================================== ============= =============
2022 2021
GBP'000 GBP'000
=============================================== ============= =============
Interim dividend for 2022 - 3.2p (2021
- nil) 5023 -
=============================================== ============= =============
Interim dividend for 2022 - 1.6p (2021
- nil) 2511 -
=============================================== ============= =============
Interim dividend for 2022 - 1.6p (2021
- nil) 2511 -
=============================================== ============= =============
Proposed final dividend for 2022 - nil
(2021 - 3.0p) - 4,708
=============================================== ============= =============
Proposed special dividend for 2022 -
1.6p (2021 - 0.2p) 2,511 314
----------------------------------------------- ------------- -------------
12,556 5,022
----------------------------------------------- ------------- -------------
The amount reflected above for the cost of the proposed final
and special dividend for 2022 is based on 156,953,631 Ordinary
shares, being the number of Ordinary shares in issue excluding
shares held in treasury at the date of this Report.
The rates disclosed for prior year has been restated to reflect
the 5:1 sub-division as disclosed in note 14.
9. Return per share
===============================================================================================
2022 2021
======================== ======= ======== =========== =========== =========== ===========
(*Restated) (*Restated)
Revenue Capital Total Revenue Capital Total
======================== ======= ======== =========== =========== =========== ===========
Basic
======================== ======= ======== =========== =========== =========== ===========
Return after taxation
(GBP'000) 14,652 (25,674) (11,022) 2,636 143,847 146,483
======================== ======= ======== =========== =========== =========== ===========
Weighted average number
of shares in issue(A) 156,951,436 158,635,715
======================== ======= ======== =========== =========== =========== ===========
Return per share (p) 9.34 (16.36) (7.02) 1.66 90.68 92.34
------------------------ ------- -------- ----------- ----------- ----------- -----------
======================== ======= ======== =========== =========== =========== ===========
2022 2021
======================== ======= ======== =========== =========== =========== ===========
Diluted Revenue Capital Total Revenue Capital Total
======================== ======= ======== =========== =========== =========== ===========
Return after taxation
(GBP'000) 14,831 (25,139) (10,308) 3,253 143,847 147,100
======================== ======= ======== =========== =========== =========== ===========
Weighted average number
of shares in issue(AB) 169,459,584 171,154,920
======================== ======= ======== =========== =========== =========== ===========
Return per share (p) 8.75 n/a n/a n/a 84.04 85.95
------------------------ ------- -------- ----------- ----------- ----------- -----------
(A) Calculated excluding shares held in treasury.
(B) The calculation of the diluted total, revenue and capital
returns per Ordinary share is carried out in accordance with
IAS 33, "Earnings per Share". For the purpose of calculating
total, revenue and capital returns per Ordinary share, the number
of Ordinary shares used is the weighted average number used in
the basic calculation plus the number of Ordinary shares deemed
to be issued for no consideration on exercise of all 2.25% Convertible
Unsecured Loan Stock 2025 ("CULS"). The calculations indicate
that the exercise of CULS would result in an increase in the
weighted average number of Ordinary shares of 12,508,148 (2021
(*restated) - 12,519,205) to 169,459,584 (2021 (*restated) -
171,154,920) Ordinary shares.
For the year ended 31 July 2022 the assumed conversion for potential
Ordinary shares was dilutive to the revenue return per Ordinary
share but non-dilutive to the capital return per Ordinary share
(2021 - non-dilutive to the revenue return but dilutive to the
capital return). Where dilution occurs, the net returns are adjusted
for interest charges and issue expenses relating to the CULS
(2022 - GBP714,000; 2021 - GBP617,000). Total earnings for the
period are tested for dilution. Once dilution has been determined
individual revenue and capital earnings are adjusted.
The returns per share figures for 2021 have been restated to
reflect the 5:1 sub-division as disclosed in note 14.
10. Investments at fair value through profit or loss
=========================================================================
2022 2021
GBP'000 GBP'000
=============================================== =========== ===========
Opening book cost 346,431 314,306
=============================================== =========== ===========
Opening investment holding gains 194,490 80,161
----------------------------------------------- ----------- -----------
Opening fair value 540,921 394,467
=============================================== =========== ===========
Analysis of transactions made during
the year
=============================================== =========== ===========
Purchases at cost 79,496 83,636
=============================================== =========== ===========
Sales proceeds received (73,252) (85,260)
=============================================== =========== ===========
(Losses)/gains on investments (22,324) 148,078
----------------------------------------------- ----------- -----------
Closing fair value 524,841 540,921
----------------------------------------------- ----------- -----------
=============================================== =========== ===========
Closing book cost 377,733 346,431
=============================================== =========== ===========
Closing investment gains 147,108 194,490
----------------------------------------------- ----------- -----------
Closing fair value 524,841 540,921
----------------------------------------------- ----------- -----------
=============================================== =========== ===========
2022 2021
GBP'000 GBP'000
=============================================== =========== ===========
Investments listed on an overseas investment
exchange 510,984 529,261
=============================================== =========== ===========
Investments listed on the UK investment
exchange 13,857 11,660
----------------------------------------------- ----------- -----------
524,841 540,921
----------------------------------------------- ----------- -----------
The Company received GBP73,252,000 (2021 - GBP85,260,000) from
investments sold in the period. The book cost of these investments
when they were purchased was GBP48,194,000 (2021 - GBP51,511,000).
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.
Transaction costs . During the year expenses were incurred in
acquiring or disposing of investments classified as fair value
through profit or loss. These have been expensed through capital
and are included within (losses)/gains on investments in the
Statement of Comprehensive Income. The total costs were as follows:
2022 2021
GBP'000 GBP'000
=============================================== =========== ===========
Purchases 91 173
=============================================== =========== ===========
Sales 147 152
----------------------------------------------- ----------- -----------
238 325
----------------------------------------------- ----------- -----------
The above transaction costs are calculated in line with the AIC
SORP. The transaction costs in the Company's Key Information
Document are calculated on a different basis and in line with
the PRIIPs regulations.
