REG - abrdn Asian IncFd - Annual Financial Report
27/03/2024 07:00
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RNS Number : 4145I abrdn Asian Income Fund Limited 27 March 2024
ABRDN ASIAN INCOME FUND LIMITED
Legal Entity Identifier (LEI): 549300U76MLZF5F8MN87
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2023
HIGHLIGHTS
- A dividend yield of 5.6%, resulting from a 17.5%
increase in the annual dividend of 11.75p per share. It is the Board's
intention to continue to increase the dividend.
- NAV total return of 2.5%, compared to a total return of
1.6% from the MSCI AC Asia Pacific ex Japan Index (the "Index").
- NAV and share price total returns have now outperformed
the Index over one, three, and five years. Our structural underweight exposure
to China continues to contribute to performance.
- A 23% reduction in the management fee, saving
shareholders £664,000, based on the lower of market capitalisation and net
assets which aligns the fees with shareholders' interests. This is expected to
reduce the OCR from 1.00% to 0.83% resulting in the Company offering one of
the lowest fees in the peer group.
Dividend per Ordinary share Dividend yield ( A C D)
2023 11.75p 2023 5.6%
2022 10.00p 2022 4.7%
Net asset value total return (A) (B) Ordinary share price total return (A B)
2023 2.5% 2023 1.9%
2022 -3.6% 2022 -2.7%
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)
2023 1.6% 2023 11.7%
2022 -6.8% 2022 3.2%
Earnings per Ordinary share - basic (revenue) Discount to net asset value per Ordinary share (AC)
2023 11.97p 2023 12.8%
2022 10.23p 2022 11.7%
Ongoing charges (AE) Net gearing (A C)
2023 1.00% 2023 7.5%
2022 1.01% 2022 8.1%
(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 2023 31 December 2022 % change
Net asset value total return (A) +2.5% -3.6%
Share price (Ordinary) total return (A) +1.9% -2.7%
MSCI AC Asia Pacific ex Japan Index total return (currency adjusted) +1.6% -6.8%
MSCI AC Asia Pacific ex Japan High Dividend Yield Index total return (currency +11.7% +3.2%
adjusted)
Market capitalisation (£million) £347.7 £365.1 -4.8
Discount to net asset value per Ordinary share (A) 12.8% 11.7%
Ongoing charges ratio (A) 1.00% 1.01%
Dividend and earnings
Total return per Ordinary share (B) 5.18p (10.01)p n/a
Earnings per Ordinary share - basic (revenue) (B) 11.97p 10.23p +17.0
Dividends per Ordinary share (C) 11.75p 10.00p +17.5
Dividend cover per Ordinary share (A) 1.02 1.02 -
Revenue reserves (£million) (D) £7.7 £7.3
Dividend yield (A) 5.6% 4.7%
(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 £7,105,000 (2022 - fourth interim
amounting to £5,263,000).
Capital Performance to 31 December 2023
31 December 2023 31 December 2022 % change
Total assets (£million) £431.0 £454.4 -5.2
Total equity shareholders' funds (net assets) (£million) £398.9 £413.4 -3.5
Net asset value per Ordinary share 238.59p 243.44p -2.0
Ordinary share price 208.00p 215.00p -3.3
Long Term Total Return Performance to 31 December 2023
1 year 3 year 5 year Since launch (B)
% return % return % return % return
Net asset value (A) +2.5 +9.7 +36.8 +388.0
Share price (Ordinary) (A) +1.9 +4.3 +33.5 +333.3
MSCI AC Asia Pacific ex Japan Index (currency adjusted) +1.6 -6.9 +27.2 +308.7
MSCI AC Asia Pacific ex Japan High Dividend Yield Index (currency adjusted) +11.7 +24.6 +35.8 +399.6
(A) Considered to be an Alternative Performance Measure.
(B) Launch date being 20 December 2005.
CHAIRMAN'S STATEMENT
Navigating Challenging Environments: Proactive Response from the Board
As outlined in the Market Overview below, the macroeconomic landscape of 2023
was characterised by higher interest rates aimed at curbing inflationary
pressures, compounded by geopolitical tensions stemming from military actions
in Ukraine and, subsequently, Israel/Gaza. The Association of Investment
Companies (the "AIC"), representing the investment trust industry, recently
reported that discounts across the sector have reached multi-year highs, with
the average discount hovering around 14%. Simply put, this discount reflects
an imbalance between supply and demand, with more sellers than buyers of
investment trusts. Despite abrdn Asian Income Fund consistently outperforming
its comparable Index, it has not been immune to these challenges, ending the
year with a discount of 12.8%.
To address this scenario and stimulate interest in the Company, the Board,
alongside continuing to commit to its buyback programme in 2024, has
proactively implemented several additional measures that are set out below.
Firstly, we have announced a significant reduction in the management fee,
following negotiations with our Investment Manager, abrdn. The new fee
structure, which is based on the lower of market capitalisation and net
assets, represents an approximate 23% decrease compared to the previous fee,
an estimated saving of £664,000 based on the year end assets. This adjustment
enhances value for both existing and prospective shareholders.
Moreover, the shift to a market capitalisation-based fee aligns abrdn more
closely with our shareholders, particularly when the Company's shares are
trading at a discount to the net asset value ("NAV"). Furthermore, abrdn's
commitment to the Company is underscored by its decision to invest its
management fees for a six-month period back into the shares of the Company.
In line with our commitment to enhancing shareholder returns, our portfolio
managers are optimising the portfolio with a proportionate emphasis on higher
yielding stocks, which has enabled us to increase the dividend yield, a
crucial requirement for many of our investors. The dividend yield stood at
5.6% at the year end, and we aim to position the Company among the highest
dividend-yielding companies within our Asia Pacific Income investment trust
peer group.
Lastly, recognising the importance of brand recognition and investor outreach,
we have engaged a brand specialist to review the Company's messaging. Coupled
with a strategy aimed at expanding our reach to retail investors, supported by
abrdn, we anticipate an uptick in retail demand throughout 2024.
We believe these measures collectively underscore the appeal of abrdn Asian
Income Fund to both private and institutional investors. With our track record
of index-beating performance, an attractive dividend yield, and a commitment
to enhancing value through lower fees, we will continue to be proactive in
navigating these challenging market conditions and deliver value to our
shareholders.
Market Overview
During 2023, Asia-Pacific stock markets were influenced by a combination of
inflation expectations, central bank decision- making, and the health of the
Chinese economy following the re-opening of its international borders three
years after the Covid pandemic. Investors were left wanting, with the slow
pace of domestic consumption recovery in China trailing their expectations.
Some bright spots in an otherwise volatile global market were found in
Australia and India, as well as a rebound in technology-heavy markets such as
South Korea and Taiwan.
The rapid pace at which input prices rose around the world in prior years
eased throughout 2023, due to the aggressive response from global central
banks and improving supply chains. As a result, prices of key raw materials
fell over the course of the year, which relieved some of the cost pressures
for many companies. Broadly, inflation in the Asia-Pacific region has returned
to relatively manageable levels, influenced by various market-specific factors
reflecting the region's incredibly diverse nature.
Towards the end of the year, major central banks slowed their aggressive pace
of monetary tightening to avoid disrupting economic growth but kept interest
rates at higher levels than seen in recent years. The US Federal Reserve
paused rate increases from July, while Asian central banks were ahead of the
Federal Reserve in ending their tightening measures. From a dividend
perspective, this 'pivot' from the US central bank is expected to be
supportive for high-yielding companies, whose income characteristics become
more attractive in a lower interest rate environment.
There was continued disappointment and underperformance of the Chinese market,
an exposure your Company has successfully shielded itself from due to the
portfolio's natural underweight position in this market. Chinese equities
started the year strongly, riding a wave of heightened optimism that followed
the post-Covid re-opening. However, investor sentiment weakened once it became
apparent that domestic demand remained muted while nervousness and general
economic malaise became evident in the property market. Policymakers in
Beijing introduced a swathe of fiscal and monetary measures throughout the
year to promote domestic consumption and support real estate, but investors
remained unconvinced.
Performance
On a total return basis, the NAV per share rose by 2.5% for the year,
outperforming the MSCI AC Asia Pacific ex Japan Index (the "Index"), which
generated a total return of 1.6% (currency adjusted). The share price total
return for the year was slightly lower, at 1.9%. The discount at which the
shares trade to the NAV ended the year at 12.8% compared to 11.7% at the start
of the period.
In both NAV and share price terms, the Company has now outperformed the Index
over one, three and five years. This outperformance reflects the Investment
Manager's approach to stock selection through comprehensive analysis and a
focus on high-yielding quality companies. These are companies with excellent
cash-generation capabilities, a sustainable growth path for dividends, and the
potential for capital growth.
The portfolio benefitted from the underweight exposure to China referred to
above, in particular during the second half of the year. Growth in Asia
ex-China remained attractive, and the Investment Manager endeavoured to
harness this trend with positions in Taiwan, Singapore, and Australia, where
dividend yields and distribution ratios are the highest in the region. Stock
selection in Taiwan was a positive factor, while performance in Australia
improved in the second half of the year due to good results from the banks
held in the portfolio.
A more detailed summary of performance for the year can be found in the
Investment Manager's Review.
Revenue and Dividends
Four quarterly dividends were declared in respect of the year. The first three
dividends were paid at a rate of 2.5p with a fourth interim dividend of 4.25p,
resulting in total dividends for the year of 11.75p per share. This represents
a 17.5% increase compared to last year's dividends of 10.0p per share. This
increase maintains the trend that has been established over each of the last
15 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.
