LEGAL
ENTITY IDENTIFIER: 549300YM9USHRKIET173
Invesco Asia Trust plc
Annual Financial Report Announcement for the Year Ended
30 April 2024
The
following text is extracted from the Annual Financial Report of the
Company for the year ended 30 April
2024. All page numbers below refer to the Annual Financial
Report which will be made available on the Company's
website.
This
announcement contains regulated information.
Investment
Objective
The
Company’s objective is to provide long-term capital growth and
income by investing in a diversified portfolio of Asian and
Australasian companies. The Company aims to achieve growth in its
net asset value (NAV) total return in excess of the Benchmark
Index, the MSCI AC Asia ex Japan Index (total return, net of
withholding tax, in sterling terms).
Financial
Information and Performance Statistics
The
benchmark index of the Company is the MSCI AC Asia ex Japan Index
(total return, net of withholding tax, in sterling
terms)
Total Return Statistics(1)
with dividends reinvested
Change for the year (%)
|
2024
|
2023
|
Net asset value (NAV) total return(2)
|
2.7
|
1.3
|
Share price total return(2)
|
2.2
|
1.2
|
Benchmark index total return(3)
|
7.9
|
-6.0
|
Capital
Statistics
At
30 April
|
2024
|
2023
|
change
%
|
Net assets
(£’000)
|
238,266
|
245,004
|
–2.8
|
NAV per
share
|
361.51p
|
366.48p
|
–1.4
|
Share
price(1)
|
313.00p
|
321.00p
|
–2.5
|
Benchmark
index (capital)
|
989.35
|
938.42
|
+5.4
|
Discount(2)
per
ordinary share:
|
(13.4)%
|
(12.4)%
|
|
Average
discount over the year(1)(2)
|
(11.3)%
|
(11.6)%
|
|
Gearing(2):
|
|
|
|
–
gross
|
5.3%
|
5.9%
|
|
–
net
|
4.5%
|
5.3%
|
|
|
|
|
|
Revenue
Statistics
|
|
|
|
Year
Ended 30 April
|
2024
|
2023
|
change
%
|
Income
(£’000)
|
7,375
|
7,601
|
–3.0
|
Net revenue
available for ordinary shares (£’000)
|
5,422
|
5,596
|
–3.1
|
Revenue
return per ordinary share
|
8.12p
|
8.37p
|
–3.0
|
Dividends
per share(4):
|
|
|
|
–
first interim
|
7.20p
|
7.20p
|
|
–
second interim
|
6.90p
|
7.60p
|
|
Total
dividends
|
14.10p
|
14.80p
|
–4.7
|
Ongoing
charges ratio(2)
|
1.03%
|
0.99%
|
|
(1) Source:
LSEG Data & Analytics.
(2) Alternative
Performance Measure (‘APM’). See Glossary of Terms and Alternative
Performance Measures on pages 78 to 80 of the financial report for
details of the explanation and reconciliations of APMs.
(3)
Index
returns are shown on a total return basis, with dividends
reinvested net of withholding taxes.
(4)
The
Company’s dividend policy aims to pay a regular six-monthly
dividend calculated at 2% of the Company’s NAV on the last business
day of September and February. Dividends are paid from a
combination of the Company’s revenue reserves and capital reserves,
as required. The Board are proposing a minor change to the dividend
policy. Further details can be found in the Chairman’s Statement on
page 8.
Chairman’s
Statement
Highlights
• NAV
total return performance behind benchmark over 1 year; strong
relative performance over 3, 5 and 10 years.
• Asian
economies are forecast to grow faster than the West yet their
stockmarkets are at unusually attractive valuation levels. There is
then a double discount of the share price trading at below net
asset value.
• On
top of this comes a 4.5% annual dividend yield based on the share
price as at 30 April 2024,
approximately half of which is effectively a return of capital at
net asset value.
This
is the first time in four years
that your Company’s NAV has underperformed the benchmark index over
the Company’s year to 30 April. The year saw a net asset value
total return of 2.7%, behind the benchmark index’s total return of
7.9%. The share price total return was 2.2% with the discount
widening a little from 12.4% at 30 April
2023 to 13.4% at 30 April 2024
and averaging 11.3% over the year. Attribution numbers show that
the year’s underperformance came mainly from stock selection within
China and the underweight
allocation to India. Fiona Yang and Ian
Hargreaves review performance in more detail in their
Portfolio Managers’ Report.
Despite an
underperforming year, the Company’s long term performance record
remains strong with outperformance over three, five and ten years
as shown in the table below. The table also shows performance over
four years from 30 April 2020, which
is relevant to our performance conditional tender offer which will
be assessed on five-year performance from 30 April
2020. In the first four years, NAV total return of 11.0%
annualised is comfortably ahead of the benchmark’s 4.5%. Indeed our
longer-term performance record has been recognised in the industry
through us winning the Citywire Winners award at the publication’s
Investment Trust Awards 2023 for best risk-adjusted performance for
the Asia Pacific Equities Sector. We were also awarded the “Kepler
Income & Growth Rating 2024” by Kepler Partners and an A-rating
by Square Mile Investment Consulting & Research.
Shareholders
will know that we believe that the discount is determined by a
combination of demand for Asian equity investment vehicles, the
Investment Case for Invesco Asia Trust plc and the Corporate
Proposition that we offer. In order to stimulate more demand for
the Company’s shares, we aim to provide a strong investment case
and a strong corporate proposition at the same time.
The
Investment Case
The
Investment Case rests on accessing the attractions of Asian equity
markets through the institutional expertise of Fiona Yang and Ian Hargreaves’ team at Invesco.
The team is unchanged and remains strong. We were delighted to
announce that from 1 May 2024, our
Co-Portfolio Managers have swapped roles with Fiona Yang taking the lead from Ian Hargreaves, with both continuing to work
very closely together on the Company’s portfolio. Ian will remain
closely involved for years to come. The Directors have been
impressed by Fiona’s contribution over the past five years and are
pleased to support her promotion.
Their
investment process can be summarised as “valuation not value” and
has been very successful with institutional clients such as pension
funds and sovereign wealth investors. In these times of great
change, we would argue that this forward-looking active approach
(as opposed to a backward-looking index tracking style) is exactly
what is needed. The team have delivered very strong relative
performance for shareholders over three, five and ten years, as
shown in the table on the below. Like many professional consultants
and shareholders we, as fully independent directors, look for
talented stock pickers, a robust process and consistent
outperformance in our investment manager. We believe we have all
three in Fiona, Ian and the team at Invesco.
Annualised
Total Return in Sterling Terms to 30 April
2024(1)(2)
|
1
|
3
|
4
|
5
|
10
|
|
year
|
years
|
years
|
years
|
years
|
Net Asset
Value %(3)
|
2.7
|
–1.0
|
11.0
|
6.4
|
10.1
|
Benchmark
%
|
7.9
|
–4.1
|
4.5
|
2.6
|
6.8
|
(1) Source:
LSEG Data & Analytics.
(2) The
benchmark index of the Company was changed on 1 May 2015 to the MSCI AC Asia ex Japan Index
from the MSCI AC
Asia Pacific ex Japan Index (both
indices total return, net of withholding tax, in sterling terms).
The benchmark performance used throughout this report uses the
former index for periods prior to 1 May
2015.
(3) Alternative
Performance Measure (‘APM’). See Glossary of Terms and Alternative
Performance Measures on pages 78 to 80 of the financial report for
details of the explanation and reconciliations of APMs.
The
Corporate Proposition
The
Company’s Corporate Proposition was first introduced in 2018. Since
then the Board has continued to review and adopt measures intended
to create additional demand for the Company’s shares, both from
existing and new shareholders, and to reduce the discount. We have
been careful to ensure that the measures chosen are in the best
interests of all shareholders. The intention is that the gains from
each will combine to make the Corporate Proposition as compelling
as the Investment Case.
There are
multiple elements to our Corporate Proposition,
including:
1. Continuation
Vote: Every
three years the future of the Company is subject to a continuation
vote. The next one is due in September
2025.
2. Enhanced
dividend policy: The Board
introduced an enhanced dividend policy in 2020 which aimed to pay
in two instalments, in the absence of unforeseen circumstances, a
regular dividend equivalent to approximately 4.0% of the Company’s
NAV, calculated by reference to the Company’s NAV on the last
business days of September and February. The dividend instalments
are paid to shareholders in November and April. This year the first
interim dividend of 7.20p was paid to shareholders on 23 November 2023 and a second interim dividend of
6.90p was paid to shareholders on 23 April
2024. This gave a total distribution of approximately 4.0%
of NAV over the year and represents a 4.5% dividend yield on the
closing share price on 30 April
2024.
Following
feedback from shareholders, the Board will be making a minor change
to the dividend policy. The Company will aim to pay in two
instalments, in the absence of unforeseen circumstances, a regular
dividend equivalent to approximately 4.0% of the Company’s NAV on
the last business day of September. The dividends will continue to
be paid to shareholders in November and April. The change will take
effect from 1 May 2024. Please note
that the policy of paying out approximately 4.0% of NAV means that
dividend payments will not necessarily increase every year. This
distribution policy as a whole is put to shareholders at each
AGM.
3. Performance
Conditional Tender: We
introduced a performance conditional tender offer in 2020 through
which the Board has undertaken to effect a tender offer for up to
25.0% of the Company’s issued share capital at a discount of 2.0%
to the prevailing NAV per share (after deduction of tender costs)
in the event that the Company’s NAV cum-income total return
performance over the five year period to 30
April 2025 fails to exceed the Company’s comparator index,
the MSCI AC Asia ex Japan Index (net of withholding tax, total
return in sterling terms) by 0.5% per annum over the five years on
a cumulative basis. Shareholders already have the opportunity to
vote on the continuation of the Company every three years, but the
Board believes that also providing shareholders with the option to
tender a proportion of their shares for a cash price close to NAV,
if the Company underperforms, constitutes a pragmatic and
attractive initiative, particularly if the shares were to be
trading at a material discount at the time.
4. Minimising
Ongoing Charges and Fees: Fair and
accurate cost disclosure for investment trust companies has been
making headlines over the past year. As a Board we believe that all
costs and charges should be clearly disclosed but also that it is
important to remember that these costs are the ordinary costs of
doing business and that they are already deducted from the net
asset value by which we judge performance net of these costs
against our index benchmark.
The Board
is responsible for managing the level of charges to shareholders.
Our intention is to seek to reduce gradually the level of ongoing
charges over time. The main component of the ongoing charge of
1.03% p.a. in 2024 is the investment management fee paid to
Invesco. The investment management fee is 0.75% on assets up to
£250 million
reducing to 0.65% on net assets over this amount. Other components
within the ongoing charges calculation include company secretarial
(£119,000), external auditor (£70,000), directors’ fees (£143,000),
custody fees and miscellaneous others (£360,000). Outside the
ongoing charges calculation are the costs of gearing and
transaction charges (the incidental costs of buying and selling
shares within the portfolio) which taken together amounted to
£800,000 over the year. All of these costs have always been
included within the net asset value calculation.
5.
Buyback
Authority: The Board
has a stated average discount target of less than 10% of NAV
calculated on a cum-income basis (formerly ex-income) over the
Company’s financial year, although the Directors are cognisant of
the fact that the Company’s share rating at any particular time
will reflect a combination of various factors, a number of which
are beyond the Board’s control. Share buybacks will occur where and
when we consider (in conjunction with our broker) that such
buybacks will be effective, taking into account market factors and
the discounts of comparable funds. As previously flagged, we are
more likely to buy back shares when performance is behind the
index. During the financial year we have bought back 945,000 shares
into Treasury at a total cost of £2,915,000, representing 1.26% of
the starting number of shares in issue and which has been accretive
to NAV by 0.16%. Discounts across the whole investment trust
sector, not just Asian trusts, remain elevated and we shall
continue to be proactive in our efforts to reduce ours.
6. Environmental,
Social and Governance Matters (ESG): The
Board recognises the importance of ESG considerations in delivering
value to shareholders and our approach and that of the Manager is
explained in detail later in this report. We continue to monitor
closely developments in this space. We have asked the Manager to
highlight examples of holdings in companies where improved ESG
initiatives that have increased the fair value of companies and an
update on the number of portfolio companies committing to net zero
alignment (‘NZA’). The Manager has sufficient expertise to assess
the risks and opportunities which may result from accelerating
ESG-driven change. Their Global ESG function, based in Henley,
inputs into the research process and provides a formal ESG
oversight process including meetings with the Portfolio Managers
and analysts to review the portfolio formally from an ESG
perspective. The Manager is a signatory to the Financial Reporting
Council’s Stewardship Code and is an active member of the UK
Sustainable Investment and Finance Association. In addition, the
Manager scored four out of five stars for its Investment &
Stewardship Policy under new scoring methodology produced by
United Nations
Principles for Responsible Investment (‘PRI’). This followed five
consecutive years of achieving an A+ rating for responsible
investment (Strategy & Governance) under the previous
methodology. The Manager received an AA ESG rating from MSCI and as
a signatory and discloser to the Carbon Disclosure Project, the
Manager supports enhanced, market-wide environmental disclosure and
reports annually on its climate change management and performance,
including comprehensive emissions accounting.
The Board
reviews at each board meeting the Manager’s assessment of ESG
considerations on individual stock decisions, and various
indicators of overall ESG progress. We do not expect every
indicator to travel in the favoured direction in every period: the
portfolio will change as will the measurements. Some factors will
have their priorities reassessed over time, for example products
with a military use may have been negatively assessed in the past
but when reconsidering the social factor of security in the light
of the Russian invasion of Ukraine, will now be assessed more favourably.
