REG - abrdn China Inv.Co. - Half-year Report
06/07/2022 07:00
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RNS Number : 4375R abrdn China Investment Company Ltd. 06 July 2022
abrdn China Investment Company Limited
LEI: 213800RIA1NX8DP4P938
Seeking long-term capital growth by investing predominantly in Chinese equities
Half-Yearly Report 30 April 2022
abrdn.com
Performance Highlights and Financial Calendar
Performance Highlights for the six months ended 30 April 2022
Net asset value ("NAV") per Ordinary share total return1,5 NAV per Ordinary share2
-21.5%
Year ended 31 October 2021 637.7p
+19.8%
As at 31 October 2021
813.2p
Ordinary share price total return1,5 Ordinary share price - Closing price
-22.9% 536.0p
Year ended 31 October 2021 As at 31 October 2021 695.0p - Closing
+18.7% price
MSCI China All Shares Index Net Assets
Net Total Return in sterling terms
-16.8% £296.5m
Year ended 31 October 2021 As at 31 October 2021 £373.8
+10.7%4 m
Net cash3,5 Revenue return per Ordinary share
4.0% -0.47p
As at 31 October 2021 Year ended 31 October 2021
53.8% -0.61p
(1) Performance figures stated above include reinvestment of dividends on the
ex-date.
(2) See note 8 in the Selected Explanatory Notes to these Financial Statements
for basis of calculation.
(3) Based on the net of the drawn down loan value and cash, as a percentage of
NAV.
(4) The Company's previous benchmark was the MSCI Emerging Markets Net Total
Return Index in sterling terms.
(5) Definitions of these Alternative Performance Measures ('APMs') together
with how these have been calculated can be found below.
Financial Calendar
31 October 2022
Financial year end
Expected announcement of results for year ended 31 October 2022 February 2023
April 2023
Annual General Meeting
Chairman's Statement
Overview
This is the first report of the Company as an investor in Chinese equities
since shareholders approved the change of mandate in October 2021. It has been
a testing period for most equity markets, but China has been particularly
challenging. While the Board recognises that this is not the most auspicious
start, it remains confident in the long-term prospects for China and for an
investment trust investing therein remain strong. The net asset value ("NAV")
total return of the Company for the six month period ended 30 April 2022 was
-21.5%. This return is behind the return from the reference index, the MSCI
China All Shares Index (in Sterling terms), of -16.8%.
It was a turbulent period for Chinese equities as they battled against
numerous challenges. Beijing's zero- tolerance approach to Covid-19 outbreaks,
regulatory upheaval, property and energy woes, significant disruption to
supply chains and the potential delisting of US-listed Chinese companies over
auditing requirements all weighed on markets. This was compounded at a global
level by sharply rising inflation, further fueled by the war in Ukraine, and
the rising threat of a prolonged tighter monetary policy in the US and Europe
but loosening in China.
Fundamentals have taken a back seat since January, with the direction of share
prices being dictated by the current heightened levels of macroeconomic and
geopolitical risk. This has led to a general rotation from growth to value
stocks and the Company struggled to keep pace against such a strong wave of
negative sentiment. Many of your Company's high-quality growth holdings, in
areas such as renewable energy, technology and healthcare, experienced
aggressive profit-taking. On the other hand, the energy sector, to which the
Company has no direct exposure, rallied sharply as global energy prices soared
on the back of concerns around the impact of the war in Ukraine on supply.
Similarly, strong flows into the large state-owned banks, where the Company is
underweight, counted against performance. The performance for the period under
review is discussed in more detail in the Investment Manager's Review.
Scheme of Reconstruction
As reported in the Company's Annual Report, I am pleased to confirm the
Company successfully completed the merger with Aberdeen New Thai Investment
Trust PLC ("New Thai") on 9 November 2021. As part of the merger, a tender
offer to shareholders was made and 6,894,773 Ordinary shares were tendered and
bought back into treasury. Simultaneously, 7,554,440 new Ordinary shares were
issued to the shareholders of New Thai who elected to roll their shareholding
into the Company.
Discount and Share Buy Backs
The discount at which the Company's shares trade relative to the NAV narrowed
significantly following the completion of the merger with New Thai from
14.5% to less than 10% for much of the period. Unfortunately, in the final
days of April, the discount widened as the news of renewed Covid-19 lockdowns
in Shanghai weighed slightly on Chinese equities and the discount at the end
of the period was 15.9%. At 24 June 2022 the discount narrowed to 14.8%.
In December 2021, the Company undertook its first share buy back for over two
years. During the period ended April 2022, 134,749 Ordinary shares were bought
back by the Company, representing 0.3% of the issued share capital, at a
weighted average discount of 10.3%. At the time of writing, a further 228,610
Ordinary shares have been bought back. The Board monitors the discount on a
continual basis and expects to buy back shares when it considers that it is in
the best interests of shareholders to do so.
Loan Facility and Gearing
In April 2022, the Company announced that it had entered into a £15 million
unsecured multi-currency revolving loan facility with Industrial and
Commercial Bank of China, London Branch, for two years. Under the terms of the
facility, the Company has the option to increase the level of the commitment
from £15 million to £30 million at any time. The facility was undrawn at the
end of the period and has yet to be drawn.
The Board continues to believe that the use of gearing, which is one of the
advantages of a closed end structure, within pre-determined ranges and at
times when the Investment Manager sees attractive investment opportunities,
will be beneficial to the longer term performance of the Company.
Compliance with US Executive Orders
Following the release of US Presidential Executive Orders ("Orders") which
prohibit US Persons from purchasing publicly traded securities of certain
Chinese companies identified as Communist Chinese Military Companies, the
Company can confirm that its policy is to adhere to the Orders and that it has
no direct investments in any of these companies.
Board Composition
William Collins retired from the Board at the Company's Annual General Meeting
in April 2022. Helen Green has taken on the role of Senior Independent
Director. On behalf of the Board, I would like to thank Bill for his
significant contribution to the Company over the ten year period that he
served as a Director.