Following payment of the fourth quarterly dividend, the Company has
accumulated revenue reserves of approximately 4.6p per share, or 39% of the
current annual dividend, which is available to support future distributions in
years where the dividend is not covered. The Company also has the ability to
use its capital reserves for this purpose. This provides an added level of
comfort to the Company's ability to pay dividends and is a significant benefit
of the closed end investment company structure.
The Board is very aware of the importance of dividends to shareholders, as
well as providing an above-average yield and ensuring that those dividends
grow over time. Based upon the Ordinary share price of 208p at the year end,
the shares were yielding an above average 5.6%.
Revenue earnings per share were 11.97p for the year, an increase of 17.0%
compared to the previous year. The Company has continued to benefit from the
Investment Manager's focus on high-yielding companies with strong fundamentals
and, as a result, we have seen growth in dividend receipts flowing into the
portfolio. The Company has also been able to start recognising the benefit of
lower rates of overseas withholding tax, following its move to UK tax
residency in 2022.
Share Capital Management
The Company bought back 2.65 million shares during the year to be held in
treasury, representing 1.6% of the shares in issue at the start of the year.
Subsequent to the year-end we have continued to buy back shares and a total of
2.43 million further shares have been acquired.
These buybacks provide an enhancement to the Company's NAV and benefit all
shareholders. Given the persistent discount for the reasons I elaborate on
above, the Company will continue to selectively buy back shares in the market,
in normal market conditions and at the discretion of the Board.
Gearing
Throughout the year, the Company had a £10 million fixed rate term loan and a
£40 million revolving credit facility. At the year end, a Sterling equivalent
of £32.1 million was drawn down, resulting in a gearing figure (net of cash)
of 7.5%, compared to 8.1% at the beginning of the year. The Board considers
that the use of moderate gearing is one of the advantages of the investment
trust structure and beneficial to shareholders over the long term.
Both of the Company's borrowing facilities matured on 1 March 2024. The £10
million fixed rate loan was repaid in full and the Company renewed its £40
million revolving credit facility with a £50 million loan for one year with
the Bank of Nova Scotia, London Branch, its existing lender. Under the terms
of the revolving credit facility, the Company has the option to increase the
level of the commitment from £50 million to £70 million at any time, subject
to the Lender's credit approval.
Annual General Meeting ("AGM") and Online Shareholder Presentation
AGM
The AGM will be held at 10:30 a.m. on 8 May 2024 at the offices of abrdn, 18
Bishops Square, London E1 6EG. 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.
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.
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 Tuesday 30 April 2024. 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 so as 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:
https://bit.ly/Asia-Income-24 (https://bit.ly/Asia-Income-24)
Details are also contained on the Company's website.
Ongoing Charges and Management Fees
The figure for ongoing charges represents the total charges to shareholders
for managing and administering the Company. The management fee payable to
abrdn Asia Limited for its management of the investment portfolio is the
largest component of this cost. The fee for the year was calculated on a
tiered basis on the Company's net assets, at 0.80% up to £350 million and
0.60% over £350 million. With effect from 1 January 2024, the Company has
benefited from a negotiated reduction in the management fee, with the annual
fee now calculated on the lower of market capitalisation and net assets, at
0.75% up to £300 million and 0.60% over £300 million. Based on the year end
assets, the new fee structure should result in a reduction in fee paid to
abrdn of approximately £664,000.
In addition to the management fee, other material costs that contribute to the
ongoing charges are an annual marketing fee payable to the Investment Manager
(£200,000 for the year to 31 December 2023) and interest payable on the
Company's debt. Other costs are shown in note 6 to the financial statements.
The Jersey administration fee is rebated to the Company by the Investment
Manager and therefore does not impact the ongoing charges figure. The total
ongoing charges for the year to December 2023 were 1.00%. All other things
being equal, the reduction in management fee referred to above is expected to
result in an ongoing charges figure of approximately 0.83% for the year ended
December 2024, a reduction of 17%.
Board Composition
Following a thorough search process, and subject to regulatory approval, the
Board has identified a suitable candidate to join the Board in line with its
succession plan and expects to announce the appointment of a new independent
non-executive Director at the time of the AGM.
Krystyna Nowak, our Senior Independent Director, was appointed as a Director
on 7 May 2015 and will have served for nine years at the time of the AGM on 8
May 2024. To allow for the completion of the regulatory approval process
referred to above and to ensure a smooth transition of responsibilities,
including the appointment of a new Senior Independent Director, Krystyna will
stand for re-election at the AGM but will retire from the Board on or before
the AGM in 2025.
Outlook
After a difficult year, the road ahead for Asian equities is one of cautious
optimism. Expectations are mounting for central banks to embark on an interest
rate easing path, which bodes well for the region. Borrowing costs are likely
to come down while equities as an asset class should benefit from lower bond
yields. Broadly, valuations in Asia remain at attractive levels compared to
developed markets such as the US, and corporate earnings in the region are
predicted to improve from 2024 onwards. Adding to this, Asia has had the
healthiest dividend growth globally.
There are many bright opportunities outside of China, as evidenced by the
Company's diversified positioning across the region. However, the recovery
potential for China remains intact. Policy remains supportive with the Chinese
government steadfast in its commitment to support growth. Although the
precise timing and pace of this recovery remains unclear, a significant and
sustainable upturn in Chinese equities could serve as a catalyst, further
elevating market sentiment across Asian markets at large.
Benefitting from a long heritage in Asia, and with its portfolio management
team based in the region, 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
26 March 2024
INVESTMENT MANAGER'S REVIEW
01. How did abrdn Asian Income Fund perform in 2023?
The Company's net asset value ("NAV") rose by 2.5% (total return, in sterling
terms), compared with the MSCI AC Asia Pacific ex Japan Index's (the "Index")
return of 1.6%. We were also pleased to generate a good level of income growth
within the portfolio, which enabled the Board to deliver a 17.5% increase in
the total dividend for 2023, and a dividend yield of 5.6% which is close to
double that of the Index. This solid performance is due to our conviction in
investing in high-yielding companies with strong fundamentals across Asia.
Longer-term performance has also been good, with the Company also
outperforming the Index over three and five years.
2023 was a year when macroeconomic policy and political developments exerted
significant influence on equity markets across the world. Volatility and
transition were prominent themes throughout the year, as challenging market
conditions in the first six months gradually gave way to a more benign
environment. A large part of the sentiment swing was due to the US Federal
Reserve, which finally confirmed its policy pivot towards an easing stance,
signalling potential interest rate cuts in 2024. With so much uncertainty
around the global economy, inflation, and geopolitical tensions, a flight to
safety saw investors seek out defensive holdings with above-average yields.
A key contributor to performance was the portfolio's low exposure to China,
especially when compared to the Index. The portfolio also benefited from its
positioning in Taiwan, such as index giant Taiwan Semiconductor Manufacturing
Company ("TSMC"), the global leader in semiconductor manufacturing, as well as
a selection of the smaller technology companies, including Sunonwealth
Electric Machine and Accton Technology, that play an essential role in the
technology value chain.
Elsewhere, the portfolio benefitted from good capital growth and dividend
yield from Power Grid Corporation, an Indian utility company that is investing
in green corridors to expand the country's access to renewable energy, in line
with the government's net zero pledge.
As stated above, the Board announced a 17.5% increase in the total dividend
for 2023, the fifteenth consecutive year of annual dividend increases. As your
Chairman mentioned in his report, this underlines the Company's status as a
"next generation dividend hero" as recognised by the Association of Investment
Companies. The dividend for the year equates to a yield of 5.6%, based on the
closing share price as at 31 December 2023.
02 What is the exposure to China?
Due to our focus on quality, Environmental, Social and Governance ("ESG")
matters, and total returns, the Company has managed a small position in China
for several years. This below index position of 4.8% of the portfolio was
beneficial over the year, as the Chinese market was among the weakest in the
region's economies, falling sharply on concerns over a slower than expected
consumer recovery. The large but low yielding internet companies such as
Alibaba and Meituan did not fare well, and we were able to avoid these in
favour of higher dividend paying companies elsewhere in the region.
Longer term, China has the potential to spring back, both in terms of its
economy and its stock market. The roll out of more supportive policies in a
co-ordinated manner could send a strong signal to the market that the
government is intensifying its efforts to prop up the economy. This would
suggest an incrementally positive outlook for China in 2024. There are also
some structural trends in China that speak to its future potential and
opportunity. As wealth increases and the middle class expands, the Chinese
population will shift up the spending pyramid, with higher wealth reaching
more individuals. Growing affluence and prosperity in the middle class means
rising demand for assets. This could be growing demand for white goods, as
provided by consumer appliance maker Midea, or for wealth management and
insurance services, which helps the financial conglomerate AIA, both of which
are held in the portfolio. China is also making moves in the green transition,
with the holding in China Resources Gas set to gain from the rising demand for
renewable energy.
Given the size of the Chinese economy and its remarkable growth in the past
decade, some investors have tended to overlook other markets in Asia. However,
Asia is far more than just China. There are world class businesses held in the
portfolio that offer both capital growth and growing yields across a diverse
range of sectors. The portfolio includes Tata Consultancy Services ("TCS") in
India, Samsung Electronics in South Korea and BHP in Australia, all of which
have a high quality business offering that makes them globally competitive. In
addition, some parts of Asia will be beneficiaries of new supply chain
networks that form to diversify manufacturing outside of China. Singapore
listed companies such as Venture and AEM have manufacturing plants in Malaysia
that service the needs of global blue chip customers looking for new
suppliers. Similarly, Hong Kong based shipping company SITC International has
been a beneficiary of new trading routes emerging under the "China plus one"
diversification strategy.
