abrdn Asian IncFd - Annual Financial Report
05/04/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230405:nRSE3725Va&default-theme=true
RNS Number : 3725V abrdn Asian Income Fund Limited 05 April 2023
ABRDN ASIAN INCOME FUND LIMITED
Legal Entity Identifier (LEI): 549300U76MLZF5F8MN87
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2022
PERFORMANCE HIGHLIGHTS
The NAV total return of -3.6% for the year ended 31 December 2022 was ahead of
the Index, which fell by 6.8% on a total return basis. The dividend per
Ordinary share increased by 5.3%, from 9.5p to 10.0p, providing a dividend
yield of 4.7%.
Dividend per Ordinary share Dividend yield (ACD)
2022 10.0p 2022 4.7%
2021 9.5p 2021 4.1%
Net asset value total return (AB) Ordinary share price total return (AB)
2022 -3.6% 2022 -2.7%
2021 11.0% 2021 5.2%
MSCI AC Asia Pacific ex Japan Index total return (currency adjusted) (B) MSCI AC Asia Pacific ex Japan High Dividend Yield Index total return (currency
adjusted) (B)
2022 -6.8% 2022 3.2%
2021 -1.8% 2021 8.1%
Earnings per Ordinary share - basic (revenue) Discount to net asset value per Ordinary share (AC)
2022 10.23p 2022 11.7%
2021 8.95p 2021 12.1%
Ongoing charges (AE) Net gearing (AC)
2022 1.01% 2022 8.1%
2021 1.01% 2021 9.6%
(A) Alternative Performance Measure.
(B) Total return represents the capital return plus dividends
reinvested.
(C) As at 31 December.
(D) Yield is calculated as the dividend per Ordinary share
divided by the share price per Ordinary share expressed as a percentage.
(E) Calculated in accordance with the latest AIC guidance issued
in October 2020 to increase the scope of reporting the look-through costs of
holdings in investment companies
SUMMARY OF RESULTS
Financial Highlights
31 December 2022 31 December 2021 % change
Net asset value total returnA -3.6% +11.0%
Share price (Ordinary) total returnA -2.7% +5.2%
MSCI AC Asia Pacific ex Japan Index total return (currency adjusted) -6.8% -1.8%
MSCI AC Asia Pacific ex Japan High Dividend Yield Index total return (currency +3.2% +8.1%
adjusted)
Market capitalisation (£million) £365.1 £396.3 -7.9
Discount to net asset value per Ordinary shareA 11.7% 12.1%
Ongoing charges ratioA 1.01% 1.01%
Dividends and earnings
Total return per Ordinary shareB (10.01)p 25.88p n/a
Earnings per Ordinary share - basic (revenue)B 10.23p 8.95p +14.3
Dividends per Ordinary shareC 10.00p 9.50p +5.3
Dividend cover per Ordinary shareA 1.02 0.94 +8.6
Revenue reserves (£million)D £7.3 £6.9
Dividend yieldA 4.7% 4.1%
(A) Considered to be an Alternative Performance Measure.
(B) Measures the relevant earnings for the year divided by the weighted
average number of Ordinary shares in issue (see note 10).
(C) The figure for dividends reflects the years in which they were
earned (see note 9).
(D) The revenue reserves figure takes account of the fourth interim
dividend amounting to £5,263,000 (2021 - fourth interim amounting to
£4,712,000).
Capital Performance to 31 December 2022
31 December 2022 31 December 2021 % change
Total assets (£million) £454.4 £497.5 -8.7
Total equity shareholders' funds (net assets) (£million) £413.4 £450.8 -8.3
Net asset value per Ordinary share 243.44p 262.76p -7.4
Ordinary share price 215.00p 231.00p -6.9
Long Term Total Return Performance to 31 December 2022
1 year 3 year 5 year Since launch(B)
% return % return % return % return
Net asset value(A) -3.6 +20.8 +26.1 +376.1
Share price (Ordinary)(A) -2.7 +14.8 +23.0 +325.4
MSCI AC Asia Pacific ex Japan Index (currency adjusted) -6.8 +9.0 +14.8 +302.2
MSCI AC Asia Pacific ex Japan High Dividend Yield Index (currency adjusted)
+3.2 +10.0 +17.4 +347.4
(A) Considered to be an Alternative Performance Measure.
(B) Launch date being 20 December 2005.
CHAIRMAN'S STATEMENT
Highlights
- Performance ahead of the MSCI AC Asia Pacific ex Japan Index (the
"Index") in the year; NAV per share was -down 3.6% on a total return basis
compared to a fall of 6.8% in the Index.
- NAV total return out-performed the Index over one, three and five
years.
- 5.3% increase in total dividends paid, from 9.5p to 10.0p,
providing a dividend yield of 4.7%.
- Revenue earnings per share were 10.2p for the year, an increase of
14.3% compared to the previous year.
Background and Overview
The year under review was an unsettling period for investors in Asian markets.
Optimism for a return to growth was tempered by global concerns over rising
inflation, recession fears and the impact of the conflict in Ukraine.
Your company has not been immune to these factors. For the year ended 31
December 2022, on a total return basis, the net asset value ("NAV") per share
was down 3.6%. However, as a result of the Investment Manager's thorough
approach to stock selection, investing in companies with strong balance
sheets, performance was still ahead of the Index, which fell by 6.8% over the
year (currency adjusted, on a total return basis). Over the longer term, the
Company's performance continues to look healthy, with NAV total returns of
20.8% over three years and 26.1% over five years, compared to 9.0% and 14.8%
respectively from the Index.
In some respects, the global situation is similar to the environment I
described in the Half Yearly Report last year. Russia's invasion of Ukraine -
Europe's biggest conflict since World War II - has led to a sharp increase in
commodity prices and heightened fears about the potential impact on corporate
profit margins. Meanwhile, soaring inflation means that investors are
increasingly dwelling on the possibility of a recession, as central banks look
to mitigate the impact of inflation.
Having said that, inflation in Asia, while rising, is still not as acute as it
is in the West (compare Singapore's 7.7%, among the highest in the region at
the end of 2022, with the UK's rate of inflation of 10.5% in December). As a
result, the region has not been subject to the same level of interest rate
increases. Clearly, however, the risk now for Asia is whether this trend of
rising prices will catch up, or whether the higher levels of GDP growth will
compensate.
One key shift towards the end of the year was China's approach to containing
the Covid-19 pandemic. In December, the country started the process of moving
away from its strict zero- Covid approach, which had led to lengthy lockdowns.
China's re-opening should lead to improved tourism and consumer spending due
to pent-up demand on the mainland and further afield. Meanwhile, China's
government has also taken action to improve regulation and ease the burden on
its debt-laden real estate sector.
In terms of currency impact, despite the US Federal Reserve (the "Fed") taking
aggressive action on interest rate increases to avoid inflation, Asian
currencies largely did better than our base currency, Sterling, over the year
- the weaker British pound resulting in part from the well documented
political instability in the UK. Currency movements had a positive impact on
the portfolio over the period, with the Singapore Dollar gaining the most and
the Thai Baht also fairly strong.
Performance
As stated above, the NAV total return of -3.6% for the year was ahead of the
Index, which fell by 6.8% on a total return basis, but was behind the MSCI AC
Asia Pacific ex Japan High Dividend Yield Index (the "High Yield Index"),
which produced a total return of 3.2%.
The share price total return for the 12 months was -2.7%, reflecting a
narrowing of the discount at which the shares trade, from 12.1% to 11.7% at
the year end. At the time of writing the Ordinary shares are trading at a
discount of 12.3% to the prevailing NAV.
As I set out in the Half Yearly Report, the portfolio fared well in the first
five months of the year, only for those gains to be eroded in June by a
rebound in China, where the Company is underweight. However, the portfolio
staged a good recovery over the second half of the year, with particularly
strong performance in November and December.
One of the prevailing themes over the year was weakness in the technology
sector, as investors considered how consumer demand would stand up to a global
recession. However, the Company has benefited from being underweight to some
of the expensive growth areas and Chinese internet companies which
underperformed over the course of the year.
Conversely, relative to the High Yield Index, the Company's performance lagged
over the period on account of the index's heavier allocation to Chinese banks,
a sector which held up relatively well on hopes of a recovery in credit
growth.
The end of the year saw stronger performance from two notable areas of the
portfolio: Australian mining and commodity companies, which benefited from
positive sentiment in China and higher prices for commodities such as iron ore
(which returned to more than US$100 per tonne in November); and Singapore
banks, which have benefited from higher interest rates and the growing
economy. Singapore's biggest banks have all reported record profits with
growing net interest margins. As the Investment Manager looks to increase
exposure to dividend-paying companies, this has included topping up the
portfolio's weighting to financials, including Singapore banks.
Further information on performance and portfolio activity during the year is
contained in the Investment Manager's Review.
Revenue and Dividends
Revenue earnings per share were 10.2p for the year ended 31 December 2022, an
increase of 14.3% compared to the previous year. The Company has continued to
benefit from the Investment Manager's focus on high-yielding companies with
strong fundamentals, where it believes there is room for significant increases
in dividend receipts over the next couple of years, given low distribution
ratios by companies and healthy free cash flow generation.
Four quarterly dividends were declared over 2022. The first three dividends
were paid at a rate of 2.3p with a fourth interim dividend of 3.1p,
representing a 5.3% increase in total dividends for the year, from 9.5p to
10.0p. This increase maintains the trend that has been established over each
of the last 14 years and means that the Company continues to be a "next
generation dividend hero" as recognised by the Association of Investment
Companies. It is very much our intention to continue to extend this record.
Based upon the Ordinary share price of 215p, the shares were yielding 4.7% at
the year end. The Board is very aware of the importance of dividends to
shareholders and is pleased to confirm that, in the absence of unforeseen
circumstances, it is our intention to declare a total dividend of at least
10.5p per Ordinary share in respect of the year to 31 December 2023.
Over the forthcoming year, the Investment Manager will be researching further
dividend-paying companies that could be added to the portfolio. As Asia's
economies continue to re-open and recover from the shock of the pandemic, the
Investment Manager expects to see strong earnings growth in Asia relative to
Western markets, which should translate into increasing dividend receipts. The
Board hopes that this will provide it with an opportunity to accelerate the
rate of dividend growth in future years.
Although not required this year, the Company continues to have the ability to
use some of its accumulated revenue reserves, which have been built up since
the launch of the Company, with the aim of smoothing the impact on dividend
payments to shareholders. Having these revenue reserves as well as the ability
to use its capital reserves in support of dividend payments from time to time,
provides an added level of comfort to your company's ability to pay dividends
and is a significant benefit of the closed end investment company structure.
Share Capital Management
In line with the Board's policy to buy back shares when the discount at which
the Company's shares trade exceeds 5% to the underlying NAV (exclusive of
income), the Company bought back 1.7 million shares during the year to be held
in treasury (2021: 4.3 million shares). Subsequent to the year end we have
continued to buy back shares and a total of 499,669 further shares have been
acquired.
These buybacks provide an enhancement to the Company's NAV and benefit all
shareholders. The Company will continue selectively to buy back shares in the
market, in normal market conditions and at the discretion of the Board.
Gearing
The Company has a £10 million fixed rate term loan and a £40 million
revolving credit facility, both of which mature in March 2024. At the year
end, £31 million of the revolving credit facility was drawn down, resulting
in total borrowings of £41 million and gearing (net of cash) of 8.1% (2021:
9.6%).
Environmental, Social and Governance ("ESG") Investing
The Board continues its ESG-focused dialogue with the Investment Manager in
the belief that companies with good ESG practices will be the winners over the
longer term, whilst benefitting society.
Annual General Meeting ("AGM") and Online Shareholder Presentation AGM
The AGM will be held at 10:30 a.m. on 10 May 2023 at Wallacespace
Spitalfields, 15-25 Artillery Lane, London E1 7HA.There will be a short
presentation by videoconference from the Investment Manager followed by tea
and coffee. We very much look forward to meeting and engaging with as many
shareholders as possible at the meeting.
We encourage all shareholders to complete and return the Proxy Form enclosed
with the Annual Report so as to ensure that your votes are represented at the
meeting. If you hold your shares in the Company via a share plan or a platform
and would like to attend and / or vote at the AGM, then you will need to make
arrangements with the administrator of your share plan or platform. For this
purpose, investors who hold their shares in the Company via one of the abrdn
savings plans will find a Letter of Direction enclosed. Shareholders are
encouraged to complete and return their Proxy Forms / Letters of Direction in
accordance with the instructions.
Online Shareholder Presentation
In order to encourage as much interaction as possible with our shareholders,
and especially for those who are unable to attend the AGM, we will also be
hosting an Online Shareholder Presentation, which will be held at 10.00 a.m.
on Wednesday 26 April 2023. At this event you will receive a presentation from
the Investment Manager and have the opportunity to ask live questions of the
Chairman and the Investment Manager. The online presentation is being held
ahead of the AGM to allow shareholders who attend to submit their proxy votes
for the AGM after the presentation.
Full details on how to register for the online event can be found at:
bit.ly/abrdn-asia-income
Details are also contained on the Company's website.
Board Composition
Having been a Director since the launch of the Company in 2005, Hugh Young has
decided to retire at this year's AGM. Over the years, the Company has
benefited hugely from Hugh's vast investment experience and insight of the
Asian region. On behalf of the Board I would like to thank Hugh for his
significant contribution over this time.
Jersey Administrator
Since the end of the year, the Board has noted the announcement made by abrdn
plc ("abrdn") of the proposed sale of its discretionary fund management
business in Jersey, which currently provides a Jersey regulatory function to
the Company.
The Board wishes to confirm that, notwithstanding this proposed sale, the
investment management of the Company's portfolio will continue to be carried
out by abrdn via its Singapore based Asian Equity team.
The Board will of course fulfil its own duty to review carefully any new
Jersey regulatory arrangements that abrdn proposes to put in place, to ensure
that such arrangements remain in the best interests of the Company's
shareholders.
Outlook
While growth prospects in Asia may have moderated slightly (the Asian
Development Bank has reduced its 2023 outlook for GDP expansion to 4.6%),
economic growth is still forecast to be ahead of many other parts of the
world. The question now is whether the region's growth prospects outweigh the
potential for higher inflation creeping into Asian economies. Investors will
also keenly watch the Fed's monetary policy, with many Asian currencies pegged
to the US Dollar, and China's emergence from its zero-Covid policy, alongside
other economies that continue to re-open, which is a positive sign for the
region.
The Asia investment story remains as compelling as ever for investors.
Long-term drivers of rising affluence, green energy and technology adoption
provide opportunities for companies that have the ability to generate steady
cash flow and pay stable dividends.
With a long heritage in Asia, the Investment Manager has a strong record of
finding those proven, quality companies that benefit from structural trends
while generating healthy income and capital growth for investors. The Board
remains confident this will be to the benefit of shareholders over the long
term.
Ian Cadby
Chairman
4 April 2023
INVESTMENT MANAGER'S REVIEW
1. How did abrdn Asian Income Fund do in 2022?
An overarching theme that shaped markets in 2022 was the global pivot towards
monetary tightening, as central banks raced to contain an inflation surge
which had been inflamed by the commodity crisis following Russia's invasion of
Ukraine. Rising borrowing costs ignited recession fears and took the shine off
growth stocks, where frothy valuations based on sentiment rather than
fundamentals were particularly sensitive to interest rates. Instead, investors
rotated towards value stocks, which looked relatively cheap and offered better
shareholder returns.
With its income focus, the Company benefited from this change in sentiment.
The Company's net asset value ("NAV") fell by 3.6% on a total return basis in
sterling terms, outperforming the MSCI AC Asia Pacific ex Japan Index's loss
of 6.8%. The Company's holdings in Singapore outpaced the broader markets, led
by the banks which resumed dividend payments after the pandemic-related
regulatory restrictions were removed. The portfolio also benefited from having
less exposure to China, where dividend yields are lower than the regional
average, as sentiment there was weighed down by regulatory uncertainty, a
property slump and disruptive Covid-19 lockdowns. In comparison, the Company
trailed the MSCI AC Asia Pacific ex Japan High Dividend Yield Index, which
returned 3.2%. This index includes state-owned financial and power companies,
which we have chosen not to hold as we find better managed peers with more
sustainable outlooks elsewhere in the region.
Information technology was the weakest performing sector as valuations of
technology companies corrected, having been consistent outperformers over the
previous years. However, the Company's holdings in this sector are technology
leaders with strong balance sheets. They have been resilient relative to their
peers and continue to offer attractive medium-term total returns and growth
prospects.
2. How were the Company's holding able to remain resilient in
the tough macro environment?
One of the ways we try to mitigate the impact of macro- economic events on the
portfolio is by knowing the holdings inside out, through disciplined analysis,
and investing only in quality companies that we believe will be winners in the
long run. In our view, company fundamentals are the ultimate drivers of share
prices. Specifically, the Company targets the income and growth potential of
Asia's most compelling and sustainable firms. Our focus is therefore on
finding high-quality, dividend- paying companies that offer capital
appreciation alongside growing dividends.
We form our expectations of a company's growth potential and dividend-paying
ability via rigorous, first-hand research, drawing on the knowledge of
approximately 40 investment professionals on the ground in Asia. We meet
companies before making any investments and continue monitoring them regularly
after they are added to the portfolio. Among the key attributes we look for
are proven management teams with good track records, healthy balance sheets
and sustainable cash-generative operations that can support dividends. This is
particularly important in the current higher interest rate environment, as
heavily debt-laden businesses could face financial pressure which may result
in withheld or reduced dividends.
We also prefer companies with robust business models and enduring competitive
advantages. These qualities can improve their pricing power, allowing them to
protect market share and profitability by passing on higher costs - an
important consideration in today's inflationary environment. The output of
this process is a portfolio of companies that exhibits stronger profitability,
a better return on equity and a higher dividend yield compared to the Index.