For my part, I shall be stepping down from the Board shortly and as such this
is my last Chairman's Statement. I am delighted to report that Helen Green
shall be succeeding me upon my retirement once her replacement as Chair of the
Audit Committee has been appointed. The process of identifying a suitable
candidate is well under way and we shall update you once the appointment is
made.
Outlook
There are brighter signs on the horizon for Chinese companies. The People's
Bank of China has taken some initial measures to boost liquidity in the
financial system and the ruling party has made several pledges to provide
further economic stimulus. Although there have been a limited number of
concrete measures introduced thus far, the rhetoric from Beijing suggests a
strong commitment to reviving the nation's flagging economy. In addition,
after a sharp sell-off, company valuations look more compelling than they have
for some time. Your Investment Managers will continue to monitor the situation
very closely for investment opportunities that arise from Beijing's shift to a
more pro-growth stance.
In the long run, China has many years of growth ahead of it as it transitions
from an industrial-based to a more consumer-led economy and an increasing
focus on technological innovation, self-sufficiency and a cleaner environment.
This has already produced a range of structural growth trends to which the
portfolio has a significant exposure, such as renewable energy and information
technology.
The Board believes there are reasons to be optimistic about both the
short-term and longer-term prospects for Chinese equities, especially given
where company valuations currently sit after the pull-back of the last few
months. We have every confidence that, under the management of Nicholas Yeo
and Elizabeth Kwik, the Company is very well equipped to deliver sustainable
returns for investors over the long term.
It has been a privilege to serve on the Board over the last decade and
latterly as your Chairman. I wish Helen every success as your new Chair and I
look forward to watching the fortunes of the Company over the coming years as
an ongoing shareholder
Mark Hadsley-Chaplin
Chairman
5 July 2022
Investment Manager's Review
This is our first report to shareholders since the change of mandate in
October 2021. The first few weeks of the period were spent completing the
liquidation of the remaining positions inherited from the former mandate and
investing the proceeds of the liquidation of the Company's former portfolio
and that of Aberdeen New Thai Investment Trust.
Market Review
Chinese stock markets endured a volatile six months. The Shanghai Composite
and Shenzhen Component share indices both hit 21-month lows in mid-March
before clawing back some ground following supportive policy rhetoric from the
government.
Investors were buffeted on many fronts, both domestically and globally. A
flare-up of Covid-19 cases in December, albeit amounting to a relatively low
number of reported infections versus outbreaks in Western societies, saw
lockdowns imposed first in Xi'an followed by the major cities of Shanghai and
Shenzhen, as the Chinese government stuck to its 'zero-Covid-19' policy.
Lockdowns since March have disrupted industrial production and pushed out
hopes of China's reopening further, which has added to investor caution.
Ongoing anxiety over regulation crackdowns added to negative market sentiment,
as did fears that the US may delist Chinese companies listed in New York if
they fail to provide audit documents.
In January, we witnessed a general rotation from growth to value stocks with
more expensive and higher growth sectors such as healthcare and information
technology seeing the largest pullbacks, while value-concentrated sectors such
as real estate and financials were relatively resilient. Amidst the economic
slowdown, the government set an increasingly easing tone on both monetary and
fiscal policies, cutting the reserve requirement ratio and loan prime rate.
Towards the end of February, and with preliminary full year results generally
in-line or above expectations, growth stocks recovered from earlier sell-offs
at the expense of value names.
March was another volatile month, with a number of macroeconomic factors and
events adding to market fears and jitters. The 5.5% GDP growth target that was
announced at the National People's Congress early in the month was met with
scepticism by investors as the real estate sector, the largest contributor to
GDP growth, remained under pressure. Omicron cases of Covid-19 started rising
in a number of provinces including Shanghai and Shenzhen, leading to city-wide
lockdowns, causing temporary disruptions to economic activity and global
supply chains.
The Russian invasion of Ukraine further increased turbulence in global
financial markets including commodities, with oil prices hitting multi-year
highs before receding slightly. Speculation over China's relationship with
Russia raised concerns relating to possible secondary sanctions which also led
to a sell-off in the market.
Furthermore, US regulators commenced a de-listing process for Chinese ADRs
that fail to satisfy the regulator's audit requirements by 2024. The news
triggered a large sell-off in Chinese ADRs which spread to the overall market.
Our view is that the extent of this sell off was surprising as this was not a
new or unexpected development, but was consistent with the way in which the
market has reacted to bad news since the start of 2022.
Chinese stock markets remained under significant pressure in April as the
effects of Covid-19 lockdowns continued to weigh on investor sentiment and
economic activity. The Shanghai and Shenzhen markets edged steadily lower over
the first three weeks before selling off heavily. They then recovered some
ground at the month-end amid supportive announcements from the Chinese central
bank, which vowed to support liquidity levels, alongside promising support for
the development of technology platform companies, which have been the target
of a regulatory crackdown in recent months.
While there was some easing of Covid-19-related restrictions in Shanghai amid
signs of falling case numbers towards the end of April, an outbreak of cases
in Beijing stoked fears of a Shanghai-style lockdown in the capital. As a
result, the Caixin China Manufacturing PMI, an index of the prevailing
direction of economic trends in the manufacturing and service sectors, hit a
25-month low at the start of the month. This was below consensus expectations
and new orders fell by the most since the first wave of the pandemic. In the
services sector, the Caixin China Services PMI fell from 50.2 in February to
42.0.
On a brighter note, Chinese exports recorded 14.7% year-on-year growth, which
eclipsed forecasts, but was obviously based on depressed comparatives.
Industrial production grew 5% year-on-year to March, which also surpassed
expectations. The Chinese economy grew 4.8% year-on-year in the first quarter
of 2022, beating forecasts of a 4.4% expansion.
In contrast to Western economies, Chinese monetary policy is expected to
remain loose, given the country's currently slowing economy. In addition,
China is not facing as much inflationary pressure as other economies.
Performance
The first six months of the new mandate have been eventful both for the
Company and Chinese equity markets. The net asset value ("NAV") total return
of the Company was -21.5%, while the benchmark MSCI China All Shares Index
delivered a total return in Sterling terms of -16.8%. The underperformance
relative to the benchmark over the period was driven mainly by stock selection
as the market focused more on sentiment rather than on fundamentals.