11. Debtors: amounts falling due within one
year
======================================== =========== ===========
2022 2021
GBP'000 GBP'000
======================================== =========== ===========
Amounts due from brokers 280 4,060
======================================== =========== ===========
Other debtors 766 418
======================================== =========== ===========
Prepayments and accrued income 418 629
---------------------------------------- ----------- -----------
1,464 5,107
---------------------------------------- ----------- -----------
None of the above amounts is past their due date or impaired
(2021 - same).
12. Creditors
====================================== =========== ===========
2022 2021
Amounts falling due within one year GBP'000 GBP'000
====================================== =========== ===========
Amounts due to brokers - 1,997
====================================== =========== ===========
Other creditors 2,864 1,425
-------------------------------------- ----------- -----------
2,864 3,422
-------------------------------------- ----------- -----------
13. Non-current liabilities
2022 2021
======================= =============================== =============================
Number Liability Equity Number Liability Equity
of of
units component component units component component
(a) CULS GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======================= ========= ========= ========= ======= ========= =========
2.25% Convertible
Unsecured Loan Stock
2025
======================= ===== ========= ========= ======= ========= =========
Balance at beginning
of year 36,658 35,708 1,057 36,694 35,497 1,057
======================= ========= ========= ========= ======= ========= =========
Conversion of 2.25%
CULS 2025 (16) (16) - (36) (36) -
======================= ========= ========= ========= ======= ========= =========
Notional interest
on CULS transferred
to revenue reserve - 154 - - 153 -
======================= ========= ========= ========= ======= ========= =========
Amortisation and issue
expenses - 94 - - 94 -
----------------------- --------- --------- --------- ------- --------- ---------
Balance at end of
year 36,642 35,940 1,057 36,658 35,708 1,057
----------------------- --------- --------- --------- ------- --------- ---------
The 2.25% Convertible Unsecured Loan Stock 2025 ("CULS") can
be converted at the election of holders into Ordinary shares
during the months of May and November each year throughout
their life, commencing 30 November 2018 to 31 May 2025 at
a rate of 1 Ordinary share for every 293.0p (2021 - 1,465.0p)
nominal of CULS. Interest is payable on the CULS on 31 May
and 30 November each year, commencing on 30 November 2018.
With effect from 1 August 2021, the interest will be charged
25% to revenue and 75% to capital (previously 100% to revenue),
in line with the Board's expected long-term split of returns
from the investment portfolio of the Company.
The CULS has been constituted as an unsecured subordinated
obligation of the Company by the Trust Deed between the Company
and the Trustee, the Law Debenture Trust Corporation p.l.c.,
dated 23 May 2018. The Trust Deed details the 2025 CULS holders'
rights and the Company's obligations to the CULS holders and
the Trustee oversees the operation of the Trust Deed. In the
event of a winding-up of the Company the rights and claims
of the Trustee and CULS holders would be subordinate to the
claims of all creditors in respect of the Company's secured
and unsecured borrowings, under the terms of the Trust Deed.
In 2022 the Company received elections from CULS holders to
convert GBP15,343 (2021 - GBP36,476) nominal amount of CULS
into 5,211 (2021 - 2,475) Ordinary shares.
The fair value of the 2025 CULS at 31 July 2022 was GBP37,009,000
(2021 - GBP37,941,000).
======================= ===== ========= ========= ======= ========= =========
2022 2021
(b) Loan Note GBP'000 GBP'000
======================= ===== ========= ========= ======= ========= =========
3.05% Senior Unsecured
Loan Note 2035 30,000 30,000
============================== ========= ========= ======= ========= =========
Unamortised Loan Note
issue expenses (108) (114)
============================== --------- --------- ------- --------- ---------
29,892 29,886
----------------------- ----- --------- --------- ------- --------- ---------
On 1 December 2020 the Company issued GBP30,000,000 of a 15
year loan note at a fixed rate of 3.05%. Interest is payable
in half yearly instalments in June and December and the Loan
Note is due to be redeemed at par on 1 December 2035. The
issue costs of GBP118,000 will be amortised over the life
of the loan note. The Company has complied with the Note Purchase
Agreement that the ratio of total borrowings to adjusted net
assets will not exceed 0.20 to 1.00, that the ratio of total
borrowings to adjusted net liquid assets will not exceed 0.60
to 1.00, that net tangible assets will not be less than GBP225,000,000
and that the minimum number of listed assets will not be less
than 40.
The fair value of the Senior Unsecured Loan Note as at 31
July 2022 was GBP28,804,000 (2021 - GBP30,713,000), the value
being based on a comparable quoted debt security.
======================= ===== ========= ========= ======= ========= =========
2022 2021
GBP'000 GBP'000
======================= ===== --------- --------- ------- --------- ---------
Deferred tax liability
(c) on Indian capital gains 2,684 3,631
------------------------------ --------- --------- ------- --------- ---------
14. Called up share capital
=========================== =============== ============== =============
2022 2021
GBP'000 GBP'000
=========================== =============== ============== =============
Allotted, called-up and
fully paid
=========================== =============== ============== =============
Ordinary shares of 5p
(2021 - 25p) 7,848 7,848
=========================== =============== ============== =============
Treasury shares 2,587 2,587
--------------------------- --------------- -------------- -------------
10,435 10,435
--------------------------- --------------- -------------- -------------
=========================== =============== ============== =============
Ordinary Treasury Total
shares shares shares
Number Number Number
=========================== =============== ============== =============
At 31 July 2021(A) 156,948,420 51,744,590 208,693,010
=========================== =============== ============== =============
Conversion of CULS 5,211 - 5,211
--------------------------- --------------- -------------- -------------
At 31 July 2022 156,953,631 51,744,590 208,698,221
--------------------------- --------------- -------------- -------------
(A) The prior year has been restated to reflect the 5:1 sub-division
as disclosed below.
On 7 February 2022 there was a sub-division of each existing
Ordinary 25p share into five Ordinary shares of 5p each.
During the year no Ordinary shares of 5p were purchased (2021
- 1,055,000 Ordinary shares of 25p purchased) by the Company
at a total cost of GBPnil (2021 - total cost of GBP11,473,000),
all of which were held in treasury. At the year end 51,744,590
(2021 (*restated) - 51,744,590) shares were held in treasury,
which represents 24.79% (2021 - 24.79%) of the Company's total
issued share capital at 31 July 2022. During the year there were
a further 5,211 (2021 - 2,475) Ordinary shares issued as a result
of CULS conversions.