Another way we enhance returns and mitigate portfolio risk is by integrating
environmental, social and governance ("ESG") analysis into our investment
process. In our opinion, informed and constructive engagement helps foster
better corporate practices, and that in turn can protect and increase the
value of the Company's investments. Moreover, active engagement is
particularly pertinent in Asia, where an ESG culture has been slow to emerge
relative to Europe and the US. Many companies in the region are beginning to
understand the significance of ESG reporting and the potential impact on share
prices from having a clear and transparent ESG policy.
That is why we regularly engage with the companies we invest in, to share and
encourage better ESG practices, while ensuring we fully understand their
future direction from a risk and an ESG perspective. Our regular dialogues
with managements cover varied topics such as climate change risks, management
turnover, data security and gender diversity. Notably, the Company's portfolio
is rated A by MSCI for ESG, has maintained its above- benchmark ESG quality
score and continues to enjoy a similar or better E, S and G score relative to
the Index.
3. What contributed to the Company's performance over the
year?
The Company's investments in Singapore, the portfolio's biggest single country
exposure, delivered strong gains. As bottom-up stock pickers, we select the
best companies regardless of the country they are based in. We like Singapore
for its diversity of well-governed businesses with a prudent attitude towards
balance sheet gearing, many of which have expanded their earnings across the
higher-growth economies in the region.
Among the Singapore holdings, well-capitalised lenders DBS Group,
Oversea-Chinese Banking Group ("OCBC") and United Overseas Bank ("UOB")
performed well as rising interest rates pushed up their net interest margins,
which had been suppressed by several years of very-low rates. All three banks
emerged from the pandemic with their asset qualities intact. In addition, they
have reported a sharp increase in earnings and rewarded shareholders by
resuming dividend payments once the local regulator removed pandemic- related
dividend restrictions. Keppel Infrastructure Trust fared similarly well,
deriving steady and predictable cash flows from diversified assets that
supported stable distributions.The Company also benefited from special
dividends from Singapore Telecommunications, a telecom operator with regional
franchises that capture growth in Asia's emerging markets.
China was once again a swing factor for performance. Our active decision to
avoid holding large, non-dividend paying Chinese internet companies was
favourable as their share prices have come under intense pressure since late
2020 on the back of sweeping regulatory changes. In addition, stock selection
in China was positive.
For example, property company China Resources Land ("CR Land") was boosted by
market-friendly policy announcements as the authorities stepped up measures to
support the housing market. The country's swift re-opening provided another
welcome fillip for the sector. Shares of the high-quality property developer
have risen over each of the past two years - no small feat considering the
Chinese market's double-digit losses over those periods. It is not just that
the company has a low cost of capital and a good execution track record. CR
Land's portfolio of investment properties is an additional liquidity source
that provides it with steady cash flow and helps keep its balance sheet
modestly geared. This is in stark contrast to many of its heavily indebted
domestic rivals.
Elsewhere, Australian commodity companies stood out. Mining giants Rio Tinto
and BHP Group rallied on strong iron ore prices, which received a further
boost towards the year-end on optimism over Chinese demand. In addition, BHP
declared a record dividend following stellar full-year results. Rio Tinto
reduced its special dividend as part of its regular shareholder returns
management policy, but it remains a large dividend payer with a yield of
around 9%. At the time of writing, both companies have reported strong
production and higher iron ore shipments. We continue to like the diversified
miners, which have solid assets and balance sheets, and provide a good proxy
for growth in China and other emerging markets.
In neighbouring New Zealand, Spark New Zealand was another outstanding
performer. The telecom operator's active portfolio management strategy has
been instrumental in supporting its solid growing dividend profile.
4. What changes have you made to the portfolio?
We have been increasing the weighting to financials, which we believe are
beneficiaries of rising interest rates and re- opening economies, and of an
increase in dividend growth as domestic regulators lift distribution
restrictions following the pandemic. Earlier in the year, we introduced
Thailand-based Kasikornbank, a leader on the digitalisation, technology and
ESG fronts. The lender's promising prospects are backed by its solid balance
sheet, strong branch network and measured approach in digital transformation.
We also added attractively valued Dah Sing Financial, which offers banking,
insurance and other financial-related services mainly in Hong Kong, Macau and
mainland China. The group's business fundamentals are improving, aided by the
continued economic recovery in Hong Kong and China.
Conversely, we reduced the portfolio's technology exposure given the weak
global demand environment as we suspect there will come a time when we can
invest back into these quality companies at lower prices. That said, we did
take advantage of bouts of market weakness to initiate some positions in
quality technology companies with compelling valuations. As highlighted in the
Half-Yearly Report, two such purchases were MediaTek and Taiwan Union
Technology ("TUC"), which are both based in Taiwan. Fabless integrated-circuit
design house MediaTek has committed to returning capital to shareholders via a
special dividend over at least the next couple of years, on top of its regular
dividend based on an 80%-85% distribution ratio. TUC is a leading maker of
copper clad laminate, which is an integral part of the structural growth in
capital expenditure in data centres, base stations and servers in the 5G
infrastructure rollout and connectivity such as industrial automation,
internet of things and autonomous cars. The company's first mover advantage
and focus on product innovation have kept it ahead of the competition. In
addition,
we established a small position in Singapore-based AEM Holding in the second
half of the year, given its dividend track record and business outlook. AEM
has embedded itself in chipmaker Intel's global supply chain due to its
patented test and handling technology. Its growth profile could become more
diverse as Intel seeks to move into system-level testing equipment to bring
more chip manufacturing in-house.
The purchases were funded with the sale of China Mobile, CNOOC, SP Setia and
Waypoint REIT. Proceeds from the takeover of AusNet Services were also
invested across holdings with high dividend yields.
5. What key areas are you monitoring closely this year?
Inflation and interest rate concerns remain front and centre for investors.
Key central banks have retained their hawkish language, though moderating
price increases have raised hopes of a slower pace of interest rate rises. At
the same time, the world economy is still fragile, while geopolitical risks
remain, with continued conflict between Russia and Ukraine.
Developments in China, meanwhile, continue to take centre stage. We believe
the country's re-opening is broadly positive for Asia's prospects. A revival
in domestic consumption and industrial conditions should benefit the region,
as demand for exports, services and trade rebounds. The lifting of border
constraints is likely to boost tourism revenues in South-East Asia,
particularly as China accounted for the bulk of tourist arrivals pre-pandemic.
In our view, China's recovery is sustainable, as domestic demand over the
medium and longer term will be underpinned by broader economic improvement
alongside excess household savings and disposable income accumulated during
the pandemic years.
We are keeping a watchful eye on the shifting landscape and continuing our
dialogue with the Company's underlying holdings, closely monitoring their
operational performance and the impact of lower demand. As noted earlier,
higher borrowing costs will impair the dividend-paying ability of debt-
saddled firms, while those unable to pass on rising input costs could fall by
the wayside. Encouragingly, the portfolio's quality holdings, with their
robust balance sheets, are less reliant on debt financing and continue to
display financial strength. Their durable competitive advantages have also
been pivotal in preserving their margins and supporting their ability to pay
out dividends, even in the face of elevated inflation.
Overall, Asia is starting the year in a relatively better position compared to
other global regions. Manageable price pressures have allowed central banks to
take a more deliberate approach to interest rate rises. Government finances
and corporate balance sheets have, on average, remained solid. Asia is also
growing faster than any other region in the world as it emerges from the
effects of the pandemic. The gathering economic momentum should support
earnings growth. We will remain alert and adapt alongside changing
circumstances.
6. Where do the most attractive opportunities lie in Asia?
Quality income ideas are spread across multiple themes in Asia, where we can
find companies offering good long-term total return opportunities across a
variety of countries and sectors.
The accelerating transition to clean energy, for instance, is a game-changer.
Among the quality holdings in the portfolio that offer dividends and growth in
the green space are South Korea's LG Chem and Taiwan-based Hon Hai Precision
Industry. The former is increasingly dominant in the electric vehicle ("EV")
battery supply chain, while the latter is gaining a foothold in the EV market.
Electric power transmission utility Power Grid Corp of India, too, is poised
to play a decisive role in India's long-term decarbonisation efforts.
Elsewhere, technology enablers are fundamental for a digital future. The
Company has exposure via its two largest positions in Taiwan Semiconductor
Manufacturing Company and Samsung Electronics. Both are world-leading chip
makers with sturdy balance sheets and good cash flow generation, and have
considerable experience navigating the ups and downs of the industry cycle.
The financial holdings, such as Kasikornbank and DBS, which are ramping up
their digital capabilities, also offer exposure to the digital future theme.
Furthermore, they are beneficiaries of Asia's rising affluence, which has
created new opportunities for wealth solutions and services. Insurer AIA Group
is a case in point.
Another of our preferred themes is the urbanisation and infrastructure
expansion that is set to bolster property developers and material producers,
such as the holdings in diversified miners BHP Group and Rio Tinto as well as
property developer CR Land.
7. What is the outlook for dividends in the region?
We remain optimistic. Asia - long associated with growth - has often been
considered a less obvious choice for investors in search of yield. In fact,
dividend contribution in Asia has been on a steady upward path, helped by
greater capital discipline and shareholder-friendly reforms. Dividends now
comprise close to half of total returns to shareholders.
The source of these dividends is also broadening across countries and sectors.
In addition to traditional high-yielding markets such as Australia, Singapore
and Taiwan, we are starting to see dividend growth and better yields in
emerging markets and countries not traditionally known for a dividend- paying
business culture. India is a classic example, as companies have historically
prioritised re-investing capital back into future growth. Increasingly, we are
finding companies that can offer both earnings and dividend growth. Power Grid
Corp of India, for example, offers a healthy yield of around 6%,
while delivering earnings growth and investing in renewables generation.
Opportunities are also spread across sectors ranging from banks and mining to
technology and businesses exposed to the region's growing consumer market.
That said, persistent near-term macroeconomic uncertainty and Asia's
wide-ranging stock universe underline the value of fundamental analysis and
stock picking.
Overall, Asian companies have stronger balance sheets relative to global
peers, as is evident from the chart below. This puts them in a favourable
position of being able to choose to invest in growth or improve returns to
shareholders. We believe Asian companies are in a better position financially
to raise dividends and our quality process enables us to filter this list down
to companies that are more willing to increase total returns. Asian markets
are also trading at lower price-earnings multiples relative to historical
standards as well as world indices.
We are convinced that Asia continues to provide huge potential in both income
and capital growth. We will remain discriminating in our selection of well-run
and financially sound sustainable businesses with a long runway of growth.
Yoojeong Oh
Investment Director
abrdn Asia Limited,
4 April 2023
OVERVIEW OF STRATEGY
Launched in December 2005, abrdn Asian Income Fund Limited (the "Company") is
registered with limited liability in Jersey as a closed-end investment company
under the Companies (Jersey) Law 1991 with registered number 91671. The
Company's Ordinary shares are listed on the premium segment of the London
Stock Exchange.
Change of Name
On 1 January 2022, the Company changed its name from Aberdeen Asian Income
Fund Limited to abrdn Asian Income Fund Limited.
Change of Tax Residency
Following shareholder approval at the Extraordinary General Meeting held on 8
September 2021, with effect from 1 January 2022 the Company migrated its tax
residency to the UK from Jersey and elected to join the UK's investment trust
regime. The Company continues to be registered with limited liability in
Jersey as a closed-end investment company under the Companies (Jersey) Law
1991.
Investment Objective
To provide investors with a total return primarily through investing in Asia
Pacific securities, including those with an above average yield. Within its
overall investment objective, the Company aims to grow its dividends over
time.
Business Model
The Company aims to attract long term private and institutional investors
wanting to benefit from the growth prospects of Asian companies including
those with above average dividend yields.
The business of the Company is that of an investment company and the Directors
do not envisage any change in this activity in the foreseeable future.
Investment Policy
Asset Allocation
The Company primarily invests in the Asia Pacific region through investment
in:
- companies listed on stock exchanges in the Asia Pacific region;
- Asia Pacific securities, such as global depositary receipts (GDRs),
listed on other international stock -exchanges;
- companies listed on other international exchanges that derive
significant revenues or profits from the Asia Pacific region; and
- debt issued by governments or companies in the Asia Pacific region or
denominated in Asia Pacific currencies.
The Company's investment policy is flexible, enabling it to invest in all
types of securities, including equity shares, preference shares, debt,
convertible securities, warrants and other equity-related securities. The
Company is free to invest in any market segments or any countries in the Asia
Pacific region. The Company may use derivatives to enhance income generation.
The Company invests in small, mid and large capitalisation companies. The
Company's policy is not to acquire securities that are unquoted or unlisted at
the time of investment (with the exception of securities which are about to be
listed or traded on a stock exchange). However, the Company may continue to
hold securities that cease to be quoted or listed if the Investment Manager
considers this to be appropriate. The Company may also enter into stock
lending contracts for the purpose of enhancing income returns.
Typically, the portfolio will comprise of between 40 and 70 holdings (but
without restricting the Company from holding a more or less concentrated
portfolio in the future).
Risk Diversification
The Company will not invest more than 10%, in aggregate, of the value of its
total assets in investment trusts or investment companies admitted to the
Official List, provided that this restriction does not apply to investments in
any such investment trusts or investment companies which themselves have
stated investment policies to invest no more than 15% of their total assets in
other investment trusts or investment companies admitted to the Official List.
In any event, the Company will not invest more than 15% of its total assets in
other investment trusts or investment companies admitted to the Official List.
In addition, the Company will not:
- invest, either directly or indirectly, or lend more than 20% of its
total assets to any single underlying issuer (including the underlying
issuer's subsidiaries or affiliates), provided that this restriction does not
apply to cash deposits awaiting investment;
- invest more than 20% of its total assets in other collective
investment undertakings (open-ended or closed-ended);
- expose more than 20% of its total assets to the creditworthiness or
solvency of any one counterparty (including the counterparty's subsidiaries or
affiliates);
- invest in physical commodities;
- take legal or management control of any of its investee companies; or
- conduct any significant trading activity.
The Company may invest in derivatives, financial instruments, money market
instruments and currencies for investment purposes (including the writing of
put and call options for non-speculative purposes to enhance investment
returns) as well as for the purpose of efficient portfolio management (i.e.
for the purpose of reducing, transferring or eliminating investment risk in
the Company's investments, including any technique or instrument used to
provide protection against foreign exchange and credit risks). For the
avoidance of doubt, in line with the risk parameters outlined above, any
investment in derivative securities will be covered.
The Investment Manager expects the Company's assets will normally be fully
invested. However, during periods in which changes in economic conditions or
other factors so warrant, the Company may reduce its exposure to securities
and increase its position in cash and money market instruments.
Gearing Policy
The Board is responsible for determining the gearing strategy for the Company.
The Board has restricted the maximum level of gearing to 25% of net assets
although, in normal market conditions, the Company is unlikely to take out
gearing in excess of 15% of net assets. Gearing is used selectively to
leverage the Company's portfolio in order to enhance returns where this is
considered appropriate. Borrowings are generally shorter term, but the Board
may from time to time take out longer term borrowings where it is believed to
be in the Company's best interests to do so. Particular care is taken to
ensure that any bank covenants permit maximum flexibility of investment
policy.
The percentage investment and gearing limits set out under this sub-heading
"Investment Policy" are only applied at the time that the relevant investment
is made or borrowing is incurred.
In the event of any breach of the Company's investment policy, shareholders
will be informed of the actions to be taken by the Investment Manager by an
announcement issued through a Regulatory Information Service or a notice sent
to shareholders at their registered addresses.
The Company may only make material changes to its investment policy (including
the level of gearing set by the Board) with the approval of shareholders (in
the form of an ordinary resolution). In addition, any changes to the Company's
investment objective or policy will require the prior approval of the
Financial Conduct Authority as well as prior consent of the Jersey Financial
Services Commission ("JFSC") to the extent that the changes materially affect
the import of the information previously supplied in connection with its
approval under Jersey Funds Law or are contrary to the terms of the Jersey
Collective Investment Funds laws.
Duration
The Company does not have a fixed life.
Comparative Indices
The Company's portfolio is constructed without reference to any stockmarket
index. It is likely, therefore, that there will be periods when the Company's
performance will be quite unlike that of any index and there can be no
assurance that such divergence will be wholly or even primarily to the
Company's advantage. The Company compares its performance against the
currency-adjusted MSCI AC Asia Pacific ex Japan Index and the
currency-adjusted MSCI AC Asia Pacific ex Japan High Dividend Yield Index.
Promoting the Success of the Company
In accordance with corporate governance best practice, the Board is required
to describe to the Company's shareholders how the Directors have discharged
their duties and responsibilities over the course of the financial year
following the guidelines set out in the UK under section 172 (1) of the
Companies Act 2006 (the "s172 Statement"). This Statement, from "Promoting the
Success of the Company" to "Long Term Investment" provides an explanation of
how the Directors have promoted the success of the Company for the benefit of
its members as a whole, taking into account, among other things, the likely
long term consequences of decisions, the need to foster relationships with all
stakeholders and the impact of the Company's operations on the environment.
The purpose of the Company is to act as a vehicle to provide, over time,
financial returns (both income and capital) to its shareholders. The Company's
investment objective is disclosed above. The activities of the Company are
overseen by the Board of Directors of the Company. The Board's philosophy is
that the Company should operate in a transparent culture where all parties are
treated with respect and provided with the opportunity to offer practical
challenge and participate in positive debate which is focused on the aim of
achieving the expectations of shareholders and other stakeholders alike. At
its regular meetings, the Board reviews the culture and manner in which the
Manager operates and receives regular reporting and feedback from the other
key service providers.
Investment companies, such as the Company, are long-term investment vehicles,
with a recommended holding period of five or more years. Typically, investment
companies are externally managed, have no employees, and are overseen by an
independent non-executive board of directors. The Company's Board of Directors
sets the investment mandate, monitors the performance of all service providers
(including the Manager and Investment Manager) and is responsible for
reviewing strategy on a regular basis. All this is done with the aim of
preserving and, indeed, enhancing shareholder value over the longer term.