Some sectors in particular, renewable energy and healthcare, proved prone to
profit taking as investors turned increasingly nervous about the near-term
outlook and sought to book gains. Sungrow Power Supplywas one such name and
detracted from performance during the period.
Other detractors included Estun Automation, medical and dental equipment
manufacturer Heifei Meyer Optoelectronic Technology, glass fibre, wind blade
and separator manufacturer Sinoma Science & Technology and power equipment
manufacturer Qingdao TGOOD Electric,whose earnings came under pressure due to
the Covid-19 lockdowns and macro slowdown.
Electric vehicle battery maker Contemporary Amperex Technologyfell as rising
lithium prices clouded visibility on the company's margin for the year.
Portfolio losses were cushioned somewhat by the performance of holdings such
as Kweichow Moutai, the Company's top performer over the period, as the Baijiu
spirit maker posted a solid set of results, reporting a higher proportion of
direct sales and product mix upgrades. There have been positive earnings
revisions for the holding year to date, reflecting management's guidance for
the higher 15% growth rate .
The technology and internet sector was weighed down by continued regulatory
uncertainty. The Company's underweight position in Alibaba Groupand not
holding e-commerce platform Pinduoduocontributed positively to performance.
Among the financial holdings, Bank of Ningbo posted solid FY21 results with
earnings coming in above expectations. China Vanke was also a positive
contributor, with investors favourably regarding its attributes as a market
leader with a solid balance sheet. Insurance company AIA delivered strong
earnings growth and increased its dividend per share by 8% year on year. It
also announced a share buyback of US$10 billion over the next three years. The
company grew more cautious over the growth outlook for the first half of 2022,
given that its business in China and Hong Kong is expected to be affected by
the Covid-19 lockdowns and the weak macroeconomic backdrop. Separately, it is
acquiring 100% of Blue Cross (Asia-Pacific) Insurance and 80% of Blue Care JV
(BVI) from Bank of East Asia, for US$278 million. The deal will enable AIA to
leverage Blue Cross's medical network in Hong Kong and accelerate its
healthcare service integration with its core insurance business.
Not holding state-owned banks China Construction Bankand Industrial &
Commercial Bank of Chinawere detractors to performance amidst the market's
rotation towards value stocks. Not holding vehicle maker NIO, which sold off
during the rotation towards value names, was a positive.
Portfolio Activity
We reviewed the Company's exposure in our five core themes - aspiration,
digitalization, going green, health and wealth - and adjusted positions to
manage volatility at portfolio level. As a result, we added exposure in
defensive sectors where revenue is typically mainly derived from the domestic
market. This change also helped to narrow the underweight gap in value stocks
as the market style rotated from growth to value stocks as the major Western
central banks started to raise interest rates.
We increased certain positions in the consumer staples sector which have
better earnings visibility, including cosmetics manufacturer Proya Cosmetics
and nuts and seeds manufacturer Cha Cha Food. We also added slightly to our
holdings in Bank of Ningbo, Ping An Bank and China Merchants Bank. At the same
time, we lowered the active exposure to healthcare and renewable energy
sectors.
Since the period ended, we have exited the position in Aberdeen Standard SICAV
I - China A Share Equity Fund.Approval for the Company's Qualified Foreign
Investor (QFI) application is expected in the coming weeks. The QFI programme
will enable the Company to directly participate in mainland China's stock
exchanges. There is one remaining legacy holding in Komodo Fund,which now
accounts for just 0.4% of net assets. This fund is in the protracted process
of being liquidated. The management team of Komodo continues to work on
achieving an exit from the final remaining position in Berlina, an Indonesian
packaging company. Any exit will likely be via a corporate restructuring
involving the sale of the company to a strategic buyer and, while there are
several interested parties, there is as yet no firm plan or timescale.
Outlook
While the economic outlook for the remainder of the year looks challenging
amidst Covid-19 outbreaks and a weak property market, incrementally we have
started to see more supportive comments from central government. Vice Premier
Liu He, President Xi Jinping's closest economic adviser, stated that the
Chinese government would introduce policies that will be "favourable to the
markets" and will "boost the economy" and we have witnessed a gradual easing
since the end of 2021. To this end the People's Bank of China has lowered
banks' reserve requirement ratio and loan prime rates several times over the
period. Furthermore, despite market volatility, the company volatility, the
company results season in March and April proved that the market is still
focused on fundamentals and it was reassuring that the high quality companies
in the portfolio, whose results exceeded expectations, saw improvements in
their share prices. We remain cautiously optimistic on the outlook for 2022,
as the stimulus starts to work through the system. We also believe that
Covid-19 measures are likely to be gradually less stringent and the long-term
policy support for our five themes (aspiration, digitalization, going green,
health and wealth) remains compelling.
We continue to focus on quality companies with strong balance sheets that are
not reliant on debt financing and particularly to those companies with robust
franchises. We expect these companies to be able to grasp opportunities not
available to heavily leveraged competitors and, in the case of those with
competitive advantage, to be in a better position to pass on inflationary cost
pressures, and continue to generate positive cash flows from their operations.
Nicholas Yeo and Elizabeth Kwik
abrdn Hong Kong Limited
5 July 2022
Ten Largest Investments
Tencent (7.6% of net assets)
An innovative leader in China's internet sector with a strong presence in
fintech and cloud segments, backed by an entrenched social media and payment
ecosystem.
Kweichow Moutai (5.6% of net assets)
The largest maker of Chinese alcohol spirit Baijiu, positioned in the ultra-
premium space where there are few competitors. The company is well placed to
capture rising domestic consumption trends in China.
China Merchants Bank (4.9% of net assets)
Best-in-class retail bank in China, offering diversified financial services
with a solid track record and sound risk management practices in place.
JD.com (4.1% of net assets)
Online retailer with an edge in its strong logistics network. The company has
shown improving corporate governance and management quality over the years.