03 What was behind the strong growth in investment income?
Asia is often wrongly perceived as a region which mainly offers capital
growth. In reality, dividends have risen steadily for the past 25 years and
now make up half of total returns for the region, demonstrating that there are
plenty of opportunities for those seeking good income.
In addition to regular dividends, companies can pay special dividends from
time to time for various business reasons. Our ability to stay alert to these
opportunities can generate good returns, and is well supported by our team of
approximately 40 analysts located on the ground across Asia. We look for
strong balance sheets in our holdings as this provides flexibility. Not only
does it provide resilience through business cycles and mitigate refinancing
risk in a rising rate environment, but it also gives a company the choice to
reinvest in growth, reduce borrowings or distribute returns to shareholders.
Analysis shows the strength of Asian corporate balance sheets relative to the
US and Europe, where companies have been leveraging up their balance sheets
during the past decade.
Outside of the traditional yield sectors of banking, real estate and telecoms,
we have also managed to source good yields from companies in highly diverse
industries that benefit from many of the structural growth trends seen across
Asia. The investment income generated by the portfolio is collected across a
broad range of themes, sectors, and geographies.
The consumer growth story in Asia has proven to be a good driver of dividend
growth. As an example, we bought shares in consumer group Astra International
ahead of its special dividend. One of the company's subsidiaries enjoyed a
strong recovery post-Covid and Astra decided to pay out the extra cash
generated as a special dividend, taking the total yield of the shares close to
12%. Ultimately we exited this position after the special dividend was paid as
we do not expect this payout to be repeated in the coming years. Meanwhile in
Taiwan, MediaTek, a semiconductor company, restructured its dividend policy to
return free cash flows generated from its operations by way of special
dividends. The total yield on this holding, including the capital return, was
close to 11%.
One of our key strengths, and the reason why we can act quickly on dividend
updates from corporates, comes from having a large team of analysts in Asia.
We engage regularly with all the companies we are invested in and the analysts
stay informed of companies across the region within our investment universe.
This means we can be nimble and act upon special dividend announcements, which
by nature are unpredictable and difficult to time.
More broadly, we have been able to generate a good level of income from the
portfolio without any significant increase in activity. Portfolio turnover
remains below 40%.
04. Is Asia's technology sector still seeing good growth?
Asia's technology sector is coming off a trough after a challenging 2023, and
we believe that this remains one of the areas where structural growth trends
are helping our search for dividend paying companies. Asia plays a crucial
role in the global technology sector. It is home to some of the largest and
most influential technology companies in the world, including Samsung
Electronics and TSMC, which are the Company's top two holdings. The growth of
technology related companies in Taiwan and South Korea has been so strong that
the stock markets in both these countries are now heavily weighted towards the
sector.
Asian companies dominate the global market for smartphones and global brands
rely on Asia for the production of hardware components and devices. Heavy
investment in research and development has led to significant advancements in
fields from wearable devices to biotechnology, which is boosting growth in
generative artificial intelligence ("AI") and on-device AI, as well as
increasing data consumption and processing.
A notable consequence of the sector's growth has been the emergence of a
thriving supply chain of companies which make products ranging from
semiconductor materials to server cooling fans and circuit switches.
Semiconductor chips are particularly important as they are the building blocks
for many more complex electronics devices. TSMC has over half of the world's
semiconductor manufacturing capacity which gives it pricing power, a key
advantage in passing on cost inflation to customers. It also has strong cash
flow generation which helps shore up its balance sheet and increase returns to
shareholders. Semiconductor chips can be used as part of an integrated circuit
to power large scale servers which process and store data. Integrated circuits
need several components including switches that control data flow, which are
produced by Accton Technology, whilst data servers generate heat which require
specialist cooling fans to moderate temperatures, such as those made by
Sunonwealth Electric Machine. In 2023, investors focused increasingly on the
huge potential for AI related products. Generative AI, which produces content,
images and audio, could be particularly significant in the long term due to
the need to upgrade technology infrastructure. ChatGPT is just the first of
many such applications. This could provide a long-term boost for both TSMC and
Samsung Electronics, as these companies are amongst the global leaders in
advanced semiconductor technology that powers generative AI.
Beyond technology hardware, Asia has also seen significant growth in
e-commerce and digital services, including social media and gaming. Asian
countries have some of the highest numbers of internet users globally and the
development of 5G networks and other advanced technologies is a priority for
many Asian nations. To gain further exposure to this and enhance income
returns, the portfolio holds network infrastructure companies such as Taiwan
Mobile and Australia's Telstra, as well as digitally optimised banking
franchises across the region such as Singapore's DBS.
Overall, we remain confident of the longer-term prospects for both growth and
income in this sector.
05. Does ESG matter in selection companies?
Yes, we regard ESG as a core part of our quality investment process. When
picking quality stocks, we look for several key attributes: trustworthy
management with a good track record of execution, healthy balance sheets,
robust business models with entrenched competitive advantages, and sustainable
cash-generative operations that can support dividends. Before we invest in a
company, we do our own due diligence using published financial statements and
meeting the management teams. We invest in a company at the right price, once
we are convinced of its investment thesis and quality, and we monitor it
regularly after adding it to the portfolio.
Another way to enhance returns and mitigate portfolio risk is by 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 portfolio. Moreover, active engagement
is particularly pertinent in Asia, where an ESG culture has been slower 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.
As part of the process, we find that regular engagement with companies on ESG
issues is vital in keeping up to date with industry developments. This is
another reason why having a significant presence on the ground in Asia is a
source of competitive strength. We currently have three on-desk ESG
specialists within the equity team in Asia. This enables us to maintain
regular access with company management teams and industry thought leaders
across the region. On top of this, our team's understanding of many local
languages and cultures, helps us to keep our finger on the pulse and get the
most out of our engagement, driving better returns for shareholders.
In 2023, we had 129 company meetings with 49 separate companies. Among these
engagements, we discussed various issues with Samsung Electronics, including
share ownership and remuneration targets for directors, and also asked the
company how it tests the authenticity of the recycled resin and polyamide it
uses. We engaged with Rio Tinto on proposed changes to its remuneration
policy, especially those related to performance measures and vesting
thresholds for the long- term incentive plan, as well as the share deferral
requirements for annual bonuses. In our discussions with Commonwealth Bank of
Australia, we learned more about how the bank manages the risks associated
with labour management, money laundering and counter terrorism financing
operations.
Our successful approach to ESG is reflected by the recognition we have
received from external ESG agencies, including the widely used Morningstar
Sustainability Index which assigned us its highest rating, and MSCI which
awarded the Company an A rating.
06 What is the outlook for Asian markets in 2024?
The final weeks of 2023 saw the clearest signal yet from the Federal Reserve
that its long period of tightening monetary policy could finally be coming to
an end. The precise timing and scale of future interest rate cuts remains to
be seen, but the benefits of potentially lower borrowing costs and a weaker US
Dollar are likely to boost the appeal of Asian assets and currencies. Income
investors have more reason to cheer as better economic growth and lower bond
yields only serve to increase the appeal of the equity income asset class.
Another positive economic factor is that inflation across Asia in 2023 was
modest compared with many developed countries, which means interest rates have
not risen as much and central banks in several countries were able to stop
increasing rates in the second half of 2023.
China remains a source of concern, given its economic recovery has not been as
smooth as expected. Domestic consumption continues to be muted, while ongoing
challenges persist to stimulate spending and growth. However, we are seeing
signs of increasing targeted support and intervention by both the central bank
and the government. Other headwinds for the region include geopolitical
developments that have already and could continue to dampen investor appetite
for risky assets and disrupt supply chains, including attacks in the Red Sea,
ongoing trade tensions between the US and China, and territorial disputes in
the South China Sea. 2024 will also see political influence as elections loom
large across Asia. Whilst outcomes in Taiwan and Indonesia thus far suggest
policy continuity, the polls move to India next in April where Prime Minister
Modi will look to continue his vision for India as a leading global economy.
Further afield, the US Presidential elections in November could lead to an
increase in political noise and
uncertainty for the Asia region.
Key structural themes, such as increasing personal incomes and the move to
renewable energy, continue to provide some of the best investment
opportunities across a range of sectors from infrastructure to financial
services and vehicle manufacturing. Asia has some of the largest and fastest
growing companies in the world. Many are established global brands or have
built dominant positions in growing sectors. The technology sector is now
recovering as AI-related applications and chips start to proliferate, fuelling
further demand in the semiconductor and consumer electronics sectors.
More broadly, there are expectations that corporate earnings will show
improvement from the beginning of 2024. We continue to believe that quality
companies with solid balance sheets and sustainable earnings growth will
emerge stronger from tough times. For income investors, the prospects are
improving, with dividends of Asian companies showing steady growth. A growing
valuation divergence between Asia and developed markets over the past 12
months means that Asian companies now offer better value coupled with better
forecast earnings growth. This means investors have an excellent opportunity
to prosper from the twin benefits of rising income and capital growth.
Over the longer term, we see the most attractive opportunities around some key
structural themes in Asia. Rising affluence is spurring growth in areas
including financial services, while urbanisation and an infrastructure boom is
set to benefit property developers and mortgage providers. The region is also
in the driving seat when it comes to the green transition, with renewable
energy, batteries, electric vehicles, related infrastructure, and
environmental management all leading the way. We continue to favour
fundamental themes, which we believe will deliver good dividends for
shareholders over the long run.
Yoojeong Oh and Eric Chan
abrdn Asia Limited
26 March 2024
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.