Shareholder Engagement
The following table describes some of the ways the Board engages with the
Company's shareholders:
Annual General Meeting ("AGM") and Online Shareholder Presentation The AGM provides an opportunity for the Directors to engage with shareholders,
answer their questions and meet them informally. The next AGM will take place
at 10:30 a.m. on 10 May 2023 in London. Shareholders who are unable to attend
are encouraged to lodge their votes by proxy on all the resolutions put
forward.
As explained in the Chairman's Statement, the Company will hold an online
shareholder presentation in advance of the AGM this year including the
opportunity for an interactive question and answer session.
Annual Report The Company publishes a full annual report each year that contains a strategic
report, governance section, financial statements and additional information.
The report is available online and in paper format.
Company Announcements The Company issues announcements for all substantive news relating to it.
These can be found on the Company's website and the London Stock Exchange's
website.
Results Announcements The Company releases a full set of financial results at the half year and full
year stage. Updated net asset value figures are announced on a daily basis.
Monthly Factsheets The Manager publishes monthly factsheets on the Company's website including
commentary on the portfolio and market performance.
Website The Company's website contains a range of information and includes a full
monthly portfolio listing of the Company's investments as well as podcasts by
the Investment Manager. Details of financial results, the investment process
and Investment Manager together with Company announcements and contact details
can be found here: asian-income.co.uk.
Investor Relations The Company subscribes to the Manager's Promotional and Investor Relations
programme.
The Manager and Investment Manager
The key service providers for the Company are the Manager, abrdn Capital
International Limited, and the Investment Manager, abrdn Asia Limited, and the
performance of both is reviewed in detail at each Board meeting.
Key Stakeholders - Shareholders
Shareholders are key stakeholders in the Company - they are looking to the
Manager and Investment Manager to achieve the investment objective over time
and to deliver a regular growing income together with some capital growth. The
Board is available to meet at least annually with shareholders at the AGM.
This is seen as a very useful opportunity to understand the needs and views of
the shareholders. In between AGMs, the Directors and Investment Manager also
conduct programmes of investor meetings with larger institutional, private
wealth and other shareholders to ensure that the Company is meeting their
needs. Such regular meetings may take the form of joint presentations with the
Investment Manager or meetings directly with a Director where any matters of
concern may be raised directly.
Other Stakeholders - Service Providers
The other key stakeholder group is that of the Company's third party service
providers. The Board is responsible for selecting the most appropriate
outsourced service providers and monitoring the relationships with these
suppliers regularly in order to ensure a constructive working relationship.
The service providers look to the Company to provide them with a clear
understanding of its needs in order that those requirements can be delivered
efficiently and fairly. The Board, via the Management Engagement Committee,
ensures that the arrangements with service providers are reviewed in detail at
least annually. The aim is to ensure that contractual arrangements remain
competitively priced in line with best practice, services being offered meet
the requirements and needs of the Company and performance is in line with the
expectations of the Board, Manager, Investment Manager and other relevant
stakeholders. Reviews include those of the Company's Custodian, Registrar,
Broker and Auditor.
Principal Decisions
Pursuant to the Board's aim of promoting the long term success of the Company,
the following principal decisions were taken during the year:
Portfolio
The Investment Manager's Review details the key investment decisions taken
during the year and subsequently. The Investment Manager has continued to
monitor the investment portfolio throughout the year under the supervision of
the Board.
During the year, the Board confirmed that the continuing appointment of the
Manager with the delegation arrangements to the Investment Manager, on the
terms agreed, is in the interests of shareholders as a whole.
Gearing
The Company utilises gearing in the form of bank debt with the aim of
enhancing shareholder returns over the longer term. The Company has a £40
million revolving credit facility and a £10 million fixed rate loan both
scheduled to mature in March 2024. The Board reviews the level of gearing at
each Board meeting.
Share Buybacks
During the year, the Board continued to buy back Ordinary shares
opportunistically in order to provide liquidity to the market.
ESG
The Board is responsible for overseeing the work of the Investment Manager and
this is not limited solely to the investment performance of the portfolio
companies. The Board also has regard for environmental, social and governance
("ESG") matters that subsist within the portfolio companies. During the year,
the Board conducted regular meetings and met with the Investment Manager's ESG
team in Singapore in order to discuss the Investment Manager's principles and
policies. The Board is supportive of, and encourages, the Investment Manager's
pro-active approach to ESG engagement.
Long Term Investment
The Investment Manager's investment process seeks to outperform over the
longer term. The Board has in place the necessary procedures and processes to
continue to promote the long term success of the Company. The Board continues
to monitor, evaluate and seek to improve these processes as the Company
continues to grow over time, to ensure that the investment proposition is
delivered to shareholders and other stakeholders in line with their
expectations.
Online Shareholder Presentation
To encourage and promote stronger interaction and engagement with the
Company's shareholders, the Board will hold an interactive online shareholder
presentation which will be held at 10.00 a.m. on Wednesday 26 April 2023. At
the presentation, shareholders will receive updates from the Chairman and
Investment Manager and there will be the opportunity for an interactive
question and answer session. The online presentation is being held ahead of
the AGM to allow shareholders to submit their proxy votes prior to the
meeting.
Key Performance Indicators ("KPIs")
The Board uses a number of financial performance measures to assess the
Company's success in achieving its objective and to determine the progress of
the Company in pursuing its investment policy. The main KPIs identified by the
Board in relation to the Company, which are considered at each Board meeting,
are as follows:
KPI Description
Dividend Payments per Ordinary share The Board aims to grow the Company's dividends over time. Dividends paid over
the past 10 years are set out above.
Performance Absolute Performance: The Board monitors the Company's NAV total return
performance in absolute terms.
Relative Performance: The Board also measures performance against the MSCI AC
Asia Pacific ex Japan Index (currency adjusted) and the MSCI AC Asia Pacific
ex Japan High Dividend Yield Index (currency adjusted) and performance
relative to other investment companies within the Company's peer group over a
range of time periods, taking into consideration the differing investment
policies and objectives employed by those companies.
Share Price Performance: The Board also monitors the price at which the
Company's shares trade relative to the MSCI AC Asia Pacific ex Japan Index
(currency adjusted) and the MSCI AC Asia Pacific ex Japan High Dividend Yield
Index (currency adjusted) on a total return basis over time.
The Board measures performance over a time horizon of at least five years.
Discount/Premium to NAV The discount/premium relative to the NAV per share represented by the share
price is closely monitored by the Board. The objective is twofold: (i) to
maintain the price at which the Ordinary shares trade, relative to the
exclusive of current period income NAV, at a discount of no more than 5% in
normal market conditions; and (ii) to avoid large fluctuations in the
discount/premium, relative to similar investment companies investing in the
region, by the use of share buy backs or the issuance of new shares, subject
to market conditions.
Ongoing Charges Ratio The Board monitors the Company's operating costs carefully. Ongoing charges
for the year and previous year are disclosed above.
Gearing The Board ensures that gearing is kept within the Board's guidelines to the
Manager.
Risk Management
There are a number of risks which, if realised, could have a material adverse
effect on the Company and its financial condition, performance and prospects.
The Board has undertaken a robust review of the principal and emerging risks
and uncertainties facing the Company including those that would threaten its
business model, future performance, solvency or liquidity. Those principal
risks are disclosed in the table below together with a description of the
mitigating actions taken by the Board. The principal risks associated with an
investment in the Company's shares are published monthly on the Company's
factsheet or they can be found in the Pre-Investment Disclosure Document
published by the Manager, both of which are available on the Company's
website.
The Board reviews the risks and uncertainties faced by the Company in the form
of a risk matrix and heat map at its Audit Committee meetings and a summary of
the principal risks are set out below. The Board also has a process to
consider emerging risks and if any of these are deemed to be significant they
are categorised, rated and added to the risk matrix for closer monitoring.
The Board considers that a number of contingent risks stemming from the
Covid-19 pandemic may continue to linger, which may impact the operation of
the Company. These include investment risks surrounding the companies in the
portfolio such as employee absence, reduced demand, reduced turnover and
supply chain breakdowns. In addition, the Russian military offensive against
Ukraine has resulted in heightened security and cyber threats across the globe
as well as market disruption and heightened geo-political uncertainty. Whilst
the Company has no holdings in Ukraine or Russia, these contingent and
emerging risks from the conflict may have a global impact for some time and
may affect the portfolio in the form of higher energy prices as well as
increased volatility. The Investment Manager will continue to review carefully
the composition of the Company's portfolio and to be pro-active in taking
investment decisions where necessary.
In all other respects, the Company's principal risks and uncertainties have
not changed materially since the date of this Annual Report and are not
expected to change materially for the current financial year.
Risk Management Mitigating Action
Investment strategy and objectives - the setting of an unattractive strategic The Board keeps the investment objective and policy as well as the level of
proposition to the market and the failure to adapt to changes in investor discount and/or premium at which the Company's Ordinary shares trade under
demand may lead to poor performance, the Company becoming unattractive to review. In particular, there are periodic strategy discussions where the Board
investors, a decreased demand for shares and a widening discount. reviews the Investment Manager's investment processes, analyses the work of
the Manager's Promotional and Investor Relations teams and receives reports on
the market from the Broker. In addition, the Board is updated at each Board
meeting on the make-up of and any movements in the shareholder register.
Investment portfolio, investment management - investing outside of the The Board sets, and monitors, its investment restrictions and guidelines, and
investment restrictions and guidelines set by the Board could result in poor receives regular reports which include performance reporting on the
performance and an inability to meet the Company's objectives or a regulatory implementation of the investment policy, the investment process and
breach. application of the Board guidelines. The Investment Manager is represented at
all Board meetings.
Financial obligations - the ability of the Company to meet its financial The Board sets a gearing limit and receives regular updates on the actual
obligations, or increasing the level of gearing, could result in the Company gearing levels the Company has reached from the Investment Manager together
becoming over-geared or unable to take advantage of potential opportunities with the assets and liabilities of the Company and reviews these at each Board
and result in a loss of value to the Company's Ordinary shares. meeting.
Financial - the financial risks associated with the portfolio could result in The financial risks associated with the Company include market risk, liquidity
losses to the Company. risk and credit risk, all of which are mitigated in conjunction with the
Investment Manager. Further details of the steps taken to mitigate the
financial risks associated with the portfolio are set out in note 18 to the
financial statements.
Regulatory - failure to comply with relevant regulation (including Jersey The Board relies upon the abrdn Group to ensure the Company's compliance with
Company Law and Regulations, the Financial Services and Markets Act, The applicable law and regulations and from time to time employs external advisers
Packaged Retail and Insurance-based Investment Products (PRIIPS) Regulation, to advise on specific concerns. The Board also reviews the Manager's
the Alternative Investment Fund Managers Directive, Accounting Standards, the compliance manual and compliance monitoring plan.
UK Corporation Tax Act 2010 and the FCA's Listing Rules, Disclosure Guidance
and Transparency Rules and Prospectus Rules) may have an impact on the
Company.
Operational - the Company is dependent on third parties for the provision of The Board monitors operational risk and as such receives internal controls and
all systems and services (in particular, those of the abrdn Group) and any risk management reports from the Investment Manager at each Board meeting. It
control failures and gaps in these systems and services could result in a loss also receives assurances from all its significant service providers, as well
or damage to the Company. as back to back assurance from the Manager at least annually. Further details
of the internal controls which are in place are set out in the Directors'
Report.
Income and dividend risk - there is a risk that the portfolio could fail to The Board monitors this risk through the review of income forecasts, provided
generate sufficient income to meet the level of the annual dividend, thereby by the Investment Manager, at each Board meeting.
drawing upon, rather than replenishing, its revenue and/or capital reserves.
Promoting the Company
The Board recognises the importance of communicating the long-term attractions
of the Company to prospective investors both for improving liquidity and
enhancing the value and rating of the Company's Ordinary shares. The Board
believes an effective way to achieve this is through subscription to and
participation in the promotional programme run by the abrdn Group on behalf of
a number of investment companies under its management. The Company also
supports the abrdn investor relations programme which involves regional
roadshows and promotional and public relations campaigns. The purpose of these
initiatives is both to communicate effectively with existing shareholders and
to gain new shareholders with the aim of improving liquidity and enhancing the
value and rating of the Company's shares. The Company's financial contribution
to the programmes is matched by the Manager. abrdn's closed end fund sales and
promotional teams report quarterly to the Board, giving analysis of the
promotional activities as well as updates on the shareholder register and any
changes in the make-up of that register. The Company, through the Manager, has
also commissioned independent paid-for research which has been undertaken by
Edison Investment Research Limited and a copy of the latest research is
available for download from the Company's website.
Board Diversity
The Board recognises the importance of having a range of skilled, experienced
individuals with the right knowledge represented on the Board in order to
allow it to fulfil its obligations. The Board also recognises the benefits,
and is supportive of, the principle of diversity in its recruitment of new
Board members, including diversity of thought, location and background. The
Board will not display any bias for age, gender, race, sexual orientation,
religion, ethnic or national origins, or disability in considering the
appointment of its Directors. At 31 December 2022, the Company did not have
any employees and there were four male Directors and two female Directors on
the Board. There are two Directors based in Singapore, two Directors based in
Jersey and two Directors based in the UK.
Environmental, Social and Human Rights Issues
The Company has no employees as management of the assets is delegated to the
Manager and sub-delegated to the Investment Manager. There are therefore no
disclosures to be made in respect of employees.
Due to the nature of the Company's business, being a Company that does not
offer goods and services to customers, the Board considers that it is not
within the scope of the UK's Modern Slavery Act 2015 because it has no
turnover. The Company, therefore, is not required to make a slavery and human
trafficking statement.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from the operations of
its business, nor does it have direct responsibility for any other emissions
producing sources.
Under Listing Rule 15.4.29(R), the Company, as a closed ended investment
company, is exempt from complying with the Task Force on Climate
Change-related financial disclosures.
Socially Responsible Investment Policy
The Company supports the UK's Stewardship Code, and seeks to play its role in
supporting good stewardship of the companies in which it invests. While the
delivery of stewardship activities has been delegated to the Manager, the
Board acknowledges its role in setting the tone for the effective delivery of
stewardship on the Company's behalf.
Viability Statement
The Company does not have a formal fixed period strategic plan but the Board
formally considers risks and strategy at least annually. The Board considers
the Company, with no fixed life, to be a long term investment vehicle, but for
the purposes of this viability statement has decided that a period of three
years is an appropriate period over which to report. The Board considers that
this period reflects a balance between looking out over a long term horizon
and the inherent uncertainties of looking out further than three years. In
assessing the viability of the Company over the review period the Directors
have focused upon the following factors:
- The principal risks detailed in the Strategic Report;
- The ongoing relevance of the Company's investment objective in the
current environment;
- The demand for the Company's shares evidenced by the historical level
of premium and/or discount;
- The level of income generated by the Company;
- Current market conditions caused by the global impact of Covid-19 and
the conflict in Ukraine;
- The liquidity of the Company's portfolio; and,
- The flexibility and certainty provided by the £40 million revolving
credit facility and £10 million fixed term loan which do not expire until
March 2024.
Accordingly, taking into account the Company's current position, the fact that
its investments are mostly liquid and the potential impact of its principal
risks and uncertainties, the Directors have a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they
fall due for a period of three years from the date of this Report. In making
its assessment, the Board is also aware that there are other matters that
could have an impact on the Company's prospects or viability in the future,
including the long-term impact of the war in Ukraine, significant stock market
volatility, and changes in regulation or investor sentiment.
Future
Many of the non-performance related trends likely to affect the Company in the
future are common across all closed- end investment companies, such as the
attractiveness of investment companies as investment vehicles, the increased
focus on ESG factors when making investment decisions, the impact of
regulatory changes and the effects of changes to the pensions and savings
market in the UK in recent years.These factors need to be viewed alongside the
outlook for the Company, both generally and specifically, in relation to the
portfolio. The Board's view on the general outlook for the Company can be
found in the Chairman's Statement whilst the Investment Manager's views on the
outlook for the portfolio are included in its statement.