Despite this, we should be able to see progress for many indicators
over longer time periods. Some examples: in the year to
30 April 2024, the Manager engaged
with 54 of the 58 portfolio holdings, voting against resolutions
for 29 of them. The Manager met a total of 322 companies over the
year, engaging with ESG issues on 199 of them. A year ago, the
Company held 23 companies that had not yet set a net zero target
date. Now that number has risen to 24. Finally, where data is
available, the number of women on investee company boards has been
increasing.
7. Access
to Invesco Expertise: Invesco
Asia Trust plc is the only vehicle available to UK retail investors
who wish to access the track record of Fiona and Ian. They manage
it with a high degree of commonality to their institutional
portfolios and also add the best smaller company opportunities. Ian
is Invesco’s lead portfolio manager of Asian accounts for
institutional investors and as at 30 June
2024 manages over £5 billion of institutional assets with
Fiona, a key member of the team and a rising star in our
opinion.
8. Engaging
more individual shareholders: We are
encouraged that an increasing proportion of our shareholders are
individuals, with the proportion of investors who hold shares of
Invesco Asia Trust plc via investment platforms once again
increasing. The Board aims to engage more directly with individual
investors. Working closely with the Manager, we continue to raise
the profile of the Company through new direct investor information,
commentary and events, which will provide access to the thoughts
and views of Fiona and Ian, their team and the Directors. These
activities complement the ongoing
engagement with a broad range of professional investors.
Please visit our homepage www.invesco.co.uk/invescoasia where you
can also find presentations, read updates or register to receive
printed copies of the Half-Yearly and Annual Financial Reports. You
can also see third party research (by Edison Group and Kepler
Partners) and monthly factsheets on the Company’s website.
Shareholders can also contact us by email at
investmenttrusts@invesco.com.
9. Meeting
the Directors and Managers: One of
the main attractions of owning an investment trust over a unit
trust or OEIC is that all shareholders have the opportunity of
meeting the Directors and the Managers every year at the AGM. This
year’s meeting will be held in person at Invesco’s London office at 12pm on 12 September
2024. As well as the Company’s formal business, there will
be a presentation, the opportunity to ask questions of Fiona, who
will be joining the meeting remotely, Ian and the Directors and
then to chat informally with all of us afterwards over lunch.
Shareholders may bring a guest to these meetings. For me this is
one of the highlights of being Chairman, and I look forward to
meeting as many of you as possible. For those unable to make it in
person, we will record a special version of the presentation and
post it onto our website after the AGM. Shareholders wishing to
lodge questions in advance of the AGM should do so by email to the
Company Secretary at investmenttrusts@invesco.com or, by letter, to
43-45 Portman Square, London W1H
6LY.
10. Gearing:
The Company intends to use gearing (or borrowings) actively to take
advantage of its closed-end structure. At the year end the Company
had net gearing of 4.5% having started the year at 5.3%.
11. Directors’
Shareholdings:
Institutional investors often follow and ask for information on
Directors’ holdings of shares in the Company. These are shown in
the Directors’ Remuneration Report in the Annual Financial Report
and we are required to notify any changes to the stock market by
regulatory announcement. Additionally, our Portfolio Managers,
Fiona and Ian are both shareholders in the Company and we can
confirm that their remuneration by the Manager is partly determined
by the performance of the Company.
Update
In view of
increases in audit fees, the Company recently completed a tender
process and has appointed Ernst & Young LLP (‘EY’) to the role
of external auditor for the financial year ending 30 April 2025. Further details of the process can
be found in the Audit Committee report on page 44.
Since
30 April 2024, the NAV total return
has been -0.2%, underperforming the index return of 2.3%. The share
price has returned 2.9% with the discount narrowing to
10.8%.
Outlook
First
thoughts writing this outlook are that not much has changed over
the last six months. Trade friction between the US and China remains, with the US Presidential
election adding noise and uncertainty. China has taken further steps to stabilise its
residential property sector, where overdevelopment has led to a
loss of consumer confidence and also some bank instability. Asian
technology companies such as Taiwan Semiconductor Manufacturing and
Samsung Electronics have performed well on the coattails of the
“Magnificent Seven” tech stocks that have led the US stockmarket
rally. India’s economy has continued to grow without so far
threatening the high rating of its stockmarket. Domestic consumer
spending growth is healthy across Asia; for example 4.8% in China, 5.7% in India, 5.1% in Indonesia and 2.2% in Taiwan (Morgan Stanley 2024 forecasts). And
with overall forecast 2024 economic growth rates including 4.8% in
China, 6.8% in India, 2.7% in South
Korea, 5.1% in Indonesia,
3.7% in Taiwan and 2.2% in
Singapore comparing favourably
with the US at 2.2% and the Eurozone at 1.3%, there continues to be
grounds for optimism.
On top of
this, Asian stock market valuations are cheap relative to the world
and cheap relative to their own history. Experience proves that
this would normally be a good time to invest. There may be no
obvious immediate catalyst for a sudden recovery but as a long-term
investor in Invesco Asia Trust plc we would argue that you are paid
to wait, especially as you currently benefit from the double
discount of the share price relative to the net asset value. On top
of this comes a 4.5% annual dividend yield based on the share price
as at 30 April 2024, approximately
half of which is effectively a return of capital at net asset
value.
Neil Rogan
Chairman
25 July 2024
Portfolio
Managers’ Report Q&A
Q How
has the Company performed in the year under
review?
A The
Company’s net asset value grew by 2.7% (total return, in sterling
terms) over the twelve months to 30 April
2024, which compares to the benchmark MSCI AC Asia ex Japan
Index return of 7.9%.
The year
began with a degree of optimism surrounding the prospects for Asian
markets as China’s economy reopened post-Covid. However, the
strength of China’s recovery has disappointed while markets have
also had to contend with shifting expectations around the
trajectory of US interest rates. Against this backdrop, the
portfolio has benefitted from the positive impact of our stock
selection in markets such as South
Korea, Taiwan, Singapore and Thailand, with enthusiasm for AI having
generated strong returns for chip stocks in particular. This has
helped offset the impact of stock selection in China, where consumer-related stocks that
rallied strongly in the prior period gave back some of that
outperformance. Looking at markets more broadly, performance over
the last twelve months has been mixed (as can be seen from the
chart below), and it is frustrating to report that the impact of
being underweight India and
overweight markets such as China,
Hong Kong and Indonesia has also counted against
us.
What gives
us grounds for optimism is that the degree of divergence we have
seen in terms of performance and valuation between the best and
worst performing markets is extreme. This is the kind of backdrop
that usually presents us with great opportunities. Conditions can
change, sometimes rapidly, and although recent performance has
disappointed, we are increasingly confident in the prospects for
the portfolio over our investment time horizon.
Q What
have been the biggest detractors?
A Chinese
consumer stocks were amongst the best performers in the prior
reporting period, amidst optimism surrounding post-Covid reopening.
However, some of those gains have been reversed as the strength of
China’s recovery has disappointed. China
Meidong Auto was the
biggest single detractor, with weak demand and increased
competition from the electric vehicle (‘EV’) segment being
headwinds for the luxury auto dealership, although business
operations appear to be faring better than feared.
Beijing
Capital International Airport has
struggled as international routes have been slow to re-start,
especially from the US, while restaurant operator
Jiumaojiu
faces
pricing pressures in a slower-than-expected recovery.
Ming
Yang Smart Energy has also
faced competitive pressures, leading to concern over the wind
turbine manufacturers decision to move into wind farm development,
a more capital-intensive business – a development that prompted us
to sell. Exposure to life insurers Ping
An Insurance and
AIA
also
detracted, as did auto parts manufacturer MINTH.
Elsewhere,
LG
Chemical felt the
effect of slowing EV sales as government subsidies have been
reduced in several key markets. Indonesia’s economy has also been
going through a softer patch of growth, which negatively impacted
cement manufacturer Semen
Indonesia
and auto
conglomerate Astra
International.
Q And
contributors?
A Shriram
Transport Finance was the
biggest single contributor, as India’s leading lender for buyers of
second-hand commercial vehicles, it continued to deliver strong
earnings growth and improved margins, with evidence of its
extensive branch network being used to good effect with growth in
cross-selling products. Aurobindo
Pharma has also
added significant value on the back of an improvement in generics
pricing in the US (their largest market) and strong execution in
their injectables business, but we have taken profits and sold,
with the stock appearing fully valued, in our view.
Tech stocks
with exposure to the AI server supply-chain have been strong
contributors, with the likes of South Korean chip
manufacturer SK
Hynix, Taiwan Semiconductor Manufacturing (‘TSMC’)
and
Chroma
ATE in
Taiwan all making strong gains.
More broadly speaking, stock selection in South Korea has added value, with some
excitement over the unveiling of a ‘Corporate Value-Up’ programme,
intended to drive improvements in shareholder returns and corporate
governance. Samsung
Fire & Marine is already
setting a good example in this regard, with the insurer’s strong
operating performance being matched by a more progressive dividend
policy. Hyundai
Motor also
advanced with sales in the US, Europe and India complementing increased distribution of
higher margin vehicles.
Other
notable contributions came from South-East Asian gaming and
e-commerce company Sea
and
Anglo American, after the
mining group received a takeover bid from BHP.
We have also started to see selected Chinese companies, like
Tencent Music Entertainment and the
digital freight platform Full
Truck Alliance, being
well rewarded for demonstrating an ability to grow.
Q Are
you able to find any pockets of value in India?
A India
appears to be in a macro sweet spot, with a bull market supported
by a strong capital expenditure cycle and robust domestic demand.
Our Indian holdings have generally performed very well, but we have
now sold outperformers like Aurobindo
Pharma, Larsen & Toubro and
Mahindra
& Mahindra, with
valuations appearing increasingly full, implying long term growth
rates we struggle to justify.
The
challenge has been to find new ideas that appear undervalued, with
the market trading at 4.0x Price-to-book ratio (‘P/B’), a level
last breached nearly two decades ago (see chart above), at a time
when other Asian markets attracted a similar premium. As the
increased underweight position in India suggests, we have been finding more
attractive opportunities elsewhere.
That said,
we still have some exposure and have been adding to
HDFC
Bank, which has
recently merged with its parent, a bumpier journey than the market
expected. Looking through the near-term issues, we have no concerns
on their ability to integrate the two businesses and have been
happy to add at trough valuations. We have also introduced:
Delhivery,
which is India’s largest third-party logistics company, making it
well positioned to benefit from growth in e-commerce; and
Power
Grid of
India, the nation’s central
transmission utility, a company with what we consider to be stable,
long-term growth potential and an attractive dividend
yield.
Q Has
your positioning in Hong
Kong/China changed, are green shoots
emerging?
A The
portfolio continues to have a small overweight position in
China and Hong Kong. Market sentiment for much of the
year has been weak, reflecting concerns over escalating
geopolitical tensions, poor consumer confidence and a troubled
property market. We witnessed a degree of capitulation towards the
end of 2023, with indiscriminate markets weakness suggesting little
hope for a recovery and a feeling that the policy response was
underwhelming. Our view has not changed, with a belief that
coordinated measures have been put in place to support the economy,
with valuations still deeply discounted, and equities likely to
prove sensitive to signs of improvement in the fundamentals, which
we have started to see.
Against a
challenging backdrop, we have been thoroughly reviewing the
portfolio, seeking to upgrade on quality where possible. As already
discussed, we sold wind turbine manufacturer Ming Yang Smart Energy
given a change in strategy that compromised our original investment
thesis. We also sold China
BlueChemical and
Will
Semiconductor, which
have performed well in a weak market, and looked to consolidate the
portfolio, exiting some smaller holdings. In turn, we have sought
to introduce or add to stocks that offered what we consider to be
better quality, stable growth potential at discounted valuations.
Names introduced include digital freight platform
Full
Truck Alliance, baijiu
distiller Wuliangye,
China Resources Beer and
Tencent Music Entertainment.
Meanwhile,
markets have rebounded nicely from their January lows. Geopolitical
tensions linger, but we have seen signs of stabilisation in the
economy and policy support measures that signal a more determined
attempt to support the property market.
Q What
are your thoughts on AI developments and related
opportunities?
A There
has been a bit of a buying frenzy around any company in NVIDIA’s
supply chain, given how they have raised their guidance on
AI-related chip growth, with their new AI chips being multiple
times more powerful than the previous generation, enabling the
launch of awe-inspiring AI applications such as Sora from
OpenAI.
What we
have noticed is that AI enthusiasm has started to move into nascent
or niche adopters and beneficiaries. For example,
MediaTek,
which is a portfolio holding, announced the launch of a new mobile
chip in November 2023 which
facilitates the use of generative AI on smartphones. This is part
of a trend known as ‘edge-AI’ with other high-end Android
smartphones having adopted the chip.
For the
tech companies we hold, the current contribution to earnings from
new AI components or devices is negligible, but the market has been
placing higher multiples on these new earnings with the expectation
of significant, structural growth from these products in future
years. While these AI beneficiaries are clearly in-favour, arguably
the biggest and most important change in their fundamentals has
been an improvement in the cycle for legacy semiconductors that go
into everyday PCs, smartphones and servers, with inventory being
drawn down and shipments starting to grow, which is helping drive
earnings and margin improvement. We do not need to place high
multiples on AI-related earnings to justify double-digit expected
returns for these stocks.
Q Are
you convinced by South Korea’s ‘Corporate Value-Up’
programme?
A It
is great to see politicians and regulators co-ordinating on
measures to help narrow the ‘Korea discount’, but this is not a new
trend. Initiatives introduced in 2014 promised similar improvement,
since when we have identified signs of gradual improvement in
corporate governance, particularly in the growth of dividends from
South Korean companies.
The recent
measures target companies trading on a low P/B, suggesting
management should be accountable for improving governance, that
boards should measure P/B and return-on-equity (‘ROE’) and actively
explain to investors why they are underperforming. Publishing these
metrics and creating premium indices of companies succeeding on
that basis (tracked by ETFs) follows the approach taken in
Japan, where the strategy has
enjoyed success and continues to build momentum.