Tax Residency
Following shareholder approval at an 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 stock market
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") which the Company has adopted on a
voluntary basis. This Statement, from "Promoting the Success of the Company"
to "Online Shareholder Presentation" 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
Investment 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 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 8 May 2024 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 Investment 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 Investment Manager's Promotional and Investor
Relations programme.
The Investment Manager
The key service provider for the Company is the Investment Manager, abrdn Asia
Limited. The performance of abrdn Asia Limited is reviewed in detail at each
Board meeting.
Key Stakeholders - Shareholders
Shareholders are key stakeholders in the Company - they are looking to the
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, Investment Manager and other relevant stakeholders.
Reviews include those of the Company's Custodian, Company Secretary,
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
Investment Manager, on the terms agreed, is in the interests of the
shareholders as a whole.
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.
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 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.
Gearing
The Company utilises gearing in the form of bank debt with the aim of
enhancing shareholder returns over the longer term. Throughout the year, the
Company had a £10 million fixed rate term loan and a £40 million revolving
credit facility. Both of the borrowing facilities matured on 1 March 2024. The
£10 million fixed rate loan was repaid in full and the Company renewed its
£40 million revolving credit facility with a £50 million loan for one year
with the Bank of Nova Scotia, London Branch, its existing lender. Under the
terms of the revolving credit facility, the Company has the option to increase
the level of the commitment from £50 million to £70 million at any time,
subject to the Lender's credit approval. 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 and to provide
an enhancement to the Company's NAV and benefit all shareholders. 2.6 million
shares were bought back during the year to be held in treasury, representing
1.6% of the shares in issue at the start of the year.
Investment Management and Company Secretarial Arrangements
During the year, the Board was advised by the abrdn Group of the proposed sale
of its discretionary fund management business in Jersey, which had previously
provided a Jersey regulatory function to the Company.
Consequently, with effect from 15 August 2023, pursuant to a new management
agreement between the Company and the abrdn Group, abrdn Asia Limited was
appointed as the Company's Investment Manager and abrdn Investments Limited
was appointed as the Company's Administrator. In addition, the Company
appointed JTC Fund Solutions (Jersey) Limited ("JTC") to provide certain
Jersey based services, including company secretarial services.
There were no changes to the management fee as a result of the above changes
and the administration fee charged by JTC is met by the abrdn Group.
Management Fee
During the year the Board negotiated a reduction in the management fee,
details of which are set out in the Chairman's Statement. The new fee
arrangement takes effect from 1 January 2024 . All other things being equal,
the reduction in management fee is expected to result in a reduction of
approximately 17% in the ongoing charges figure, benefitting all shareholders.
Company Messaging
Recognising the importance of brand recognition and investor outreach, the
Board has engaged a brand specialist to review the Company's messaging.
Coupled with a strategy aimed at expanding the Company's reach to retail
investors, supported by abrdn, the Board anticipate an increase in retail
demand for the Company's shares throughout 2024, thereby benefiting all
shareholders.
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 Tuesday 30 April 2024. 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 below.
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.
Further commentary on the performance of the Company is contained in the
Chairman's Statement and Investment Manager's Review.
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 Directors aim to operate an
active share buyback policy should the price at which the Ordinary shares
trade relative to the NAV per Share (including income) be at a discount of
more than 5% in normal market conditions.
Ongoing Charges Ratio The Board monitors the Company's operating costs carefully.
Gearing The Board ensures that gearing is kept within the Board's guidelines to the
Investment 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 Investment 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. 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.
In addition to these risks, the Board is conscious of the ongoing impacts of
the conflicts in Ukraine and the Middle East, as well as continuing tensions
between the US and China. The Board is also conscious of the impact of
inflation and higher interest rates on financial markets. The Board considers
that these are risks that could have further implications for financial
markets.
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 Investment 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 with the assets and liabilities of the Company and reviews these at each Board
meeting.
advantage of potential opportunities and result in a loss of value to the
Company's Ordinary shares.
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 Company Secretary and Investment Manager to ensure
Company Law and regulations, the Financial Services and Markets Act, The the Company's compliance with applicable law and regulations and from time to
Packaged Retail and Insurance-based Investment Products (PRIIPS) Regulation, time employs external advisers to advise on specific concerns. The Board also
the Alternative Investment Fund Managers Directive, Accounting Standards, the reviews the Company's Business Risk Assessment and the Company Secretary's and
UK Corporation Tax Act 2010 and the FCA's Listing Rules, Disclosure Guidance Investment Manager's compliance monitoring plans.
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 Investment Manager) and risk management reports from the Investment Manager at each Board meeting. It
any control failures and gaps in these systems and services could result in a also receives assurances from all its significant service providers, as well
loss or damage to the Company. as back to back assurance from the Investment 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, or fully by the Investment Manager, at each Board meeting.
recover its entitlement to overseas withholding tax, thereby 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 Investment 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 Investment 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.
Environmental, Social and Human Rights Issues
The Company has no employees as management of the assets is 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 Investment
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;
- The liquidity of the Company's portfolio; and,
- The flexibility provided by the £50 million revolving
credit facility that has been renewed since the year end and which matures in
March 2025.
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 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
26 March 2024
28 Esplanade St Helier
Jersey JE2 3QA
DIVIDENDS AND TEN YEAR FINANCIAL RECORD
Dividends
Rate Ex-dividend date Record date Payment date
First interim 2023 2.50p 27 April 2023 28 April 2023 23 May 2023
Second interim 2023 2.50p 27 July 2023 28 July 2023 25 August 2023
Third interim 2023 2.50p 26 October 2023 27 October 2023 24 November 2023
Fourth interim 2023 4.25p 25 January 2024 26 January 2024 23 February 2024
2023 11.75p
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
Ten Year Financial Record
Year to 31 December 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Total revenue (£'000) 19,333 21,216 20,947 21,758 21,056 20,996 16,942 20,198 21,841 24,021
Per Ordinary share (p)
Revenue return 8.24 9.11 9.15 9.58 9.25 9.42 7.41 8.95 10.23 11.97
Total return 14.17 (18.86) 49.12 33.14 (13.17) 22.29 27.10 25.88 (10.01) 5.18
Dividends payable 8.00 8.50 8.75 9.00 9.15 9.25 9.30 9.50 10.00 11.75
Net asset value per Ordinary share (p) 197.84 170.58 211.82 235.63 213.96 227.15 245.40 262.76 243.44 238.59
Share price per Ordinary share (p) 199.88 159.00 194.25 218.00 195.75 214.00 228.50 231.00 215.00 208.00
Equity shareholders' funds (£'000) 384,868 329,432 396,028 431,869 382,199 403,403 431,476 450,790 413,447 398,868
INVESTMENT PORTFOLIO
As at 31 December 2023
Valuation Total Valuation
2023 assets (A) 2022 (B)
Company Country £'000 % £'000
Taiwan Semiconductor Manufacturing Company Taiwan 35,371 8.2 26,538
Samsung Electronics (Pref) South Korea 28,170 6.6 21,308
BHP Australia 19,340 4.5 18,860
DBS Singapore 15,260 3.5 19,925
Oversea-Chinese Banking Corporation Singapore 14,088 3.3 14,722
MediaTek Taiwan 13,062 3.0 2,789
Power Grid Corp India 12,056 2.8 9,803
Venture Corporation Singapore 11,147 2.6 14,555
United Overseas Bank Singapore 10,807 2.5 11,688
Rio Tinto (C) Australia 10,516 2.4 11,480
Top ten investments 169,817 39.4
Taiwan Mobile Taiwan 9,963 2.3 10,126
Centuria Industries REIT Australia 9,219 2.1 6,702
LG Chem (Pref) South Korea 8,975 2.1 11,477
AIA Hong Kong 8,730 2.0 10,789
China Resources Land China 8,704 2.0 11,804
Spark New Zealand New Zealand 8,188 1.9 8,705
Keppel Infrastructure Trust Singapore 7,960 1.8 8,534
Sunonwealth Electric Machine Taiwan 7,603 1.8 4,967
Accton Technology Taiwan 7,365 1.7 5,182
Charter Hall Long Wale REIT Australia 7,153 1.7 8,035
Top twenty investments 253,677 58.8
Tisco Financial Group Foreign Thailand 7,055 1.6 8,064
Auckland International Airport New Zealand 6,736 1.6 6,492
Singapore Technologies Engineering Singapore 6,582 1.5 5,923
Region RE Australia 6,569 1.5 7,874
Infosys India 6,442 1.5 6,715
Commonwealth Bank of Australia Australia 6,396 1.5 8,356
Capitaland India Trust Singapore 6,129 1.4 5,006
Hana Microelectronics (Foreign) Thailand 5,691 1.3 5,776
Hong Kong Exchanges & Clearing Hong Kong 5,465 1.3 6,461
Midea Group 'A' China 5,252 1.2 4,187
Top thirty investments 315,994 73.2
GlobalWafers Taiwan 5,221 1.2 4,024
ASX Australia 5,219 1.2 5,898
SAIC Motor 'A' China 5,013 1.2 5,599
Tata Consultancy Services India 4,979 1.2 4,550
Capitaland Investment Singapore 4,947 1.2 6,040
National Australia Bank Australia 4,903 1.1 9,073
Siam Cement (D) Thailand 4,864 1.1 5,696
Momo.com Inc Taiwan 4,862 1.1 7,242
SITC International Hong Kong 4,662 1.1 -
Hang Lung Properties Hong Kong 4,479 1.0 6,685
Top forty investments 365,143 84.6
Hon Hai Precision Industry Taiwan 4,442 1.0 8,441
Singapore Telecommunications Singapore 4,333 1.0 7,926
NZX New Zealand 4,278 1.0 4,871
Bank Mandiri India 4,251 1.0 -
Telstra Corporation Australia 4,207 1.0 -
Amada Co Japan 4,197 1.0 3,344
Lotus's Retail Growth Freehold And Leasehold Property Fund (Foreign) Thailand 4,186 1.0 4,142
AKR Corporindo Indonesia 4,119 1.0 -
Tencent Hong Kong 4,088 0.9 -
Taiwan Union Technology Taiwan 3,768 0.9 1,627
Top fifty investments 407,012 94.4
Autohome Inc - ADR Hong Kong 3,609 0.8 -
ICICI Bank (E) India 3,321 0.8 3,596
Land & Houses Foreign Thailand 3,263 0.8 4,166
Dah Sing Financial Hong Kong 3,134 0.7 3,755
Digital Core REIT Singapore 2,866 0.7 2,590
Convenience Retail Asia Hong Kong 2,746 0.6 3,425
AEM Singapore 2,058 0.5 2,120
China Resources Gas China 1,627 0.4 1,975
Top sixty investments 429,636 99.7
G3 Exploration (E) China - - -
Total value of investments 429,636 99.7
Net current assets (F) 1,355 0.3
Total assets (A) 430,991 100.0
(A) Net assets excluding borrowings.