Since the year end no further Ordinary shares of 5p have been
purchased by the Company.
15. Reserves
=============================================== =========== ===========
2021
2022 (*Restated)
GBP'000 GBP'000
=============================================== =========== ===========
Capital reserve
=============================================== =========== ===========
At 31 July 2021 (*restated - see note
22) 401,124 268,750
=============================================== =========== ===========
Movement in investment holdings fair
value (47,382) 114,329
=============================================== =========== ===========
Gains on realisation of investments at
fair value 25,058 33,749
=============================================== =========== ===========
Purchase of own shares to treasury - (11,473)
=============================================== =========== ===========
Indian capital gains tax rebate on sales - 101
=============================================== =========== ===========
Movement in deferred liability on Indian
capital gains 947 (3,631)
=============================================== =========== ===========
Withholding tax charged on capital dividends (71) (26)
=============================================== =========== ===========
Foreign exchange movement 72 (425)
=============================================== =========== ===========
Capital expenses (*restated - see note
22) (4,298) (250)
----------------------------------------------- ----------- -----------
At 31 July 2022 375,450 401,124
----------------------------------------------- ----------- -----------
The capital reserve includes investment holding gains amounting
to GBP147,108,000 (2021 - GBP194,490,000) as disclosed in note
10. The above split in capital reserve is shown in accordance
with provisions of the Statement of Recommended Practice 'Financial
Statements Of Investment Trust Companies and Venture Capital
Trusts'.
16. Net asset value per share
============================================== ============== ==============
2022 2021
============================================== ============== ==============
Basic
============================================== ============== ==============
Net assets attributable GBP464,396,000 GBP487,958,000
============================================== ============== ==============
Number of shares in issue(AB) 156,953,631 156,948,420
============================================== ============== ==============
Net asset value per share(B) 295.88p 310.90p
---------------------------------------------- -------------- --------------
============================================== ============== ==============
2022 2021
============================================== ============== ==============
Diluted
============================================== ============== ==============
Net assets attributable GBP500,336,000 GBP523,666,000
============================================== ============== ==============
Number of shares in issue(AB) 169,459,574 169,459,600
============================================== ============== ==============
Net asset value per share(BC) 295.25p 309.02p
---------------------------------------------- -------------- --------------
(A) Calculated excluding shares held
in treasury.
(B) Figures for 2021 have been restated
to reflect the 5:1 sub-division as disclosed
in note 14 .
(C) The diluted net asset value per share has been calculated
on the assumption that GBP36,642,412 (2021 - GBP36,657,755) 2.25%
Convertible Unsecured Loan Stock 2025 ("CULS") is converted at
293.0p (2021 - 1,465.0p) per share, giving a total of 169,459,574
(2021 (*restated) - 169,459,600) shares. Where dilution occurs,
the net assets are adjusted for items relating to the CULS.
Net asset value per share - debt converted . In accordance with
the Company's understanding of the current methodology adopted
by the AIC, convertible financial instruments are deemed to be
"in the money" if the cum income net asset value ("NAV") exceeds
the conversion price of 293.0p (2021 - 1,465.0p) per share. In
such circumstances a net asset value is produced and disclosed
assuming the convertible debt is fully converted. At 31 July
2022 the cum income NAV was 295.88p (2021 (*restated) - 310.90p)
and thus the CULS were 'in the money' (2021 - same).
17. Analysis of changes in net debt
======================================================================================
At At
31 July Currency Cash Non-cash 31 July
2021 differences flows movements 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ======== ============ ======== ========= ========
Cash and short term deposits 14,577 72 (5,178) - 9,471
=============================== ======== ============ ======== ========= ========
Debt due after more than
one year (69,225) - - 709 (68,516)
------------------------------- -------- ------------ -------- --------- --------
(54,648) 72 (5,178) 709 (59,045)
------------------------------- -------- ------------ -------- --------- --------
=============================== ======== ============ ======== ========= ========
At At
31 July Currency Cash Non-cash 31 July
2020 differences flows movements 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ======== ============ ======== ========= ========
Cash and short term deposits 10,919 (425) 4,083 - 14,577
=============================== ======== ============ ======== ========= ========
Debt due within one year (11,200) - 11,200 - -
=============================== ======== ============ ======== ========= ========
Debt due after more than
one year (35,497) - (29,882) (3,846) (69,225)
------------------------------- -------- ------------ -------- --------- --------
(35,778) (425) (14,599) (3,846) (54,648)
------------------------------- -------- ------------ -------- --------- --------
A statement reconciling the movement in net funds to the net
cash flow has not been presented as there are no differences
from the above analysis.
18. Related party transactions and transactions with the Manager
Fees payable during the year to the Directors and their interests
in shares of the Company are considered to be related party transactions
and are disclosed within the Directors' Remuneration Report on
pages 56 to 58 of the published Annual Report and financial statements
for the year ended 31 July 2022. The balance of fees due to Directors
at the year end was GBPnil (2021 - GBPnil).
The Company's Investment Manager, abrdn Asia, is a wholly-owned
subsidiary of abrdn plc, which has been delegated, under an agreement
with aFML, to provide management services to the Company, the
terms of which are outlined in notes 4 and 5 along with details
of transactions during the year and balances outstanding at the
year end. Up until 27 November 2020 Mr Young, a director of abrdn
Asia, was the Alternate Director for Mr Martin Gilbert. Up until
1 December 2020 Mr Yea was a Director of the Company as well
as being a director of the Company's registrar, Equiniti Limited.
19. Financial instruments
Risk management . The Company's investment activities expose
it to various types of financial risk associated with the financial
instruments and markets in which it invests. The Company's financial
instruments comprise equities and other investments, cash balances,
loans and debtors and creditors that arise directly from its
operations; for example, in respect of sales and purchases awaiting
settlement, and debtors for accrued income.
The Board has delegated the risk management function to aFML
under the terms of its management agreement with aFML (further
details of which are included under note 4 and in the Directors'
Report) however, it remains responsible for the risk and control
framework and operation of third parties. The Board regularly
reviews and agrees policies for managing each of the key financial
risks identified with the Manager. The types of risk and the
Manager's approach to the management of each type of risk, are
summarised below. Such approach has been applied throughout the
year and has not changed since the previous accounting period.