Ian Cadby
Chairman
4 April 2023
1st Floor, Sir Walter Raleigh House
48 - 50 Esplanade
St Helier
Jersey JE2 3QB
DIVIDENDS AND TEN YEAR FINANCIAL RECORD
Dividends
Rate Ex-dividend date Record date Payment date
First interim 2022 2.30p 21 April 2022 22 April 2022 23 May 2022
Second interim 2022 2.30p 28 July 2022 29 July 2022 22 August 2022
Third interim 2022 2.30p 27 October 2022 28 October 2022 18 November 2022
Fourth interim 2022 3.10p 19 January 2023 20 January 2023 17 February 2023
2022 10.00p
First interim 2021 2.25p 22 April 2021 23 April 2021 21 May 2021
Second interim 2021 2.25p 29 July 2021 30 July 2021 20 August 2021
Third interim 2021 2.25p 21 October 2021 22 October 2021 18 November 2021
Fourth interim 2021 2.75p 20 January 2022 21 January 2022 17 February 2022
2021 9.50p
Ten Year Financial Record
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Total revenue (£'000) 18,736 19,333 21,216 20,947 21,758 21,056 20,996 16,942 20,198 21,841
Per Ordinary share (p)
Revenue return 8.23 8.24 9.11 9.15 9.58 9.25 9.42 7.41 8.95 10.23
Total return (6.69) 14.17 (18.86) 49.12 33.14 (13.17) 22.29 27.10 25.88 (10.01)
Dividends payable 7.90 8.00 8.50 8.75 9.00 9.15 9.25 9.30 9.50 10.00
Net asset value per Ordinary share (p)
191.56 197.84 170.58 211.82 235.63 213.96 227.15 245.40 262.76 243.44
Share price per Ordinary share (p)
195.00 199.88 159.00 194.25 218.00 195.75 214.00 228.50 231.00 215.00
Equity shareholders' funds (£'000)
371,117 384,868 329,432 396,028 431,869 382,199 403,403 431,476 450,790 413,447
LIST OF INVESTMENTS
As at 31 December 2022
Valuation Total Valuation
2022 assets(A) 2021(B)
Company Country £'000 % £'000
Taiwan Semiconductor Manufacturing Company Taiwan 26,538 5.8 39,135
Samsung Electronics (Pref) South Korea 21,308 4.7 36,025
DBS Group Singapore 19,925 4.4 16,951
BHP Group Australia 18,860 4.1 14,155
Oversea-Chinese Banking Corporation Singapore 14,722 3.2 16,699
Venture Corporation Singapore 14,555 3.2 15,056
China Resources Land China 11,804 2.6 9,629
United Overseas Bank Singapore 11,688 2.6 8,165
Rio Tinto(C) Australia 11,480 2.5 9,197
LG Chem (Pref) South Korea 11,477 2.5 8,821
Top ten investments 162,357 35.6
AIA Group Hong Kong 10,789 2.4 7,638
Taiwan Mobile Taiwan 10,126 2.2 10,561
Power Grid Corp of India India 9,803 2.2 10,021
National Australia Bank Australia 9,073 2.0 4,411
Spark New Zealand New Zealand 8,705 1.9 7,886
Keppel Infrastructure Trust Singapore 8,534 1.9 5,026
Hon Hai Precision Industry Taiwan 8,441 1.9 8,670
Commonwealth Bank of Australia Australia 8,356 1.8 8,923
Tisco Financial Group Foreign Thailand 8,064 1.8 8,835
Charter Hall Long Wale REIT Australia 8,035 1.7 8,598
Top twenty investments 252,283 55.4
Singapore Telecommunications Singapore 7,926 1.7 4,670
Region RE Australia 7,874 1.7 7,991
Momo.com Inc Taiwan 7,242 1.6 15,095
Infosys India 6,715 1.5 12,594
Centuria Industries REIT Australia 6,702 1.5 8,238
China Merchants Bank 'A' China 6,692 1.5 7,868
Hang Lung Properties Hong Kong 6,685 1.5 4,723
Auckland International Airport New Zealand 6,492 1.4 7,085
Hong Kong Exchanges & Clearing Hong Kong 6,461 1.4 5,606
Bank Rakyat Indonesia 6,236 1.3 5,031
Top thirty investments 321,308 70.5
Capitaland Investment Singapore 6,040 1.3 4,931
Singapore Technologies Engineering Singapore 5,923 1.3 5,858
ASX Australia 5,898 1.3 7,712
Hana Microelectronics (Foreign) Thailand 5,776 1.3 9,139
China Vanke (H shares) China 5,727 1.2 3,432
Siam Cement (D) Thailand 5,696 1.2 5,920
SAIC Motor 'A' China 5,599 1.2 7,745
Okinawa Cellular Telephone Japan 5,308 1.2 4,741
Accton Technology Taiwan 5,182 1.1 5,669
Capitaland India Trust Singapore 5,006 1.1 4,835
Top forty investments 377,463 82.7
Sunonwealth Electric Machine Taiwan 4,967 1.1 5,090
NZX New Zealand 4,871 1.1 6,093
Tata Consultancy Services India 4,550 1.0 7,794
Kasikornbank Bank PCL (Foreign) Thailand 4,529 1.0 -
Midea Group 'A' China 4,187 0.9 5,765
Land & Houses Foreign Thailand 4,166 0.9 3,410
Lotus's Retail Growth Freehold And Leasehold Property Fund (Foreign) Thailand 4,142 0.9 4,571
GlobalWafers Taiwan 4,024 0.9 9,834
Dah Sing Financial Holding Hong Kong 3,755 0.9 -
ICICI Bank E India 3,596 0.8 3,761
Top fifty investments 420,250 92.2
KMC Kui Meng Taiwan 3,514 0.8 4,879
Convenience Retail Asia Hong Kong 3,425 0.8 2,779
Medibank Private Australia 3,418 0.8 3,695
Amada Co Japan 3,344 0.7 3,752
Macquarie Group Australia 3,271 0.7 2,125
MediaTek Taiwan 2,789 0.6 -
Digital Core REIT Singapore 2,590 0.6 4,851
AEM Holding Singapore 2,120 0.5 -
China Resources Gas China 1,975 0.4 2,645
Taiwan Union Technology Taiwan 1,627 0.3 -
Top sixty investments 448,323 98.4
G3 Exploration(E) China - - -
Total value of investments 448,323 98.4
Net current assets(F) 7.215 1.6
Total assetsA 455,538 100.0
(A) Net assets excluding borrowings.
(B) Purchases and/or sales effected during the year may result in 2022 and
2021 values not being directly comparable.
(C) Incorporated in and listing held in United Kingdom.
(D) Holding includes investment in common (£3,808,000) and non-voting
depositary receipt (£1,888,000) lines.
(E) Corporate bonds.
(F) Excludes bank loans of £40,967,000
DIRECTORS' REPORT (EXTRACT)
Introduction
The Directors present their Report and the audited financial statements for
the year ended 31 December 2022.
Results and Dividends
The financial statements for the year ended 31 December 2022 are contained
below. The Company's dividend policy is to pay interim dividends on a
quarterly basis and for the year to 31 December 2022 dividends were paid on 23
May, 22 August and 18 November 2022 and 17 February 2023. As at 31 December
2022 the Company's revenue reserves (adjusted for the payment of the fourth
interim dividend) amounted to £7.3 million (approximately 4.3p per Ordinary
share).
Status
The Company is registered with limited liability in Jersey as a closed-end
investment company under the Companies (Jersey) Law 1991 with registered
number 91671 and regulated as an Alternative Investment Fund by the Jersey
Financial Services Commission. In addition, the Company constitutes and is
regulated as a collective investment fund under the Collective Investment
Funds (Jersey) Law 1988 and is an Alternative Investment Fund (within the
meaning of Regulation 3 of the Alternative Investment Fund Regulations). The
Company has no employees and makes no political donations. The Ordinary shares
are admitted to the Official List in the premium segment and are traded on the
London Stock Exchange's Main Market.
With effect from 1 January 2022 the Company applied to HM Revenue &
Customs to become an investment trust subject to the Company continuing to
meet the relevant eligibility conditions of Section 1158 of the Corporation
Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory
Instrument 2011/2999 for all financial years commencing on or after 1 January
2022. The Directors are of the opinion that the Company has conducted its
affairs for the period from 1 January 2022 so as to enable it to comply with
the ongoing requirements for investment trust status.
The Company is a member of the Association of Investment Companies ("AIC").
Individual Savings Accounts
The Company has conducted its affairs so as to satisfy the requirements as a
qualifying security for Individual Savings Accounts. The Directors intend that
the Company will continue to conduct its affairs in this manner.
Capital Structure, Issuance and Buybacks
The Company's capital structure is summarised in note 15 to the financial
statements. At 31 December 2022, there were 169,832,401 fully paid Ordinary
shares of no par value (2021 - 171,558,896) Ordinary shares in issue. At the
year end there were 25,100,988 Ordinary shares held in treasury (2021 -
23,374,493).
During the year 1,726,495 Ordinary shares were purchased in the market for
treasury (2021 - 4,265,587) and no Ordinary shares were issued or sold from
treasury.
Subsequent to the year end 499,669 Ordinary shares have been purchased in the
market at a discount for treasury.
Voting Rights
Each Ordinary share holds one voting right and shareholders are entitled to
vote on all resolutions which are proposed at general meetings of the Company.
The Ordinary shares, excluding treasury shares, carry a right to receive
dividends. On a winding up or other return of capital, after meeting the
liabilities of the Company, the surplus assets will be paid to Ordinary
shareholders in proportion to their shareholdings. There are no restrictions
on the transfer of Ordinary shares in the Company other than certain
restrictions which may be applied from time to time by law.
Borrowings
The Company has a three-year £10 million term facility and a £40 million
revolving credit facility with Bank of Nova Scotia, London Branch on an
unsecured basis, both maturing in March 2024. £10 million has been drawn down
under the term facility and fixed for three years at an all-in rate of 1.53%.
Under the revolving credit facility, HKD 73.5 million, US$ 8.85 million and
£15.8 million is currently drawn at the prevailing Sterling Overnight Index
Average (SONIA) plus the margin of 1.2%. Under the terms of the revolving
credit facility, the Company also has the option to increase the level of the
commitment from £40 million to £60 million at any time, subject to the
identification by the Investment Manager of suitable investment opportunities
and the lender's credit approval.
Management Arrangements
abrdn Capital International Limited ("aCIL") is the Company's Manager and
Company Secretary. aCIL is a wholly owned subsidiary of abrdn plc.
The investment management of the Company is delegated from aCIL to abrdn Asia
Limited.
Management Fee
Under the terms of the management agreement dated 21 March 2017, management
services are provided by aCIL.
Further details are provided in note 5 to the financial statements. In 2021,
the Directors negotiated a new, lower, level of management fee with the
Manager and with effect from
1 January 2022 the management fee has been calculated on the following tiered
basis:
i. Average Value up to £350 million - 0.8% per annum; and
ii. Average Value in excess of £350 million - 0.6% per annum.
iii. The management fee is calculated and accrued on a monthly basis
(being 1/12th of the value resulting from the sum of (i) plus (ii) above) and
is payable quarterly in arrears.
Termination of the management agreement is subject to six months' notice.
The Directors review the terms of the management agreement on a regular basis
and have confirmed that, due to the investment skills, experience and
commitment of the Manager, in their opinion the continuing appointment of aCIL
with the delegation arrangements to the Investment Manager, on the terms
agreed, is in the interests of shareholders as a whole.
Risk Management
Details of the financial risk management policies and objectives relative to
the use of financial instruments by the Company are set out in note 18 to the
financial statements.
Substantial Interests
The Board has been advised that the following shareholders owned 3% or more of
the issued Ordinary share capital of the Company at 31 December 2022:
Shareholder No of Shares Held %held
1607 Capital Partners 18,520,986 10.9
Rathbones 15,679,419 9.2
Hargreaves Lansdown (A) 13,035,528 7.7
Interactive Investor (A) 12,001,513 7.1
City of London Inv. Management 8,981,655 5.3
abrdn Retail Plans (A) 8,492,715 5.0
Allspring Global Investors 7,129,953 4.2
RBC Brewin Dolphin 6,773,357 4.0
Charles Stanley 6,293,472 3.7
AJ Bell (A) 5,247,986 3.1
(A) Non-beneficial interests
There have been no changes notified in respect of these holdings in the period
from 31 December 2022 to 4 April 2023.
Directors
The Board currently consists of six non-executive Directors, Robert Kirkby,
Mark Florance, Ian Cadby, Nicky McCabe, Krystyna Nowak and Hugh Young who each
held office throughout the year.
Governance
The names of each of the six current Directors are disclosed above. As
explained in more detail in the Chairman's Statement, Mr Young, who was
appointed to the Board as a non-independent Director at the launch of the
Company in 2005, will retire at the Annual General Meeting ("AGM") and will
not seek re-election. In accordance with the AIC's Code of Corporate
Governance, which recommends that all Directors should be subject to annual
re-election by shareholders, all the other members of the Board will retire at
the AGM and will offer themselves for re-election.
The Board considers that there is a balance of skills and experience within
the Board relevant to the leadership and direction of the Company and that all
the Directors contribute effectively. The Board has reviewed each of the
proposed re-elections and concluded that each of the Directors has the
requisite high level and range of business and financial experience and
recommends their re-election at the forthcoming AGM.
In common with most investment companies, the Company has no employees.
Directors' & Officers' liability insurance cover has been maintained
throughout the year at the expense of the Company.
Policy on Tenure
Directors are not currently required to serve on the Board for a limited
period of time only. However, the Board's intention is to follow best practice
in this area and for the independent Directors, including the Chairman, to
serve for up to a maximum of nine years on the Board.
Corporate Governance
The Company is committed to high standards of corporate governance. The Board
is accountable to the Company's shareholders for good governance and this
statement describes how the Company has applied the principles identified in
the UK Corporate Governance Code as published in July 2018 (the "UK Code"),
which is available on the Financial Reporting Council's (the "FRC") website:
frc.org.uk.
The Board has also considered the principles and provisions of the AIC Code of
Corporate Governance as published in February 2019 (the "AIC Code"). The AIC
Code addresses the principles and provisions set out in the UK Code, as well
as setting out additional provisions on issues that are of specific relevance
to the Company. The AIC Code is available on the AIC's website: theaic.co.uk.
The Board considers that reporting against the principles and provisions of
the AIC Code, which has been endorsed by the FRC, provides more relevant
information to shareholders.
The Board confirms that, during the year, the Company complied with the
principles and provisions of the AIC Code and the relevant provisions of the
UK Code, except as set out below.
The UK Code includes provisions relating to:
- interaction with the workforce (provisions 2, 5 and 6);
- the role and responsibility of the chief executive (provisions 9
and 14);
- previous experience of the chairman of a remuneration committee
(provision 32); and
- executive directors' remuneration (provisions 33 and 36 to 40).
The Board considers that these provisions are not relevant to the position of
the Company, being an externally managed investment company. In particular,
all of the Company's day-to-day management and administrative functions are
outsourced to third parties. As a result, the Company has no executive
directors, employees or internal operations. The Company has therefore not
reported further in respect of these provisions.
Full details of the Company's compliance with the AIC Code of Corporate
Governance can be found on its website.
Directors attended the following scheduled Board and Committee meetings during
the year ended 31 December 2022 (with their eligibility to attend the relevant
meeting in brackets):
Board Audit MEC Nom
Total Meetings 4 2 1 1
I Cadby (A) 4 (4) 2 (2) 1 (1) 1 (1)
M Florance 4 (4) 2 (2) 1 (1) 1 (1)
R Kirkby 4 (4) 2 (2) 1 (1) 1 (1)
N McCabe 4 (4) 2 (2) 1 (1) 1 (1)
K Nowak 4 (4) 2 (2) 1 (1) 1 (1)
H Young (B) 3 (4) n/a n/a - (1)
(A) Mr Cadby is not a member of the Audit Committee but attended both meetings
by invitation.
(B) Mr Young is not a member of the Audit or Management Engagement Committees.
In addition to the above meetings there have been a number of ad hoc Board
Meetings to review and approve dividends and other operational matters.
The Board has a schedule of matters reserved to it for decision and the
requirement for Board approval on these matters is communicated directly to
the senior staff of the Manager. Such matters include strategy, gearing,
treasury and dividend policy. Full and timely information is provided to the
Board to enable the Directors to function effectively and to discharge their
responsibilities. The Board also reviews the financial statements, performance
and revenue budgets.
The Role of the Chairman and Senior Independent Director
The Chairman is responsible for providing effective leadership to the Board,
by setting the tone of the Company, demonstrating objective judgement and
promoting a culture of openness and debate. The Chairman facilitates the
effective contribution, and encourages active engagement, by each Director. In
conjunction with the Company Secretary, the Chairman ensures that Directors
receive accurate, timely and clear information to assist them with effective
decision-making. The Chairman leads the evaluation of the Board and individual
Directors, and acts upon the results of the evaluation process by recognising
strengths and addressing any weaknesses. The Chairman also engages with major
shareholders and ensures that all Directors understand shareholder views.
The Senior Independent Director acts as a sounding board for the Chairman and
acts as an intermediary for other Directors, when necessary. Working closely
with the Nomination and Remuneration Committee, the Senior Independent
Director takes responsibility for an orderly succession process for the
Chairman, and leads the annual appraisal of the Chairman's performance. The
Senior Independent Director is also available to shareholders to discuss any
concerns they may have.
Management of Conflicts of Interests
The Board has a procedure in place to deal with a situation where a Director
has a conflict of interest. As part of this process, the Directors are
required to disclose other positions held and all other conflict situations
that may need to be authorised either in relation to the Director concerned or
his or her connected persons. The Board considers each Director's situation
and decides whether to approve any conflict, taking into consideration what is
in the best interests of the Company and whether the Director's ability to act
in accordance with his or her wider duties is affected. Each Director is
required to notify the Company Secretary of any potential or actual conflict
situations that will need authorising by the Board. Authorisations given by
the Board are reviewed at each Board meeting.
No Director has a service contract with the Company although Directors are
issued with letters of appointment upon appointment. The Directors' interests
in contractual arrangements with the Company are as shown in note 20 to the
financial statements. No other Directors had any interest in contracts with
the Company during the period or subsequently.
The Company has a policy of conducting its business in an honest and ethical
manner. The Company takes a zero tolerance approach to bribery and corruption
and has procedures in place that are proportionate to the Company's
circumstances to prevent them. The abrdn Group also adopts a group-wide zero
tolerance approach and has its own detailed policy and procedures in place to
prevent bribery and corruption. Copies of the abrdn Group's anti-bribery and
corruption policies are available on its website: abrdn.com.
Going Concern
The Directors have undertaken a robust review of the Company's viability and
ability to continue as a going concern. The Company's assets consist primarily
of a diverse portfolio of listed equity shares which in most circumstances are
realisable within a very short timescale.
In assessing the Company's ability to continue as a going concern, the Board
has also taken into account progress made in relation to appointing a new
administrator in Jersey (see Chairman's Statement).
The Directors have reviewed forecasts detailing revenue and liabilities, have
set limits for borrowing and reviewed compliance with banking covenants,
including the headroom available. Having taken these factors into account, the
Directors believe that the Company has adequate financial resources
to continue its operational existence for the foreseeable future and at least
12 months from the date of this Annual Report.
Accordingly, the Directors continue to adopt the going concern basis in
preparing these financial statements.
Accountability and Audit
Each Director confirms that, so far as he or she is aware, there is no
relevant audit information of which the Company's Auditor is unaware, and he
or she has taken all the steps that they ought to have taken as a Director in
order to make themselves aware of any relevant audit information and to
establish that the Company's Auditor is aware of that information.