Meituan (4.0% of net assets)
Diversified online services platform with over 400 million users, offering
services including food delivery, travel bookings and wedding planning. It is
optimally placed to capture rising consumption in mainland China
Bank of Ningbo (3.4% of net assets)
City bank focused on lending to small and medium enterprises in the affluent
Ningbo-Zhejiang region. The bank has shown superior returns and asset quality
over the years.
China Tourism Group Duty Free (3.3% of net assets)
China's largest duty-free operator that is well placed to benefit from
supportive government policy and rising demand for duty-free cosmetics on the
mainland.
Alibaba Group (3.1% of net assets)
The Chinese internet group is a leading global e-commerce company with leading
platforms including Taobao and T-mall in the mainland. The company also has
interests in logistics and media as well as cloud computing platforms and
payments.
Aberdeen Standard SICAV I - China A Share Equity Fund (3.0% of net assets)
China A share fund with a long-term quality investment approach managed by the
same team managing the Company (since the period end, we have exited this
position).
Contemporary Amperex Technology (2.6% of net assets)
Leading electric vehicle battery maker with a dominant market share in China.
The company has strong bargaining power along the electric vehicle supply
chain and provides exposure to the rapid growth in electric vehicle adoption
in China.
Investment Portfolio
As at 30 April 2022
Industry (Sub-Sector) Value (£'000) Percentage of net assets (%)
Company
Tencent Holdings Ltd Interactive Media & Services 22,507 7.6
Kweichow Moutai Co Ltd Beverages 16,478 5.6
China Merchants Bank Co Ltd Banks 14,491 4.9
JD.com Inc Internet & Direct Marketing Retail 12,018 4.1
Meituan Internet & Direct Marketing Retail 11,864 4.0
Bank of Ningbo Co Ltd Banks 10,227 3.4
China Tourism Group Duty Free Corp Ltd Banks 9,745 3.3
Alibaba Group Holding Ltd Internet & Direct Marketing Retail 9,074 3.1
Aberdeen Standard SICAV I - China A Share Equity Fund Unit Trusts 8,907 3.0
Contemporary Amperex Technology Co Ltd Electrical Equipment 7,845 2.6
Top ten investments 123,156 41.6
Ping An Bank Co Ltd Banks 7,415 2.5
AIA Group Ltd Insurance 7,191 2.4
China Vanke Co Ltd Banks 6,310 2.1
Li Ning Co Ltd Textiles, Apparel & Luxury Goods 5,699 1.9
Nari Technology Co Ltd Electrical Equipment 5,555 1.9
Shenzhen Mindray Bio-Medical Electronics Co Ltd Textiles, Apparel & Luxury Goods 5,531 1.9
Fuyao Glass Industry Group Co Ltd Auto Components 5,455 1.8
Wanhua Chemical Group Co Ltd Chemicals 5,390 1.8
Proya Cosmetics Co Ltd Personal Products 5,212 1.8
LONGi Green Energy Technology Co Ltd Semiconductors & Semiconductor Equipment 5,143 1.7
Top twenty investments 182,057 61.4
Aier Eye Hospital Group Co Ltd Health Care Providers & Services 5,040 1.7
Sungrow Power Supply Co Ltd Electrical Equipment 5,030 1.7
Foshan Haitian Flavouring & Food Co Ltd Food Products 4,837 1.6
Shenzhou International Group Holdings Ltd Textiles, Apparel & Luxury Goods 4,768 1.6
Hong Kong Exchanges & Clearing Ltd Capital Markets 4,621 1.6
Wuliangye Yibin Co Ltd Beverages 4,596 1.6
Midea Group Co Ltd Internet & Direct Marketing Retail 4,558 1.5
Chacha Food Co Ltd Food Products 4,342 1.5
Hangzhou Tigermed Consulting Co Ltd Life Sciences Tools & Services 4,203 1.4
CIFI Ever Sunshine Services Group Ltd Real Estate Management & Development 3,969 1.3
Top thirty investments 228,021 76.9
Wuxi Biologics Cayman Inc Life Sciences Tools & Services 3,918 1.3
By-health Co Ltd Personal Products 3,911 1.3
Sinoma Science & Technology Co Ltd Chemicals 3,854 1.3
Hundsun Technologies Inc Software 3,753 1.3
Shanghai M&G Stationery Inc Commercial Services & Supplies 3,572 1.2
Estun Automation Co Ltd Machinery 3,388 1.1
China Meidong Auto Holdings Ltd Banks 3,133 1.1
Luxshare Precision Industry Co Ltd Electronic Eqpt Instruments & Components 3,120 1.1
Venustech Group Inc Software 2,949 1.0
Hefei Meiya Optoelectronic Technology Inc Machinery 2,942 1.0
Top forty investments 262,561 88.6
GDS Holdings Ltd IT Services 2,829 1.0
Yantai China Pet Foods Co Ltd Food Products 2,604 0.9
Amoy Diagnostics Co Ltd Biotechnology 2,474 0.8
Maxscend Microelectronics Co Ltd Electronic Eqpt Instruments & Components 2,319 0.8
Jiangsu Hengrui Medicine Co Ltd Pharmaceuticals 2,186 0.7
Qingdao TGOOD Electric Co Ltd Electrical Equipment 2,054 0.7
Zai Lab Ltd Biotechnology 1,973 0.7
Shanghai MicroPort MedBot Group Co Ltd Commercial Services & Supplies 1,606 0.50
Komodo Fund Unit Trusts 1,038 0.4
China Conch Venture Holdings Ltd Banks 1,029 0.3
Top fifty investments 282,673 95.4
China Conch Environment Protection Holdings Banks 339 0.1
Total investments 283,012 95.5
Cash plus other net assets and liabilities 13,446 4.5
Net assets 296,458 100.0
Sector Breakdown
As at 30 April 2022
Sector %
Consumer Discretionary 23.4
Financials 15.5
Consumer Staples 14.8
Industrials 11.2
Health Care Communication 9.5
Services 8.0
Information Technology 7.1
Real Estate 3.6
Unit Trusts 3.5
Materials 3.3
Source: Refinitiv Datastream
Investment Case Studies
Foshan Haitian Flavouring & Food Co Ltd
Foshan Haitian has over 300 years of history in soy sauce making and is today
China's largest condiment producer. It is a household brand in China with
strong consumer recognition. It has the largest market share in soy sauce,
oyster sauce and cooking wine and is constantly developing new products which
have been readily adopted by consumers. It has been consistently investing in
R&D to drive product innovation and improve operational efficiency. This
has enabled the company to build a robust and diversified product portfolio
and industry-leading low-cost operation.