The numerical disclosures exclude short-term debtors and creditors.
Risk management framework . The directors of aFML collectively
assume responsibility for aFML's obligations under the AIFMD
including reviewing investment performance and monitoring the
Company's risk profile during the year.
aFML is a fully integrated member of the abrdn Group ("the Group"),
which provides a variety of services and support to aFML in the
conduct of its business activities, including in the oversight
of the risk management framework for the Company. The AIFM has
delegated the day to day administration of the investment policy
to abrdn Asia, which is responsible for ensuring that the Company
is managed within the terms of its investment guidelines and
the limits set out in its pre-investment disclosures to investors
(details of which can be found on the Company's website). The
AIFM has retained responsibility for monitoring and oversight
of investment performance, product risk and regulatory and operational
risk for the Company.
The Group's Internal Audit Department is independent of the Risk
Division and reports directly to the Group CEO and to the Audit
Committee of the Group's Board of Directors. The Internal Audit
Department is responsible for providing an independent assessment
of the Group's control environment.
The Manager conducts its risk oversight function through the
operation of the Group's risk management processes and systems
which are embedded within the Group's operations. The Group's
Risk Division supports management in the identification and mitigation
of risks and provides independent monitoring of the business.
The Division includes Compliance, Business Risk, Market Risk,
Risk Management and Legal. The team is headed up by the Group's
Chief Risk Officer, who reports to the CEO of the Group. The
Risk Division achieves its objective through embedding the Risk
Management Framework throughout the organisation using the Group's
operational risk management system ("SHIELD").
The Group's corporate governance structure is supported by several
committees to assist the board of directors, its subsidiaries
and the Company to fulfil their roles and responsibilities. The
Group's Risk Division is represented on all committees, with
the exception of those committees that deal with investment recommendations.
The specific goals and guidelines on the functioning of those
committees are described in the committees' terms of reference.
Risk management . The main risks the Company faces from these
financial instruments are (i) market risk (comprising interest
rate, foreign currency and other price risk), (ii) liquidity
risk and (iii) credit risk.
Market risk. The fair value of or future cash flows from a financial
instrument held by the Company may fluctuate because of changes
in market prices. This market risk comprises three elements -
interest rate risk, currency risk and other price risk.
Interest rate risk . Interest rate movements may affect:
- the level of income receivable on cash deposits;
- valuation of debt securities in the portfolio.
Management of the risk . The possible effects on fair value and
cash flows that could arise as a result of changes in interest
rates are taken into account when making investment and borrowing
decisions. When drawn down, interest rates are fixed on borrowings.
Interest rate risk profile. The interest rate risk profile of
the Company's financial assets and liabilities, excluding equity
holdings which are all non-interest bearing, at the reporting
date was as follows:
============================== ============== ========= ======= ========
Weighted Weighted
average
period for average Fixed Floating
which
rate is fixed interest rate rate
rate
At 31 July 2022 Years % GBP'000 GBP'000
============================== ============== ========= ======= ========
Assets
============================== ============== ========= ======= ========
Sterling - - - 8,585
============================== ============== ========= ======= ========
Taiwan Dollar - - - 458
============================== ============== ========= ======= ========
Vietnam Dong - - - 371
============================== ============== ========= ======= ========
Sri Lanka Rupee - - - 32
============================== ============== ========= ======= ========
Pakistan Rupee - - - 11
============================== ============== ========= ======= ========
Indian Rupee - - - 9
============================== ============== ========= ======= ========
Thailand Baht - - - 3
============================== ============== ========= ======= ========
Malaysian Ringgit - - - 2
------------------------------ -------------- --------- ------- --------
- - - 9,471
------------------------------ -------------- --------- ------- --------
Liabilities
============================== ============== ========= ======= ========
2.25% Convertible Unsecured
Loan Stock 2025 2.83 2.3 35,940 -
============================== ============== ========= ======= ========
3.05% Senior Unsecured Loan
Note 2035 13.35 3.1 29,892 -
------------------------------ -------------- --------- ------- --------
- - 65,832 -
------------------------------ -------------- --------- ------- --------
============================== ============== ========= ======= ========
Weighted Weighted
average
period for average Fixed Floating
which
rate is fixed interest rate rate
rate
At 31 July 2021 Years % GBP'000 GBP'000
============================== ============== ========= ======= ========
Assets
============================== ============== ========= ======= ========
Sterling - - - 13,712
============================== ============== ========= ======= ========
Indian Rupee - - - 476
============================== ============== ========= ======= ========
Pakistan Rupee - - - 14
============================== ============== ========= ======= ========
Thailand Baht - - - 141
============================== ============== ========= ======= ========
Vietnam Dong - - - 2
============================== ============== ========= ======= ========
Malaysian Ringgit - - - 2
============================== ============== ========= ======= ========
Taiwan Dollar - - - 230
------------------------------ -------------- --------- ------- --------
- - - 14,577
------------------------------ -------------- --------- ------- --------
Liabilities
============================== ============== ========= ======= ========
2.25% Convertible Unsecured
Loan Stock 2025 3.83 3.1 35,708 -
============================== ============== ========= ======= ========
3.05% Senior Unsecured Loan
Note 2035 14.35 3.1 29,886 -
------------------------------ -------------- --------- ------- --------
- - 65,594 -
------------------------------ -------------- --------- ------- --------
The weighted average interest rate is based on the current yield
of each asset or liability, weighted by its market value.
The floating rate assets consist of cash deposits on call earning
interest at prevailing market rates.
The Company's equity portfolio and short term debtors and creditors
have been excluded from the above tables.
Interest rate sensitivity . Movements in interest rates would
not significantly affect net assets attributable to the Company's
shareholders and total return.
Foreign currency risk. Most of the Company's investment portfolio
is invested in overseas securities and the Statement of Financial
Position, therefore, can be significantly affected by movements
in foreign exchange rates.
Management of the risk . It is not the Company's policy to hedge
this risk on a continuing basis but the Company may, from time
to time, match specific overseas investment with foreign currency
borrowings.
The revenue account is subject to currency fluctuations arising
on dividends receivable in foreign currencies and, indirectly,
due to the impact of foreign exchange rates upon the profits
of investee companies. It is not the Company's policy to hedge
this currency risk but the Board keeps under review the currency
returns in both capital and income.