Independent Auditor
Shareholders approved the re-appointment of KPMG Channel Islands Limited as
independent Auditor at the AGM held on 11 May 2022 and a resolution to
re-appoint KPMG Channel Islands Limited as the Company's Auditor and to
authorise the Directors to fix the Auditor's remuneration will be put to
shareholders at the AGM to be held on 10 May 2023.
Principal Risks and Internal Control
The Principal Risks and Uncertainties facing the Company are detailed above.
The Board of Directors is ultimately responsible for the Company's system of
internal control and for reviewing its effectiveness.
Following the Financial Reporting Council's publication of "Guidance on Risk
Management, Internal Controls and Related Financial and Business Reporting"
(the "FRC Guidance"), the Directors confirm that there is an ongoing process
for identifying, evaluating and managing the principal risks faced by the
Company. This process has been in place for the full year under review and up
to the date of approval of the financial statements, and this process is
regularly reviewed by the Board and accords with the FRC Guidance.
The design, implementation and maintenance of controls and procedures to
safeguard the assets of the Company and to manage its affairs properly extends
to operational and compliance controls and risk management. The Board has
prepared its own risk register which identifies potential risks relating to
strategy, investment management, shareholders, marketing, gearing, regulatory
and financial obligations, third party service providers and the Board. The
Board considers the potential cause and possible impact of these risks as well
as reviewing the controls in place to mitigate these potential risks. A risk
is rated by having a likelihood and an impact rating and the residual risk is
plotted on a "heat map" and is reviewed regularly.
The Board has reviewed the effectiveness of the system of internal control
and, in particular, it has reviewed the process for identifying and evaluating
the principal risks faced by the Company and the policies and procedures by
which these risks are managed.
The Directors have delegated the investment management of the Company's assets
to the Manager which has, in turn, delegated the responsibility to the
Investment Manager within overall guidelines. This embraces implementation of
the system of internal control, including financial, operational and
compliance controls and risk management. Internal control systems are
monitored and supported by the Manager's internal audit function which
undertakes periodic examination of business processes, including compliance
with the terms of the management agreement, and ensures that recommendations
to improve controls are implemented.
Risks are identified and documented through a risk management framework by
each function within the Manager's activities. Risk is considered in the
context of the FRC Guidance and includes financial, regulatory, market,
operational and reputational risk. This helps the internal audit risk
assessment model identify those functions for review. Any relevant weaknesses
identified are reported to the Board and timetables are agreed for
implementing improvements to systems. The implementation of any remedial
action required is monitored and feedback provided to the Board.
The key components designed to provide effective internal control for the year
under review and up to the date of this Report are outlined below:
- the Manager prepares forecasts and management accounts which allow
the Board to assess the Company's activities and review its investment
performance;
- the Board and Manager have agreed clearly defined investment
criteria;
- there are specified levels of authority and exposure limits. Reports
on these issues, including performance statistics and investment valuations,
are regularly submitted to the Board. The Investment Manager's investment
process and financial analysis of the companies concerned include detailed
appraisal and due diligence;
- as a matter of course the compliance department of aCIL continually
reviews the Investment Manager's operations;
- written agreements are in place which specifically define the roles
and responsibilities of the Manager, Investment Manager and other third-party
service providers and the Audit Committee reviews, where relevant, ISAE3402
Reports, a global assurance standard for reporting on internal controls for
service organisations. The Board has reviewed the exceptions arising from the
abrdn Group's Investment Vector ISAE3402 for the year to 30 September 2022,
none of which were judged to be of direct relevance to the Company;
- the Board has considered the need for an internal audit function
but, because of the compliance and internal control systems in place within
the abrdn Group, has decided to place reliance on the abrdn Group's systems
and internal audit procedures; and
- twice a year, at its meetings, the Audit Committee carries out an
assessment of internal controls by considering documentation from the Manager,
including its internal audit and compliance functions and taking account of
events since the relevant period end.
In addition, the Manager and Investment Manager ensure that clearly documented
contractual arrangements exist in respect of any activities that have been
delegated to external professional organisations. The Board meets periodically
with representatives from the Custodian, BNP Paribas Securities
Services, London Branch, and receives control reports covering its activities.
Representatives from the Manager's internal audit department report six
monthly to the Audit Committee of the Company and have direct access to the
Directors at any time.
The internal control systems are designed to meet the Company's particular
needs and the risks to which it is exposed. Accordingly, the internal control
systems are designed to manage rather than eliminate the risk of failure to
achieve business objectives and, by their nature, can provide reasonable but
not absolute assurance against material misstatement or loss.
The UK Stewardship Code and Proxy Voting
Responsibility for actively monitoring the activities of portfolio companies
has been delegated by the Board to the Manager which has sub-delegated that
authority to the Investment Manager.
abrdn plc is a tier 1 signatory of the UK Stewardship Code which aims to
enhance the quality of engagement by investors with investee companies in
order to improve their socially responsible performance and the long term
investment return to shareholders.
Relations with Shareholders
The Directors place a great deal of importance on communication with
shareholders. The Chairman welcomes feedback from all shareholders and meets
periodically with the largest shareholders to discuss the Company. The Annual
Report and financial statements are available on the Company's website and are
widely distributed to other parties who have an interest in the Company's
performance. Shareholders and investors may obtain up to date information on
the Company through the Manager's freephone information service and the
Company's website.
The Notice of the Annual General Meeting included within the Annual Report and
financial statements is ordinarily sent out at least 20 working days in
advance of the meeting. All shareholders have the opportunity to put questions
to the Board or Manager, either formally at the Company's Annual General
Meeting or informally following the meeting. As explained in the Chairman's
Statement, the Company will hold an online shareholder presentation in advance
of the Annual General Meeting this year, which will include an interactive
question and answer session.
The Company Secretary is available to answer general shareholder queries at
any time throughout the year. The Directors are keen to encourage dialogue
with shareholders and the Chairman welcomes direct contact from shareholders.
The Board's policy is to communicate directly with shareholders and their
representative bodies without the involvement of the management group (either
the Company Secretary, the Manager or the Investment Manager) in situations
where direct communication is required and usually a representative from the
Board meets with major shareholders on an annual basis in order to gauge their
views.
Alternative Investment Fund Managers Directive ("AIFMD")
In accordance with the Alternative Investment Funds (Jersey) Regulations 2012,
the Jersey Financial Services Commission ("JFSC") has granted its permission
for the Company to be marketed within any EU Member State or other EU State to
which the AIFMD applies. The Company's registration certificate with the JFSC
mandates that the Company "must comply with the applicable sections of the
Codes of Practice for Alternative Investment Funds and AIF Services Business".
aCIL, as the Company's non-EEA alternative investment fund manager, has
notified the UK Financial Conduct Authority in accordance with the
requirements of the UK National Private Placement Regime of its intention to
market the Company (as a non-EEA AIF under the AIFMD) in the UK.
In addition, in accordance with Article 23 of the AIFMD and Rule 3.2.2 of the
Financial Conduct Authority ("FCA") Fund Sourcebook, aCIL is required to make
available certain disclosures for potential investors in the Company. These
disclosures, in the form of a Pre-Investment Disclosure Document ("PIDD"), are
available on the Company's website.
Annual General Meeting
The AGM will be held at 10:30 a.m. on 10 May 2023 at Wallacespace
Spitalfields, 15-25 Artillery Lane, London E1 7HA.
Ian Cadby
Chairman
4 April 2023
1st Floor, Sir Walter Raleigh House
48 - 50 Esplanade
St Helier
Jersey JE2 3QB
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual 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 are required to prepare the financial
statements in accordance with International Financial Reporting Standards as
issued by the IASB and applicable law.
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, relevant and
reliable;
- state whether applicable 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 (Jersey) Law 1991. They are
responsible for such internal controls as they determine are 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.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company's website.
Legislation in the Jersey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
The Directors who hold office at the date of approval of this Director's
Report confirm that, so far as they are aware, there is no relevant audit
information of which the Company's Auditor is unaware, and that each Director
has taken all the steps he or she ought to have taken as a Director to make
himself or herself aware of any relevant audit information and to establish
that the Company's Auditor is aware of that information.
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 and Directors' Report includes a fair review of
the development and performance of the business and the position of the
Company, together with a description of the principal risks and uncertainties
that it faces.
The Directors consider the Annual Report and financial statements, 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.
Ian Cadby
Chairman
4 April 2023
1st Floor, Sir Walter Raleigh House
48 - 50 Esplanade
St Helier
Jersey JE2 3QB
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website, but not
the content of any information included on the website that has been prepared
or issued by third parties. Legislation in Jersey governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 2022 31 December 2021
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Investment income 4
Dividend income 21,423 - 21,423 19,869 - 19,869
Interest income 371 - 371 294 - 294
Stock lending income - - - 2 - 2
Traded option premiums 47 - 47 33 - 33
Total revenue 3 21,841 - 21,841 20,198 - 20,198
(Losses)/gains on investments held at fair value through profit or loss
11 - (29,033) (29,033) - 33,354 33,354
Net currency (losses)/gains - (3,204) (3,204) - (266) (266)
21,841 (32,237) (10,396) 20,198 33,088 53,286
Expenses
Investment management fee 5 (1,308) (1,962) (3,270) (1,411) (2,116) (3,527)
Other operating expenses 6 (939) - (939) (862) - (862)
Profit/(loss) before finance costs and tax 19,594 (34,199) (14,605) 17,925 30,972 48,897
Finance costs 7 (470) (704) (1,174) (238) (357) (595)
Profit/(loss) before tax 19,124 (34,903) (15,779) 17,687 30,615 48,302
Tax expense 2(d), 8 (1,695) 408 (1,287) (2,024) (967) (2,991)
Profit/(loss) for the year 17,429 (34,495) (17,066) 15,663 29,648 45,311
Earnings per Ordinary share (pence) 10 10.23 (20.24) (10.01) 8.95 16.93 25.88
The Company does not have any income or expense that is not included in
profit/(loss) for the year, and therefore the "Profit/(loss) for the year" is
also the "Total comprehensive income for the year".
All of the profit/(loss) and total comprehensive income is attributable to the
equity holders of abrdn Asian Income Fund Limited. There are no
non-controlling interests.
The total column of this statement represents the Statement of Comprehensive
Income of the Company, prepared in accordance with IFRS. The revenue and
capital columns are supplementary to this and are prepared under guidance
published by the Association of Investment Companies. All items in the above
statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.
BALANCE SHEET
As at As at
31 December 2021 31 December 2020
Notes £'000 £'000
Non-current assets
Investments held at fair value through profit or 448,323 497,370
loss
11
Current assets
Cash and cash equivalents 7,328 3,268
Other receivables 12 1,175 1,438
8,503 4,706
Creditors: amounts falling due within one year
Bank loans 13(a) (30,986) (36,788)
Other payables 13(b) (1,288) (2,917)
(32,274) (39,705)
Net current liabilities (23,771) (34,999)
Total assets less current liabilities 424,552 462,371
Creditors: amounts falling due after more than one year
Bank loans 13(a) (9,981) (9,965)
Deferred tax liability on Indian capital gains 13(c) (1,124) (1,616)
(11,105) (11,581)
Net assets 413,447 450,790
Stated capital and reserves
Stated capital 15 194,933 194,933
Capital redemption reserve 1,560 1,560
Capital reserve 16 204,414 242,727
Revenue reserve 12,540 11,570
Equity shareholders' funds 413,447 450,790
Net asset value per Ordinary share (pence) 17 243.44 262.76
The financial statements were approved by the Board of Directors and
authorised for issue on 4 April 2023 and were signed on its behalf by:
Ian Cadby
Chairman
The accompanying notes are an integral part of the financial statements
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Capital
Stated redemption Capital Revenue Retained
capital reserve reserve reserve earnings Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Opening balance 194,933 1,560 242,727 11,570 - 450,790
Buyback of Ordinary shares for treasury 15 - - (3,818) - - (3,818)
Loss for the year - - - - (17,066) (17,066)
Transferred from retained earnings to capital reserveA
- - (34,495) - 34,495 -
Transferred from retained earnings to revenue reserve
- - - 17,429 (17,429) -
Dividends paid 9 - - - (16,459) - (16,459)
Balance at 31 December 2022 194,933 1,560 204,414 12,540 - 413,447
For the year ended 31 December 2021
Capital redemption
Stated Capital Revenue Retained
capital reserve reserve reserve earnings Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Opening balance 194,933 1,560 222,751 12,232 - 431,476
Buyback of Ordinary shares for treasury 15 - - (9,672) - - (9,672)
Profit for the year - - - - 45,311 45,311
Transferred from retained earnings to capital reserveA
- - 29,648 - (29,648) -
Transferred from retained earnings to revenue reserve
- - - 15,663 (15,663) -
Dividends paid 9 - - - (16,325) - (16,325)
Balance at 31 December 2021 194,933 1,560 242,727 11,570 - 450,790
A Represents the capital profit/(loss) attributable to equity shareholders per
the Statement of Comprehensive Income.
The revenue reserve represents the amount of the Company's reserves
distributable by way of dividend.
The stated capital in accordance with Companies (Jersey) Law 1991 Article 39A
is £260,822,000 (2021 - £260,822,000). These amounts include proceeds
arising from the issue of shares by the Company but exclude the cost of shares
purchased for cancellation or treasury by the Company.
The accompanying notes are an integral part of the financial statements.
CASH FLOW STATEMENT
Year ended Year ended
31 December 2022 31 December 2021
Notes £'000 £'000
Cash flows from operating activities
Dividend income received 21,140 18,432
Interest income received 354 298
Derivative income received 47 33
Investment management fee paid (5,169) (3,148)
Other cash expenses (801) (860)
Net cash generated from operating activities before interest paid and tax 15,571 14,755
Interest paid (1,041) (557)
Overseas taxation paid (1,712) (2,009)
Net cash inflows from operating activities 12,818 12,189
Cash flows from investing activities
Purchases of investments (55,017) (98,164)
Sales of investments 75,625 98,324
Indian capital gains tax on sales (83) -
Net cash inflow from investing activities 20,525 160
Cash flows from financing activities
Purchase of own shares for (3,818) (9,672)
treasury
15
Dividends (16,459) (16,325)
paid
9
Loan arrangement expense paid - (49)
Drawdown of loans - 25,800
Repayment of loans (8,948) (14,900)
Net cash outflow from financing activities (29,225) (15,146)
Net increase/(decrease) cash and cash equivalents 4,118 (2,797)
Cash and cash equivalents at the start of the year 3,268 6,177
Effect of foreign exchange on cash and cash equivalents (58) (112)
Cash and cash equivalents at the end of the 7,328 3,268
year
2(f)
Non-cash transactions during the year comprised stock dividends of £616,000
(2021 - £1,373,000) (Note 4). The accompanying notes are an integral part of
the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. Principal activity
The Company is a closed-end investment company incorporated in Jersey, with
its Ordinary shares being listed on the London Stock Exchange. The Company's
principal activity is investing in securities in the Asia Pacific region.
2. Accounting policies
a) Basis of preparation. The financial statements have been
prepared in accordance with International Financial Reporting Standards
("IFRS"), as adopted by the International Accounting Standards Board ("IASB"),
and interpretations issued by the International Reporting Committee of the
IASB ("IFRIC").
The financial statements have also been prepared in accordance with the
Statement of Recommended Practice (SORP), 'Financial Statements of Investment
Trust Companies and Venture Capital Trusts' issued in July 2022 to the extent
they are consistent with IFRS.
The Company had net current liabilities at the year end. The Directors have
undertaken a robust review of the Company's viability (refer to statement on
page 24) and ability to continue as a going concern. The Company's assets
consist primarily of a diverse portfolio of listed equity shares which in most
circumstances are realisable within a very short timescale.
Since the end of the year, the Board has noted the announcement made by abrdn
plc ("abrdn") of the proposed sale of its discretionary fund management
business in Jersey, which currently provides a Jersey regulatory function to
the Company. The Board wishes to confirm that, notwithstanding this proposed
sale, the investment management of the Company's portfolio will continue to be
carried out by abrdn via its Singapore based Asian Equity team. The Board will
fulfil its own duty to review carefully any new Jersey regulatory arrangements
that abrdn proposes to put in place, to ensure that such arrangements remain
in the best interests of the Company's shareholders. In assessing the
Company's ability to continue as a going concern, the Board has taken into
account progress made in relation to appointing a new administrator in Jersey.
The Directors have reviewed forecasts detailing revenue and liabilities, have
set limits for borrowing and reviewed compliance with banking covenants,
including the headroom available. Having taken these factors into account, the
Directors believe that the Company has adequate financial resources to
continue its operational existence for the foreseeable future and at least 12
months from the date of this Annual Report. Accordingly, the Directors
continue to adopt the going concern basis in preparing these financial
statements.
Significant accounting judgements and estimates.
The preparation of financial statements in conformity with IFRS requires the
use of certain significant accounting judgements and estimates which requires
management to exercise its judgement in the process of applying the accounting
policies and are continually evaluated. These judgements include the
assessment of the Company's ability to continue as a going concern. One area
requiring significant judgement and assumption in the financial statements is
the determination of the fair value hierarchy classification of quoted bonds
which have been assessed as being Level 2 due to not being considered to trade
in active markets. In addition, significant judgement is required to determine
the fair value hierarchy classification of Thai securities held on foreign
markets whose pricing is based on the local market and have been assessed as
Level 1 as the local securities are considered to be identical assets in line
with IFRS 13 guidance. Another area of judgement includes the assessment of
whether special dividends should be allocated to revenue or capital based on
their individual merits. Examples of where special dividends are allocated to
capital include events such as the disposal of capital assets and capital
restructuring.
Furthermore, the Board of Directors has a policy to write down the value of
investments in the financial statements where there are concerns over
liquidity, credit worthiness, exit opportunities and the timing of any
potential receipts. The Directors believe there are no significant estimates
contained within the financial statements as all investments are valued at
quoted bid price and all other assets and liabilities are valued at amortised
cost.