The Investment Manager has invested in Foshan Haitian for over 5 years in a
number of its other portfolios and considers that it remains a cornerstone
investment for the Company.
On the ESG front, the company has established strong internal controls to
ensure good corporate governance. Unusually for a Chinese company, it has an
internal audit team reporting directly to the board to conduct regular audits
in order to assess and improve management and operational processes. Foshan
Haitian has set specific targets to reduce energy consumption and water use.
The company has also been making conscious efforts to improve ESG disclosures
and published its first ESG report in 2020.
Nari Technology Co Ltd
Nari Technology is a technology leader in grid secondary equipment and
software, which automates dispatch, transmission and communication of power.
The company contributes to China's carbon neutral initiatives as renewables
and rising power demand from the rapidly rising uptake of electric vehicles
requires a full-suite upgrade of the power grid to avoid curtailment and
safety concerns.
Nari is an integrated player in four divisions: power automation,
telecommunication, transmission and generation, and the Investment Manager
believes that the company can remain dominant in this industry with its
high-barriers to entry. Nari has a strong R&D capability, exclusive power
dispatching data, and an experienced, high quality workforce.
On the ESG front, the Investment Manager engaged with the company to seek
clarifications on related party transaction policies, and encouraged the
company to improve disclosures, including more transparency on the clean
technology opportunity and business ethics to that of global standards. Nari's
management has promised to improve ESG management and established a new ESG
team working on disclosures. The company has recently issued its ESG report
according to Global Reporting Initiative ('GRI') standards, which gave the
Investment Manager a clearer understanding of the company's clean technology
opportunity and business ethics policy.
The GRI is an international independent standards organisation that helps
businesses, governments and other organisations understand and communicate
their impacts on issues such as climate change, human rights and corruption.
Interim Management Report
The Chairman's Statement and the Investment Manager's Review provide details
on the performance of the Company. Those reports also include an indication of
the important events that have occurred during the first six months of the
financial year ending 31 October 2022 and the impact of those events on the
condensed unaudited financial statements included in this Half-Yearly
Financial Report.
Details of investments held and the sector breakdown at the period end is
shown above.
Principal Risks, Emerging Risks and Uncertainties
The Board considers that the main risks and uncertainties faced by the Company
fall into the categories of:
(i) Risks relating to the Company.
(ii) Risks relating to the investment policy.
(iii) Risks relating to the Manager/Investment. Manager.
(iv) Risks relating to regulation, taxation and the Company's operating
environment
(v) Internal Risks.
(vi) Emerging Risks and
(vii) Failure to manage premium and/or discount.
A detailed explanation of these risks and uncertainties can be found in the
Company's most recent Annual Report for the year ended 31 October 2021 (the
"Annual Report'').
The principal risks, emerging risks and uncertainties facing the Company
remain unchanged from those
disclosed in the Annual Report. The Chairman's Statement and the Investment
Manager's Review contain market outlook sections.
The Directors have also reviewed and assessed recent emerging risks and
increasing focus of ethical, social and governance measures in assessing
investment opportunities. The Investment Manager has performed stress tests on
the Company's portfolio of investments under current conditions and the
Directors remain comfortable with the liquidity of the portfolio.
Related Party Transactions
Full details of the investment management arrangements were provided in the
Annual Report for the year ended 31 October 2021. There have been no changes
to the related party transactions described in the Annual Report that could
have a material effect on the financial position or performance of the
Company. Amounts payable to the Manager in the six months ended 30 April 2022
are detailed in note 10 of the Selected Explanatory Notes to the Unaudited
Financial Statements.
Going Concern
See note 2 for details on going concern. Signed on behalf of the Board of
Directors on 5 July 2022
Helen Green
Director
Statement of Directors' Responsibilities
In respect of the Half-Yearly Financial Report, the Directors confirm that to
the best of their knowledge:
• the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting; and
• the Interim Management Report which includes the Chairman's Statement,
Investment Manager's Review and Interim Management Report includes a fair
review of the information required by:
a. DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
b. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or the performance of the Company during that period; and any changes
in the related party transactions described in the last Annual Report that
could do so.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website, but not
for the content of any information included on the website that has been
prepared or issued by third parties, and for the preparation and dissemination
of financial statements. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Signed on behalf of the Board of Directors on 5 July 2022
Helen Green
Director
Independent Review Report
To abrdn China Investment Company Limited Conclusion
We have been engaged by abrdn China Investment Company Limited (the "Company")
to review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 April 2022 of the Company which
comprises the Condensed Unaudited Statement of Financial Position as at 30
April 2022, the Condensed Unaudited Statement of Comprehensive Income, the
Condensed Unaudited Statement of Changes in Equity, the Condensed Unaudited
Statement of Cash Flow for the six months then ended and the related
explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 April 2022 is not prepared, in
all material respects, in accordance with IAS 34 Interim Financial Reporting
and the Disclosure Guidance and Transparency Rules (the "DTR") of the UK's
Financial Conduct Authority (the "UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
We read the other information contained in the half-yearly financial report
and consider whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the Company are
prepared in accordance with
International Financial Reporting Standards. The directors are responsible for
preparing the condensed set of financial statements included in the
half-yearly financial report in accordance with IAS 34.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the UK FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work,
for this report, or for the conclusions we have reached.