Other
reasons for optimism include: the support of South Korea’s National
Pension Service, the world’s third-largest pension fund; and retail
share ownership that continues to climb. There has also been
recognition that the tax system has been hindering stock market
development and is in need of reform, albeit that the election
result in April 2024 makes
progressive reform less likely.
Lastly, we
should add that our overweight position in South Korea reflects the strength of the
bottom-up opportunities that we can find, rather than any top-down
view or belief in ‘Value-Up’ being a catalyst. That said, we expect
more announcements in the coming months, and that South Korean
corporates will start making more of an effort to improve
appearances when it comes to dividend pay-outs and balance
sheets.
Q Are
there any other significant portfolio changes to
report?
A We
have introduced two Singapore
listed internet companies, both of which have market leading
positions in the Association of Southeast Asian Nations (‘ASEAN’)
markets they focus on: Sea,
the region’s largest e-commerce company that also owns a gaming
studio; and Grab,
which is focussed on ride hailing and food delivery. Both had seen
big de-ratings with bearish consensus narratives, but have
compelling long-term fundamentals, strong balance sheets and
underappreciated hidden value.
Overall
exposure to financials has increased as we introduced
KB Financial
in
South Korea and added to ASEAN
financials such as Singapore-listed United
Overseas Bank (‘UOB’),
PT
Bank Negara Indonesia Persero and Thai
lender Kasikornbank.
We also introduced Telkom
Indonesia, with
recent share price weakness on competition concerns being overdone,
in our view.
Lastly
there are a few off benchmark-introductions to flag.
Anglo American (‘AA’) is global
diversified miner of copper, diamonds, iron ore, platinum group
metals (‘PGMs’), nickel, manganese and met coal. After a near death
experience during the commodity slump of 2015, AA has been through
a cycle of selling high-cost assets, moving down the cost curve,
and strengthening the balance sheet. With the share price down by
more than 40% from its 2022 peak, we felt the balance sheet was in
good shape while the valuation was the cheapest of its peer group
on a P/B basis.
Swatch
is a Swiss
luxury goods company, but more than 50% of sales (and a higher
proportion of profits) are to countries in Asia, led by China. We believe the shares are excessively
discounted, with the company having a very strong balance sheet and
encouraging growth initiatives involving brand
collaborations. Incitec
Pivot is an
Australian company with two main businesses, explosives, which has
high barriers to entry and intellectual property protection; and
fertilisers, which have low margins and low barriers to entry, and
recently faced profitability pressure due to rising costs and
falling revenues. We believe these issues are reflected in the
price and that the underlying business is strong, with a
A$1.4 billion shareholder return
policy giving us further confidence.
Q Final
thoughts?
A Since
peaking in early 2021, Asian equity markets have struggled amidst a
liquidity tightening cycle and a crescendo of negativity
surrounding China. Valuations for
regional indices trade below long-term historic averages, both in
terms of price earnings and price to book ratios, and at a
significant discount to developed markets, particularly the US. We
believe there is scope for this to narrow, with continued
divergence in performance and valuations between different
countries and sectors also providing opportunity.
Asian
equities are also well placed to benefit from an improvement in
liquidity conditions, as we approach the peak in rate expectations,
with US dollar strength likely to cease being a headwind.
Furthermore, inflation in Asia is
less of a concern than in developed markets and economies enjoy
relatively solid fundamentals, suggesting greater monetary policy
flexibility should growth headwinds start to build.
Finally,
consensus earnings growth expectations for 2024 are around 20% and
we believe that Asian corporates may see less earnings
vulnerability from a global slowdown relative to what is being
implied in valuations, although India appears to be the exception given
elevated expectations.
Fiona Yang & Ian
Hargreaves
Portfolio
Managers
25 July 2024
Principal
and Emerging Risks and Uncertainties
The Board
has carried out a robust assessment of the principal and emerging
risks facing the Company. These include those that would threaten
its business model, future performance, solvency and liquidity. In
carrying out this assessment, the Board together with the Manager
have considered emerging risks such as geopolitical risks, evolving
cyber threats including AI and climate related risks. These risks
also form part of the principal risks identified and the mitigating
actions are detailed below.
Category
and Principal Risk Description
|
Mitigating
Procedures and Controls
|
Risk
trend during the year
|
Strategic
Risk
|
Market
Risk
The
Company’s investments are mainly traded on Asian and Australasian
stock markets as well as the UK. The principal risk for investors
in the Company is a significant fall and/or a prolonged period of
decline in these markets. This could be triggered by unfavourable
developments within the region or events outside it.
|
The Company
has a diversified investment portfolio by country, sector and
stock. Due to its investment trust structure, no forced sales need
to take place and investments can be held over a longer term
horizon. However, there are few ways to mitigate absolute market
risk because it is engendered by factors which are outside the
control of the Board and the Manager. These factors include the
general health of the world economy, interest rates, inflation,
government policies, industry conditions, and changing investor
demand and sentiment. Such factors may give rise to high levels of
volatility in the prices of investments held by the
Company.
|
►
Unchanged
|
Geopolitical
Risk
Political
risk has always been a feature of investing in stock markets and it
is particularly so in Asia. Wider political developments in
geographies beyond Asia, such as the US, Ukraine and the Middle
East, can create risks to the value of the Company’s assets. Asia
encompasses a variety of political systems. There are many examples
of diplomatic skirmishes and military tensions and sometimes these
resort to military engagement. Moreover, the involvement in Asian
politics of the US and European countries can reduce or raise
tensions.
There is
also the risk of increased trade sanctions and the challenging
regulatory environment that could adversely affect imports and
Foreign Direct Investment (‘FDI’) into China and financial
decoupling could cause significant disruption to global
markets.
|
The Manager
evaluates and assesses political risk as part of the stock
selection and asset allocation policy which is monitored at every
Board meeting. This includes political, military and diplomatic
events and changes to legislation. Balancing political risk and
reward is an essential part of the active management
process.
|
▲
Increased
|
Investment
Objectives and Strategy
The
Company’s investment objectives and strategy are no longer meeting
investors’ demands.
|
The Board
receives regular reports reviewing the Company’s investment
performance against its stated objectives and peer group, and
reports from discussions with its brokers and major shareholders.
The Board also has a separate annual strategy meeting.
|
►
Unchanged
|
Widening
Discount
A lack of
liquidity and/or lack of investor interest in the Company’s shares
leads to a depressed share price and a widening discount to its
NAV.
A
persistently high discount may lead to buybacks of the Company’s
shares and result in the shrinkage of the Company to unsustainable
levels.
|
The Board
receives regular reports from both the Manager and the Company’s
broker on the Company’s share price performance, level of share
price discount to NAV and recent trading activity in the Company’s
shares. The Board has introduced initiatives to help address the
Company’s share rating including a performance conditional tender
in 2025 and the enhanced dividend policy. It may seek to reduce the
volatility and absolute level of the share price discount to NAV
for shareholders through buying back shares within the stated
limit.
The Board
also receives regular reports on investor relation meetings with
shareholders and prospective investors and works to ensure that the
Company’s investment proposition is actively marketed through
relevant messaging across many distribution channels.
|
▲
Increased
|
Performance
That the
Portfolio Managers consistently underperform the benchmark and/or
peer group over 3-5 years.
|
The Board
regularly compares the Company’s NAV performance over both the
short and long term to that of the benchmark and peer group as well
as reviewing the portfolio’s performance against benchmark
(attribution) and risk adjusted performance (volatility, beta,
tracking error, Sharpe ratio) of the Company and its
peers.
|
►
Unchanged
|
ESG
including climate risk
Risks
associated with climate change and ESG considerations could affect
the valuation of the Company’s holdings.
|
ESG
considerations are integrated as part of the investment
decision-making in constructing the portfolio. Such investment
decisions include the transactions undertaken in the year, the
review of active portfolio positions and consideration of the
gearing position and, if applicable, hedging. The Manager’s process
around ESG is described in the ESG Monitoring and Engagement
section on pages 14 to 17.
|
►
Unchanged
|
Currency
Fluctuation Risk
Exposure to
currency fluctuation risk negatively impacts the Company’s NAV. The
movement of exchange rates may have an unfavourable or favourable
impact on returns as nearly all of the Company’s assets are
non-sterling denominated.
|
With the
exception of borrowings in foreign currency, the Company does not
normally hedge its currency positions but may do so should the
Portfolio Managers or the Board feel this to be appropriate.
Contracts are limited to currencies and amounts commensurate with
the asset exposure. The foreign currency exposure of the Company is
reviewed at Board meetings.
|
►
Unchanged
|
Third
Party Service Providers Risk
|
Information
Technology Resilience and Security
The
Company’s operational structure means that all cyber risk
(integrity or availability of data or information control systems
and physical security) arises at its Third Party Providers (‘TPP’).
This cyber risk could result in adverse impacts including fraud,
sabotage or crime perpetrated against the Company or any of its
TPPs.
|
The Audit
Committee receives regular updates on the Manager’s information and
cyber security. This includes updates on the cyber security
framework, staff resource and training, and the testing of its
security systems designed to protect against a cyber security
attack.
As well as
conducting a regular review of TPPs audited service organisation
control reports, the Audit Committee monitors TPPs’ business
continuity plans and testing including the TPPs’ and Manager’s
regular ‘live’ testing of workplace recovery arrangements should a
cyber event occur.
|
▲
Increased
|
Operational
Resilience
The
Company’s operational capability relies upon the ability of its
TPPs to continue working throughout the disruption caused by a
major event such as the Covid-19 pandemic, global technology
incidents and emerging cyber threats.
|
The
Manager’s business continuity plans are reviewed on an ongoing
basis and the Directors are satisfied that the Manager has in place
robust plans and infrastructure to minimise the impact on its
operations so that the Company can continue to trade, meet
regulatory obligations, report and meet shareholder
requirements.
|
►
Unchanged
|
Viability
Statement
The Company
is a collective investment vehicle rather than a commercial
business venture and is designed and managed for long term
investment. The Company’s investment objective clearly sets out the
long-term nature of the returns from the portfolio and this is the
view taken by both the Directors and the Portfolio Managers in the
running of the portfolio. The Company is required by its Articles
to have a vote on its future every three years,
the next vote being at the Annual General Meeting in 2025. The
Directors remain confident in the Company’s Investment Case and
Corporate Proposition, as detailed on pages 7
to 9, to deliver against the Company’s investment objectives. On
this basis and notwithstanding the continuation vote in 2025, the
Directors consider that ‘long term’ for the purpose of this
viability statement is three years, albeit that the life of the
Company is not intended to be limited to this period.
In their
assessment of the Company’s viability, the Directors have performed
a robust assessment of the emerging and principal risks. The
Directors considered the risks to which it is exposed, as set out
on pages 23
and 24, together with mitigating factors. Their assessment
considered these risks, as well as the Company’s investment
objective, investment policy and strategy, the investment
capabilities of the Manager and the business model of the Company,
which has withstood several major market downcycles since the
Company’s inception in 1995. Their assessment also covered the
current outlook for the Asian economies and equity markets, the
ongoing conflicts in Ukraine, the
Middle East and US-China
relations; the demand for and buybacks of the Company’s shares; the
Company’s borrowing structure and level of gearing; the liquidity
of the portfolio; and the Company’s future income and annual
operating costs, including stressed scenario testing for both
income and loan covenants. Although the current outlook for Asian
markets is challenging, the Directors and the Manager are
cautiously optimistic that Asia
remains a region with sound economic and corporate fundamentals.
Lastly, whilst past performance may not be indicative of
performance in the future, the sustainability of the Company can be
demonstrated to date by there having been no material change in the
Company’s investment objective since its launch in 1995.
The
Directors confirm that they have a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due for the three year period from the
signing of the balance sheet.
Investments
in Order of Valuation
at
30 April 2024
Ordinary
shares unless stated otherwise
† The
sector group is based on MSCI and Standard & Poor’s Global
Industry Classification Standard.