The financial statements are prepared on a historical cost basis, except for
investments that have been measured at fair value through profit or loss
("FVTPL").
The accounting policies which follow set out those policies which apply in
preparing the financial statements for the year ended 31 December 2022.
The financial statements are presented in sterling and all values are rounded
to the nearest thousand (£'000) except when otherwise indicated.
New and amended accounting standards and interpretations.
There were no new and amended accounting standards and interpretations applied
to the financial statements of the Company during the year.
Future amendments to standards and interpretations.
At the date of authorisation of these financial statements, the following
amendments to Standards and Interpretations were assessed to be relevant and
are all effective for annual periods beginning on or after 1 January 2023:
Standards
IAS 1 Amendments Classification of Liabilities as Current or Non-Current (effective from 1
January 2023)
IAS 1 Amendments Disclosure of Accounting Policies (effective from 1 January 2023)
IAS 1 Amendments Non-current Liabilities with Covenants (effective from 1 January 2023)
IAS 8 Amendments Definition of Accounting Estimates (effective from 1 January 2023)
IAS 12 Amendments Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (effective from 1 January 2023)
The Company intends to adopt the Standards and Interpretations in the
reporting period when they become effective and the Board does not anticipate
that the adoption of these Standards and Interpretations in future periods
will materially impact the Company's financial results in the period of
initial application although there may be revised presentations to the
Financial Statements and additional disclosures.
b) Income. Dividend income receivable on equity shares is
recognised on the ex-dividend date. Dividend income on equity shares where no
ex-dividend date is quoted is brought into account when the Company's right to
receive payment is established. Where the Company has elected to receive
dividends in the form of additional shares rather than in cash, the amount of
the cash dividend foregone is recognised as income. Special dividends are an
area of significant accounting judgement and are credited to capital or
revenue according to their circumstances. Dividend income is presented gross
of any non-recoverable withholding taxes, which are disclosed separately in
the Statement of Comprehensive Income.
Interest is recognised on a time-proportionate basis using the effective
interest method. Interest income includes interest from cash and cash
equivalents. Interest from financial assets at fair value through profit or
loss includes interest from debt securities.
c) Expenses. All expenses, with the exception of interest
expenses, which are recognised using the effective interest method, are
accounted for on an accruals basis. Expenses are charged through the revenue
column of the Statement of Comprehensive Income except as follows:
- expenses which are incidental to the acquisition or disposal
of an investment are treated as capital and separately identified and
disclosed in note 11;
- expenses (including share issue costs) are treated as
capital where a connection with the maintenance or enhancement of the value of
the investments can be demonstrated; and
- the Company charges 60% of investment management fees and
finance costs to capital, in accordance with the Board's expected long term
return in the form of capital gains and income respectively from the
investment portfolio of the Company.
d) Taxation. With effect from 1 January 2022 the Company
migrated tax residency to the UK from Jersey and elected to join the UK's
investment trust regime.
The tax expense for year ended 31 December 2022 represents the sum of tax
currently payable and deferred tax. Any tax payable is based on the taxable
profit for the year. Taxable profit differs from net profit as reported in the
Statement of Comprehensive Income because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Company's liability for
current tax is calculated using tax rates that were applicable at the Balance
Sheet date. Profits arising in the Company for the year ended 31 December 2021
were subject to Jersey income tax at the rate of 0%.
Deferred tax is recognised in respect of all temporary differences at the
Balance Sheet date, where transactions or events that result in an obligation
to pay more tax in the future or right to pay less tax in the future have
occurred at the Balance Sheet date. This is subject to deferred tax assets
only being recognised if it is considered more likely than not that there will
be suitable profits from which the future reversal of the temporary
differences can be deducted. Deferred tax assets and liabilities are measured
at the rates applicable to the legal jurisdictions in which they arise, using
tax rates that are expected to apply at the date the deferred tax position is
unwound. Deferred tax is charged or credited in the Statement of Comprehensive
Income, except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in equity.
In some jurisdictions, investment income and capital gains are subject to
withholding tax deducted at the source of the income. The Company presents the
withholding tax separately from the gross investment income in the Statement
of Comprehensive Income.
e) Investments. The Company has adopted the classification and
measurement provisions of IFRS 9 'Financial Instruments'.
The Company classifies its investments based on their contractual cash flow
characteristics and the Company's business model for managing the assets. The
business model, which is the determining feature for debt instruments, is such
that the portfolio of investments is managed, and performance is evaluated, on
a fair value basis. The Manager is also compensated based on the fair value of
the Company's assets. Equity instruments are classified as FVTPL because cash
flows resulting from such instruments do not represent payments of principal
and interest on the principal outstanding, and therefore they fail the
contractual cash flows test. Consequently, all investments are measured at
FVTPL.
Purchases and sales of investments are recognised on a trade date basis.
Proceeds are measured at fair value, which is regarded as the proceeds of sale
less any transaction costs.
The fair value of the financial assets is based on their quoted bid price at
the reporting date, without deduction for any estimated future selling costs.
Changes in the value of investments held at fair value through profit or loss
and gains and losses on disposal are recognised in the Statement of
Comprehensive Income as "(Losses)/gains on investments held at fair value
through profit or loss" on an average cost basis. Also included within this
caption are transaction costs in relation to the purchase or sale of
investments, including the difference between the purchase price of an
investment and its bid price at the date of purchase.
f) Cash and cash equivalents. Cash comprises cash held at
banks. Cash equivalents are short-term highly liquid investments that are
readily convertible to known amounts of cash and that are subject to an
insignificant risk of changes in values.
For the purposes of the Cash Flow Statement, cash and cash equivalents
comprise cash at bank net of any outstanding bank overdrafts.
g) Other receivables. Financial assets previously classified
as loans and receivables are held to collect contractual cash flows and give
rise to cash flows representing solely payments of principal and interest. As
such they are measured at amortised cost. Other receivables do not carry any
interest, therefore they have not been assessed for any expected credit losses
over their lifetime due to their short-term nature.
h) Other payables. The Company has adopted the simplified
approach under IFRS9 which allows entities to recognise lifetime expected
losses on all these assets without the need to identify significant increases
in credit risk. Other payables are non interest bearing and are stated at
amortised cost.
i) Dividends payable. Interim dividends payable to Shareholders
are recognised in the financial statements in the period in which they are
declared and paid.
j) Nature and purpose of reserves
Capital redemption reserve. The capital redemption reserve arose when Ordinary
shares were redeemed, at which point an amount equal to £1 per share of the
Ordinary share capital was transferred from the Statement of Comprehensive
Income to the capital redemption reserve. Following a law amendment in 2008,
the Company is no longer required to make a transfer. Although the transfer
from the Statement of Comprehensive Income is no longer required, the amount
remaining in the capital redemption reserve is not distributable in accordance
with the undertaking provided by the Board in the launch Prospectus.
Capital reserve. This reserve reflects any gains or losses on investments
realised in the period along with any increases and decreases in the fair
value of investments held that have been recognised in the Statement of
Comprehensive Income. This reserve also reflects any gains realised when
Ordinary shares are issued at a premium to £1 per share and any losses
suffered on the redemption of Ordinary shares for cancellation at a value
higher than £1 per share.
When the Company purchases its Ordinary shares to be held in treasury, the
amount of the consideration paid, which includes directly attributable costs,
is recognised as a deduction from the capital reserve. Should these shares be
sold subsequently, the amount received is recognised in the capital reserve
and the resulting surplus or deficit on the transaction remains in the capital
reserve.
Revenue reserve. This reserve reflects all income and costs which are
recognised in the revenue column of the Statement of Comprehensive Income. The
revenue reserve is the principal reserve which is utilised to fund dividend
payments to shareholders.
k) Foreign currency. Monetary assets and liabilities
denominated in foreign currencies are converted into sterling at the rate of
exchange ruling at the reporting date. The financial statements are presented
in sterling, which is the Company's functional and presentation currency. The
Company's performance is evaluated and its liquidity is managed in sterling.
Therefore sterling is considered as the currency that most faithfully
represents the economic effects of the underlying transactions, events and
conditions. Transactions during the year involving foreign currencies are
converted at the rate of exchange ruling at the transaction date. Gains or
losses arising from a change in exchange rates subsequent to the date of a
transaction are included as a currency gain or loss in revenue or capital in
the Statement of Comprehensive Income, depending on whether the gain or loss
is of a revenue or capital nature.
l) Bank loans. The Company has adopted the classification and
measurement provisions of IFRS 9 'Financial Instruments'. Bank loans are
measured at amortised cost using the effective interest rate method.
Bank loans are stated at the amount of the net proceeds immediately after draw
down plus cumulative finance costs less cumulative payments. The finance cost
of bank loans is allocated to years over the term of the debt at a constant
rate on the carrying amount and charged 40% to revenue and 60% to capital to
reflect the Company's investment policy and prospective revenue and capital
growth.
m) Share capital. The Company's Ordinary shares are classified
as equity as the Company has full discretion on repurchasing the Ordinary
shares and on dividend distributions.
Issuance, acquisition and resale of Ordinary shares are accounted for as
equity transactions. Upon issuance of Ordinary shares, the consideration
received is included in equity.
Transaction costs incurred by the Company in acquiring or selling its own
equity instruments are accounted for as a deduction from equity to the extent
that they are incremental costs directly attributable to the equity
transaction that otherwise would have been avoided.
Own equity instruments which are acquired (treasury shares) are deducted from
equity and accounted for at amounts equal to the consideration paid, including
any directly attributable incremental costs.
No gain or loss is recognised in the Statement of Comprehensive Income on the
purchase, sale, issuance or cancellation of the Company's own instruments.
n) Traded options. The Company may enter into certain
derivative contracts (e.g. options) to gain exposure to the market. The option
contracts are classified as fair value through profit or loss and accounted
for as separate derivative contracts and are therefore shown in other assets
or other liabilities at their fair value i.e. market value. The premium
received on the open position is recognised over the life of the option in the
revenue column of the Statement of Comprehensive Income along with fair value
changes in the open position which occur due to the movement in underlying
securities. Losses realised on the exercise of the contracts are recorded in
the capital column of the Statement of Comprehensive Income as they arise.
Where the Company enters into derivative contracts to manage market risk,
gains or losses arising on such contracts are recorded in the capital column
of the Statement of Comprehensive Income.
3. Segmental information
The Company is organised into one main operating segment, which invests in
equity securities, debt instruments and derivatives. All of the Company's
activities are interrelated, and each activity is dependent on the others.
Accordingly, all significant operating decisions are based upon analysis of
the Company as one segment. The financial results from this segment are
equivalent to the financial statements of the Company as a whole.
The following table analyses the Company's operating income by each
geographical location. The basis for attributing the operating income is the
place of incorporation of the instrument's counterparty.
Year ended 31 December 2022 Year ended 31 December 2021
Asia Pacific region 20,571 17,431
United Kingdom 1,270 2,767
21,841 20,198
4. Investment income
Year ended 31 December 2022 Year ended 31 December 2021
Income from investments
Overseas dividend income 19,600 15,729
UK dividend income 1,207 2,767
Stock dividend income 616 1,373
21,423 19,869
Other income
Bond interest 308 294
Deposit interest 63 -
Stock lending income - 2
Traded option premiums 47 33
418 329
Total revenue 21,841 20,198
During the year, the Company was entitled to premiums totalling £47,000 (2021
- £33,000) in exchange for entering into option contracts. At the year end
there were no (2021 - nil) open positions. Losses realised on the exercise of
derivative transactions are disclosed in note
5. Investment management fee
Year ended 31 December 2022 Year ended 31 December 2021
Investment management fee 1,308 1,962 3,270 1,411 2,116 3,527
The Company has an agreement with abrdn Capital International Limited ("aCIL")
for the provision of management services. With the exception of stocklending
activities, the investment management services have been sub-delegated to
abrdn Asia Limited ("abrdn Asia"). Any stocklending activity has been
sub-delegated to abrdn Investments Limited.
The investment management fee is payable quarterly in arrears and with effect
from 1 January 2022 is based on an annual fee of 0.8% of the average net
assets of the previous six months up to £350 million and 0.6% per annum
thereafter. Prior to this, the annual management fee was charged at 0.85% on
the average net assets of the previous six months up to £350 million and
0.65% per annum thereafter. The balance due to aCIL at the year end was
£786,000 (2021 - £2,685,000). The investment management fees are charged 40%
to revenue and 60% to capital in line with the Board's expected long term
returns.
6. Other operating expenses
Year ended 31 December 2022 Year ended 31 December 2021
Directors' fees 164 166
Promotional activities(A) 206 206
Auditor's remuneration:
- statutory audit 52 40
- disbursements 1 -
Custody fees 143 178
Other 373 272
939 862
(A) Promotional activities in relation to the Company's participation in the
abrdn Investment Trust savings plans are provided by abrdn Investments
Limited. The total fees paid are based on an annual rate of £206,000 (2021 -
£206,000). An amount of £103,000 (2021 - £52,000) was payable to abrdn
Investments Limited at the year end.
No fees have been paid to the Company's Auditor during the period other than
those listed here.
7. Finance costs
2022 2021
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000 £'000
Interest on bank loans 464 694 1,158 232 349 581
Amortisation of loan arrangement expenses 6 10 16 6 8 14
470 704 1,174 238 357 595
Finance costs are charged 40% to revenue and 60% to capital as disclosed in
the accounting policies.
8. Taxation
a) Analysis of tax charge in the year
2022 2021
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000 £'000
Indian capital gains tax on sales - 34 34 - 45 45
Overseas withholding tax 1,695 50 1,745 2,024 - 2,024
Total current tax charge for the year (note b) 1,695 84 1,779 2,024 45 2,069
Movement of deferred tax liability on Indian capital gains - (492) (492) - 922 922
Total deferred tax charge for the year (note c) - (492) (492) - 922 922
Total tax charge for the year 1,695 (408) 1,287 2,024 967 2,991
b) The UK corporation tax rate is 19% (2021 - effective rate of 0%
from Jersey residency). The tax charge for the year differs from the
corporation tax rate.
2022 2021
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000 £'000
Net profit/(loss) before taxation 19,124 (34,903) (15,779) 17,687 30,615 48,302
Corporation tax @ 19% (2021 - 0%) 3,633 (6,631) (2,998) - - -
Effects of: - -
UK dividends (229) - (229) - - -
Non-taxable overseas dividends (3,315) - (3,315) - - -
Currency gains/losses - 609 609 - - -
Realised/unrealised gains/losses on investments - 5,516 5,516 - - -
Expenses not deductible for tax purposes 10 - 10 - - -
Excess management expenses (71) 507 436 - - -
Tax effect of expensed double taxation relief (28) - (28) - - -
Irrecoverable overseas withholding tax 1,695 49 1,744 2,024 - 2,024
Indian capital gains tax - 34 34 - 45 45
Movement of deferred tax liability on Indian CGT - (492) (492) - 922 922
Total current tax charge for the year (note a) 1,695 (408) 1,287 2,024 967 2,991
c) Factors that may affect future tax charges
At the period end, after offset against income taxable on receipt, there is a
potential deferred tax asset of £573,000 (2021 - £nil) in relation to
surplus management expenses. It is unlikely that the fund will generate
sufficient taxable profits in the future to utilise these amounts and
therefore no deferred tax asset has been recognised.
9. Dividends on Ordinary shares
Year ended 31 December 2022 Year ended 31 December 2021
Amounts recognised as distributions to equity holders in the year:
Fourth interim dividend 2021 - 2.75p per Ordinary share (2020 - 2.55p) 4,712 4,484
First interim dividend 2022 - 2.30p per Ordinary share (2021 - 2.25p) 3,924 3,954
Second interim dividend 2022 - 2.30p per Ordinary share (2021 - 2.25p) 3,915 3,951
Third interim dividend 2022 - 2.30p per Ordinary share (2021 - 2.25p) 3,908 3,936
16,459 16,325
Following the change of tax residency, the Company is required to comply with
the UK investment trust retention test to satisfy s.1158 of the Corporation
Tax Act 2010. The total dividends payable in respect of the financial year
which form the basis of s.1158 of the Corporation Tax Act 2010 are set out
below.
The table below sets out the total dividends declared in respect of the
financial year. The comparative data is also presented albeit there was no
requirement to satisfy this test in the previous year when the Company was
Jersey tax resident. The revenue available for distribution by way of dividend
for the year is £17,429,000 (2021 - £15,663,000).
2022 2021
£'000
£'000
First interim dividend 2022 - 2.30p per Ordinary share (2021 - 2.25p) 3,924 3,954
Second interim dividend 2022 - 2.30p per Ordinary share (2021 - 2.25p) 3,915 3,951
Third interim dividend 2022 - 2.30p per Ordinary share (2021 - 2.25p) 3,908 3,936
Fourth interim dividend 2022 - 3.10p per Ordinary share (2021 - 2.75p) 5,263 4,712
17,010 16,553
The fourth interim dividend for 2022, amounting to £5,263,000 (2021 - fourth
interim dividend of £4,712,000), is not recognised as a liability in these
financial statements as it was announced and paid after 31 December 2022.
10. Earnings per share
Ordinary shares. The earnings per Ordinary share is based on the loss after
taxation of £17,066,000 (2021 - profit of £45,311,000) and on 170,411,839
(2021 - 175,057,061) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the year excluding Ordinary shares held in
treasury, which do not carry the rights to vote or to dividends.
The earnings per Ordinary share detailed above can be further analysed between
revenue and capital as follows:
Year ended 31 December 2022 Year ended 31 December 2021
Revenue Capital Total Revenue Capital Total
Net profit/(loss) (£'000) 17,429 (34,495) (17,066) 15,663 29,648 45,311
Weighted average number of Ordinary shares in issue(A)
170,411,839 175,057,061
Return per Ordinary share (pence) 10.23 (20.24) (10.01) 8.95 16.93 25.88
(A) Calculated excluding Ordinary shares held in treasury.