Foreign currency risk exposure by currency of denomination:
================= =========== ============= ======== =========== ============= ========
31 July 2022 31 July 2021
================= ==================================== ====================================
Net monetary Total Net monetary Total
Overseas assets/ currency Overseas assets/ currency
investments (liabilities) exposure Investments (liabilities) exposure
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================= =========== ============= ======== =========== ============= ========
Australian
Dollar 7,940 - 7,940 - - -
================= =========== ============= ======== =========== ============= ========
Chinese Renminbi 15,756 - 15,756 4,619 - 4,619
================= =========== ============= ======== =========== ============= ========
Danish Krona 12,352 - 12,352 10,157 - 10,157
================= =========== ============= ======== =========== ============= ========
Hong Kong
Dollar 64,947 - 64,947 57,636 - 57,636
================= =========== ============= ======== =========== ============= ========
Indian Rupee 82,097 9 82,106 90,186 476 90,662
================= =========== ============= ======== =========== ============= ========
Indonesian
Rupiah 55,431 - 55,431 43,412 - 43,412
================= =========== ============= ======== =========== ============= ========
Korean Won 31,429 - 31,429 34,240 - 34,240
================= =========== ============= ======== =========== ============= ========
Malaysian
Ringgit 35,339 2 35,341 29,106 2 29,108
================= =========== ============= ======== =========== ============= ========
Taiwan Dollar 56,994 458 57,452 78,501 230 78,731
================= =========== ============= ======== =========== ============= ========
New Zealand
Dollar 14,061 - 14,061 17,054 - 17,054
================= =========== ============= ======== =========== ============= ========
Pakistan Rupee - 11 11 927 14 941
================= =========== ============= ======== =========== ============= ========
Philippine
Peso 19,825 - 19,825 21,921 - 21,921
================= =========== ============= ======== =========== ============= ========
Singapore
Dollar 41,585 - 41,585 55,283 - 55,283
================= =========== ============= ======== =========== ============= ========
Sri Lankan
Rupee 7,640 32 7,672 13,942 - 13,942
================= =========== ============= ======== =========== ============= ========
Thailand Baht 35,114 3 35,117 44,104 141 44,245
================= =========== ============= ======== =========== ============= ========
Vietnamese
Dong 30,474 371 30,845 28,173 2 28,175
================= =========== ============= ======== =========== ============= ========
510,984 886 511,870 529,261 865 530,126
================= =========== ============= ======== =========== ============= ========
Sterling 13,857 (57,247) (43,390) 11,660 (51,882) (40,222)
----------------- ----------- ------------- -------- ----------- ------------- --------
Total 524,841 (56,361) 468,480 540,921 (51,017) 489,904
----------------- ----------- ------------- -------- ----------- ------------- --------
Foreign currency sensitivity . The Company's foreign currency
financial instruments are in the form of equity investments,
fixed interest investments, cash and bank loans. The sensitivity
of the former has been included within other price risk sensitivity
analysis so as to show the overall level of exposure. Due consideration
is paid to foreign currency risk throughout the investment process.
Other price risk. Other price risks (ie changes in market prices
other than those arising from interest rate or currency risk)
may affect the value of the quoted investments.
Investment in Far East equities or those of companies that derive
significant revenue or profit from the Far East involves a greater
degree of risk than that usually associated with investment in
the securities in major securities markets. The securities that
the Company owns may be considered speculative because of this
higher degree of risk. It is the Board's policy to hold an appropriate
spread of investments in the portfolio in order to reduce the
risk arising from factors specific to a particular country or
sector. Both the allocation of assets and the stock selection
process, as detailed on pages 106 to 108 of the published Annual
Report and financial statements for the year ended 31 July 2022,
act to reduce market risk. The Manager actively monitors market
prices throughout the year and reports to the Board, which meets
regularly in order to review investment strategy. The investments
held by the Company are listed on various stock exchanges worldwide.
Other price risk sensitivity . If market prices at the reporting
date had been 20% (2021 - 20%) higher or lower while all other
variables remained constant, the return attributable to Ordinary
shareholders for the year ended 31 July 2022 would have increased/(decreased)
by GBP104,968,000 (2021 - increased/(decreased) by GBP108,184,000)
and equity reserves would have increased/(decreased) by the same
amount.
Liquidity risk . This is the risk that the Company will encounter
difficulty in meeting obligations associated with financial liabilities.
Management of the risk. The Board imposes borrowing limits to
ensure gearing levels are appropriate to market conditions and
reviews these on a regular basis. Gearing comprises both senior
unsecured loan notes and convertible unsecured loan stock. The
Board has imposed a maximum gearing level, measured on the most
stringent basis of calculation after netting off cash equivalents,
of 25%. Details of borrowings at the 31 July 2022 are shown in
note 13.
Liquidity risk is not considered to be significant as the Company's
assets comprise mainly readily realisable securities, which can
be sold to meet funding commitments if necessary. Details of
the Board's policy on gearing are shown in the investment policy
section on page 12 of the published Annual Report and financial
statements for the year ended 31 July 2022.
Liquidity risk exposure . At 31 July 2022 the Company had borrowings
in the form of the GBP36,642,000 (2021 - GBP36,658,000) nominal
of 2.25% Convertible Unsecured Loan Stock 2025 and GBP29,892,000
(2021 - GBP29,886,000) in the form of the 3.05% Senior Unsecured
Loan Note 2035.
At 31 July 2022 the amortised cost of the Company's 3.05% Senior
Unsecured Loan Note 2035 was GBP29,892,000 (2021 - GBP29,886,000).
The maximum exposure at 31 July 2022 was GBP29,892,000 (2021
- GBP29,886,000) and the minimum exposure at 31 July 2022 was
GBP29,886,000 (2021 - GBP29,886,000).
The maturity profile of the Company's existing borrowings is
set out below.