|
|
|
Market
|
|
|
|
|
Value
|
%
of
|
Company
|
Sector†
|
Country
|
£’000
|
Portfolio
|
Taiwan
Semiconductor Manufacturing
|
Semiconductors
and Semiconductor Equipment
|
Taiwan
|
23,983
|
9.5
|
Samsung
Electronics
|
Technology
Hardware and Equipment
|
South
Korea
|
|
|
–
ordinary shares
|
|
|
12,617
|
5.0
|
–
ADS
|
|
|
6,404
|
2.6
|
|
|
|
19,021
|
7.6
|
TencentR
|
Media and
Entertainment
|
China
|
17,947
|
7.1
|
HDFC
Bank
|
Banks
|
India
|
11,736
|
4.7
|
AIA
|
Insurance
|
Hong
Kong
|
9,600
|
3.8
|
AlibabaR
|
Consumer
Discretionary Distribution and Retail
|
China
|
7,944
|
3.2
|
KasikornbankF
|
Banks
|
Thailand
|
6,994
|
2.8
|
Anglo
American
|
Materials
|
United
Kingdom
|
6,171
|
2.5
|
SK
Hynix
|
Semiconductors
and Semiconductor Equipment
|
South
Korea
|
6,045
|
2.4
|
Shriram
Transport Finance
|
Financial
Services
|
India
|
5,760
|
2.3
|
Top
Ten Holdings
|
|
|
115,201
|
45.9
|
United
Overseas Bank
|
Banks
|
Singapore
|
5,407
|
2.2
|
Samsung
Fire & Marine
|
Insurance
|
South
Korea
|
5,399
|
2.1
|
YiliA
|
Food,
Beverage and Tobacco
|
China
|
5,120
|
2.0
|
JD.comR
|
Consumer
Discretionary Distribution and Retail
|
China
|
4,814
|
1.9
|
Yageo
|
Technology
Hardware and Equipment
|
Taiwan
|
4,326
|
1.7
|
Largan
Precision
|
Technology
Hardware and Equipment
|
Taiwan
|
4,236
|
1.7
|
NetEaseR
|
Media &
Entertainment
|
China
|
3,989
|
1.6
|
Full Truck
Alliance – ADS
|
Transportation
|
China
|
3,933
|
1.6
|
ICICI Bank
– ADR
|
Banks
|
India
|
3,862
|
1.5
|
Grab
|
Transportation
|
Singapore
|
3,810
|
1.5
|
Top
Twenty Holdings
|
|
|
160,097
|
63.7
|
LG
Chemical
|
Materials
|
South
Korea
|
3,776
|
1.5
|
Delhivery
|
Transportation
|
India
|
3,751
|
1.5
|
Link
REIT
|
Equity Real
Estate Investment Trusts (REITs)
|
Hong
Kong
|
3,469
|
1.4
|
CK
Asset
|
Real Estate
Management and Development
|
Hong
Kong
|
3,463
|
1.4
|
Hansoh
PharmaceuticalR
|
Pharmaceuticals,
Biotechnology and Life Sciences
|
China
|
3,371
|
1.3
|
MINTH
|
Automobiles
and Components
|
Hong
Kong
|
3,337
|
1.3
|
WuliangyeA
|
Food,
Beverage and Tobacco
|
China
|
3,320
|
1.3
|
Gree
Electrical AppliancesA
|
Consumer
Durables and Apparel
|
China
|
3,198
|
1.3
|
PT Bank
Negara Indonesia Persero
|
Banks
|
Indonesia
|
3,154
|
1.3
|
Beijing
Capital International AirportH
|
Transportation
|
China
|
3,060
|
1.2
|
Top
Thirty Holdings
|
|
|
193,996
|
77.2
|
ENN
EnergyR
|
Utilities
|
China
|
2,981
|
1.2
|
Astra
International
|
Capital
Goods
|
Indonesia
|
2,942
|
1.2
|
Vinamilk
|
Food,
Beverage and Tobacco
|
Vietnam
|
2,908
|
1.2
|
Swatch
|
Consumer
Durables and Apparel
|
Switzerland
|
2,845
|
1.1
|
Sea
– ADS
|
Media and
Entertainment
|
Singapore
|
2,756
|
1.1
|
Suofeiya
Home CollectionA
|
Consumer
Durables and Apparel
|
China
|
2,714
|
1.1
|
KB
Financial
|
Banks
|
South
Korea
|
2,631
|
1.0
|
Hyundai
Motor – preference
shares
|
Automobiles
and Components
|
South
Korea
|
2,532
|
1.0
|
TingyiR
|
Food,
Beverage and Tobacco
|
China
|
2,505
|
1.0
|
Semen
Indonesia
|
Materials
|
Indonesia
|
2,320
|
0.9
|
Top
Forty Holdings
|
|
|
221,130
|
88.0
|
MediaTek
|
Semiconductors
and Semiconductor Equipment
|
Taiwan
|
2,215
|
0.9
|
Hoa
Phat
|
Materials
|
Vietnam
|
2,211
|
0.9
|
Yue Yuen
Industrial
|
Consumer
Durables and Apparel
|
Hong
Kong
|
2,186
|
0.9
|
Chroma
ATE
|
Technology
Hardware and Equipment
|
Taiwan
|
2,106
|
0.8
|
Ping An
InsuranceH
|
Insurance
|
China
|
2,070
|
0.8
|
QBE
Insurance
|
Insurance
|
Australia
|
1,970
|
0.8
|
Telkom
Indonesia
|
Telecommunication
Services
|
Indonesia
|
1,916
|
0.7
|
Power
Grid
|
Utilities
|
India
|
1,737
|
0.7
|
China
Resources Beer
|
Food,
Beverage and Tobacco
|
Hong
Kong
|
1,735
|
0.7
|
Uni-President
|
Food,
Beverage and Tobacco
|
Taiwan
|
1,724
|
0.7
|
Top
Fifty Holdings
|
|
|
241,000
|
95.9
|
Incitec
Pivot
|
Materials
|
Australia
|
1,721
|
0.7
|
Tencent
Music Entertainment – ADS
|
Media and
Entertainment
|
China
|
1,588
|
0.6
|
LG
Household & Health Care
|
Household
and Personal Products
|
South
Korea
|
1,572
|
0.6
|
Invesco
Liquidity Funds – US
Dollar
|
Money
Market Fund
|
Ireland
|
1,494
|
0.6
|
China
MeiDong AutoR
|
Consumer
Discretionary Distribution and Retail
|
China
|
1,353
|
0.6
|
China
Overseas Land and Investment
|
Real Estate
Management and Development
|
Hong
Kong
|
1,283
|
0.5
|
JiumaojiuR
|
Consumer
Services
|
China
|
1,199
|
0.5
|
Lime
CoUQ
|
Capital
Goods
|
South
Korea
|
37
|
–
|
Total
Holdings 58 (2023: 57)
|
|
|
251,247
|
100.0
|
A:
A-shares –
shares that are denominated in Renminbi and traded on the
Shanghai and Shenzhen stock exchanges.
ADR/ADS:
American
Depositary Receipts/Shares – are certificates that represent shares
in the relevant stock and are issued by a US bank. They are
denominated and pay dividends in US dollars.
F: F-Shares
– shares issued by companies incorporated in Thailand that are available to foreign
investors only. Thai laws have imposed restrictions on foreign
ownership of Thai companies so there is a pre-determined limit of
these shares. Voting rights are retained with these
shares.
H:
H-Shares –
shares issued by companies incorporated in the People’s
Republic of China (‘PRC’) and
listed on the Hong Kong Stock Exchange.
R:
Red Chip
Holdings – holdings in companies incorporated outside the PRC,
listed on the Hong Kong Stock Exchange, and controlled by PRC
entities by way of direct or indirect shareholding and/or
representation on the board.
UQ: Unquoted
investment.
Classification
of Investments by Country/Sector
at
30 April
|
2024
|
2023
|
|
Market
Value
|
%
of
|
Market
Value
|
%
of
|
|
£’000
|
Portfolio
|
£’000
|
Portfolio
|
Australia
|
|
|
|
|
Capital
Goods
|
–
|
–
|
2,345
|
0.9
|
Insurance
|
1,970
|
0.8
|
2,380
|
0.9
|
Materials
|
1,721
|
0.7
|
3,702
|
1.4
|
|
3,691
|
1.5
|
8,427
|
3.2
|
China
|
|
|
|
|
Capital
Goods
|
–
|
–
|
6,692
|
2.5
|
Consumer
Discretionary Distribution and Retail
|
14,111
|
5.7
|
18,341
|
7.1
|
Consumer
Durables and Apparel
|
5,912
|
2.4
|
10,414
|
4.0
|
Consumer
Services
|
1,199
|
0.5
|
2,673
|
1.0
|
Food,
Beverage and Tobacco
|
10,945
|
4.3
|
7,673
|
3.0
|
Insurance
|
2,070
|
0.8
|
6,353
|
2.5
|
Materials
|
–
|
–
|
1,593
|
0.6
|
Media and
Entertainment
|
23,524
|
9.3
|
23,073
|
8.9
|
Pharmaceuticals,
Biotechnology and Life Sciences
|
3,371
|
1.3
|
3,227
|
1.2
|
Real Estate
Management and Development
|
–
|
–
|
487
|
0.2
|
Semiconductors
and Semiconductor Equipment
|
–
|
–
|
3,773
|
1.5
|
Transportation
|
6,993
|
2.8
|
4,258
|
1.6
|
Utilities
|
2,981
|
1.2
|
3,123
|
1.2
|
|
71,106
|
28.3
|
91,680
|
35.3
|
Hong
Kong
|
|
|
|
|
Automobiles
and Components
|
3,337
|
1.3
|
5,357
|
2.1
|
Consumer
Durables and Apparel
|
2,186
|
0.9
|
3,886
|
1.5
|
Consumer
Services
|
–
|
–
|
1,234
|
0.5
|
Equity Real
Estate Investment Trusts (REITs)
|
3,469
|
1.4
|
–
|
–
|
Food,
Beverage and Tobacco
|
1,735
|
0.7
|
–
|
–
|
Insurance
|
9,600
|
3.8
|
9,373
|
3.6
|
Real Estate
Management and Development
|
4,746
|
1.9
|
9,208
|
3.6
|
|
25,073
|
10.0
|
29,058
|
11.3
|
India
|
|
|
|
|
Automobiles
and Components
|
–
|
–
|
1,656
|
0.6
|
Banks
|
15,598
|
6.2
|
3,622
|
1.4
|
Capital
Goods
|
–
|
–
|
3,212
|
1.2
|
Financial
Services
|
5,760
|
2.3
|
14,406
|
5.5
|
Pharmaceuticals,
Biotechnology and Life Sciences
|
–
|
–
|
4,995
|
1.9
|
Transportation
|
3,751
|
1.5
|
–
|
–
|
Utilities
|
1,737
|
0.7
|
–
|
–
|
|
26,846
|
10.7
|
27,891
|
10.6
|
Indonesia
|
|
|
|
|
Banks
|
3,154
|
1.3
|
1,314
|
0.5
|
Capital
Goods
|
2,942
|
1.2
|
6,606
|
2.6
|
Materials
|
2,320
|
0.9
|
2,707
|
1.0
|
Telecommunication
Services
|
1,916
|
0.7
|
–
|
–
|
|
10,332
|
4.1
|
10,627
|
4.1
|
Ireland
|
|
|
|
|
Money
Market Fund
|
1,494
|
0.6
|
–
|
–
|
|
1,494
|
0.6
|
–
|
–
|
Singapore
|
|
|
|
|
Banks
|
5,407
|
2.2
|
2,167
|
0.8
|
Media and
Entertainment
|
2,756
|
1.1
|
–
|
–
|
Transportation
|
3,810
|
1.5
|
–
|
–
|
|
11,973
|
4.8
|
2,167
|
0.8
|
South
Korea
|
|
|
|
|
Automobiles
and Components
|
2,532
|
1.0
|
4,346
|
1.7
|
Banks
|
2,631
|
1.0
|
–
|
–
|
Capital
Goods
|
37
|
–
|
38
|
–
|
Household
and Personal Products
|
1,572
|
0.6
|
3,503
|
1.4
|
Insurance
|
5,399
|
2.1
|
3,883
|
1.5
|
Materials
|
3,776
|
1.5
|
8,587
|
3.4
|
Semiconductors
and Semiconductor Equipment
|
6,045
|
2.4
|
6,123
|
2.4
|
Technology
Hardware and Equipment
|
19,021
|
7.6
|
16,551
|
6.4
|
|
41,013
|
16.2
|
43,031
|
16.8
|
Switzerland
|
|
|
|
|
Consumer
Durables & Apparel
|
2,845
|
1.1
|
–
|
–
|
|
2,845
|
1.1
|
–
|
–
|
Taiwan
|
|
|
|
|
Food,
Beverage and Tobacco
|
1,724
|
0.7
|
3,273
|
1.3
|
Semiconductors
and Semiconductor Equipment
|
26,198
|
10.4
|
24,085
|
9.3
|
Technology
Hardware and Equipment
|
10,668
|
4.2
|
6,288
|
2.5
|
|
38,590
|
15.3
|
33,646
|
13.1
|
Thailand
|
|
|
|
|
Banks
|
6,994
|
2.8
|
6,680
|
2.6
|
|
6,994
|
2.8
|
6,680
|
2.6
|
United
Kingdom
|
|
|
|
|
Materials
|
6,171
|
2.5
|
–
|
–
|
|
6,171
|
2.5
|
–
|
–
|
Vietnam
|
|
|
|
|
Food,
Beverage and Tobacco
|
2,908
|
1.2
|
3,356
|
1.3
|
Materials
|
2,211
|
0.9
|
2,399
|
0.9
|
|
5,119
|
2.1
|
5,755
|
2.2
|
Total
|
251,247
|
100.0
|
258,962
|
100.0
|
Statement of Directors’
Responsibilities
IN RESPECT OF THE PREPARATION OF THE ANNUAL FINANCIAL
REPORT AND THE FINANCIAL STATEMENTS
The
Directors are responsible for preparing the Annual Financial Report
and financial statements in accordance with applicable law and
regulations.
Company law
requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the
financial statements in accordance with UK accounting standards,
and applicable law, including FRS 102 the Financial Reporting
Standard applicable in the UK and Republic of Ireland.
Under
company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of its profit or loss for
that period.
In
preparing these financial statements, the Directors are required
to:
– select
suitable accounting policies and then apply them
consistently;
– make
judgements and estimates that are reasonable and
prudent;
– state
whether applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements;
– assess
the Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and
– use
the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations or have no realistic
alternative but to do so.
The
Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that its
financial statements comply with the Companies
Act 2006.
They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Under
applicable law and regulations, the Directors are also responsible
for preparing a Strategic Report, Directors’ Report, Directors’
Remuneration Report and Corporate Governance Statement that
complies with that law and those regulations.
The
Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s
website, which is maintained by the Company’s Manager. Legislation
in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.
Responsibility
Statement of the Directors in Respect of the Annual Financial
Report
We confirm
that to the best of our knowledge:
– the
financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company; and
– the
Strategic Report includes a fair review of the development and
performance of the business and the position of the issuer,
together with a description of the principal risks and
uncertainties that they face.
We consider
the Annual Financial Report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company’s position and performance,
business model and strategy.