(B) Purchases and/or sales effected during the year may result in
2023 and 2022 values not being directly comparable.
(C) Incorporated in and listing held in United Kingdom.
(D) Holding includes investment in common (£3,252,000) and
non-voting depositary receipt (£1,612,000) lines.
(E) Corporate bonds.
(F) Excludes bank loans of £32,123,000
DIRECTORS' REPORT (EXTRACT)
Introduction
The Directors present their Report and the audited financial statements for
the year ended 31 December 2023.
Results and Dividends
The financial statements for the year ended 31 December 2023 are contained
below. The Company's dividend policy is to pay interim dividends on a
quarterly basis and for the year to 31 December 2023 dividends were paid on 23
May, 25 August and 24 November 2023 and 23 February 2024. As at 31 December
2023 the Company's revenue reserves (adjusted for the payment of the fourth
interim dividend) amounted to £7.7 million (approximately 4.6p 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 2023, there were 167,178,707 fully paid Ordinary
shares of no par value (2022 - 169,832,401) Ordinary shares in issue. At the
year end there were 27,754,682 Ordinary shares held in treasury (2022 -
25,100,988).
During the year 2,653,694 Ordinary shares were purchased in the market for
treasury (2022 - 1,726,495) and no Ordinary shares were issued or sold from
treasury.
Subsequent to the year end 2,433,079 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
Throughout the year, the Company had a £10 million fixed rate term loan and a
£40 million revolving credit facility. Both of the borrowing facilities
matured on 1 March 2024. The £10 million fixed rate loan was repaid in full
and the Company renewed its revolving credit facility with a £50 million loan
for one year with the Bank of Nova Scotia, London Branch, its existing lender.
Under the terms of the revolving credit facility, the Company has the option
to increase the level of the commitment from
£50 million to £70 million at any time, subject to the Lender's credit
approval.
Management and Company Secretarial Arrangements
During the year, the Board was advised by the abrdn Group of the proposed sale
of its discretionary fund management business in Jersey, which had previously
provided a Jersey regulatory function to the Company; abrdn Capital
International Limited ("aCIL") was the Company's Manager and Company
Secretary, and the investment management of the Company was delegated from
aCIL to abrdn Asia Limited, aCIL and abrdn Asia Limited both being wholly
owned subsidiaries of abrdn plc.
Consequently, with effect from 15 August 2023, pursuant to a new management
agreement between the Company and the abrdn Group:
- abrdn Asia Limited was appointed to provide portfolio and risk
management services and to act as the Company's non-EU 'alternative investment
fund manager' for the purposes of the Alternative Investment Fund Managers
Directive 2011/61/EU; and
- abrdn Investments Limited (a UK based wholly owned subsidiary
of abrdn plc, authorised and regulated by the Financial Conduct Authority) was
appointed to provide general administrative and advisory services, fund
accounting, secretarial, marketing and promotional activities as well as group
risk and compliance reporting to the Company.
In addition, from 15 August 2023, the Company appointed JTC Fund Solutions
(Jersey) Limited ("JTC") under an administration agreement between JTC and the
Company to provide certain Jersey based services including, but not limited to
Jersey administration services and compliance with applicable Jersey codes
(including provision of a compliance officer, money laundering reporting
officer and money laundering compliance officer). JTC also provide a
registered office and company secretarial services.
There were no changes to the management fee as a result of the above changes
and the administration fee charged by JTC is met by the abrdn Group.
Termination of the management agreement is subject to six months' notice.
Further details of the management fee arrangements are contained in notes 5
and 20 to the financial statements.
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
Information provided to the Company by major shareholders pursuant to the
FCA's Disclosure Guidance and Transparency Rules are published by the Company
via a Regulatory Information Service.
The table below sets out the interests in 3% or more of the issued share
capital of the Company, of which the Board was aware as of 31 December 2023.
No of Shares %
Shareholder Held held
1607 Capital Partners 18,104,785 10.8
Interactive Investor 18,047,129 10.8
Rathbones 13,917,647 8.3
Hargreaves Lansdown 13,891,562 8.3
City of London Investment Management 13,031,927 7.8
Allspring Global Investments 6,846,023 4.1
RBC Brewin Dolphin 5,821,713 3.5
AJ Bell 5,569,716 3.3
Charles Stanley 5,444,235 3.3
There have been no changes notified to the Company since the end of the year.
Directors
The Board currently consists of five non-executive Directors, Robert Kirkby,
Mark Florance, Ian Cadby, Nicky McCabe and Krystyna Nowak who each held office
throughout the year. Hugh Young retired as a Director at the Annual General
Meeting ("AGM") on 10 May 2023.
Governance
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 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.
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. In view of its size, the Board will continue to
ensure that all appointments are made on the basis of merit against the
specification prepared for each appointment. In doing so, the Board will take
account of the targets set out in the FCA's Listing Rules, which are set out
below.
The Board has resolved that the Company's year-end date is the most
appropriate date for disclosure purposes. In addition to the information
contained below, of the five Directors at 31 December 2023, one is based in
Singapore, two are based in Jersey and two are based in the UK.
Table for reporting on gender as at 31 December 2023
Number of Board Members Percentage of the Board Number of senior positions on the Board
(note3)
Men 3 60% 2
Women 2 40% (note 1) 1
Not specified/ prefer not to say - -
Table for reporting on ethnic background as at 31 December 2023
Number of Board Members Percentage of the Board Number of senior positions on the Board
(note3)
White British or other White (including minority-white groups) 5 100% 3
Minority ethnic - (note 2) -
Not specified/prefer not to say - - -
Notes:
1. Meets target that at least 40% of Directors are women as set out
in LR 9.8.6R (9)(a)(i).
2. Does not meet target that at least one Director is from a minority
ethnic background as set out in LR 9.8.6R (9)(a)(iii).
3. The Company is externally managed and does not have any executive
staff. Specifically, it does not have either a CEO or CFO. The Company
considers that the roles of Chairman of the Board, Senior Independent Director
and Chairman of the Audit Committee are senior Board positions. Accordingly,
the Company meets the requirement of LR 9.8.6R (9)(a)(ii) that at least one
senior Board position is held by a woman.
As shown in the above table, the Company has not as yet met the target set out
in LR 9.8.6R (9)(a)(iii) that at least one Director is from a minority ethnic
background. The Board short listed and interviewed ethnically diverse
candidates as part of its current recruitment process as set out in the
Chairman's Statement, and will continue to take ethnic diversity into account
for future appointments.
Policy on Tenure
In normal circumstances, it is the Board's expectation that Directors will not
serve beyond the Annual General Meeting following the ninth anniversary of
their appointment. However, the Board takes the view that independence of
individual Directors is not necessarily compromised by length of tenure on the
Board and that continuity and experience can add significantly to the Board's
strength. The Board believes that recommendation for re-election should be on
an individual basis following a rigorous review which assesses the
contribution made by the Director concerned, but also taking into account the
need for managed succession and diversity.
It is the Board's policy that the Chairman of the Board will not serve as a
Director beyond the Annual General Meeting following the ninth anniversary of
his or her appointment to the Board. However, this may be extended in
exceptional circumstances or to facilitate effective succession planning and
the development of a diverse Board. In such a situation the reasons for the
extension will be fully explained to shareholders and a timetable for the
departure of the Chairman clearly set out.
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 2023 (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 2 (2) n/a n/a 1 (1)
(A) Mr Cadby is not a member of the Audit Committee but attended both meetings
by invitation.
(B) Mr Young was not a member of the Audit or Management Engagement
Committees.
In addition to the above meetings there were a number of ad hoc Board Meetings
held during the year 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 Investment 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. Other than Mr Young, who retired as a Director during
the year, 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.
The Directors have reviewed forecasts detailing revenue and liabilities, have
set limits for borrowing and reviewed compliance with banking covenants,
including the headroom available.
Since the year end, the Company has renewed its revolving credit facility with
a £50 million loan for one year with the Bank of Nova Scotia, London Branch,
its existing lender. In the event that it is not possible to renew the loan in
March 2025, the Board considers that there is sufficient portfolio liquidity
to enable the loan to be repaid.
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 10 May 2023 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 8 May 2024.
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, 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. 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 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 Investment 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 Investment 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 Investment Manager prepares forecasts and
management accounts which allow the Board to assess the Company's activities
and review its investment performance;
- the Board and Investment 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;
- written agreements are in place which specifically
define the roles and responsibilities of the 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 2023, 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 Investment Manager, including its internal audit and compliance
functions and taking account of events since the relevant period end.