================ ========= ======== ============ ======== ============ =========
Due
Due between
Expected within 3 months Due after
cashflows 3 months and 1 year 1 year
31 July 2022 GBP'000 GBP'000 GBP'000 GBP'000
================ ========= ======== ============ ======== ============ =========
2.25% Convertible Unsecured
Loan Stock 2025 38,282 - 827 37,455
===================================== ============ ======== ============ =========
3.05% Senior Unsecured Loan
Note 2035 42,353 - 915 41,438
===================================== ------------ -------- ------------ ---------
80,635 - 1,742 78,893
---------------- --------- -------- ------------ -------- ------------ ---------
================ ========= ======== ============ ======== ============ =========
Due
Due between
Expected within 3 months Due after
cashflows 3 months and 1 year 1 year
31 July 2021 GBP'000 GBP'000 GBP'000 GBP'000
================ ========= ======== ============ ======== ============ =========
2.25% Convertible Unsecured
Loan Stock 2025 39,692 - 826 38,866
===================================== ============ ======== ============ =========
3.05% Senior Unsecured Loan
Note 2035 43,268 - 915 42,353
===================================== ------------ -------- ------------ ---------
82,960 - 1,741 81,219
---------------- --------- -------- ------------ -------- ------------ ---------
Credit risk . This is the risk of failure of the counterparty
to a transaction to discharge its obligations under that transaction
that could result in the Company suffering a loss.
Management of the risk. Investment transactions are carried out
with a large number of brokers, whose credit-standing is reviewed
periodically by the Investment Manager, and limits are set on
the amount that may be due from any one broker. Settlement of
investment transactions are also done on a delivery versus payment
basis;
- the risk of counterparty exposure due to failed trades causing
a loss to the Company is mitigated by the review of failed trade
reports on a monthly basis. In addition, the third party administrator
carries out a stock reconciliation to Custodian records on a
monthly basis to ensure discrepancies are picked up on a timely
basis. The Manager's compliance department carries out periodic
reviews of the Custodian's operations and reports its finding
to the Manager's risk management committee. This review will
also include checks on the maintenance and security of investments
held; and
- cash is held only with reputable banks with high quality external
credit ratings.
It is the Manager's policy to trade only with A- and above (Long
Term rated) and A-1/P-1 (Short Term rated) counterparties.
None of the Company's financial assets is secured by collateral
or other credit enhancements.
Credit risk exposure . In summary, compared to the amounts in
the Statement of Financial Position, the maximum exposure to
credit risk at 31 July was as follows:
================ ========= ======== ============ ======== ============ =========
2022 2021
================ ========= ======== ====================== =======================
Statement Statement
of Financial Maximum of Financial Maximum
Position exposure Position exposure
Current assets GBP'000 GBP'000 GBP'000 GBP'000
================ ========= ======== ============ ======== ============ =========
Debtors and prepayments 1,464 1,464 5,107 5,107
===================================== ============ ======== ============ =========
Cash and short term deposits 9,471 9,471 14,577 14,577
------------------------------------- ------------ -------- ------------ ---------
10,935 10,935 19,684 19,684
---------------- --------- -------- ------------ -------- ------------ ---------
None of the Company's financial assets is past due or impaired.
Fair values of financial assets and financial liabilities. The
fair value of the loan note has been calculated at GBP28,804,000
as at 31 July 2022 (2021 - GBP30,713,000) compared to a value
at amortised cost in the financial statements of GBP29,892,000
(2021 - GBP29,886,000) (note 13). The fair value of the loan
note is determined by aggregating the expected future cash flows
for that loan discounted at a rate comprising the borrower's
margin plus an average of market rates applicable to loans of
a similar period of time and currency. Investments held at fair
value through profit or loss are valued at their quoted bid prices
which equate to their fair values. The Directors are of the opinion
that the other financial assets and liabilities, excluding CULS
which are held at amortised cost, are stated at fair value in
the Statement of Financial Position and considered that this
approximates to the carrying amount.
20. Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements
using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements.
Level 1: unadjusted quoted prices in an active market for identical
assets or liabilities that the entity can access at the measurement
date.
Level 2: inputs other than quoted prices included within Level
1 that are observable (ie developed using market data) for the
asset or liability, either directly or indirectly.
Level 3: inputs are unobservable (ie for which market data is
unavailable) for the asset or liability.
The financial assets measured at fair value in the Statement
of Financial Position are grouped into the fair value hierarchy
at 31 July 2022 as follows:
======================================= ====== ======== === ====== ==== === ========
Level Level Level Total
1 2 3
As at 31 July 2022 Note GBP'000 GBP'000 GBP'000 GBP'000
======================================= ====== ======== =========== ========= ========
Financial assets and liabilities
at fair value through profit or
loss
======================================= ====== ======== === ====== ==== === ========
Quoted equities a) 511,540 - 9,664 521,204
======================================= ====== ======== =========== ========= ========
Quoted preference shares b) - 3,203 - 3,203
======================================= ====== ======== =========== ========= ========
Quoted warrants b) - 434 - 434
--------------------------------------- ------ -------- ----------- --------- --------
Net fair value 511,540 3,637 9,664 524,841
--------------------------------------- ------ -------- ----------- --------- --------
======================================= ====== ======== === ====== ==== === ========
Level Level Level Total
1 2 3
As at 31 July 2021 Note GBP'000 GBP'000 GBP'000 GBP'000
======================================= ====== ======== =========== ========= ========
Financial assets and liabilities
at fair value through profit or
loss
======================================= ====== ======== === ====== ==== === ========
Quoted equities a) 536,934 - - 536,934
======================================= ====== ======== =========== ========= ========
Quoted preference shares b) - 3,652 - 3,652
======================================= ====== ======== =========== ========= ========
Quoted warrants b) - 335 - 335
--------------------------------------- ------ -------- ----------- --------- --------
Net fair value 536,934 3,987 - 540,921
--------------------------------------- ------ -------- ----------- --------- --------
a) Quoted equities . The fair value of the Company's investments
in quoted equities has been determined by reference to their
quoted bid prices at the reporting date. Quoted equities included
in Fair Value Level 1 are actively traded on recognised stock
exchanges.
b) Quoted preference shares and quoted warrants. The fair value
of the Company's investments in quoted preference shares and
quoted warrants has been determined by reference to their quoted
bid prices at the reporting date. Investments categorised as
Level 2 are not considered to trade as actively as Level 1 assets.