Signed on
behalf of the Board of Directors
Neil Rogan
Chairman
25 July 2024
Income Statement
|
Year
ended 30 April 2024
|
Year
ended 30 April 2023
|
|
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
Notes
|
Gains/(losses)
on investments held at
|
|
|
|
|
|
|
|
fair
value
|
9
|
—
|
2,420
|
2,420
|
—
|
(1,309)
|
(1,309)
|
(Losses)/gains
on foreign exchange
|
|
–
|
(30)
|
(30)
|
—
|
625
|
625
|
Income
|
2
|
7,375
|
79
|
7,454
|
7,601
|
51
|
7,652
|
Investment
management fee
|
3
|
(441)
|
(1,322)
|
(1,763)
|
(460)
|
(1,381)
|
(1,841)
|
Other
expenses
|
4
|
(692)
|
(4)
|
(696)
|
(681)
|
(3)
|
(684)
|
Net
return before finance costs and taxation
|
|
6,242
|
1,143
|
7,385
|
6,460
|
(2,017)
|
4,443
|
Finance
costs
|
5
|
(126)
|
(375)
|
(501)
|
(108)
|
(325)
|
(433)
|
Net
return on ordinary activities before
|
|
|
|
|
|
|
|
taxation
|
|
6,116
|
768
|
6,884
|
6,352
|
(2,342)
|
4,010
|
Tax on
ordinary activities
|
6
|
(694)
|
(626)
|
(1,320)
|
(756)
|
(532)
|
(1,288)
|
Net
return on ordinary activities after
|
|
|
|
|
|
|
|
taxation
for the financial year
|
|
5,422
|
142
|
5,564
|
5,596
|
(2,874)
|
2,722
|
Net
return per ordinary share:
|
|
|
|
|
|
|
|
Basic
|
7
|
8.12p
|
0.22p
|
8.34p
|
8.37p
|
(4.30)p
|
4.07p
|
The total
columns of this statement represent the Company’s profit and loss
account, prepared in accordance with UK Accounting Standards. The
return on ordinary activities after taxation is the total
comprehensive income and therefore no additional statement of other
comprehensive income is presented. The supplementary revenue and
capital columns are presented for information purposes in
accordance with the Statement of Recommended Practice issued by the
Association of Investment Companies. All items in the above
statement derive from continuing operations of the Company. No
operations were acquired or discontinued in the year.
Statement
of Changes in Equity
|
|
|
Capital
|
|
|
|
|
|
|
Share
|
Redemption
|
Special
|
Capital
|
Revenue
|
|
|
|
Capital
|
Reserve
|
Reserve
|
Reserve(1)
|
Reserve(1)
|
Total
|
|
Notes
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
At Year
ended 30 April 2022
|
|
7,500
|
5,624
|
34,827
|
202,814
|
1,411
|
252,176
|
Net return
on ordinary activities
|
|
—
|
—
|
—
|
(2,874)
|
5,596
|
2,722
|
Dividends
paid
|
8
|
—
|
—
|
—
|
(4,227)
|
(5,667)
|
(9,894)
|
At Year
ended 30 April 2023
|
|
7,500
|
5,624
|
34,827
|
195,713
|
1,340
|
245,004
|
Net return
on ordinary activities
|
|
–
|
–
|
–
|
142
|
5,422
|
5,564
|
Dividends
paid
|
8
|
–
|
–
|
–
|
(4,491)
|
(4,896)
|
(9,387)
|
Shares
bought back and held in treasury
|
13
|
–
|
–
|
(2,915)
|
–
|
–
|
(2,915)
|
At Year
ended 30 April 2024
|
|
7,500
|
5,624
|
31,912
|
191,364
|
1,866
|
238,266
|
(1) These
reserves form the distributable reserves of the Company and may be
used to fund distributions by way of dividends.
The
accompanying accounting policies and notes are an integral part of
these financial statements.
Balance
Sheet
|
|
At
30 April
|
At
30 April
|
|
|
2024
|
2023
|
|
Notes
|
£’000
|
£’000
|
Fixed
assets
|
|
|
|
Investments
held at fair value through profit or loss
|
9
|
251,247
|
258,962
|
Current
assets
|
|
|
|
Debtors
|
10
|
927
|
522
|
Cash
and cash equivalents
|
|
537
|
1,337
|
|
|
1,464
|
1,859
|
Creditors:
amounts falling due within one year
|
|
|
|
Bank
overdraft
|
|
(50)
|
(740)
|
Other
Creditors
|
11
|
(13,625)
|
(14,261)
|
|
|
(13,675)
|
(15,001)
|
Net
current liabilities
|
|
(12,211)
|
(13,142)
|
Total
assets less current liabilities
|
|
239,036
|
245,820
|
Provision
for deferred tax liabilities
|
12
|
(770)
|
(816)
|
Net
assets
|
|
238,266
|
245,004
|
Capital
and reserves
|
|
|
|
Share
capital
|
13
|
7,500
|
7,500
|
Other
reserves:
|
|
|
|
Capital
redemption reserve
|
14
|
5,624
|
5,624
|
Special
reserve
|
14
|
31,912
|
34,827
|
Capital
reserve
|
14
|
191,364
|
195,713
|
Revenue
reserve
|
14
|
1,866
|
1,340
|
Total
shareholders’ funds
|
|
238,266
|
245,004
|
Net
asset value per ordinary share
|
|
|
|
Basic
|
15
|
361.51p
|
366.48p
|
The
financial statements were approved and authorised for issue by the
Board of Directors on 25 July
2024.
Signed on
behalf of the Board of Directors
Neil Rogan
Chairman
Notes to
the Financial Statements
1. Accounting
Policies
Accounting
policies describe the Company’s approach to recognising and
measuring transactions during the year and the position of the
Company at the year end.
A summary
of the principal accounting policies, all of which have been
consistently applied throughout this and the preceding year is set
out below:
(a) Basis
of Preparation
(i) Accounting
Standards applied
The
financial statements have been prepared in accordance with
applicable United Kingdom Accounting Standards and applicable law
(UK Generally Accepted Accounting Practice (‘UK GAAP’)), including
FRS 102, and with the Statement of Recommended Practice Financial
Statements of Investment Trust Companies and Venture Capital
Trusts, updated by the Association of Investment Companies in
July 2022 (‘SORP’). The financial
statements are prepared on a going concern basis.
As an
investment fund the Company has the option, which it has taken, not
to present a cash flow statement as the following conditions have
been met:
• substantially
all investments are highly liquid;
• substantially
all investments are carried at market value; and
• a
statement of changes in equity is provided.
(ii) Going
concern
The
financial statements have been prepared on a going concern basis.
The Directors performed an assessment of the Company’s ability to
meet its liabilities as they fall due. In performing this
assessment, the Directors took into consideration the continuing
uncertain economic outlook and other geopolitical events
including:
• the
level of borrowings, cash balances and the diversified portfolio of
readily realisable securities which can be used to meet short-term
funding commitments, including repayment of the bank
facility;
• the
net current liability position of the Company, after the deduction
of drawn-down borrowings, which will be met through the renewal of
the existing credit facility or the sale of investments in order to
repay any borrowings;
• the
ability of the Company to meet all of its liabilities and ongoing
expenses from its assets;
• revenue
and operating cost forecasts for the forthcoming year;
• the
ability of third-party service providers to continue to provide
services; and
• potential
downside scenarios including a fall in the valuation of the
investment portfolio or levels of investment income.
Based on
this assessment, the Directors are satisfied that the Company has
adequate resources to continue in operational existence for at
least 12 months after signing the balance sheet and the financial
statements have therefore been prepared on a going concern
basis.
(iii) Significant
Accounting Estimates and Judgements
The
preparation of the financial statements may require the Directors
to make estimates where uncertainty exists. It also requires the
Directors to make judgements, estimates and assumptions, in the
process of applying the accounting policies. Except for the
functional and presentation currency as noted below, there have
been no other significant judgements, estimates or assumptions for
the current or preceding year.
(b) Foreign
Currency
(i) Functional
and presentation currency
The
Company’s investments are made in several currencies, however, the
financial statements are presented in sterling, which is the
Company’s functional and presentational currency. In arriving at
this conclusion, the Directors considered that the Company’s shares
are listed and traded on the London Stock Exchange, the shareholder
base is predominantly in the United
Kingdom and the Company pays dividends and expenses in
sterling.
(ii) Transactions
and balances
Transactions
in foreign currency, whether of a revenue or capital nature, are
translated to sterling at the rates of exchange ruling on the dates
of such transactions. Foreign currency assets and liabilities are
translated to sterling at the rates of exchange ruling at the
balance sheet date. Any gains or losses, whether realised or
unrealised, are taken to the capital reserve or to the revenue
account, depending on whether the gain or loss is of a capital or
revenue nature. All gains and losses are recognised in the income
statement.
(c) Financial
Instruments
The Company
has chosen to apply the provisions of Sections 11 and 12 of FRS 102
in full in respect of the financial instruments, which is explained
below.
(i) Recognition
of financial assets and financial liabilities
The Company
recognises financial assets and financial liabilities when the
Company becomes a party to the contractual provisions of the
instrument. The Company offsets financial assets and financial
liabilities in the financial statements if the Company has a
legally enforceable right to set off the recognised amounts and
interests and intends to settle on a net basis.
(ii) Derecognition
of financial assets
The Company
derecognises a financial asset when the contractual rights to the
cash flows from the asset expire or it transfers the right to
receive the contractual cash flows on the financial asset in a
transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any interest in
the transferred financial asset that is created or retained by the
Company is recognised as an asset.
(iii) Derecognition
of financial liabilities
The Company
derecognises financial liabilities when its obligations are
discharged, cancelled or expired.
(iv) Trade
date accounting
Purchases
and sales of financial assets are recognised on trade date, being
the date on which the Company commits to purchase or sell the
assets.
(v) Classification
and measurement of financial assets and financial
liabilities
Financial
assets
The
Company’s investments are held at fair value through profit or loss
as the investments are managed and their performance evaluated on a
fair value basis in accordance with documented investment strategy
and this is also the basis on which information about the
investments is provided internally to the Board. Financial assets
held at fair value through profit or loss are initially recognised
at fair value, which is taken to be their cost, with transaction
costs expensed in the income statement, and are subsequently valued
at fair value.
Financial
assets measured at amortised cost include cash, debtors and
prepayments.
Fair value
for investments that are actively traded in organised financial
markets, is determined by reference to stock exchange quoted bid
prices at the balance sheet date. For investments that are not
actively traded and where active stock exchange quoted bid prices
are not available, fair value is determined by reference to a
variety of valuation techniques including last traded price, broker
quotes and price modelling.
Financial
liabilities
Financial
liabilities, including borrowings, are initially measured at fair
value, net of transaction costs and are subsequently measured at
amortised cost using the effective interest method.
(d) Cash
and Cash Equivalents
Cash and
cash equivalents may comprise short term deposits which are readily
convertible to a known amount of cash and are subject to an
insignificant risk of change in value. Investments are regarded as
cash equivalents if they meet all of the following criteria: highly
liquid investments held in the Company’s base currency that are
readily convertible to a known amount of cash, are subject to an
insignificant risk of change in value and have a maturity of no
more than three months. There were no cash equivalents at the
balance sheet date.
(e) Income
All
dividends are taken into account on the date investments are marked
ex-dividend, and UK dividends are shown net of any associated tax
credit. Where the Company elects to receive dividends in the form
of additional shares rather than cash, the equivalent of the cash
dividend is recognised as income in the revenue account and any
excess in value of the shares received over the amount of the cash
dividend is recognised in capital. Special dividends representing a
return of capital are allocated to capital in the Income Statement
and then taken to capital reserves. Dividends will generally be
recognised as revenue however all special dividends will be
reviewed, with consideration given to the facts and circumstances
of each case, including the reasons for the underlying
distribution, before a decision over whether allocation is to
revenue or capital is made. Interest income and expenses are
accounted for on an accruals basis. Other income from investments
is accounted for on an accruals basis. Deposit interest receivable
is accounted for on an accruals basis.
(f) Expenses
and Finance Costs
Expenses
are recognised on an accruals basis and finance costs are
recognised using the effective interest method in the income
statement.
The
investment management fee and finance costs are allocated 75% to
capital and 25% to revenue. This is in accordance with the Board’s
expected long-term split of returns, in the form of capital gains
and income respectively, from the portfolio.
Investment
transaction costs are recognised in capital in the income
statement. All other expenses are allocated to revenue in the
income statement.
(g) Dividends
Dividends
are not recognised in the accounts unless there is an obligation to
pay at the balance sheet date. Proposed final dividends are
recognised in the period in which they are either approved by or
paid to shareholders.
(h) Taxation
The
liability to corporation tax is based on taxable profit for the
period. Taxable profit differs from profit before tax as reported
in the income statement because it excludes items of income or
expenses that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The
tax charge is allocated between the revenue and capital accounts on
the marginal basis whereby revenue expenses are matched first
against taxable income in the revenue account.
Deferred
taxation is recognised in respect of all timing differences that
have originated but not reversed at the balance sheet date where
transactions or events that result in an obligation to pay more tax
or a right to pay less tax in the future have occurred. Timing
differences are differences between the Company’s taxable profits
and its results as stated in the financial statements. Deferred
taxation assets are recognised where, in the opinion of the
Directors, it is more likely than not that these amounts will be
realised in future periods.
A deferred
tax asset has not been recognised in respect of surplus management
expenses and the non-trade loan relationship deficit as the Company
is unlikely to have sufficient future taxable revenue to offset
against these.
Gains and
losses on sale of investments purchased and sold in India are liable to capital gains tax in
India.
At each
year end date, a provision for Indian capital gains tax is
calculated based upon the Company’s realised and unrealised gains
and losses. There are two rates of tax: short-term and long-term.
The short-term rate of tax is applicable to investments held for
less than 12 months and the long-term rate of tax is applicable to
investments held for more than 12 months.
The
provision for the Indian capital gains tax is recognised in the
balance sheet and the year-on-year movement in the deferred tax
provision is recognised in the income statement.