Andrew Salisbury
For and on behalf of
KPMG Channel Islands Limited
Chartered Accountants, Guernsey
5 July 2022
Condensed Unaudited Statement of Comprehensive Income
Six month period ended Six month period ended
30 April 2022 30 April 2021
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (82,328) (82,328) - 68,879 68,879
Losses on currency movements - (508) (508) - (151) (151)
Net investment (losses)/gains - (82,836) (82,836) - 68,728 68,728
Investment income 452 - 452 2,033 - 2,033
452 (82,836) (82,384) 2,033 68,728 70,761
Investment management fees 10 (75) - (75) (1,346) - (1,346)
Other expenses (455) - (455) (454) - (454)
Operating (loss)/profit before finance costs and taxation
(78) (82,836) (82,914) 233 68,728 68,961
Finance costs 5 (107) - (107) (112) - (112)
Operating (loss)/profit before taxation (185) (82,836) (83,021) 121 68,728 68,849
Withholding tax expense (36) - (36) (125) - (125)
Total (loss)/profit and comprehensive income for the period
(221) (82,836) (83,057) (4) 68,728 68,724
(Losses)/earnings per Ordinary share 6 (0.47p) (177.94p) (178.41p) (0.01p) 149.52p 149.51p
The Total column of this statement represents the Company's Statement of
Comprehensive Income, prepared under IAS 34 Interim Financial Reporting. The
Revenue and Capital columns, including the revenue and capital
(losses)/earnings per Ordinary share data, are supplementary information
prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the period.
The notes further below form an integral part of these financial statements.
Condensed Unaudited Statement of Financial Position
As at As at
30 April 2022 31 October 2021*
£'000 £'000
Note
Non-current assets
Investments at fair value through profit or loss 283,012 112,905
Current assets
Cash and cash equivalents 13,433 201,795
Sales for future settlement 1,555 59,838
Other receivables 6 119
14,994 261,752
Total assets 298,006 374,657
Current liabilities
Purchases for future settlement (1,244) -
Other payables (261) (835)
Finance costs payable (43) (34)
Total liabilities (1,548) (869)
Net assets 296,458 373,788
Equity
Share capital 7 154,462 148,735
Capital reserve 147,708 230,544
Revenue reserve (5,712) (5,491)
Total equity 296,458 373,788
Net assets per Ordinary share 8 637.68p 813.20p
*Audited
Approved by the Board of Directors and authorised for issue on 5 July 2022 and
signed on its behalf by:
Helen Green Director
The notes further below form part of these financial statements. Incorporated
in Guernsey: Company registration number 50900
Condensed Unaudited Statement of Changes in Equity
For the six months to 30 April 2022
Share capital Capital reserve Revenue reserve
£'000 £'000 £'000
Total
Note £'000
Balance at start of 1 November 2021 148,735 230,544 (5,491) 373,788
Loss for the period - (82,836) (221) (83,057)
Scheme of reconstruction
Ordinary shares issued 62,037 - - 62,037
Ordinary shares repurchased (55,291) - - (55,291)
Tender offer and share issue costs 7 (177) - - (177)
Share buybacks 7 (842) - - (842)
Balance at 30 April 2022 154,462 147,708 (5,712) 296,458
For the year ended 31 October 2021*
Share capital Capital reserve Revenue reserve
£'000 £'000 £'000 Total
Note £'000
Balance at start of 1 November 2020 149,616 176,563 (5,209) 320,970
Profit for the year - 64,438 (282) 64,156
Dividends paid 9 - (10,457) - (10,457)
Tender offer and share issue costs (Scheme of Reconstruction)
(881) - - (881)
Balance at 31 October 2021 148,735 230,544 (5,491) 373,788
*Audited
The capital reserve at 30 April 2022 is split between realised gains of
£218,088,000 and unrealised loss of £70,380,000 (31 October 2021: realised
gains of £183,241,000 and unrealised gains of £47,303,000).
The revenue reserve and the capital reserve is distributable subject to the
solvency requirements of the Guernsey Company Law 2008.
The notes further below form an integral part of these financial statements.
Condensed Unaudited Statement of Cash Flow
Six months to 30 April 2022 Six months to 30 April 2021
£'000 £'000
Operating activities
Cash inflow from investment income 540 1,958
Cash outflow from management expenses (868) (2,269)
Cash inflow from disposal of investments1 244,052 71,991
Cash outflow from purchase of investments1 (378,180) (60,628)
Cash outflow from withholding tax (36) (125)
Net cash flow from operating activities (134,492) 10,927
Financing activities
Repayment of bank borrowings - (15,000)
Proceeds from bank borrowings - 12,500
Borrowing commitment fee and interest charges (98) (112)
Dividends paid - (5,171)
Scheme of reconstruction
Ordinary shares issued2 3,257 -
Ordinary shares repurchased (55,291) -
Tender offer and share issue costs paid (388) -
Share buybacks (842) -
Net cash flow from/(used) in financing activities (53,362) (7,783)
Net (decrease)/increase in cash and cash equivalents (187,854) 3,144
Effect of foreign exchange (508) (151)
Cash and cash equivalents at start of the period 201,795 8,315
Cash and cash equivalents at end of the period 13,433 11,308
1 Cash flows from the disposal and purchase of investments have been
classified as components of cash flow from operating activities because they
form part of the Company's operating activities.
2 Actual proceeds received as a result of the Scheme of reconstruction on 9
November 2021 amounted to £3,257,000 with the remainder being received in the
form of a UK treasury bill amounting to £57,980,000. The UK treasury bill was
immediately sold on 10 November 2021 and subsequently deployed into Chinese
equities.
The notes further below form an integral part of these financial statements.
Selected Explanatory Notes to the Condensed Unaudited
Financial Statements
For the six month period ended 30 April 2022
1. Reporting entity
abrdn China Investment Company Limited (the "Company") is a closed-ended
investment company, registered in Guernsey on 16 September 2009. The Company's
registered office is 11 New Street, St Peter Port, Guernsey GY1 2PF. The
Company's Ordinary shares have a premium listing on the London Stock Exchange
and commenced trading on 10 November 2009. The condensed interim financial
statements of the Company are presented for the six months to 30 April 2022.
The Company's investment policy is to invest in companies listed, incorporated
or domiciled in the People's Republic of China ("China"), or companies that
derive a significant proportion of their revenues or profits from China
operations or have a significant proportion of their assets there.
In furtherance of the investment policy, the portfolio will normally consist
principally of quoted equity securities and depositary receipts although
unlisted companies, fixed interest holdings or other non-equity investments
may be held. Investments in unquoted companies will be made where the Manager
has a reasonable expectation that the company will seek a listing in the near
future. The portfolio is actively managed and may be invested in companies of
any size and in any sector.