======================================= ====== ======== === ====== ==== === ========
Year ended Year ended
31 July 31 July
2022 2021
Level 3 Financial assets at fair GBP'000 GBP'000
value through profit or loss
======================================= ====== ======== === ============ =============
Opening fair value - -
======================================= ====== ======== === ============ =============
Transfers from level 1 9,664 -
======================================= ====== ======== === ============ =============
Total gains or losses included in losses on -
investments in the Statement of Comprehensive
Income:
========================================================= === ====== ==== =============
- assets disposed of during the - -
year
======================================= ====== ======== === ============ =============
- assets held at the end of the - -
year
--------------------------------------- ------ -------- --- ------------ -------------
Closing balance 9,664 -
--------------------------------------- ------ -------- --- ------------ -------------
During the year, the Company changed the basis for valuing its
holding in Cebu Holdings. The investee company has received regulatory
approval to merge with another company, Ayala Land, and new shares
will be issued in Ayala Land in the near future to satisfy the
transaction by a share conversion. The valuation methodology
employed is based on the underlying quoted price of Ayala Land
and the implied conversion ratio.
21. Capital management policies and procedures
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to
shareholders through the optimisation of the debt (comprising
CULS and Loan Note) and equity balance.
The Company's capital comprises the following:
================================================= =========== ===========
2022 2021
GBP'000 GBP'000
================================================= =========== ===========
Equity
================================================= =========== ===========
Equity share capital 10,435 10,435
================================================= =========== ===========
Reserves 453,961 477,523
================================================= =========== ===========
Liabilities
================================================= =========== ===========
3.05% Senior Unsecured Loan Note 2035 29,892 29,886
================================================= =========== ===========
2.25% Convertible Unsecured Loan Stock
2025 35,940 35,708
------------------------------------------------- ----------- -----------
530,228 553,552
------------------------------------------------- ----------- -----------
The Board's policy is to utilise gearing when the Manager believes
it appropriate to do so, up to a maximum of 25% geared at the
time of drawdown. Gearing for this purpose is defined as the
excess amount above shareholders' funds of total assets (including
net current assets/liabilities) less cash/cash equivalents, expressed
as a percentage of the shareholders' funds. If the amount so
calculated is negative, this is shown as a 'net cash' position.
================================================= =========== ===========
2022 2021
GBP'000 GBP'000
================================================= =========== ===========
Investments at fair value through profit
or loss 524,841 540,921
================================================= =========== ===========
Current assets excluding cash and cash
equivalents 1,184 1,047
================================================= =========== ===========
Current liabilities (2,864) (1,425)
================================================= =========== ===========
Deferred tax liability on Indian capital
gains (2,684) (3,631)
================================================= =========== ===========
520,477 536,912
================================================= =========== ===========
Net assets 464,396 487,958
------------------------------------------------- ----------- -----------
Gearing (%) 12.1 10.0
------------------------------------------------- ----------- -----------
The Board monitors and reviews the broad structure of the Company's
capital on an ongoing basis. The review includes:
- the planned level of gearing which takes account of the Manager's
views on the market;
- the level of equity shares in issue;
- the extent to which revenue in excess of that which is required
to be distributed should be retained.
The Company's objectives, policies and processes for managing
capital are unchanged from the preceding accounting period.
The Company does not have any externally imposed capital requirements.
22. Prior year restatement
The Statement of Comprehensive Income, the Statement of Financial
Position and the Statement of Changes in Equity for the year
ended 31 July 2021 have been restated to reallocate costs of
GBP250,000 incurred during that period in relation to the long-term
investment strategy review from revenue to capital. This treatment
was changed to align to the presentation in accordance with guidance
provided by the AIC's SORP as disclosed in the 2021 annual report
as these costs were adjudged by the Board to have been incurred,
wholly or partly, in connection with the maintenance or enhancement
of the value of the investments in the portfolio.
Consequently, in the Statement of Comprehensive Income for the
year ended 31 July 2021, administrative expenses allocated to
revenue have decreased from GBP1,386,000 to GBP1,136,000 and
administrative expenses allocated to capital have increased from
GBPnil to GBP250,000. In the Statement of Financial Position
as at 31 July 2021 the capital reserve has decreased from GBP401,374,000
to GBP401,124,000 and the revenue reserve has increased from
GBP12,618,000 to GBP12,868,000. In the Statement of Changes in
Equity for the year ended 31 July 2021, the return after taxation
allocated to the capital reserve has decreased from a gain of
GBP144,097,000 to a gain of GBP143,847,000 and the return after
taxation allocated to the revenue reserve has increased from
GBP2,386,000 to GBP2,636,000. In note 7(b) (i) the revenue return
before taxation has increased from GBP2,936,000 to GBP3,186,000
and the capital return before taxation has decreased from GBP147,653,000
to GBP147,403,000 (ii) the revenue return multiplied by the standard
rate of corporation tax of 19% has increased from GBP558,000
to GBP605,000 and the capita return multiplied by the standard
rate of corporation tax of 19% has decreased from GBP28,054,000
to GBP28,007,000 and (iii) the movement in unutilised management
expenses allocated to revenue has decreased from GBP916,000 to
GBP869,000 and the movement in unutilised management expenses
allocated to capital has increased from GBPnil to GBP47,000.
Alternative Performance Measures
Alternative Performance Measures ("APMs") are numerical measures of
the Company's current, historical or future performance, financial
position or cash flows, other than financial measures defined or specified
in the applicable financial framework. The Company's applicable financial
framework includes FRS 102 and the AIC SORP. The Directors assess the
Company's performance against a range of criteria which are viewed
as particularly relevant for closed-end investment companies.
Discount to net asset value per Ordinary share
The difference between the share price and the net asset value per
Ordinary share expressed as a percentage of the net asset value per
Ordinary share. 2022 has been presented on a diluted basis as the Convertible
Unsecured Loan Stock ("CULS") is "in the money" (2021 - same).
============================================ ============= ============= ============
As at
As at 31 July 2021
31 July 2022 (*Restated)
============================================ ============= ============= ============
NAV per Ordinary share (p) a 295.25 309.02
============================================ ============= ============= ============
Share price (p) b 254.00 266.00
============================================ ============= ============= ============
Discount (a-b)/a 14.0% 13.9%
-------------------------------------------- ------------- ------------- ------------
* Rates for 2021 have been restated to reflect the 5:1 sub division
as disclosed in note14.