In addition, the Investment Manager ensures 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 SA, London Branch, and
receives control reports covering its activities.
Representatives from the Investment 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 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 Company's website.
The Notice of the AGM 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 Investment Manager, either formally at the Company's AGM or informally
following the meeting. As explained in the Chairman's Statement, the Company
will hold an online shareholder presentation in advance of the AGM 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 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".
abrdn Asia Limited, 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, abrdn Asia Limited 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 8 May 2024 at 18 Bishops Square, London
E1 6EG.
Ian Cadby
Chairman
26 March 2024
28 Esplanade St Helier
Jersey JE2 3QA
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 Jersey governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The Directors 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
The Directors confirm that to the best of their 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
26 March 2024
28 Esplanade St Helier
Jersey JE2 3QA
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 2023 31 December 2022
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Investment income 4
Dividend income 23,558 32 23,590 21,423 - 21,423
Interest income 459 - 459 371 - 371
Stock lending income 4 - 4 - - -
Traded option premiums - - - 47 - 47
Total revenue 3 24,021 32 24,053 21,841 - 21,841
Losses on investments held at fair value through profit or loss 11 - (8,457) (8,457) - (29,033) (29,033)
Net currency gains/(losses) - 701 701 - (3,204) (3,204)
24,021 (7,724) 16,297 21,841 (32,237) (10,396)
Expenses
Investment management fee 5 (1,216) (1,825) (3,041) (1,308) (1,962) (3,270)
Other operating expenses 6 (867) - (867) (939) - (939)
Profit/(loss) before finance costs and tax 21,938 (9,549) 12,389 19,594 (34,199) (14,605)
Finance costs 7 (810) (1,215) (2,025) (470) (704) (1,174)
Profit/(loss) before tax 21,128 (10,764) 10,364 19,124 (34,903) (15,779)
Tax expense 2d, 8 (934) (686) (1,620) (1,695) 408 (1,287)
Profit/(loss) for the year 20,194 (11,450) 8,744 17,429 (34,495) (17,066)
Earnings per Ordinary share (pence) 10 11.97 (6.79) 5.18 10.23 (20.24) (10.01)
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 2023 31 December 2022
Notes £'000 £'000
Non-current assets
Investments held at fair value through profit or loss 11 429,636 448,323
Current assets
Cash and cash equivalents 1,560 7,328
Other receivables 12 2,913 1,175
4,473 8,503
Creditors: amounts falling due within one year
Bank loans 13(a) (32,123) (30,986)
Other payables 13(b) (1,503) (1,288)
(33,626) (32,274)
Net current liabilities (29,153) (23,771)
Total assets less current liabilities 400,483 424,552
Creditors: amounts falling due after more than one year
Bank loans 13(a) - (9,981)
Deferred tax liability on Indian capital gains 13(c) (1,615) (1,124)
(1,615) (11,105)
Net assets 398,868 413,447
Stated capital and reserves
Stated capital 15 194,933 194,933
Capital redemption reserve 1,560 1,560
Capital reserve 16 187,549 204,414
Revenue reserve 14,826 12,540
Equity shareholders' funds 398,868 413,447
Net asset value per Ordinary share (pence) 17 238.59 243.44
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
Capital
Stated redemption Capital Revenue Retained
capital reserve reserve reserve earnings Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Opening balance 194,933 1,560 204,414 12,540 - 413,447
Buyback of Ordinary shares for treasury 15 - - (5,415) - - (5,415)
Profit for the year - - - - 8,744 8,744
Transferred from retained earnings to capital reserve (A) - - (11,450) - 11,450 -
Transferred from retained earnings to revenue reserve - - - 20,194 (20,194) -
Dividends paid 9 - - - (17,908) - (17,908)
Balance at 31 December 2023 194,933 1,560 187,549 14,826 - 398,868
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 reserve (A) - - (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
(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 (2022 - £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.
CASH FLOW STATEMENT
Year ended Year ended
31 December 2023 31 December 2022
Notes £'000 £'000
Cash flows from operating activities
Dividend income received 23,293 21,140
Interest income received 481 354
Derivative income received - 47
Investment management fee paid (2,734) (5,169)
Return of capital included in investment income 32 -
Other cash expenses (940) (801)
Net cash generated from operating activities before interest paid and tax 20,132 15,571
Interest paid (2,115) (1,041)
Overseas taxation paid (1,980) (1,712)
Net cash inflows from operating activities 16,037 12,818
Cash flows from investing activities
Purchases of investments (142,128) (55,017)
Sales of investments 152,001 75,625
Indian capital gains tax on sales (195) (83)
Net cash inflow from investing activities 9,678 20,525
Cash flows from financing activities
Purchase of own shares for treasury 15 (5,415) (3,818)
Dividends paid 9 (17,908) (16,459)
Repayment of loans (8,000) (8,948)
Net cash outflow from financing activities (31,323) (29,225)
Net (decrease)/increase in cash and cash equivalents (5,608) 4,118
Cash and cash equivalents at the start of the year 7,328 3,268
Effect of foreign exchange on cash and cash equivalents (160) (58)
Cash and cash equivalents at the end of the year 2(f) 1,560 7,328
Non-cash transactions during the year comprised stock dividends of £390,000
(2022 - £616,000) (Note 4).
The accompanying notes are an integral part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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 April 2021 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 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. 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 2023.
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.
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 Issued and effective
IAS 1 Amendments - Disclosure of Accounting Policies (effective from 1 January
2023)
IAS 8 Amendments - Definition of Accounting Estimates (effective from 1
January 2023)
IAS 12 Amendments (Deferred Tax and OECD Pillar 2 Taxes)(effective from 1
January 2023)
Future amendments to accounting standards and interpretations
Standards Issued but not yet effective
IAS 1 Amendments - Classification of Liabilities as Current or Non-Current
(effective from 1 January 2024)
IAS 1 Amendments - Non-current Liabilities with Covenants (effective from 1
January 2024)
IFRS S1 - General requirements for disclosure of sustainability-related
financial information (effective from 1 January 2024)
IFRS S2 - Climate-related disclosures (effective from 1 January 2024)
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 2023 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.
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 Investment 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.
(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 Year ended
31 December 2023 31 December 2022
£'000 £'000
Asia Pacific region 23,069 20,571
United Kingdom 952 1,270
24,021 21,841
4. Investment income
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Income from investments
Overseas dividend income 22,398 19,600
UK dividend income 770 1,207
Stock dividend income 390 616
23,558 21,423
Other income
Bond interest 277 308
Deposit interest 182 63
Stock lending income 4 -
Traded option premiums - 47
463 418
Total revenue 24,021 21,841
During the year, the Company was entitled to premiums totalling £nil (2022 -
£47,000) in exchange for entering into option contracts. At the year end
there were no (2022 - nil) open positions. Losses realised on the exercise
of derivative transactions are disclosed in note 11.
5. Investment management fee
Year ended Year ended
31 December 2023 31 December 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 1,216 1,825 3,041 1,308 1,962 3,270
With effect from 15 August 2023, investment management services have been
provided by abrdn Asia Limited ("abrdn Asia"). Prior to this management
services were provided by abrdn Capital International Limited ("aCil"). Any
stocklending activity has been sub-delegated to abrdn Investments Limited.
During the year, the investment management fee was payable quarterly in
arrears and 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. The
balance due to abrdn Asia at the year end was £1,093,000 (2022 - £786,000).
The investment management fee is charged 40% to revenue and 60% to capital in
line with the Board's expected long term returns.
Since the year end, the Board has reported a reduction in the investment
management fee, details of which are contained in the Chairman's Statement.
6. Other operating expenses
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Directors' fees 175 164
Promotional activities (A) 200 206
Auditor's remuneration:
- statutory audit 57 52
- disbursements 2 1
Custody fees 98 143
Printing & postage 36 32
Professional fees 56 84
Registrars fees 58 52
Other 185 205
867 939
(A) Promotional activities are provided by abrdn Investments Limited. The
total fees paid are based on an annual rate of £193,000 from 1 July 2023
(2022 - £206,000). An amount of £48,000 (2022 - £103,000) 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
Year ended Year ended
31 December 2023 31 December 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest on bank loans 804 1,205 2,009 464 694 1,158
Amortisation of loan arrangement expenses 6 10 16 6 10 16
810 1,215 2,025 470 704 1,174
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 2023 2022
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Indian capital gains tax - 195 195 - 34 34
Overseas withholding tax 934 - 934 1,695 50 1,745
Total current tax charge for the year (note b) 934 195 1,129 1,695 84 1,779
Movement of deferred tax liability on Indian CGT - 491 491 - (492) (492)
Total deferred tax charge for the year (note c) - 491 491 - (492) (492)
Total tax charge for the year 934 686 1,620 1,695 (408) 1,287
b) The UK corporation tax rate was 19% until 31 March 2023 and 25% from 1 April
2023, giving an effective rate of 23.5% (2022 - 19%). The tax charge for the
year differs from the corporation tax rate.