2. Income
This
note shows the income generated from the portfolio (investment
assets) of the Company and income received from any other
source.
|
2024
£’000
|
2023
£’000
|
|
Income from
investments:
|
|
|
UK
dividends
|
77
|
–
|
Overseas
dividends
|
7,208
|
7,116
|
Overseas
special dividends
|
51
|
470
|
Total
dividend income
|
7,336
|
7,586
|
Other
income:
|
|
|
Deposit
interest
|
39
|
15
|
|
39
|
15
|
Total
income
|
7,375
|
7,601
|
Special
dividends of £79,000 were recognised in capital during the year (At
30 April 2023:
£51,000).
3. Investment
Management Fee
This
note shows the investment management fee due to the Manager which
is calculated and paid quarterly.
|
2024
|
2023
|
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
Investment
management fee
|
441
|
1,322
|
1,763
|
460
|
1,381
|
1,841
|
Details of
the investment management and secretarial agreement are given on
page 35 in the Directors’ Report.
At
30 April 2024, £440,000 (At
30 April 2023: £448,000) was accrued
in respect of the investment management fee.
4. Other
Expenses
The
other expenses, including those paid to Directors and the auditor,
of the Company are presented below; those paid to the Directors and
the auditor are separately identified.
|
2024
|
2023
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
Directors’
remuneration (i)
|
143
|
–
|
143
|
134
|
—
|
134
|
Auditor’s
fees (ii):
|
|
|
|
|
|
|
– for
audit of the Company’s Annual
|
|
|
|
|
|
|
Financial
Statements
|
70
|
–
|
70
|
50
|
—
|
50
|
Other
administration expenses (iii)
|
479
|
4
|
483
|
497
|
3
|
500
|
|
692
|
4
|
696
|
681
|
3
|
684
|
(i)
Directors’
fees authorised by the Articles of Association are £200,000 per
annum. The Director’s Remuneration Report provides further
information on Directors’ fees.
(ii) Auditor’s
fees include out of pocket expenses but excludes VAT. The VAT is
included in other administration expenses.
(iii) Other
administration expenses include:
-
£14,000 (2023: £12,000) of
employer’s National Insurance payable on Directors’ remuneration.
As at 30 April 2024, the amounts
outstanding on Directors’ remuneration was £11,000 (2023: £10,000);
and the amount outstanding in respect of employer’s National
Insurance was £1,000 (2023: £1,000).
-
custodian transaction
charges of £4,000 (2023: £3,000). These are charged to
capital.
-
a separate fee paid to the
Manager for secretarial and administrative services which is
subject to annual adjustment in line with the UK Retail Price
Index. During the year the Company paid £119,000 (2023: £118,000)
for these services.
5. Finance
Costs
Finance
costs arise on any borrowing the Company has utilised in the year.
The Company has a committed £20 million revolving credit facility
(the ‘bank facility’) (see note 11 for further
details).
|
2024
|
2023
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
Commitment
fees due on bank facility
|
7
|
19
|
26
|
5
|
17
|
22
|
Interest on
bank facility
|
115
|
344
|
459
|
99
|
298
|
397
|
Overdraft
interest
|
4
|
12
|
16
|
4
|
10
|
14
|
|
126
|
375
|
501
|
108
|
325
|
433
|
6. Taxation
As
an investment trust the Company pays no UK corporation tax on
capital gains. The Company suffers no UK corporation tax on income
arising on UK and certain overseas dividends. The Company’s tax
charge arises from irrecoverable tax on overseas (generally non-EU)
dividends and Indian capital gains tax paid and provided
for.
(a) Tax
charge
|
2024
|
2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
Overseas
tax
|
694
|
4
|
698
|
756
|
—
|
756
|
Indian
capital gains tax – paid – note 6(d)
|
–
|
668
|
668
|
—
|
409
|
409
|
Total
current tax charge
|
694
|
672
|
1,366
|
756
|
409
|
1,165
|
Indian
capital gains tax – movement in
|
|
|
|
|
|
|
provision –
note 6(d)
|
–
|
(46)
|
(46)
|
—
|
123
|
123
|
Total tax
charge for the year
|
694
|
626
|
1,320
|
756
|
532
|
1,288
|
|
|
|
|
|
|
|
|
The
overseas tax charge consists of irrecoverable withholding
tax.
(b) Reconciliation
of total tax charge
|
2024
|
2023
|
|
£’000
|
£’000
|
Net return
on ordinary activities before taxation
|
6,884
|
4,010
|
Theoretical
tax at the current UK Corporation Tax rate of 25%
|
|
|
(At
30 April 2023: 19.5%)
|
1,721
|
782
|
Effects
of:
|
|
|
–
Non-taxable UK dividends
|
(19)
|
–
|
–
Non-taxable overseas dividends
|
(1,754)
|
(1,425)
|
–
Non-taxable overseas special dividends
|
(33)
|
(64)
|
–
(Gains)/losses on investments not subject to UK corporation
tax
|
(605)
|
255
|
–
Non-taxable losses/(gains) on foreign exchange
|
8
|
(122)
|
–
Excess of allowable expenses over taxable income
|
681
|
573
|
–
Disallowable expenses
|
1
|
1
|
–
Overseas taxation
|
698
|
756
|
–
Indian capital gains tax - paid
|
668
|
409
|
–
Indian capital gains tax – provision – see (d) below
|
(46)
|
123
|
Tax charge
for the year
|
1,320
|
1,288
|
Given the
Company’s status as an investment trust, and the intention to
continue meeting the conditions required to obtain the necessary
approval in the foreseeable future, the Company has not provided
any UK corporation tax on any realised or unrealised capital gains
or losses arising on investments.
(c) Factors
that may affect future tax changes
The Company
has cumulative excess management expenses of £30,278,000 (2023:
£28,007,000) and a non-trade loan relationship deficit of
£1,675,000 (2023: £1,220,000) giving total unutilised losses of
£31,953,000 (2023: £29,227,000) that are available to offset future
taxable revenue.
A deferred
tax asset of £7,988,000 (2023: £7,307,000) at 25% (2023: 25%) has
not been recognised in respect of these expenses since the
Directors believe that there will be no taxable profits in the
future against which the deferred tax assets can be
offset.
The UK
corporation tax rate increased from 19% to 25% from 1 April 2023. Deferred tax assets and liabilities
on balance sheets prepared after the enactment of the new tax rate
must therefore be re-measured accordingly, so as a result the
deferred tax asset has been calculated at 25%.
(d) Indian
capital gains tax
Capital
gains arising from equity investments in Indian companies are
subject to Indian Capital Gains Tax Regulations. Consequently, the
Company is subject to both short and long term capital gains tax in
India on the growth in value of
its Indian equities.
Although
this capital gains tax only becomes payable at the point at which
the underlying investments are sold and profits crystallised, the
Company has made a provision for this tax liability for the year
ended 30 April 2024 of £770,000
(2023: £816,000).
See note 12
for further details.
7. Net
return per Ordinary Share
Net
return per share is the amount of gain or loss generated for the
financial year divided by the weighted average number of ordinary
shares in issue.
|
2024
|
2023
|
|
Pence
|
£’000
|
Pence
|
£’000
|
|
Net return
per ordinary share is based on the following:
|
|
|
|
|
|
Revenue
return after taxation
|
8.12
|
5,422
|
8.37
|
5,596
|
|
Capital
return after taxation
|
0.22
|
142
|
(4.30)
|
(2,874)
|
|
Total
return after taxation
|
8.34
|
5,564
|
4.07
|
2,722
|
|
|
2024
|
2023
|
|
£’000
|
£’000
|
Weighted
average number of ordinary shares in issue during the
year
|
66,752,781
|
66,853,287
|
|
|
|
|
|
|
8. Dividends
on Ordinary Shares
Dividends
represent a return of income to shareholders for investing in the
Company’s shares. These are determined by the Directors and paid
twice a year.
|
2024
|
2023
|
|
Pence
|
£’000
|
Pence
|
£’000
|
Dividends
paid and recognised in the year:
|
|
|
|
|
First
interim dividend paid
|
7.20
|
4,813
|
7.20
|
4,813
|
Second
interim dividend paid
|
6.90
|
4,574
|
7.60
|
5,081
|
|
14.10
|
9,387
|
14.80
|
9,894
|
Set out
above are the total dividends paid in respect of the financial
year, which is the basis on which the requirements of Section
1158–1159 of the Corporation Tax Act 2010 are considered. The
revenue available for distribution by way of dividend for the year
is £5,422,000 (2023: £5,596,000).
9. Investments
at Fair Value
The
portfolio comprises investments which are predominantly listed and
traded on regulated stock exchanges. The investments of the Company
are registered in the name of the Company or in the name of
nominees and held to the order of the Company.
Gains
and losses are either:
• realised,
usually arising when investments are sold; or
• unrealised,
being the difference from cost on those investments still held at
the year end.
|
2024
|
2023
|
|
£’000
|
£’000
|
Opening
valuation
|
258,962
|
256,686
|
Movements
in the year:
|
|
|
Purchases
at cost
|
104,378
|
90,297
|
Sales
|
(114,513)
|
(86,712)
|
Gains/(losses)
on investments in the year
|
2,420
|
(1,309)
|
Closing
valuation
|
251,247
|
258,962
|
Closing
book cost
|
232,074
|
234,875
|
Closing
investment holding gains
|
19,173
|
24,087
|
Closing
valuation
|
251,247
|
258,962
|
The Company
received £114,513,000 (2023: £86,712,000) from investments sold in
the year. The book cost of these investments when they were
purchased was £107,179,000 (2023: £67,122,000) realising a profit
of £7,334,000 (2023: £19,590,000) which when offset against the
movement in closing investment holding gains results in net gain on
investments in the year of £2,420,000 (2023: net losses of
£1,309,000). These investments have been revalued over time and
until they were sold any unrealised profits/losses were included in
the fair value of the investments.
The
transaction costs included in gains on investments amount to
£114,000 (2023: £79,000) on purchases and £185,000 (2023: £134,000)
for sales.
10. Debtors
Debtors
are amounts which are due to the Company, such as monies due from
brokers for investments sold, income which has been earned
(accrued) but not yet received and any taxes that are
recoverable.
|
2024
|
2023
|
|
£’000
|
£’000
|
Overseas
withholding tax recoverable
|
227
|
145
|
VAT
recoverable
|
14
|
19
|
Prepayments
and accrued income
|
686
|
358
|
|
927
|
522
|
11. Creditors:
amounts falling due within one year
Creditors
are amounts which must be paid by the Company and they are all due
within 12 months of the balance sheet date.
The
bank facility provides a specific amount of capital, up to £20
million, over a specified period of time (364 days). Unlike a term
loan, the revolving nature of the bank facility allows the Company
to drawdown, repay and re-draw loans.
|
2024
|
2023
|
|
£’000
|
£’000
|
Bank
facility
|
12,626
|
13,593
|
Share
buybacks awaiting settlement
|
320
|
—
|
Accruals
|
679
|
668
|
|
13,625
|
14,261
|
The
committed unsecured 364 day multi-currency revolving credit
facility (the ‘bank facility’) with The Bank of New York Mellon,
has an interest payable based on the Adjusted Reference Rate
(principally SOFR and SONIA respectively in respect of loans drawn
in USD and GBP) plus a margin for amounts drawn. Any undrawn
amounts under the bank facility attract a commitment fee of 0.2%
(2023: 0.2%). The bank facility covenants are based on the lower of
25% of net asset value and £20 million, renewable on 26 July 2024, and require total assets to not
fall below £80 million. At the year end, the bank facility drawn
down was in US dollars with a sterling equivalent of £12,626,000
(2023: £13,593,000).
12. Provision
for deferred tax liabilities
The
Company makes a deferred tax provision when a potential obligation
exists that will probably have to settle in cash, but the amount is
estimated and only becomes payable at the point at which the
underlying investments are sold and profits
crystallised.
|
2024
|
2023
|
|
£’000
|
£’000
|
Provision
for deferred Indian capital gains tax
|
770
|
816
|
|
770
|
816
|
13. Share
Capital
Share
capital represents the total number of shares in issue. Any
dividends declared will be paid on the shares in issue on the
record date.
The
Directors’ Report on page 36 sets out the share capital structure,
restrictions and voting rights.
Share
capital represents the total number of shares in issue, including
treasury shares.
(a) Allotted,
called-up and fully paid
|
2024
|
2023
|
|
£’000
|
£’000
|
Share
capital:
|
|
|
Ordinary
shares of 10p each
|
6,591
|
6,685
|
Treasury
shares of 10p each
|
909
|
815
|
|
7,500
|
7,500
|
(b) Share
movements
|
2024
|
2023
|
|
Ordinary
|
Treasury
|
Ordinary
|
Treasury
|
|
number
|
number
|
number
|
number
|
Number at
start of year
|
66,853,287
|
8,146,594
|
66,853,287
|
8,146,594
|
Shares
bought back and held in treasury
|
(945,000)
|
945,000
|
–
|
–
|
Number at
the end of the year
|
65,908,287
|
9,091,594
|
66,853,287
|
8,146,594
|
During the
year the Company bought back, into treasury, 945,000 ordinary
shares at a total cost of £2,915,000.
A further
290,000 shares have been bought back into treasury, at an average
price of 321.3p, since 30 April
2024.
As
explained in the Chairman’s Statement on page 8, the Company
introduced a performance conditional tender offer in 2020 whereby
the Board has undertaken to effect a tender offer for up to 25.0%
of the Company’s issued share capital in the event that certain
conditions are met relating to performance of the net asset value
compared to the benchmark index.
14. Reserves
This note
explains the different reserves attributable to shareholders. The
aggregate of the reserves and share capital (see previous note)
make up total shareholders’ funds.
The capital
redemption reserve maintains the equity share capital arising from
the buy-back and cancellation of shares and is non-distributable.
The special reserve arose from the cancellation of the share
premium account and is available as a distributable reserve to fund
any future tender offers and share buybacks.