11. Investments held at fair value through profit or loss
Year ended 31 December 2022 Year ended 31 December 2021
Opening book cost 346,679 313,692
Opening investment holding gains 150,691 149,131
Opening fair value 497,370 462,823
Analysis of transactions made during the year
Purchases at cost 55,611 99,517
Sales proceeds received (75,625) (98,324)
(Losses)/gains on investments(A) (29,033) 33,354
Closing fair value 448,323 497,370
£'000 £'000
Closing book cost 346,553 346,679
Closing investment gains 101,770 150,691
Closing fair value 448,323 497,370
(A) Includes losses realised on the exercise of traded options of £nil (2021
- £nil) which are reflected in the capital column of the Statement of
Comprehensive Income in accordance with accounting policy 2(n). Premiums
received from traded options totalled £47,000 (2021 - £33,000) per note 4.
The Company received £75,625,000 (2021 - £98,324,000) from investments sold
in the year. The book cost of these investments when they were purchased was
£55,736,000 (2021 - £66,530,000). These investments have been revalued over
time and until they were sold any unrealised gains/losses were included in the
fair value of the investments.
Year ended 31 December 2022 Year ended 31 December 2021
Listed on recognised stock exchanges:
Equities - overseas 444,727 493,609
Bonds - overseas 3,596 3,761
Total 448,323 497,370
Transaction costs. During the year expenses were incurred in acquiring or
disposing of investments held at fair value through profit or loss. These have
been expensed through capital and are included within gains on financial
investments held at fair value through profit or loss in the Statement of
Comprehensive Income. The total costs were as follows:
Year ended 31 December 2022 Year ended 31 December 2021
Purchases 50 108
Sales 88 181
138 289
The above transaction costs are calculated in line with the AIC SORP. The
transaction costs in the Company's Key Information Document are calculated on
a different basis and in line with the PRIIPs regulations.
12. Debtors: amounts falling due within one year
Year ended 31 December 2022 Year ended 31 December 2021
Prepayments and accrued income 1,175 1,438
None of the above assets are past their due date or impaired.
13. Creditors: amounts falling due within one year
(a) Bank loans. At the year end, the Company had the
following unsecured bank loans:
2022 2021
Interest Local currency principal amount Carrying amount £'000 Interest Local currency principal amount Carrying amount £'000
rate
rate
%
%
Unsecured bank loans repayable within one year:
Hong Kong Dollar 6.311 73,500,000 7,829 1.374 73,500,000 6,960
United States Dollar 5.175 8,850,000 7,357 1.435 19,000,000 14,028
Sterling 4.190 15,800,000 15,800 1.310 15,800,000 15,800
Total 30,986 36,788
Unsecured bank loans repayable between one and five years:
Sterling 1.530 10,000,000 9,981 1.530 10,000,000 9,965
Total 9,981 9,965
At the date of signing this report, loans of HKD 73,500,000, US$8,850,000 and
£15,800,000 were drawn down at variable interest rates of 4.20917%, 5.68456%
and 4.7015% respectively under a £40 million multi currency revolving loan
facility agreement with Bank of Nova Scotia, London Branch (the "Bank"). The
Company also has a three year loan of £10,000,000 with the Bank at a fixed
interest rate of 1.53%. Both facilities mature on 2 March 2024. Financial
covenants contained within the relevant loan agreements provide, inter alia,
that the Company's NAV shall at no time be less than £185 million and that
adjusted NAV coverage shall at no time be less than 4.0 to 1.0. At 31 December
2022 adjusted NAV coverage was 10.1 to 1.0 based on borrowings of £40,967,000
and net assets were £413,447,000. The Company has complied with all financial
covenants throughout the year.
During December 2022, the Company highlighted to the Bank that it had notified
the Jersey Financial Services Commission (Jersey regulator) of remediation
work to be undertaken in relation to maintaining up to date records of
shareholders' identity documents as required under the Jersey laws and
regulations. The remediation work related to less than 1% of long standing
shareholders. The Bank considered this event as a technical loan covenant
breach. Subsequent to the year end, the Bank has provided the Company with a
waiver of its relevant covenant in this regard and it is therefore no longer
considered to be in breach.
b) Other payables
2022 2021
£'000
£'000
Investment management fees 786 2,685
Other amounts due 502 232
1,288 2,917
Amounts falling due in more than one year:
2022 2021
£'000
£'000
c) Deferred tax liability on Indian capital gains 1,124 1,616
14. Analysis of changes in financing during the year
2022 2021
£'000
£'000
Opening balance at 1 January 46,753 35,734
Net (decrease)/increase in loan drawdown (8,948) 10,851
Amortisation of loan arrangement expenses 16 14
Foreign exchange movements 3,146 154
Closing balance at 31 December 40,967 46,753
15. Stated capital
Ordinary shares Treasury shares Total shares (number)
(number) (number)
£'000
Authorised Ordinary shares of no par value Unlimited Unlimited Unlimited Unlimited
Issued and fully paid Ordinary shares of no par value
At 31 December 2021 171,558,896 23,374,493 194,933,389 194,933
Shares purchased for treasury (1,726,495) 1,726,495 - -
At 31 December 2022 169,832,401 25,100,988 194,933,389 194,933
During the year 1,726,495 (2021 - 4,265,587) Ordinary shares were bought back
by the Company for holding in treasury at a total cost of £3,818,000 (2021 -
£9,672,000). At the year end 25,100,988 (2021 - 23,374,493) Ordinary shares
were held in treasury, which represents 12.88% (2021 - 11.99%) of the
Company's total issued share capital at 31 December 2022.
For each Ordinary share issued £1 is allocated to stated capital, with the
balance taken to the capital reserve.
The Ordinary shares give shareholders the entitlement to all of the capital
growth in the Company's assets and to all the income from the Company that is
resolved to be distributed.
Since the year end a further 499,669 Ordinary shares have been bought back for
holding in treasury at a cost of £1,108,000.
Voting and other rights. In accordance with the Articles of Association of the
Company, on a show of hands, every member (or duly appointed proxy) present at
a general meeting of the Company has one vote; and, on a poll, every member
present in person or by proxy shall have one vote for each Ordinary share
held, excluding shares held in treasury.
The Ordinary shares carry the right to receive all dividends declared by the
Company or the Directors, excluding shares held in treasury.
On a winding-up, provided the Company has satisfied all of its liabilities,
holders of Ordinary shares are entitled to all of the surplus assets of the
Company, excluding shares held in treasury.
16. Capital reserve
2022 2021
£'000
£'000
At 1 January 242,727 222,751
Net currency losses(A) (3,204) (266)
Movement in unrealised fair value (48,921) 1,560
Profit on realisation of investments 19,888 31,794
Costs charged to capital (2,258) (3,440)
Buyback of Ordinary shares for treasury (3,818) (9,672)
At 31 December 204,414 242,727
(A) Losses arising during the year have principally arisen from a revaluation
of the foreign currency bank loans offset by a revaluation of foreign currency
cash held.
17. Net asset value per share
Ordinary shares. The net asset value per Ordinary share and the net asset
values attributable to Ordinary shareholders at the year end calculated in
accordance with the Articles of Association were as follows:
Net asset value asset values attributable Net asset value asset values attributable
Net per share
Net per share
2022 2022 2021 2021
p £'000 p £'000
Ordinary shares 243.44 413,447 262.76 420,790
The net asset value per Ordinary share is based on 169,832,401 (2021 -
171,558,896) Ordinary shares, being the number of Ordinary shares in issue at
the year end excluding Ordinary shares held in treasury.
18. Financial instruments
The Company's investment activities expose it to various types of financial
risk associated with the financial instruments and markets in which it
invests. The Company's financial instruments, other than derivatives, comprise
securities and other investments, cash balances, bank loans and debtors and
creditors that arise directly from its operations; for example, in respect of
sales and purchases awaiting settlement, and debtors for accrued income.
The Company also has the ability to enter into derivative transactions, in the
form of traded options, for the purpose of enhancing income returns and
portfolio management. During the year, the Company entered into certain
derivative contracts. As disclosed in note 4, the premium received in respect
of options written in the year was £47,000 (2021 - £33,000). Positions
closed during the year realised a loss of £nil (2021 - £nil). A realised
loss would result if the underlying price on exercise is higher than the
exercise price for call options and lower than the exercise price for put
options. The largest position in derivative contracts held during the year at
any given time was £47,000 (2021 - £20,000). The Company had no open
positions in derivative contracts at 31 December 2022.
The Board has delegated the risk management function to aCIL under the terms
of its management agreement with aCIL (further details of which are included
under note 5). The Board regularly reviews and agrees policies for managing
each of the key financial risks identified with the Manager. The types of risk
and the Manager's approach to the management of each type of risk, are
summarised below. Such approach has been applied throughout the year and has
not changed since the previous accounting period. The numerical disclosures
exclude short-term debtors and creditors, with the exception of short-term
borrowings.
Risk management framework. The directors of aCIL collectively assume
responsibility for the Manager's obligations under the AIFMD including
reviewing investment performance and monitoring the Company's risk profile
during the year.
aCIL is a fully integrated member of the abrdn plc Group (the "Group"), which
provides a variety of services and support to aCIL in the conduct of its
business activities, including in the oversight of the risk management
framework for the Company. aCIL has delegated the day to day administration of
the investment policy to abrdn Asia Limited, which is responsible for ensuring
that the Company is managed within the terms of its investment guidelines and
the limits set out in its pre-investment disclosures to
investors (details of which can be found on the Company's website). aCIL has
delegated responsibility for monitoring and oversight of the Investment
Manager and other members of the Group which carry out services and support to
aCIL.
The Manager conducts its risk oversight function through the operation of the
Group's risk management processes and systems which are embedded within the
Group's operations. The Group's Risk Division supports management in the
identification and mitigation of risks and provides independent monitoring of
the business. The Division includes Compliance, Business Risk, Market Risk,
Risk Management and Legal. The team is headed up by the Group's Head of Risk,
who reports to the Chief Executive Officer of the Group. The Risk Division
achieves its objective through embedding the Risk Management Framework
throughout the organisation using the Group's operational risk management
system ("Shield").
The Group's Internal Audit Department is independent of the Risk Division and
reports directly to the Group Chief Executive Officer and to the Audit
Committee of the Group's Board of Directors. The Internal Audit Department is
responsible for providing an independent assessment of the Group's control
environment.
The Group's corporate governance structure is supported by several committees
to assist the board of directors of abrdn plc, its subsidiaries and the
Company to fulfil their roles and responsibilities. The Group's Risk Division
is represented on all committees, with the exception of those committees that
deal with investment recommendations. The specific goals and guidelines on the
functioning of those committees are described on the committees' terms of
reference.
Risk management. The main risks arising from the Company's financial
instruments are (i) market risk (comprising interest rate risk, currency risk
and equity price risk), (ii) liquidity risk, (iii) credit risk and (iv)
gearing risk.
The Board regularly reviews and agrees policies for managing each of these
risks. The Manager's policies for managing each of these risks are summarised
below and have been applied throughout the year. The numerical disclosures
exclude short-term receivables and payables with the exception of the credit
risk of short-term debtors.
(i) Market risk. The fair value or future cash flows of a
financial instrument held by the Company may fluctuate because of changes in
market prices. This market risk comprises three elements - interest rate risk,
currency risk and equity price risk.
Interest rate risk. Interest rate risk is the risk that interest rate
movements may affect:
- the fair value of the investments in fixed interest rate securities;
- the level of income receivable on cash deposits;
- the interest payable on the Company's variable rate borrowings.
Management of the risk
Financial assets. Although the majority of the Company's financial assets
comprise equity shares which neither pay interest nor have a stated maturity
date, at the year end the Company had two (2021 - two) holdings in fixed rate
overseas corporate bonds, with G3 Exploration valued at £nil (2021 - £nil)
and ICICI Bank at £3,596,000 (2021 - £3,761,000). Bond prices are determined
by market perception as to the appropriate level of yields given the economic
background. Key determinants include economic growth prospects, inflation, the
Government's fiscal position, short-term interest rates and international
market comparisons. The Investment Manager takes all these factors into
account when making any investment decisions as well as considering the
financial standing of the potential investee entity. G3 Exploration appointed
joint liquidators during December 2019. Using an adjusted net asset value
model the Board of Directors decided to write down the value of G3 Exploration
to £nil due to concerns over liquidity, credit worthiness, exit opportunities
and the timing of any potential receipts. There has been no change in carrying
value during the year under review or as at the date of this Report.
Returns from bonds are fixed at the time of purchase, as the fixed coupon
payments are known, as are the final redemption proceeds. This means that if a
bond is held until its redemption date, the total return achieved is unaltered
from its purchase date. However, over the life of a bond the market price at
any given time will depend on the market environment at that time. Therefore,
a bond sold before its redemption date is likely to have a different price to
its purchase level and a profit or loss may be incurred.
Financial liabilities. The Company primarily finances its operations through
use of equity, retained profits and bank borrowings. Details of the terms and
conditions of the bank borrowings are disclosed in note 13. Interest is due on
the Bank of Nova Scotia, London fixed term loan quarterly with the next
interest payment being due on 2 March 2023. Interest is due on the Bank of
Nova Scotia, London multi currency revolving loan facility on the maturity
date, with the next interest payment being due on 21 February 2023 for HKD
loan and 20 January 2023 for GBP and USD loans.
The Board actively monitors its bank borrowings. A decision on whether to roll
over its existing borrowings will be made prior to their maturity dates,
taking into account the Company's ability to draw down fixed, long-term
borrowings. The Company does not employ any hedging against floating rate
borrowings.
The interest rate profile of the Company (excluding short term debtors and
creditors but including short term borrowings as stated previously) was as
follows:
At 31 December 2022 Weighted average period for which rate Weighted average interest rate Floating rate Fixed rate
£'000
is fixed Years % £'000
Assets
Indian Overseas Corporate Bond 1.60 9.15 - 3,596
Cash at bank - Sterling - - 7,277 -
Cash at bank - Australia Dollar - - (203) -
Cash at bank - Hong Kong Dollar - - 1 -
Cash at bank - Indian Rupee - - (33) -
Cash at bank - Taiwan Dollar - - 41 -
Cash at bank - Thailand Baht - - 245 -
7,328 3,596
At 31 December 2022 Weighted average period for which rate Weighted average interest rate Floating rate Fixed rate
£'000
is fixed Years % £'000
Liabilities
Bank loan - Hong Kong Dollar 0.14 6.31 - (7,829)
Bank loan - US Dollar 0.05 5.18 - (7,357)
Bank loan - Sterling 0.05 4.19 - (15,800)
Bank loan - Sterling 1.17 1.53 - (9,981)
- (40,967
At 31 December 2021 Weighted average period for which rate Weighted average interest rate Floating rate Fixed rate
£'000
is fixed Years % £'000
Assets
Indian Overseas Corporate Bond 2.60 9.15 - 3,761
Cash at bank - Sterling - - 3,227 -
Cash at bank - Taiwan Dollar - - 41 -
3,268 3,761
At 31 December 2021 Weighted average period for which rate Weighted average interest rate Floating rate Fixed rate
£'000
is fixed Years % £'000
Liabilities
Bank loan - Hong Kong Dollar 0.07 1.37 - (6,960)
Bank loan - US Dollar 0.07 1.43 - (14,028)
Bank loan - Sterling 0.07 1.31 - (15,800)
Bank loan - Sterling 2.17 1.53 - (10,000)
- (46,788)
The weighted average interest rate is based on the current yield of each
asset, weighted by its market value. The weighted average interest rate on
bank loans is based on the interest rate payable, weighted by the total value
of the loans.
The floating rate assets consist of cash deposits on call earning interest at
prevailing market rates. All financial liabilities are measured at amortised
cost using the effective interest rate method.
Interest rate sensitivity. The sensitivity analysis demonstrates the
sensitivity of the Company's profit for the year to a reasonably possible
change in interest rates, with all other variables held constant.
The sensitivity of the profit/(loss) for the year is the effect of the assumed
change in interest rates on:
- the net interest income for one year, based on the floating rate
financial assets held at the Balance Sheet date; and
- changes in fair value of investments for the year, based on
revaluing fixed rate financial assets at the Balance Sheet date.
The Directors have considered the potential impact of a 100 basis point
movement in interest rates and concluded that it would not be material in the
current year (2021 - not material). This consideration is based on the
Company's exposure to interest rates on its floating rate cash balances, fixed
interest securities and bank loans.
Foreign currency risk. A significant proportion of the Company's investment
portfolio is invested in overseas securities and the Balance Sheet can be
significantly affected by movements in foreign exchange rates. It is not the
Company's policy to hedge this risk on a continuing basis. A significant
proportion of the Company's borrowings, as detailed in note 13, is in foreign
currency as at 31 December 2022.
Management of the risk. The revenue account is subject to currency fluctuation
arising on overseas income. The Company does not hedge this currency risk on a
continuing basis but the Company may, from time to time, match specific
overseas investment with foreign currency borrowings.
The fair values of the Company's monetary items that have foreign currency
exposure at 31 December are shown below. Where the Company's equity
investments (which are non-monetary items) are priced in a foreign currency,
they have been included within the equity price risk sensitivity analysis so
as to show the overall level of exposure.
Net monetary Net monetary
assets/ Total currency assets/ Total currency
Equity Equity
investments (liabilities) exposure investments (liabilities) exposure
£'000 £'000 £'000 £'000 £'000 £'000
Australian Dollar 86,685 (203) 86,482 87,514 - 87,514
Chinese Renminbi 16,478 - 16,478 21,378 - 21,378
Hong Kong Dollar 50,622 (7,828) 42,794 48,169 (6,960) 41,209
Indian Rupee 21,100 3,563 24,663 30,409 3,761 34,170
Indonesian Rupiah 6,236 - 6,236 5,031 - 5,031
Japanese Yen 8,652 - 8,652 8,493 - 8,493
Korean Won 32,785 - 32,785 44,846 - 44,846
Malaysian Ringgit - - - 474 - 474
New Zealand Dollar 4,871 - 4,871 6,093 - 6,093
Singapore Dollar 96,438 - 96,438 82,191 - 82,191
Taiwanese Dollar 74,450 41 74,491 98,933 41 98,974
Thailand Baht 32,372 245 32,617 31,875 - 31,875
US Dollar 2,590 (7,357) (4,767) 4,851 (14,028) (9,177)
Total 433,279 (11,539) 421,740 470,257 (17,186) 453,071
Foreign currency sensitivity. The following table details the impact on the
Company's net assets to a 10% decrease (in the context of a 10% increase the
figures below should all be read as negative) in sterling against the foreign
currencies in which the Company has exposure. The sensitivity analysis
includes foreign currency denominated monetary items and adjusts their
translation at the period end for a 10% change in foreign currency rates.