Prior to the approval of the new investment objective and investment policy at
the exraordinary general meeting ("EGM") on 26 October 2021, the Company was
managed in accordance with its previous investment objective, which was to
achieve consistent returns for shareholders in excess of the MSCI Emerging
Markets Net Total Return Index in sterling terms.
Manager
The Company's Manager during the six months ended 30 April 2022 was Aberdeen
Standard Fund Managers Limited ('ASFML').
Non-mainstream pooled investments ("NMPIs")
The Company currently conducts its affairs so that the Ordinary shares issued
by the Company can be recommended by Independent Financial Advisers to
ordinary retail investors in accordance with the Financial Conduct Authority's
rules in relation to NMPIs and intends to continue to do so for the
foreseeable future.
2. Basis of preparation Statement of compliance
The condensed interim financial statements have been prepared in accordance
with IAS 34 Interim Financial Reporting and the Disclosure Guidance and
Transparency Rules ("DTRs") of the UK's Financial Conduct Authority. They do
not include all of the information required for full annual financial
statements and should be read in conjunction with the financial statements of
the Company as at and for the year ended 31 October 2021. The financial
statements of the Company as at and for the year ended 31 October 2021 were
prepared in accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board ("IASB").
The accounting policies used by the Company are the same as those applied by
the Company in its financial statements as at and for the year ended 31
October 2021.
Where presentational guidance set out in the Statement of Recommended Practice
("SORP") for Investment Companies issued by the Association of Investment
Companies ("AIC") in April 2021 is consistent with the requirements of IFRS,
the Directors have prepared the financial statements on a basis compliant with
the recommendations of the SORP.
The "Total" column of the Condensed Unaudited Statement of Comprehensive
Income is the profit and loss account of the Company. The "Revenue" and
"Capital" columns provide supplementary information.
This report will be sent to shareholders and copies will be made available to
the public at the Company's registered office. It will also be made available
on the Company's website: www.abrdnchina.co.uk. (http://www.abrdnchina.co.uk/)
Going concern
The Directors have adopted the going concern basis in preparing the financial
statements. The Board formally considered the Company's going concern status
at the time of the publication of these financial statements and a summary of
the assessment is provided below.
Since the adoption of new investment policy, as approved by Shareholders at
the EGM held on 26 October 2021, the Board considered it appropriate to reset
the interval between Continuation Resolutions so that the next Continuation
Resolution will be put to Shareholders at the annual general meeting of the
Company to be held in 2027.
The Directors believe that the Company has adequate resources to continue in
operational existence for at least 12 months from the date of approval of this
document. In reaching this conclusion, the Directors have considered the
liquidity of the Company's portfolio of investments as well as its cash
position, income and expense flows.
As at 30 April 2022, the Company held £13.4 million in cash and £283.0
million in investments. It is estimated that approximately 99% of the
investments held at the period end could be realised in one month. The total
operating expenses for the period ended 30 April 2022 were £0.5 million,
which on an annualised basis represented approximately 0.56% of average net
assets during the period. The Company also incurred 0.04% of finance costs. At
the date of approval of this report, based on the aggregate of investments and
cash held, the Company has substantial operating expenses cover. The Company's
net assets at 24 June 2022 were £329.0 million.
In April 2022, the Company entered into a £15 million unsecured multicurrency
revolving loan facility with Industrial and Commercial Bank of China, London
Branch ("the Lender") for a two year period. The facility will be utilised for
general working capital purposes and for the acquisition of investments in
accordance with the Company's investment policy. Under the terms of the
facility, the Company also has the option to increase the level of the
commitment from £15 million to £30 million at any time, subject to the
Lender's credit approval.
The facility has yet to be drawn.
In light of the current market environment, the Directors have fully
considered and assessed the Company's portfolio of investments. A prolonged
and deep market decline could lead to falling values of the investments or
interruptions to cashflow. However, the Company currently has more than
sufficient liquidity available to meet any future obligations.
The Directors are satisfied that it is appropriate to adopt the going concern
basis in preparing the financial statements and, after due consideration, that
the Company is able to continue in operation for a period of at least 12
months from the date of approval of these financial statements.
Global issues and other market concerns
Covid-19 - The rapid spread of Covid-19 led governments across the globe to
implement policies to restrict the gathering, interaction and/or movement of
people. These policies have inevitably impacted and changed the nature of the
operations of some aspects of the Company, its key service providers and
companies in its investment portfolio. Share prices respond to assessments of
future economic activity as well as their own forecast performance. The
Covid-19 pandemic has had a materially negative impact on the Chinese economy
and may continue do so for an unknown period of time as further lockdowns
continue to weigh on investor sentiment and economic activity.
Russia-Ukraine war - Russia's invasion into Ukraine continues to cause
disruption in supply chains and global markets. Speculation over China's
relationship with Russia raised concerns relating to possible secondary
sanctions leading to further volatility.
The Board and Investment Manager have regular discussions to assess the impact
of emerging risks, including Covid-19 and geopolitical events, on both the
investment portfolio and on the Company's ability to maximise returns for
shareholders.
Equity and reserves Share capital
Share capital represents the 1p nominal value of the issued share capital plus
any share premium arising from the net proceeds of issuing shares less the
aggregate cost of shares repurchased (to be held in treasury or for
cancellation).
Capital reserve
Profits achieved by selling investments and changes in fair value arising upon
the revaluation of investments that remain in the portfolio are all credited
or charged to profit or loss in the capital column of the Statement of
Comprehensive Income and allocated to the capital reserve. The capital reserve
is distributable subject to the solvency requirements of the Guernsey Company
Law 2008.
Revenue reserve
The balance of all items allocated to the revenue column of the Statement of
Comprehensive Income in each year is transferred to the Company's revenue
reserve. The revenue reserve is distributable subject to the solvency
requirements of the Guernsey Company Law 2008.