The capital
reserve includes investment gains and losses, expenses allocated to
capital and special dividends received that are classified as
capital in nature. The revenue reserve reflects the income and
expenses as shown in the revenue column of the Income Statement.
The capital and revenue reserves are distributable by way of
dividend. Dividends are first funded from available revenue
reserves and then funded from capital reserves at the date of the
dividend payment.
15. Net
Asset Value
The
Company’s total net assets (total assets less total liabilities)
are often termed shareholders’ funds and are converted into net
asset value per ordinary share by dividing by the number of shares
in issue as at the reporting date.
The net
asset values attributable to each share in accordance with the
Company’s Articles are set out below.
|
2024
|
2023
|
Ordinary
shareholders’ funds
|
£238,266,000
|
£245,004,000
|
Number of
ordinary shares in issue, excluding treasury shares
|
65,908,287
|
66,853,287
|
Net asset
value per ordinary share
|
361.51p
|
366.48p
|
There is no
dilution in this or the prior year and therefore no diluted net
asset value per ordinary share has been disclosed.
16. Financial
Instruments
Financial
instruments comprise the Company’s investment portfolio, derivative
financial instruments (if the Company had any), as well as any
cash, borrowings, debtors and creditors. This note sets out the
risks arising from the Company’s financial instruments in terms of
the Company’s exposure and sensitivity, and any mitigation that the
Manager or Board can take.
Risk
Management Policies and Procedures
The
Company’s portfolio is managed in accordance with its investment
objective, which is set out in the Strategic Report on
page 20.
The Strategic Report then proceeds to set out the Manager’s
investment process and the Company’s internal control and risk
management systems as well as the Company’s principal and emerging
risks and uncertainties. Risk management is an integral part of the
investment management process and this note expands on certain of
those risks in relation to the Company’s financial instruments,
including market risk.
The
accounting policies in note 1 include criteria for the recognition
and the basis of measurement applied for financial instruments.
Note 1 also includes the basis on which income and expenses arising
from financial assets and liabilities are recognised and measured.
The Directors have delegated to the Manager the responsibility for
the day-to-day investment activities of the Company as more fully
described in the Strategic Report.
As an
investment trust the Company invests in equities and other
investments for the long-term so as to
meet its investment objective and policies. In pursuing its
investment objective, the Company is exposed to a variety of risks
that could result in either a reduction in the Company’s net assets
or a reduction
of the profits available for dividends. The risks applicable to the
Company and the policies the Company used to manage these are
summarised below and have remained substantially unchanged for the
two years under review.
16.1 Market
Risk
Market risk
arises from changes in the fair value or future cash flows of a
financial instrument because of movements in market prices. Market
risk comprises three types of risk: currency risk (16.1.1),
interest rate risk (16.1.2) and other price risk
(16.1.3).
The
Company’s Manager assesses the Company’s exposure when making each
investment decision, and monitors the overall level of market risk
on the whole of the investment portfolio on an ongoing basis. The
Board meets at least quarterly to assess risk and review investment
performance, as disclosed in the Board Responsibilities on
page 41.
Borrowing is used to enhance returns; however, this will also
increase the Company’s exposure to market risk and
volatility.
16.1.1 Currency
Risk
As nearly all of the Company’s assets, liabilities and income are
denominated in currencies other than sterling, movements in
exchange rates will affect the sterling value of those
items.
Management of the Currency Risk
The Manager monitors the Company’s exposure to foreign currencies
on a daily basis and reports to the Board on a regular basis. With
the exception of borrowings in foreign currency, the Company does
not normally hedge its currency positions but may do so should the
Portfolio Managers or the Board feel this was appropriate.
Contracts are limited to currencies and amounts commensurate with
the asset exposure.
Income denominated in foreign currencies is converted to sterling
on receipt. The Company does not use financial instruments to
mitigate the currency exposure in the period between the time that
income is accrued and received.
Foreign Currency Exposure
The fair values of the Company’s monetary items that have currency
exposure at 30 April are shown below. Where the Company’s
investments (which are not monetary items) are priced in a foreign
currency they have been included separately in the analysis so as
to show the overall level of exposure.
Year ended 30 April
2024
|
|
|
|
|
|
Foreign
|
Investments
|
|
|
|
Debtors
|
|
|
Creditors
|
currency
|
at fair
|
|
|
|
(due from
|
|
|
(due to
|
exposure
|
value
|
Total net
|
|
|
brokers
|
Cash and
|
Overdrafts
|
brokers
|
on net
|
through
|
foreign
|
|
|
and
|
cash
|
and bank
|
and
|
monetary
|
profit
|
currency
|
|
|
dividends)
|
equivalents
|
facility
|
accruals)
|
items
|
or loss
|
exposure
|
|
Currency
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Australian dollar
|
–
|
–
|
–
|
–
|
–
|
3,691
|
3,691
|
|
Chinese yuan
|
–
|
–
|
–
|
–
|
–
|
14,352
|
14,352
|
|
Hong Kong dollar
|
–
|
–
|
–
|
–
|
–
|
76,308
|
76,308
|
|
Indian rupee
|
–
|
–
|
–
|
–
|
–
|
22,984
|
22,984
|
|
Indonesian rupiah
|
–
|
–
|
–
|
–
|
–
|
10,331
|
10,331
|
|
Singapore dollar
|
151
|
–
|
–
|
–
|
151
|
5,407
|
5,558
|
|
South Korean won
|
139
|
–
|
–
|
–
|
139
|
41,011
|
41,150
|
|
Swiss franc
|
–
|
–
|
–
|
–
|
–
|
2,845
|
2,845
|
|
Taiwan dollar
|
227
|
16
|
–
|
–
|
243
|
38,590
|
38,833
|
|
Thai baht
|
289
|
–
|
–
|
–
|
289
|
6,994
|
7,283
|
|
US dollar
|
78
|
521
|
(12,626)
|
–
|
(12,027)
|
17,444
|
5,417
|
|
Vietnamese dong
|
–
|
–
|
–
|
–
|
–
|
5,119
|
5,119
|
|
|
884
|
537
|
(12,626)
|
–
|
(11,205)
|
245,076
|
233,871
|
Year ended 30 April
2023
|
|
|
|
|
|
Foreign
|
Investments
|
|
|
|
Debtors
|
|
|
Creditors
|
currency
|
at fair
|
|
|
|
(due from
|
|
|
(due to
|
exposure
|
value
|
Total net
|
|
|
brokers
|
Cash and
|
Overdrafts
|
brokers
|
on net
|
through
|
foreign
|
|
|
and
|
cash
|
and bank
|
and
|
monetary
|
profit
|
currency
|
|
|
dividends)
|
equivalents
|
facility
|
accruals)
|
items
|
or loss
|
exposure
|
|
Currency
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Australian dollar
|
—
|
—
|
—
|
—
|
—
|
8,427
|
8,427
|
|
Chinese yuan
|
—
|
—
|
—
|
—
|
—
|
23,822
|
23,822
|
|
Hong Kong dollar
|
—
|
—
|
—
|
—
|
—
|
93,836
|
93,836
|
|
Indian rupee
|
—
|
—
|
—
|
—
|
—
|
24,269
|
24,269
|
|
Indonesian rupiah
|
—
|
—
|
—
|
—
|
—
|
10,627
|
10,627
|
|
Singapore dollar
|
58
|
—
|
—
|
—
|
58
|
2,167
|
2,225
|
|
South Korean won
|
124
|
—
|
—
|
—
|
124
|
43,031
|
43,155
|
|
Taiwan dollar
|
145
|
345
|
—
|
—
|
490
|
33,646
|
34,136
|
|
Thai baht
|
151
|
—
|
—
|
—
|
151
|
6,680
|
6,831
|
|
US dollar
|
—
|
845
|
(14,333)
|
—
|
(13,488)
|
6,702
|
(6,786)
|
|
Vietnamese dong
|
—
|
—
|
—
|
—
|
—
|
5,755
|
5,755
|
|
|
478
|
1,190
|
(14,333)
|
—
|
(12,665)
|
258,962
|
246,297
|
The amounts shown are not representative of the exposure to risk
during the year, because the levels of foreign currency exposure
change significantly throughout the year.
Foreign Currency Sensitivity
The following table illustrates the sensitivity of the returns
after taxation for the year with respect to the Company’s financial
assets and liabilities.
If sterling had strengthened by the amounts shown in the second
table below, the effect on the assets and liabilities held in
non-sterling currency would have been as follows:
|
|
2024
|
2023
|
|
|
|
|
Total
|
|
|
Total
|
|
|
Revenue
|
Capital
|
loss
|
Revenue
|
Capital
|
loss
|
|
|
return
|
return
|
after tax
|
return
|
return
|
after tax
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Australian dollar
|
(2)
|
(52)
|
(54)
|
(9)
|
(219)
|
(228)
|
|
Chinese yuan
|
(15)
|
(244)
|
(259)
|
(25)
|
(572)
|
(597)
|
|
Hong Kong dollar
|
(26)
|
(1,221)
|
(1,247)
|
(62)
|
(3,097)
|
(3,159)
|
|
Indian rupee
|
(5)
|
(345)
|
(350)
|
19
|
(849)
|
(830)
|
|
Indonesian rupiah
|
(16)
|
(248)
|
(264)
|
(11)
|
(340)
|
(351)
|
|
Singapore dollar
|
(2)
|
(59)
|
(61)
|
(5)
|
(52)
|
(57)
|
|
South Korean won
|
(18)
|
(700)
|
(718)
|
(24)
|
(990)
|
(1,014)
|
|
Taiwan dollar
|
(15)
|
(656)
|
(671)
|
(24)
|
(748)
|
(772)
|
|
Thai baht
|
(7)
|
(147)
|
(154)
|
(4)
|
(147)
|
(151)
|
|
US dollar
|
208
|
(305)
|
(97)
|
434
|
(225)
|
209
|
|
Vietnamese dong
|
(4)
|
(118)
|
(122)
|
—
|
(161)
|
(161)
|
|
|
98
|
(4,095)
|
(3,997)
|
289
|
(7,400)
|
(7,111)
|
If sterling had weakened by the same amounts, the effect would have
been the converse.
The following movements in the assumed exchange rates are used in
the above sensitivity analysis:
|
|
2024
|
2023
|
|
|
%
|
%
|
|
£/Australian dollar
|
+/–1.4
|
+/–2.6
|
|
£/Chinese yuan
|
+/–1.7
|
+/–2.4
|
|
£/Hong Kong dollar
|
+/–1.6
|
+/–3.3
|
|
£/Indian rupee
|
+/–1.5
|
+/–3.5
|
|
£/Indonesian rupiah
|
+/–2.4
|
+/–3.2
|
|
£/Singapore dollar
|
+/–1.1
|
+/–2.4
|
|
£/South Korean won
|
+/–1.7
|
+/–2.3
|
|
£/Taiwan dollar
|
+/–1.7
|
+/–2.2
|
|
£/Thai baht
|
+/–2.1
|
+/–2.2
|
|
£/US dollar
|
+/–1.7
|
+/–3.3
|
|
£/Vietnamese dong
|
+/–2.3
|
+/–2.8
|
These percentages have been determined based on the market
volatility in exchange rates during the year. The sensitivity
analysis is based on the Company’s foreign currency financial
instruments held at each balance sheet date and takes account of
forward foreign exchange contracts that offset the effects of
changes in currency exchange rates. The effect of the strengthening
or weakening of sterling against foreign currencies is calculated
by reference to the volatility of exchange rates during the year
using one standard deviation of currency fluctuations from the
average exchange rate.
In the opinion of the Directors, the above sensitivity analyses are
not representative of the year as a whole since the level of
foreign currency exposure varies.
16.1.2 Interest
Rate Risk
The Company is exposed to interest rate risk through income
receivable on cash deposits and interest payable on variable rate
borrowings. When the Company has cash balances, they are held in
variable rate bank accounts yielding rates of interest dependent on
the base rate of the custodian, Bank of New York Mellon
(International) Limited.
The Company has a revolving credit facility (the ‘bank facility’)
for which details and year end drawn down amounts are shown in note
11. The Company uses the facility when required at levels approved
and monitored by the Board. At the maximum possible gearing of £20
million, the effect of a 1% increase/decrease in the interest rate
would result in a decrease/increase to the Company’s total income
of £200,000. At the year end, US dollars with a sterling equivalent
of £12,626,000 of the bank facility was drawn down (2023:
£13,593,000).
The Company also has available an uncommitted bank overdraft
arrangement with the custodian for settlement purposes. At the year
end, there was a sterling overdraft of £50,000 (2023: US dollar
overdraft with a sterling equivalent of £740,000). Interest on the
bank overdraft is payable at the custodian’s variable
rate.
The Company’s portfolio is not directly exposed to interest rate
risk.
16.1.3 Other
Price Risk
Other price risks (i.e. changes in market prices other than those
arising from interest rate risk or currency risk) may affect the
value of the equity investments, but it is the business of the
Manager to manage the portfolio to achieve the best possible
return.
The Directors manage the market price risks inherent in the
investment portfolio by meeting regularly to monitor on a formal
basis the Manager’s compliance with the Company’s stated objectives
and policies and to review investment performance.
The Company’s portfolio is the result of the Manager’s investment
process and as a result is not wholly correlated with the Company’s
benchmark or the markets in which the Company invests. The value of
the portfolio will not move in line with the markets but will move
as a result of the performance of the shares within the
portfolio.
If the value of the portfolio rose or fell by 10% at the balance
sheet date, the profit after tax for the year would increase or
decrease by £25.1 million (2023: £25.9 million)
respectively.
16.2 Liquidity
Risk
This is the risk that the Company may encounter difficulty in
meeting its obligations associated with financial liabilities
i.e. when
realising assets or raising finance to meet financial
commitments.