2023 2022
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Net profit/(loss) before taxation 21,128 (10,764) 10,364 19,124 (34,903) (15,779)
Corporation tax @ 23.5% (2022 - 19%) 4,965 (2,529) 2,436 3,633 (6,631) (2,998)
Effects of: - -
UK dividends (181) - (181) (229) - (229)
Non-taxable overseas dividends (4,700) - (4,700) (3,315) - (3,315)
Other Non-taxable overseas dividends - (8) (8) - -
Currency gains/losses - (805) (805) - 609 609
Realised/unrealised gains/losses on investments - 2,627 2,627 - 5,516 5,516
Expenses not deductible for tax purposes 2 - 2 10 - 10
Excess management expenses (53) 715 662 (71) 507 436
Tax effect of expensed double taxation relief (33) - (33) (28) - (28)
Irrecoverable overseas withholding tax 934 - 934 1,695 49 1,744
Indian capital gains tax - 195 195 - 34 34
Movement of deferred tax liability on Indian CGT - 491 491 - (492) (492)
Total current tax charge for the year (note a) 934 686 1,620 1,695 (408) 1,287
c) Factors that may affect future tax charges
At the year end, after offset against income taxable on receipt, there is a
potential deferred tax asset of £1,276,000 (2022 - £573,000) 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 Year ended
31 December 2023 31 December 2022
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Fourth interim dividend 2022 - 3.10p per Ordinary share (2021 - 2.75p) 5,263 4,712
First interim dividend 2023 - 2.50p per Ordinary share (2022 - 2.30p) 4,227 3,924
Second interim dividend 2023 - 2.50p per Ordinary share (2022 - 2.30p) 4,216 3,915
Third interim dividend 2023 - 2.50p per Ordinary share (2022 - 2.30p) 4,202 3,908
17,908 16,459
Following the change of tax residency on 1 January 2022, the Company needs
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 revenue available for distribution by way of dividend for
the year is £20,194,000 (2022 - £17,429,000).
2023 2022
£'000 £'000
First interim dividend 2023 - 2.50p per Ordinary share (2022 - 2.30p) 4,227 3,924
Second interim dividend 2023 - 2.50p per Ordinary share (2022 - 2.30p) 4,216 3,915
Third interim dividend 2023 - 2.50p per Ordinary share (2022 - 2.30p) 4,202 3,908
Fourth interim dividend 2023 - 4.25p per Ordinary share (2022 - 3.10p) 7,105 5,263
19,750 17,010
The fourth interim dividend for 2023, amounting to £7,105,000 (2022 - fourth
interim dividend of £5,263,000), is not recognised as a liability in these
financial statements as it was announced and paid after 31 December 2023.
10. Earnings per share
Ordinary shares. The earnings per Ordinary share is based on the profit after
taxation of £8,702,000 (2022 - loss £17,066,000) and on 168,693,861 (2022 -
170,411,839) 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 Year ended
31 December 2023 31 December 2022
Revenue Capital Total Revenue Capital Total
Net profit/(loss) (£'000) 20,194 (11,450) 8,744 17,429 (34,495) (17,066)
Weighted average number of Ordinary shares in issue (A) 168,693,861 170,411,839
Return per Ordinary share (pence) 11.97 (6.79) 5.18 10.23 (20.24) (10.01)
(A) Calculated excluding Ordinary shares held in treasury.
11. Investments held at fair value through profit or loss
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Opening book cost 346,553 346,679
Opening investment holding gains 101,770 150,691
Opening fair value 448,323 497,370
Analysis of transactions made during the year
Purchases at cost 142,526 55,611
Sales proceeds received (152,756) (75,625)
(Losses) on investments (A) (8,457) (29,033)
Closing fair value 429,636 448,323
£'000 £'000
Closing book cost 339,747 346,553
Closing investment gains 89,889 101,770
Closing fair value 429,636 448,323
(A) Includes losses realised on the exercise of traded options of £nil (2022
- £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 £nil (2022 - £47,000) per note 4.
The Company generated £152,756,000 (2022 - £75,625,000) from investments
sold in the year. The book cost of these investments when they were purchased
was £149,332,000 (2022 - £55,736,000). 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 Year ended
31 December 2023 31 December 2022
The portfolio valuation £'000 £'000
Listed on recognised stock exchanges:
Equities - overseas 426,315 444,727
Bonds - overseas 3,321 3,596
Total 429,636 448,323
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/(losses) 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 Year ended
31 December 2023 31 December 2022
£'000 £'000
Purchases 120 50
Sales 209 88
329 138
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
2023 2022
£'000 £'000
Prepayments and accrued income 2,913 1,175
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:
2023 2022
Local Local
Interest currency Carrying Interest currency Carrying
rate principal amount rate principal amount
% amount £'000 % amount £'000
Unsecured bank loans repayable
Hong Kong Dollar 6.609 73,500,000 7,384 6.311 73,500,000 7,829
United States Dollar 6.634 8,850,000 6,942 5.175 8,850,000 7,357
Sterling 6.420 7,800,000 7,800 4.190 15,800,000 15,800
Sterling 1.530 10,000,000 9,997 1.530 10,000,000 9,981
Total 32,123 40,967
During the year, the Company had a £40 million multi currency revolving loan
facility agreement with Bank of Nova Scotia, London Branch. The Company also
had a three year loan of £10 million with Bank of Nova Scotia, London Branch
at a fixed interest rate of 1.53%. Both facilities matured on 1 March 2024.
Financial covenants contained within the relevant loan agreements provided,
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 2023 adjusted NAV coverage was 12.4 to 1.0 based on borrowings of
£32,123,000 and net assets were £398,872,000. The Company has complied with
all financial covenants throughout the year.
On 1 March 2024, the £10 million fixed rate loan was repaid in full and the
Company renewed its £40 million multi currency revolving credit facility with
a £50 million loan for one year with Bank of Nova Scotia, London Branch, its
existing lender. Under the terms of the revolving credit facility, the Company
also has the option to increase the level of the commitment from £50 million
to £70 million at any time, subject to the Lender's credit approval.
At the date of signing this report, loans of HKD 73,500,000, US$ 8,850,000 and
£17,800,000 were drawn down at variable interest rates of 5.471%, 6.31% and
6.188% respectively.
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 was therefore no longer
considered to be in breach.
2023 2022
(b) Other payables £'000 £'000
Investment management fees 1,093 786
Other amounts due 410 502
1,503 1,288
Amounts falling due in more than one year:
2023 2022
£'000 £'000
(c) Deferred tax liability on Indian capital gains 1,615 1,124
14. Analysis of changes in financing during the year
2023 2022
£'000 £'000
Opening balance at 1 January 40,967 46,753
Net decrease in loan drawdown (8,000) (8,948)
Amortisation of loan arrangement expenses 16 16
Foreign exchange movements (860) 3,146
Closing balance at 31 December 32,123 40,967
15. Stated capital
Ordinary Treasury Total
shares shares 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 2022 169,832,401 25,100,988 194,933,389 194,933
Shares purchased for treasury (2,653,694) 2,653,694 - -
At 31 December 2023 167,178,707 27,754,682 194,933,389 194,933
During the year 2,653,694 (2022 - 1,726,495) Ordinary shares were bought back
by the Company for holding in treasury at a total cost of £5,415,000 (2022 -
£3,818,000). At the year end 27,754,682 (2022 - 25,100,988) Ordinary shares
were held in treasury, which represents 14.24% (2022 - 12.88%) of the
Company's total issued share capital at 31 December 2023.
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 2,433,079 Ordinary shares have been bought back
for holding in treasury at a cost of £4,920,581.
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
2023 2022
£'000 £'000
At 1 January 204,414 242,727
Net currency profit/(losses){A} 701 (3,204)
Overseas dividend capital 32 -
Movement in unrealised fair value (11,881) (48,921)
Profit on realisation of investments 3,424 19,888
Costs charged to capital (3,726) (2,258)
Buyback of Ordinary shares for treasury (5,415) (3,818)
At 31 December 187,549 204,414
{A}Profit/(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 Net asset values Net asset value Net asset values
per share attributable per share attributable
2023 2023 2022 2022
p £'000 p £'000
Ordinary shares 238.59 398,868 243.44 413,447
The net asset value per Ordinary share is based on 167,178,707 (2022 -
169,832,401) 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 £nil (2022 - £47,000). Positions closed
during the year realised a loss of £nil (2022 - £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 £nil (2022 - £47,000). The Company had no open positions in
derivative contracts at 31 December 2023 (2022 - none).
The Board has delegated the risk management function to abrdn Asia under the
terms of its management agreement with abrdn Asia (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 Investment
Manager. The types of risk and the Investment 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 abrdn Asia collectively assume
responsibility for the Investment Manager's obligations under the AIFMD
including reviewing investment performance and monitoring the Company's risk
profile during the year.
abrdn Asia is a fully integrated member of the abrdn plc Group (the "Group"),
which provides a variety of services and support to abrdn Asia in the conduct
of its business activities, including in the oversight of the risk management
framework for the Company. abrdn Asia is responsible for the day to day
administration of the investment policy and ensuring that the Company is
managed within the terms of its investment guidelines and the limits set out
in its pre-investment disclosures to investors (details of which can be found
on the Company's website).
The Investment 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 Investment 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 (2022 - two) holdings in fixed rate
overseas corporate bonds, with G3 Exploration valued at £nil (2022 - £nil)
and ICICI Bank at £3,321,000 (2022 - £3,596,000). 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 1 March 2024. 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 18 January 2024 for HKD
loan, GBP loan and USD loans.