2022 2022
£'000
£'000
Australian Dollar 8,648 8,751
Chinese Renminbi 1,648 2,138
Hong Kong Dollar 4,279 4,121
Indian Rupee 2,466 3,417
Indonesian Rupiah 624 503
Japanese Yen 865 849
Korean Won 3,279 4,485
Malaysian Ringgit - 47
New Zealand Dollar 487 609
Singapore Dollar 9,644 8,219
Taiwanese Dollar 7,449 9,897
Thailand Baht 3,262 3,188
US Dollar (477) (918)
Total 42,174 45,306
Equity price risk. Equity price risk (i.e. changes in market prices other than
those arising from interest rate or currency risk) may affect the value of the
Company's quoted equity investments.
Management of the risk. It is the Board's policy to hold an appropriate spread
of investments in the portfolio in order to reduce the risk arising from
factors specific to a particular country or sector. The allocation of assets
to international markets and the stock selection process both act to reduce
market risk. The Manager actively monitors market prices throughout the year
and reports to the Board, which meets regularly in order to review investment
strategy. The investments held by the Company are listed on recognised stock
exchanges.
Concentration of exposure to equity price risks. The majority of the
investments' value is in the Asia Pacific region. It should be recognised that
an investment's country of domicile or of listing does not necessarily equate
to its exposure to the economic conditions in that country.
Equity price risk sensitivity. The following table illustrates the sensitivity
of the profit after taxation for the year and the equity to an increase or
decrease of 10% (2021 - 10%) in the fair values of the Company's equities.
This level of change is considered to be reasonably possible based on
observation of current market conditions. The sensitivity analysis is based on
the Company's equities at each Balance Sheet date, with all other variables
held constant.
2022 2021
Increase in Decrease in Increase in Decrease in
fair value fair value fair value fair value
£'000 £'000 £'000 £'000
Statement of Comprehensive Income - profit after taxation
Revenue return - increase /(decrease) - - - -
Capital return - increase /(decrease) 44,473 (44,473) - -
Total profit after taxation - increase /(decrease) 44,473 (44,473) 49,361 (49,361)
Equity
44,473 (44,473) 49,361 (49,361)
(ii) Liquidity risk. This is the risk that the Company will
encounter difficulty in meeting obligations associated with financial
liabilities, which stood at £43,379,000 (2021 - £51,286,000).
Management of the risk. Liquidity risk is not considered to be significant as
the Company's assets comprise mainly cash and readily realisable securities,
which can be sold to meet funding commitments if necessary and these amounted
to £7,328,000 and £448,323,000 (2021 - £3,268,000 and £497,370,000) at the
year end respectively. Short-term flexibility is achieved through the use of
loan facilities.
Maturity profile. The following table sets out the undiscounted gross cash
flows, by maturity, of the Company's significant financial liabilities and
cash at the Balance Sheet date:
At 31 December 2022 Within 1 Between 1-5 years Total
year
£'000
£'000
£'000
Fixed rate
Bank loans 30,986 10,000 40,986
Interest on bank loans 281 26 307
31,267 10,026 41,293
Floating rate
Cash 7,328 - 7,328
Within 1 Between 1-5 years
year
Total
At 31 December 2021 £'000 £'000 £'000
Fixed rate 36,788 10,000 46,788
Bank loans 237 191 428
Interest on bank loans 37,025 10,191 47,216
35,827 -
Floating rate
Cash 3,268 - 3,268
Details of the Company's borrowing arrangements are disclosed in note 13.
(iii) Credit risk. This is failure of the counterparty to a
transaction to discharge its obligations under that transaction that could
result in the Company suffering a loss. The Company is exposed to credit risk
on debt instruments. These classes of financial assets are not subject to IFRS
9's impairment requirements as they are measured at FVTPL. The carrying value
of these assets, under IFRS 9 represents the Company's maximum exposure to
credit risk on financial instruments not subject to the IFRS 9 impairment
requirements on the respective reporting dates (see table below "Credit Risk
Exposure").
The Company's only financial assets subject to the expected credit loss model
within IFRS 9 are only short-term other receivables. At 31 December 2022, the
total of short-term other receivables was £1,175,000 (2021 - £1,438,000).
Given the balance is not material an assessment of credit risk is not
performed. No other assets are considered impaired and no other amounts have
been written off during the year.
All other receivables are expected to be received within twelve months or
less. An amount is considered to be in default if it has not been received on
the due date.
As only other receivables are impacted by the IFRS 9 model, the Company has
adopted the simplified approach. The loss allowance is therefore based on
lifetime ECLs.
Management of the risk. Where the investment manager makes an investment in a
bond, corporate or otherwise, where available, the credit rating of the issuer
is taken into account so as to minimise the risk to the Company of default.
The Company has the following holdings:
- a Chinese overseas corporate bond issued by G3 Exploration with a
book cost of £4,611,000. G3 Exploration appointed joint liquidators during
December 2019. Therefore the Board of Directors decided to write down the
value of G3 Exploration to £nil due to the uncertainty over the repayment of
the debt. No interest for G3 Exploration has been accrued in 2020, 2021 or
2022.
- an Indian overseas corporate bond issued by ICICI Bank with a fair
value of £3,596,000 (2021 - £3,761,000).
Each of the above bonds are non-rated. The investment manager undertakes an
ongoing review of their suitability for inclusion within the portfolio.
Investment transactions are carried out with a large number of brokers, whose
credit rating is taken into account so as to minimise the risk to the Company
of default.
The risk of counterparty exposure due to failed trades causing a loss to the
Company is mitigated by the review of failed trade reports on a daily basis.
In addition, both stock and cash reconciliations to the Custodian's records
are performed on a daily basis to ensure discrepancies are investigated on a
timely basis. The Manager's Compliance department carries out periodic reviews
of
the Custodian's operations and reports its finding to the Manager's Risk
Management Committee. It is the Manager's policy to trade only with A- and
above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties.
Cash is held only with reputable banks with high quality external credit
ratings.
None of the Company's financial assets are secured by collateral or other
credit enhancements.
Credit risk exposure. In summary, compared to the amounts included in the
Balance Sheet, the maximum exposure to credit risk at 31 December was as
follows:
2022 2021
Balance Maximum exposure Balance Maximum exposure
Sheet
Sheet
£'000
£'000
£'000 £'000
Non-current assets
Investments held at fair value through profit or loss 448,323 3,596 497,370 3,761
Current assets
Cash at bank 7,328 7,328 3,268 3,268
Other receivables 1,175 1,175 1,438 1,438
456,826 12,099 502,076 8,467
(iv) Gearing risk. The Company's policy is to increase its
exposure to equity markets through the judicious use of borrowings. When
borrowings are invested in such markets, the effect is to magnify the impact
on shareholders' funds of changes, both positive and negative, in the value of
the portfolio. As noted in note 2(l) financial liabilities are classified
under IFRS 9. The Company has not designated any financial liabilities at
FVPL. Therefore, this requirement has not had an impact on the Company. The
loans are carried at amortised cost, using the effective interest rate method
in the financial statements.
Management of the risk. The Board imposes borrowing limits to ensure gearing
levels are appropriate to market conditions and reviews these on a regular
basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities.
The fixed rate facilities are used to finance opportunities at low rates and,
the revolving and uncommitted facilities to provide flexibility in the short-
term.
The Company's capital management objectives are:
- to ensure that the Company will be able to continue as a going
concern; and
- to maximise the income and capital return to its equity shareholders
through an appropriate balance of equity capital and debt. The policy is that
debt should not exceed 25% of net assets.
The Company's capital at 31 December comprises:
2022 2021
£'000
£'000
Debt
Borrowings under the multi-currency loan facility 30,986 36,788
Borrowing under the three year Sterling loan facility 9,981 9,965
40,967 46,753
2022 2021
£'000
£'000
Equity
Equity share capital 194,933 194,933
Retained earnings and other reserves 218,514 255,857
413,447 450,790
Debt as a % of net assets(A) 9.91 10.37
(A) The calculation above differs from the AIC recommended methodology, where
debt levels are shown net of cash and cash equivalents held.
The Board, with the assistance of the Investment Manager monitors and reviews
the broad structure of the Company's capital on an ongoing basis. This review
includes:
- the planned level of gearing, which takes account of the Investment
Manager's views on the market;
- the need to buy back equity shares for cancellation or for holding
in treasury, which takes account of the difference between the net asset value
per Ordinary share and the Ordinary share price (i.e. the level of share price
discount);
- the need for new issues of equity shares; and
- the extent to which revenue in excess of that which is required to
be distributed should be retained.
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding accounting period.
20. Related party transactions and transactions with the Manager
Fees payable during the period to the Directors are disclosed in note 6.
Mr Young, who is a Director of the Company, is employed by the Company's
Investment Manager, abrdn Asia Limited, which is a wholly-owned subsidiary of
abrdn plc. The Manager, abrdn Capital International Limited ("aCIL") is also a
subsidiary of abrdn plc. Management, promotional activities and secretarial
and administration services are provided by aCIL with details of transactions
during the year and balances outstanding at the year end disclosed in notes 5
and 6.
Mr Clarke, who was a Director and Chairman of the Company until 31 December
2021, was, prior to his retirement, also Chairman of Thomas Dessain which was
paid £11,000 during the year ended 31 December 2021 for services provided in
relation to the recruitment search for Mr Kirkby.
21. Controlling party
In the opinion of the Directors on the basis of shareholdings advised to them,
the Company has no immediate or ultimate controlling party.
22. Fair value hierarchy
IFRS 13 'Fair Value Measurement' requires an entity to classify fair value
measurements using a fair value hierarchy that reflects the significance of
the inputs used in making measurements. The fair value hierarchy has the
following levels:
Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that
are observable for the assets or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The financial assets and liabilities measured at fair value in the Balance
Sheet are grouped into the fair value hierarchy as follows:
Level 1 Level 2 Level 3 Total
At 31 December 2022 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 444,727 - - 444,727
Quoted bonds b) - 3,596 - 3,596
Net fair value 444,727 3,596 - 448,323
Level 1 Level 2 Level 3 Total
At 31 December 2021 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 493,609 - - 493,609
Quoted bonds b) - 3,761 - 3,761
Net fair value 493,609 3,761 - 497,370
(a) Quoted equities. The fair value of the Company's
investments in quoted equities has been determined by reference to their
quoted bid prices at the reporting date. Quoted equities included in Fair
Value Level 1 are actively traded on recognised stock exchanges.
(b) Quoted bonds. The fair value of the Company's investments in
quoted bonds has been determined by reference to their quoted bid prices at
the reporting date. Investments in quoted bonds are not considered to trade in
active markets and accordingly the Company's holding in quoted bonds as at 31
December 2022 has been classified as Level 2.
In October 2019 the Board of Directors took the decision to write down the
value of G3 Exploration by 50% in light of interest payment default and
concerns over ongoing trading. At this point the G3 Exploration bond was
reclassified as Level 3. G3 Exploration appointed joint liquidators during
December 2019. Using an adjusted net asset value model the Board of Directors
decided to write down the value of G3 Exploration to £nil due to concerns
over liquidity, credit worthiness, exit opportunities and the timing of any
potential receipts. There has been no change in carrying value during the year
under review or as at the date of this Report.
Fair value of financial assets. The Directors are of the opinion that the fair
value of other financial assets is equal to the carrying amounts in the
Balance Sheet.
Fair values of financial liabilities. The fair value of borrowings as at the
31 December 2022 has been estimated at £40,919,000 (carrying value per
Balance Sheet - £40,967,000) which was calculated using a discounted cash
flow valuation technique. At 31 December 2021 the fair value was £46,878,000
(carrying value per Balance Sheet - £46,753,000). Under the fair value
hierarchy in accordance with IFRS 13, these borrowings can be classified as
Level 2 due to the use of a discount rate as an observable input in the
calculation of fair value.
23. Subsequent events
There have been no subsequent events to report on from the date of the year
end until the date this Report was approved.
ALTERNATIVE PEROFRMANE MEASURES
Alternative performance measures are numerical measures of the Company's
current, historical or future performance, financial position or cash flows,
other than financial measures defined or specified in the applicable financial
framework. The Company's applicable financial framework includes IFRS and the
AIC SORP. The Directors assess the Company's performance against a range of
criteria which are viewed as particularly relevant for closed-end investment
companies.
Discount to net asset value per Ordinary share
The discount is the amount by which the share price is lower than the net
asset value per share, expressed as a percentage of the net asset value.
2022 2021
NAV per Ordinary share 243.44 262.76
(p) a
Share price 215.00 231.00
(p)
b
Discount -11.7% -12.1%
(b-a)/a
Dividend cover
Dividend cover measures the revenue return per share divided by total
dividends per share, expressed as a ratio.
2022 2021
Revenue return per 10.23p 8.95p
share
a
Dividends per 10.00p 9.50p
share
b
Dividend 1.02 0.94
cover
a/b
Dividend yield
The annual dividend per Ordinary share divided by the share price, expressed
as a percentage.
2022 2021
Annual dividend per Ordinary share (p) a 10.00p 9.50p
Share price 215.00p 231.00p
(p)
b
Dividend 4.7% 4.1%
yield
(b-a)/a
Net gearing
Net gearing measures the total borrowings less cash and cash equivalents
dividend by shareholders' funds, expressed as a percentage. Under AIC
reporting guidance cash and cash equivalents includes amounts due to and from
brokers at the year end as well as cash and cash equivalents.
2022 2021
Borrowings (£'000) a 40,967 46,753
Cash (£'000) b 7,328 3,268
Amounts due to brokers (£'000) c - -
Amounts due from brokers (£'000) d - -
Shareholders' funds (£'000) e 413,447 450,790
Net gearing (a-b+c-d)/e 8.1% 9.6%
Ongoing charges
The ongoing charges ratio has been calculated in accordance with guidance
issued by the AIC, to include the look-through costs of holding certain
investment funds as well as the total of investment management fees and
administrative expenses and expressed as a percentage of the average daily net
asset values with debt at fair value published throughout the year.
2022 2021
Investment management fees (£'000) 3,270 3,527
Administrative expenses (£'000) 939 862
Less: non-recurring charges(A) (£'000) (42) (76)
Ongoing charges (£'000) 4,167 4,313
Average net assets (£'000) 421,170 446,994
Ongoing charges ratio (excluding look-through costs) 0.99% 0.96%
Look-through costs(B) 0.02% 0.05%
Ongoing charges ratio (including look-through costs) 1.01% 1.01%
(A) Professional services comprising advisory and legal fees considered
unlikely to recur.
(B) Calculated in accordance with AIC guidance issued in October 2020 to
include the Company's share of costs of holdings in investment companies on a
look- through basis.
The ongoing charges percentage provided in the Company's Key Information
Document is calculated in line with the PRIIPs regulations which among other
things, includes the cost of borrowings and transaction costs.
Total return
NAV and share price total returns show how the NAV and share price has
performed over a period of time in percentage terms, taking into account both
capital returns and dividends paid to shareholders. Share price and NAV total
returns are monitored against open-ended and closed-ended competitors, and the
Reference Index, respectively.
Year ended 31 December 2022 NAV Share Price
Opening at 1 January 2022 a 262.76p 231.00p
Closing at 31 December 2022 b 243.44p 215.00p
Price movements c=(b/a)-1 -7.4% -6.9%
Dividend reinvestment(A) d 3.8% 4.2%
Total return c+d -3.6% -2.7%
Year ended 31 December 2021 NAV Share Price
Opening at 1 January 2021 a 245.40p 228.50p
Closing at 31 December 2021 b 262.76p 231.00p
Price movements c=(b/a)-1 7.1% 1.1%
Dividend reinvestmentA d 3.9% 4.1%
Total return c+d +11.0% +5.2%
(A) NAV total return involves investing the net dividend in the NAV of the
Company with debt at fair value on the date on which that dividend goes
ex-dividend. Share price total return involves reinvesting the net dividend in
the share price of the Company on the date on which that dividend goes
ex-dividend.
Additional Notes:
The Annual Financial Report Announcement is not the Company's statutory
financial statements. The above results for the year ended 31 December 2022
are an abridged version of the Company's full financial statements, which have
been approved and audited with an unqualified report. The 2021 and 2022
statutory financial statements received unqualified reports from the Company's
Auditor and did not include any reference to matters to which the Auditor drew
attention by way of emphasis without qualifying the reports. The financial
information for 2021 is derived from the statutory financial statements for
2021 which have been lodged with the JFSC. The 2022 financial statements will
be filed with the JFSC in due course.
The Annual Report will be posted to Shareholders in April and further copies
may be obtained from the registered office, 1(st) Floor, Sir Walter Raleigh
House, 48 - 50 Esplanade, St Helier, Jersey JE2 3QB and on the Company's
website* asian-income.co.uk.
Please note that past performance is not necessarily a guide to the future and
that the value of investments and the income from them may fall as well as
rise and may be affected by exchange rate movements. Investors may not get
back the amount they originally invested.
* Neither the content of the Company's website nor the content of any website
accessible from hyperlinks on the Company's website (or any other website) is
(or is deemed to be) incorporated into, or forms (or is deemed to form) part
of this announcement.
abrdn Capital International Limited
Company Secretary
4 April 2023
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR USVVROOUSRAR