A lack of liquidity in the portfolio may make it difficult for the
Company to realise assets at or near their purported value in the
event of a forced sale. This is minimised as the majority of the
Company’s investments comprise a diversified portfolio of readily
realisable securities which can be sold to meet funding commitments
as necessary, cash held and the bank facility provides for
additional funding flexibility. The financial liabilities of the
Company at the balance sheet date are shown in note 11.
16.3 Credit
Risk
Credit risk comprises the potential failure by counterparties to
deliver securities which the Company has paid for, or to pay for
securities which the Company has delivered; it includes but is not
limited to: lost principal and interest, disruption to cash flows
or the failure to pay interest.
Credit risk is minimised by using:
(a) only
approved counterparties, covering both brokers and deposit
takers;
(b) a
custodian that operates under BASEL III guidelines. The Board reviews the
custodian’s annual, externally audited, service organisation
controls report and the Manager’s management of the relationship
with the custodian. Following the appointment of a depositary,
assets held at the custodian are covered by the depositary’s
restitution obligation, accordingly the risk of loss is remote;
and
(c) the
Invesco Liquidity Funds plc – US Dollar, a money market fund, which
is rated AAAm by Standard & Poor’s and AAAmmf by
Fitch.
Cash balances are limited to a maximum of 5% of net assets with the
custodian, 2.5% of net assets with any other deposit taker and a
maximum of 6% of net assets in the Invesco Liquidity Funds plc.
These limits are at the discretion of the Board and are reviewed on
a regular basis. As at the year end, the sterling equivalent of
£537,000 (2023: £1,337,000) was held at the custodian, in addition
a balance had been held in Invesco Liquidity Funds plc during the
year and the balance was £1,494,000 at the year end (2023:
£nil).
17. Fair
Value of Financial Assets and Financial
Liabilities
‘Fair value’ in accounting terms is the amount at which an
asset can be bought or sold in a transaction
between willing parties, i.e. a market-based, independent measure
of value. Under accounting standards there are three levels of fair
value based on whether there is an active market (Level 1) or, if
not, Levels 2 and 3 where other methods have been employed to
establish a fair value. This note sets out the aggregate amount of
the portfolio in each level, and why.
Financial assets and financial liabilities are either carried at
their fair value (investments), or at a reasonable
approximation of their fair value. The valuation techniques used by
the Company are explained in the accounting policy note. FRS 102
sets out three fair value levels for the fair value for the
hierarchy disclosures. Categorisation into a level is determined on
the basis of the lowest level input that is significant to the fair
value measurement of each relevant asset/liability.
The investments held by the Company at the year end are shown on
pages 29
and 30. Except for two Level 2 and one Level 3 investments
described below, all of the Company’s investments at the year end
were deemed to be Level 1 with fair values for all based on
unadjusted quoted prices in active markets for identical assets
totalling £242,722,000 (2023: £252,244,000).
Level 2 investments are investments for which inputs are other than
quoted prices included within Level 1 that are observable
(i.e. developed
using market data). At the year end there were two Level 2
investments held with a total fair value of £8,488,000
(2023: £6,680,000),
comprising of Kasikornbank, valued at £6,994,000 (2023: £6,880,000)
and Invesco Liquidity Funds – US Dollar money market fund, valued
at £1,494,000 (2023: £nil).
There have been no other transfers or movements between fair value
categories during the year.
Level 3 investments are investments for which inputs are
unobservable (i.e. for which market data is unavailable). Lime Co.
was the only Level 3 investment in the portfolio at the year end
and was valued at £37,000 using a price which was in line with
trades in the OTC market (2023: one investment: Lime Co. valued at
£38,000 based on prices of trades in the OTC market).
18. Capital
Management
This note is designed to set out the Company’s objectives,
policies and processes for managing its capital. This capital being
funded by monies invested in the Company by shareholders (both
initial investment and retained amount) and any borrowings by the
Company.
The Company’s total capital employed at 30 April 2024 was
£250,892,000 (2023: £258,597,000) comprising borrowings of
£12,626,000 (2023: £13,593,000) and equity share capital and other
reserves of £238,266,000 (2023: £245,004,000).
The Company’s total capital employed is managed to achieve the
Company’s investment objective and investment policy as set out on
page 20.
Borrowings may be used to provide gearing up to the lower of £20
million or 25% of net asset value. The Company’s policies and
processes for managing capital were unchanged throughout the year
and the preceding year.
The main risks to the Company’s investments are shown in the
Directors’ Report under the ‘Principal and Emerging Risks and
Uncertainties’ section on pages 23 and 24. These also explain that
the Company is able to gear and that gearing will amplify the
effect on equity of changes in the value of the
portfolio.
The Board can also manage the capital structure directly since it
has taken the powers, which it is seeking to renew, to issue and
buy-back shares and it also determines dividend
payments.
The Company is subject to externally imposed capital requirements
with respect to the obligation and ability to pay dividends by
section 1158 Corporation Tax Act 2010 and by the Companies Act
2006, respectively, and with respect to the availability of the
bank facility, by the terms imposed by the lender, details of which
are given in note 11. The Board regularly monitors, and the Company
has complied with, these externally imposed capital
requirements.
19. Contingencies,
Guarantees and Financial Commitments
Any liabilities the Company is committed to honour, and
which are dependent on future circumstances or events occurring,
would be disclosed in this note if any existed.
There were no contingencies, guarantees or other financial
commitments of the Company as at 30 April 2024 (2023:
nil).
20. Related
Party Transactions and Transactions with the
Manager
A related party is a company or individual who has direct
or indirect control or who has significant influence over the
Company. Under accounting standards, the Manager is not a related
party.
Under UK GAAP, the Company has identified the Directors and their
dependents as related parties. The Directors’ remuneration and
interests have been disclosed on page 46
with additional disclosure in note 4. No other related parties have
been identified.
Details of the Manager’s services and fees are disclosed in the
Director’s Report on page 35,
note 3
and note 4(iii) to the financial statements.
21. Post
Balance Sheet Events
Any significant events that occurred after the balance
sheet date but before the signing of the balance sheet will be
shown here.
There are no significant events after the end of the reporting
period requiring disclosure.
22. 2024
Financial Information
The figures and financial information for the year ended 30 April
2024 are extracted from the Company's annual financial statements
for that year and do not constitute statutory accounts. The
Company's annual financial statements for the year to 30 April 2024
have been audited but have not yet been delivered to the Registrar
of Companies. The Auditor's report on the 2024 annual financial
statements was i) unqualified, ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
23. 2023
Financial Information
The figures and financial information for the year ended 30 April
2023 are compiled from an extract of the published accounts for
that year and do not constitute statutory
accounts.
Those accounts have been delivered to the Registrar of
Companies.
The Auditor's report on the 2023 annual financial statements was
(i) unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
24. Annual
Financial Report
The Annual Report for the year-ended 30 April 2024 will be posted
to shareholders in August 2024 and will be available at
www.invesco.co.uk/invescoasia
or from the Corporate Secretary at the Company's correspondence
address, 43-45 Portman Square, London W1H 6LY. A copy of the Annual
Financial Report will be submitted shortly to the National Storage
Mechanism ("NSM") and will be available for inspection at the NSM,
which is situated at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Notice of Annual General Meeting
THIS NOTICE
OF ANNUAL GENERAL MEETING IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION. If you are in any doubt as to what action to take, you
should consult your stockbroker, solicitor, accountant or other
appropriate independent professional adviser authorised under the
Financial Services and Markets Act 2000. If you have sold or
otherwise transferred all your shares in Invesco Asia Trust plc,
please forward this document and the accompanying Form of Proxy to
the person through whom the sale or transfer was effected, for
transmission to the purchaser or transferee.
Notice is given that the Annual General Meeting of Invesco Asia
Trust plc will be held at 43-45 Portman Square, London
W1H 6LY,
on 12 September
2024 at 12pm for the following purposes:
Ordinary Business
To consider and, if thought fit, to pass the following resolutions
all of which will be proposed as ordinary resolutions:
1. To
receive and consider the Annual Financial Report for the year ended
30 April 2024.
2. To
approve the Company’s Dividend Payment Policy. This is an advisory
vote.
3. To
approve the Annual Statement and Report on Remuneration for the
year ended 30 April 2024.
4. To
re-elect Neil Rogan as a Director of the Company.
5. To
re-elect Vanessa Donegan as a Director of the Company.
6. To
re-elect Myriam Madden as a Director of the Company.
7. To
re-elect Sonya Rogerson as a Director of the Company.
8. To
appoint Ernst & Young LLP as auditor of the Company.
9. To
authorise the Audit Committee to determine the remuneration of the
auditor.
Special Business
To consider and, if thought fit, pass the following resolutions of
which resolution 10 will be proposed as an ordinary resolution and
resolutions 11 to 13 as special resolutions:
Authority to Allot Shares
10. That:
in
substitution for any existing authority under section 551 of the
Companies Act 2006 (the ‘Act’) but without prejudice to the
exercise of any such authority prior to the date of this resolution
the Directors of the Company be generally and unconditionally
authorised in accordance with section 551 of the Act as amended
from time to time prior to the date of the passing of this
resolution, to exercise all powers of the Company to allot shares
and grant rights to subscribe for, or convert any securities into,
shares up to an aggregate nominal amount (within the meaning of
sections 551(3) and (6)
of the Act) of £6,561,828, this being 10% of the Company’s issued
ordinary share capital as at 25 July 2024, such authority to expire
at the conclusion of the next Annual General Meeting of the Company
or the date 15 months
after the passing of this resolution, whichever is the earlier
unless the authority is renewed or revoked at any other general
meeting prior to such time, but so that this authority shall allow
the Company to make offers or agreements before the expiry of this
authority which would or might require shares to be allotted, or
rights to be granted, after such expiry as if the authority
conferred by this resolution had not expired.
Disapplication of Pre-emption Rights
11. That:
subject to the passing of resolution number 10 set out in the
notice of this meeting (the ‘Section 551 Resolution’) and in
substitution for any existing authority under sections 570
and 573
of the Companies Act 2006 (the ‘Act’) but without prejudice to the
exercise of any such authority prior to the date of this
resolution, the Directors be and are hereby empowered, in
accordance with sections 570 and 573 of the Act as amended from
time to time prior to the date of the passing of this resolution to
allot equity securities (within the meaning of section 560(1), (2)
and (3) of the Act) for cash, either pursuant to the authority
given by the Section 551 Resolution or (if such allotment
constitutes the sale of relevant shares which, immediately before
the sale, were held by the Company as treasury shares) otherwise,
as if section 561 of the Act did not apply to any such allotment,
provided that this power shall be limited:
(a) to
the allotment of equity securities in connection with a rights
issue in favour of all holders of a class of equity securities
where the equity securities attributable respectively to the
interests of all holders of securities of such class are either
proportionate (as nearly as may be) to the respective numbers of
relevant equity securities held by them or are otherwise allotted
in accordance with the rights attaching to such equity securities
(subject in either case to such exclusions or other arrangements as
the Directors may deem necessary or expedient in relation to
fractional entitlements or legal, regulatory or practical problems
under the laws of, or the requirements of, any regulatory body or
any stock exchange in any territory or otherwise); and
(b) to
the allotment (otherwise than pursuant to a rights issue) of equity
securities up to an aggregate nominal amount of £3,280,914, this
being 5% of the Company’s issued share capital as at 25 July 2024
and this power shall expire at the conclusion of the next Annual
General Meeting of the Company or the date 15 months after the
passing of this resolution, whichever is the earlier unless the
authority is renewed or revoked at any other general meeting prior
to such time, but so that this power shall allow the Company to
make offers or agreements before the expiry of this power which
would or might require equity securities to be allotted after such
expiry as if the power conferred by this Resolution had not
expired; and so that words and expressions defined in or for the
purposes of Part 17 of the Act shall bear the same meanings in this
resolution.
Authority to Make Market Purchases of
Shares
12. That:
the Company
be generally and subject as hereinafter appears unconditionally
authorised in accordance with Section 701 of the Companies Act 2006
as amended from time to time prior to the date of the passing of
this resolution (the ‘Act’) to make market purchases (within the
meaning of Section 693(4) of the Act) of its issued ordinary shares
of 10p each in the capital of the Company (‘Shares’).
PROVIDED
ALWAYS THAT:
(i) the
maximum number of Shares hereby authorised to be purchased shall be
9,836,181 or 14.99% of shares in issue as at 25 July
2024;
(ii) the
minimum price which may be paid for a Share shall be
10p;
(iii) the
maximum price which may be paid for a Share must not be more than
the higher of: (i) 5%
above the average of the mid-market values of the Shares for the
five business days before the purchase is made; and
(ii) the
higher of the price of the last independent trade in the Shares and
the highest then current independent bid for the Shares on the
London Stock Exchange;
(iv) any
purchase of Shares will be made in the market for cash at prices
below the prevailing net asset value per Share (as determined by
the Directors);
(v) the
authority hereby conferred shall expire at the conclusion of the
next Annual General Meeting of the Company, or the date 15 months
after the passing of this resolution, whichever is the earlier,
unless the authority is renewed or revoked at any other general
meeting prior to such time;
(vi) the
Company may make a contract to purchase Shares under the authority
hereby conferred prior to the expiry of such authority which will
be executed wholly or partly after the expiration of such authority
and may make a purchase of Shares pursuant to any such contract;
and
(vii) any
shares so purchased shall be cancelled or, if the Directors so
determine and subject to the provisions of Sections 724 to 731 of
the Act and any applicable regulations of the United Kingdom
Listing Authority, be held (or otherwise dealt with in accordance
with Section 727 or 729 of the Act) as treasury shares.
Period of Notice Required for General
Meetings
13. That:
the
period of notice required for general meetings of the Company
(other than AGMs) shall be not less than 14 days.
Dated this 25 July 2024
By order of the Board
Invesco Asset Management Limited
Corporate Company Secretary