The Board actively monitors its bank borrowings. A decision on whether to roll
over its existing borrowings is 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:
Weighted average
period for which Weighted average Floating Fixed
rate is fixed interest rate rate rate
At 31 December 2023 Years % £'000 £'000
Assets
Indian Overseas Corporate Bond 0.60 9.15 - 3,321
Cash at bank - Sterling - - 3,199 -
Cash at bank - Chinese Yuan - - (372) -
Cash at bank - Chinese CNY - - 373 -
Cash at bank - Hong Kong Dollar - - 2 -
Cash at bank - Indian Rupee - - (1,682) -
Cash at bank - Taiwan Dollar - - 40 -
1,560 3,321
Weighted average
period for which Weighted average Floating Fixed
rate is fixed interest rate rate rate
At 31 December 2023 Years % £'000 £'000
Liabilities
Bank loan - Hong Kong Dollar 0.05 6.61 - (7,384)
Bank loan - US Dollar 0.05 6.63 - (6,942)
Bank loan - Sterling 0.05 6.42 - (7,800)
Bank loan - Sterling 0.17 1.53 - (9,997)
- (32,123)
Weighted average
period for which Weighted average Floating Fixed
rate is fixed interest rate rate rate
At 31 December 2022 Years % £'000 £'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 - Thai Baht - - 245 -
7,328 3,596
Weighted average
period for which Weighted average Floating Fixed
rate is fixed interest rate rate rate
At 31 December 2022 Years % £'000 £'000
Liabilities
Bank loan - Hong Kong Dollar 0.14 6.31 - (7,829)
Bank loan - US Dollar 0.05 5.18 - (7,357)
Bank loans - Sterling 0.05 4.19 - (15,800)
Bank loans - Sterling 1.17 1.53 - (9,981)
- (40,967)
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 (2022 - 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 2023.
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.
31 December 2023 31 December 2022
Net Net
monetary Total monetary Total
Equity assets currency Equity assets currency
investments /(liabilities) exposure investments /(liabilities) exposure
£'000 £'000 £'000 £'000 £'000 £'000
Australian Dollar 77,929 - 77,929 86,685 (203) 86,482
Chinese Renminbi 10,266 1 10,267 16,478 - 16,478
Hong Kong Dollar 43,636 (7,382) 36,254 50,622 (7,828) 42,794
Indian Rupee 23,477 1,639 25,116 21,100 3,563 24,663
Indonesian Rupiah 8,371 - 8,371 6,236 - 6,236
Japanese Yen 4,197 - 4,197 8,652 - 8,652
New Zealand Dollar 4,278 - 4,278 4,871 - 4,871
Singapore Dollar 83,310 - 83,310 96,438 - 96,438
South Korean Won 37,145 - 37,145 32,785 - 32,785
Taiwanese Dollar 91,657 40 91,697 74,450 41 74,491
Thailand Baht 25,059 - 25,059 32,372 245 32,617
US Dollar 6,474 (6,942) (468) 2,590 (7,357) (4,767)
Total 415,799 (12,644) 403,155 433,279 (11,539) 421,740
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.
2023 2022
£'000 £'000
Australian Dollar 7,793 8,648
Chinese Renminbi 1,027 1,648
Hong Kong Dollar 3,625 4,279
Indian Rupee 2,512 2,466
Indonesian Rupiah 837 624
Japanese Yen 420 865
New Zealand Dollar 428 487
Singapore Dollar 8,331 9,644
South Korean Won 3,715 3,279
Taiwanese Dollar 9,170 7,449
Thailand Baht 2,506 3,262
US Dollar (47) (477)
Total 40,317 42,174
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 Investment 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. A geographic analysis of the
Company's investment portfolio shows that 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% (2022 - 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.
2023 2022
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) 42,632 (42,632) 44,473 (44,473)
Total profit after taxation - increase /(decrease) 42,632 (42,632) 44,473 (44,473)
Equity
Capital reserve 42,632 (42,632) 44,473 (44,473)
(ii) Liquidity risk. This is the risk that the Company will encounter
difficulty in meeting obligations associated with financial liabilities, which
stood at £35,241,000 (2022 - £43,379,000).
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 £1,560,000 and £429,636,000 (2022 - £7,328,000 and £448,323,000) 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:
Within Between
1 year 1-5 years Total
At 31 December 2023 £'000 £'000 £'000
Fixed rate
Bank loans 32,123 - 32,123
Interest on bank loans 162 - 162
32,285 - 32,285
Floating rate
Cash 1,560 - 1,560
Within Between
1 year 1-5 years Total
At 31 December 2022 £'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
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 2023, the
total of short-term other receivables was £2,913,000 (2022 - £1,175,000).
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 since the joint liquidator was
appointed.
- an Indian overseas corporate bond issued by ICICI Bank with a fair value of
£3,321,000 (2021 - £3,596,000).
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 Investment Manager's Compliance department carries out
periodic reviews of the Custodian's operations and reports its finding to the
Investment Manager's Risk Management Committee. It is the Investment 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:
2023 2022
Balance Maximum Balance Maximum
Sheet exposure Sheet exposure
£'000 £'000 £'000 £'000
Non-current assets
Investments held at fair value through profit or loss 429,636 3,321 448,323 3,596
Current assets
Cash at bank 1,560 1,560 7,328 7,328
Other receivables 2,913 2,913 1,175 1,175
434,109 7,794 456,826 12,099
(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.
19. Capital management policies and procedures
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:
2023 2022
£'000 £'000
Debt
Borrowings under the multi-currency loan facility 32,123 30,986
Borrowing under the three year Sterling loan facility - 9,981
32,123 40,967
2023 2022
Equity £'000 £'000
Equity share capital 194,933 194,933
Retained earnings and other reserves 203,935 218,514
398,868 413,447
Debt as a % of net assets (A) 8.05 9.91
(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 Investment Manager
Fees payable during the period to the Directors are disclosed in note 6 and
within the Directors' Remuneration Report (unaudited), along with their
interests in shares of the Company, totalling 98,101 (2022 - 92,149).
Mr Hugh Young, who was a Director of the Company until his retirement at the
Annual General Meeting held on 10 May 2023, was employed by the Company's
Investment Manager, abrdn Asia, which is a wholly-owned subsidiary of abrdn
plc.
Investment management, promotional activities and administration services are
provided by the abrdn group with details of transactions during the year and
balances outstanding at the year end disclosed in notes 5 and 6.
The Company also has an agreement with JTC Fund Solutions (Jersey) Limited for
the provision of company secretarial and administration services at a cost of
£129,000 per annum, which abrdn plc has agreed to rebate in full out of the
investment management fee which it receives.
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 2023 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 426,315 - - 426,315
Quoted bonds b) - 3,321 - 3,321
Net fair value 426,315 3,321 - 429,636
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
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 2023 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. There is no fair value attributed to the
borrowings as at 31 December 2023 given their short-term nature. At 31
December 2022 the fair value was £40,919,000 (carrying value per Balance
Sheet - £40,967,000). 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
Subsequent to the year end, the Company and Manager agreed to a change in the
management fee terms. With effect from 1 January 2024 it was agreed that the
management fee will be calculated and payable monthly in arrears, at the lower
of (i) market capitalisation up to £300 million at a rate of 0.75% per annum
and a rate of 0.60% per annum thereafter, or (ii) net asset value up to £300
million at a rate of 0.75% per annum and a rate of 0.60% per annum thereafter.
The Company and Investment Manager also agreed that an amount of £129,000 per
annum in respect of rebating fees payable by the Company to JTC Fund Solutions
(Jersey) Limited relating to administration fees and £130,000 relating to
marketing and promotional fees payable by the Company to the Investment
Manager would be deducted from the management fee.
Additional Notes:
The Annual Financial Report Announcement is not the Company's statutory
financial statements. The above results for the year ended 31 December 2023
are an abridged version of the Company's full financial statements, which have
been approved and audited with an unqualified report. The 2022 and 2023
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 2022 is derived from the statutory financial statements for
2022 which have been lodged with the JFSC. The 2023 financial statements will
be filed with the JFSC in due course.
The Annual Report will be posted to Shareholders and further copies may be
obtained from the registered office, 28 Esplanade St Helier Jersey JE2 3QA 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.
JTC Fund Solutions (Jersey) Limited
Company Secretary
26 March 2024
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.
2023 2022
NAV per Ordinary share (p) a 238.59 243.44
Share price (p) b 208.00 215.00
Discount (b-a)/a -12.8% -11.7%
Dividend cover
Dividend cover measures the revenue return per share divided by total
dividends per share, expressed as a ratio.
2023 2022
Revenue return per share a 11.97p 10.23p
Dividends per share b 11.75p 10.00p
Dividend cover a/b 1.02 1.02
Dividend yield
The annual dividend per Ordinary share divided by the share price, expressed
as a percentage.
2023 2022
Annual dividend per Ordinary share (p) a 11.75p 10.00p
Share price (p) b 208.00p 215.00p
Dividend yield (b-a)/a 5.6% 4.7%
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 including amounts
due to and from brokers.
2023 2022
Borrowings (£'000) a 32,123 40,967
Cash (£'000) b 1,560 7,328
Amounts due to brokers (£'000) c 21 -
Amounts due from brokers (£'000) d 756 -
Shareholders' funds (£'000) e 398,868 413,447
Net gearing (a-b+c-d)/e 7.5% 8.1%
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.
2023 2022
Investment management fees (£'000) 3,041 3,270
Administrative expenses (£'000) 867 939
Less: non-recurring charges (A) (£'000) (18) (42)
Ongoing charges (£'000) 3,890 4,167
Average net assets (£'000) 395,914 421,170
Ongoing charges ratio (excluding look-through costs) 0.98% 0.99%
Look-through costs(B) 0.02% 0.02%
Ongoing charges ratio (including look-through costs) 1.00% 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.
Share
Year ended 31 December 2023 NAV Price
Opening at 1 January 2023 a 243.44p 215.00p
Closing at 31 December 2023 b 238.59p 208.00p
Price movements c=(b/a)-1 -2.0% -3.3%
Dividend reinvestment (A) d 4.5% 5.2%
Total return c+d +2.5% +1.9%
Share
Year ended 31 December 2022 NAV 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%
(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.
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