Dividend cover
Revenue return per Ordinary share divided by dividends declared for
the year per Ordinary share expressed as a ratio.
============================================ ============= ============= ============
Year ended
Year ended 31 July 2021
31 July 2022 (*Restated)
============================================ ============= ============= ============
Revenue return per Ordinary share (p) a 9.34 1.66
============================================ ============= ============= ============
Dividends declared (p) b 8.00 3.20
============================================ ============= ============= ============
Dividend cover a/b 1.17 0.52
-------------------------------------------- ------------- ------------- ------------
* Rates for 2021 have been restated to reflect the 5:1 sub division
as disclosed in note14.
Net gearing
Net gearing measures the total borrowings less cash and cash equivalents
divided by shareholders' funds, expressed as a percentage. Under AIC
reporting guidance cash and cash equivalents includes net amounts due
from and to brokers at the year end as well as cash and short term
deposits.
============================================ ============= ============= ============
Year ended Year ended
31 July 2022 31 July 2021
============================================ ============= ============= ============
Borrowings (GBP'000) a 65,832 65,594
============================================ ============= ============= ============
Cash and short term deposits (GBP'000) b 9,471 14,577
============================================ ============= ============= ============
Amounts due to brokers (GBP'000) c - 1,997
============================================ ============= ============= ============
Amounts due from brokers (GBP'000) d 280 4,060
============================================ ============= ============= ============
Shareholders' funds (GBP'000) e 464,396 487,958
-------------------------------------------- ------------- ------------- ------------
Net gearing (a-b+c-d)/e 12.1% 10.0%
-------------------------------------------- ------------- ------------- ------------
Ongoing charges
The ongoing charges ratio has been calculated in accordance with guidance
issued by the AIC as the total of investment management fees and administrative
expenses and expressed as a percentage of the average published daily
net asset values with debt at fair value throughout the year.
============================================ ============= ============= ============
2022 2021
============================================ ============= ============= ============
Investment management fees (GBP'000) 3,204 3,570
============================================ ============= ============= ============
Administrative expenses (GBP'000) 1,561 1,386
============================================ ============= ============= ============
Less: non-recurring charges(A) (GBP'000) (428) (297)
-------------------------------------------- ------------- ------------- ------------
Ongoing charges (GBP'000) 4,337 4,659
-------------------------------------------- ------------- ------------- ------------
Average net assets (GBP'000) 490,446 422,440
-------------------------------------------- ------------- ------------- ------------
Ongoing charges ratio 0.88% 1.10%
-------------------------------------------- ------------- ------------- ------------
(A) Professional fees comprising corporate and legal fees associated
with proposals approved by shareholders on 27 January 2022.
The ongoing charges ratio provided in the Company's Key Information
Document is calculated in line with the PRIIPs regulations, which includes
finance costs and transaction charges.
Total return
NAV and share price total returns show how the NAV and share price
has performed over a period of time in percentage terms, taking into
account both capital returns and dividends paid to shareholders. NAV
and share price total returns are monitored against open-ended and
closed-ended competitors, and the Reference Index, respectively.
============================================ ============= ============= ============
Share
Year ended 31 July 2022 NAV Price
============================================ ============= ============= ============
Opening at 1 August 2021 a 309.02p 266.00p
============================================ ============= ============= ============
Closing at 31 July 2022 b 295.25p 254.00p
============================================ ============= ============= ============
Price movements c=(b/a)-1 -4.5% -4.5%
============================================ ============= ============= ============
Dividend reinvestment(A) d 2.5% 2.8%
-------------------------------------------- ------------- ------------- ------------
Total return c+d -2.0% -1.7%
-------------------------------------------- ------------- ------------- ------------
============================================ ============= ============= ============
Share
Year ended 31 July 2021 (*Restated) NAV Price
============================================ ============= ============= ============
Opening at 1 August 2020 a 221.29p 196.00p
============================================ ============= ============= ============
Closing at 31 July 2021 b 309.02p 266.00p
============================================ ============= ============= ============
Price movements c=(b/a)-1 39.6% 35.7%
============================================ ============= ============= ============
Dividend reinvestment(A) d 2.3% 2.5%
-------------------------------------------- ------------- ------------- ------------
Total return c+d +41.9% +38.2%
-------------------------------------------- ------------- ------------- ------------
* Rates for 2021 have been restated to reflect the 5:1 sub division
as disclosed in note14.
(A) NAV total return involves investing the net dividend in the NAV
of the Company with debt at fair value on the date on which that dividend
goes ex-dividend. Share price total return involves reinvesting the
net dividend in the share price of the Company on the date on which
that dividend goes ex-dividend.
The Annual General Meeting will be held at 12:30 p.m. on 30
November 2022 at Bow Bells House, 1 Bread Street, London EC4M
9HH.
Please note that past performance is not necessarily a guide to
the future and that the value of investments and the income from
them may fall as well as rise and may be affected by exchange rate
movements. Investors may not get back the amount they originally
invested.
The Annual Financial Report Announcement is not the Company's
statutory accounts. The above results for the year ended 31 July
2022 are an abridged version of the Company's full financial
statements, which have been approved and audited with an
unqualified report. The 2021 and 2022 statutory accounts received
unqualified reports from the Company's auditors and did not include
any reference to matters to which the auditors drew attention by
way of emphasis without qualifying the reports, and did not contain
a statement under s.498(2) or 498(3) of the Companies Act 2006. The
financial information for 2021 is derived from the statutory
accounts for 2020 which have been delivered to the Registrar of
Companies. The 2022 financial statements will be filed with the
Registrar of Companies in due course.
The audited Annual Report and financial statements will be
posted to shareholders in November. Copies may be obtained during
normal business hours from the Company's Registered Office, Bow
Bells House, 1 Bread Street, London EC4M 9HH or from the Company's
website, asia-focus.co.uk*
* Neither the content of the Company's website nor the content
of any website accessible from hyperlinks on the Company's website
(or any other website) is (or is deemed to be) incorporated into,
or forms (or is deemed to form) part of this announcement.
By Order of the Board
Aberdeen Asset Management PLC
Secretary
14 October 2022
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END
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