Use of estimates, assumptions and judgements
The preparation of the condensed interim financial statements in conformity
with IFRS requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Use of estimates and assumptions
Estimates and underlying assumptions are reviewed on an on-going basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
Classification and valuation of investments
Investments are designated as fair value through profit or loss on initial
recognition and are subsequently measured at fair value. The valuation of such
investments requires estimates and assumptions made by the management of the
Company depending on the nature of the investments as described below and fair
value may not represent actual realisable value for those investments.
Use of judgements
In respect of note 11, the determination of what constitutes 'observable'
requires significant judgement by the Company. The Company considers
observable data to be that market data that is readily available, regularly
distributed or updated, reliable and verifiable, not proprietary and provided
by independent sources that are actively involved in the relevant market.
Adoption of new and revised standards
At the date of approval of these financial statements, there were no new or
revised standards or interpretations relevant to the Company which came into
effect.
3. Investments
As the Company's business is investing in financial assets with a view to
profiting from their total return in the form of increases in fair value,
financial assets are held at fair value through profit or loss on initial
recognition. These investments are recognised on the trade date of their
acquisition at which the Company becomes a party to the contractual provisions
of the instrument. At this time, the best evidence of the fair value of the
financial assets is the transaction price. Transaction costs that are directly
attributable to the acquisition or issue of the financial assets are charged
to the profit or loss of the condensed unaudited Statement of Comprehensive
Income as a capital item. Subsequent to initial recognition, investments
designated as fair value through profit or loss are measured at fair value
with changes in their fair value recognised in the profit or loss of the
condensed unaudited Statement of Comprehensive Income and determined by
reference to:
(i) investments quoted or dealt on recognised stock exchanges in an
active market are valued by reference to their market bid prices;
(ii) investments other than those in i) above which are dealt on a
trading facility in an active market are valued by reference to broker bid
price quotations, if available, for those investments;
(iii) investments in underlying funds, which are not quoted or dealt on
a recognised stock exchange or other trading facility or in an active market,
are valued at the net asset values provided by such entities or their
administrators. These values may be unaudited or may themselves be estimates
and may not be produced in a timely manner. If such information is not
provided, or is insufficiently timely, the Investment Manager uses appropriate
valuation techniques to estimate the value of investments. In determining fair
value of such investments, the Investment Manager takes into consideration
relevant issues, which may include the impact of suspension, redemptions,
liquidation proceedings and other significant factors. Any such valuations are
assessed and approved by the Directors. The estimates may differ from actual
realisable values;
(iv) investments which are in liquidation are valued at the estimate
of their remaining realisable value; and
(v) any other investments are valued at Directors' best estimate of
fair value.
Investments are derecognised on the trade date of their disposal, which is the
point where the Company transfers substantially all the risks and rewards of
the ownership of the financial asset. Gains or losses are recognised within
profit or loss in the 'Capital' column of the condensed unaudited Statement of
Comprehensive Income. The Company uses the weighted average cost method to
determine realised gains and losses on disposal of investments.
4. Operating segments
IFRS 8, 'Operating segments' requires a 'management approach', under which
segment information is presented on the same basis as that used for internal
reporting purposes. The Board, as a whole, has been determined as constituting
the chief operating decision maker of the Company. The Board has considered
the requirements of the standard and is of the view that the Company is
engaged in a single segment of business, which is investing in a portfolio of
funds and products which give exposure to developing and emerging market
economies. The key measure of performance used by the Board is the Net Asset
Value of the Company (which is calculated under IFRS). Therefore, no
reconciliation is required between the measure of profit or loss used by the
Board and that contained in the financial statements.
The Board of Directors is responsible for ensuring that the Company's
objective and investment strategy is followed. The day-to-day implementation
of the investment strategy has been delegated to the Investment Manager, but
the Board retains responsibility for the overall direction of the Company. The
Board reviews the investment decisions of the Investment Manager at regular
Board meetings to ensure compliance with the investment strategy and to assess
the achievement of the Company's objective. The Investment Manager has been
given full authority to make investment decisions on behalf of the Company in
accordance with the investment strategy and analyses markets within a
framework of quality, value, growth and change. The investment policy employed
by the Investment Manager ensures that diversification within investments are
taken into account when deciding on the size of each investment so the
Company's exposure to any one company should never be excessive. The Company's
positions are monitored as a whole by the Board in monthly portfolio
valuations and at Board meetings. Any significant change to the Company's
investment strategy requires shareholder approval.
The Company has a diversified portfolio of investments and no single
investment accounted for more than 8% of the Company's net assets at the
Company's period end. The Investment Manager aims to identify investments
which it considers are likely to deliver consistent capital growth over the
longer term.
5. Bank loan and finance costs
In April 2022, the Company entered into a £15 million unsecured multicurrency
revolving loan facility with Industrial and Commercial Bank of China, London
Branch ("the Lender") for a two year period. The facility will be utilised for
general working capital purposes and for the acquisition of investments in
accordance with the Company's investment policy. Under the terms of the
facility, the Company also has the option to increase the level of the
commitment from £15 million to £30 million at any time, subject to the
Lender's credit approval. The facility has yet to be drawn.
Six month period ended 30 April 2022 Six month period ended 30 April 2021
£'000 £'000
Interest payable 66 93
Facility arrangement fees and other charges 41 19
Total finance costs 107 112
At 30 April 2022, interest payable of £43,000 (30 April 2021: £34,000) was
accrued in the Condensed Unaudited Statement of Financial Position.
Restrictions imposed by the Lender in connection with the credit facility
include the following financial covenants:
a) Total borrowings do not exceed 20% of the total assets at any time:
b) Its net asset value shall at all times be a minimum of £200,000,000;
and
c) The aggregate value of the unlisted investments does not exceed 10%
of the aggregate value of the investments at any time
The Company does not have any externally imposed capital requirements other
than disclosed above.
6. (Losses)/earnings per Ordinary share
(Losses)/earnings per Ordinary share is based on the total comprehensive loss
for the period ended 30 April 2022, being a loss of £83,057,000 (30 April
2021: profit of £68,724,000) attributable to the weighted average of
46,552,649 (2021: 45,965,159) Ordinary shares in issue (excluding shares held
in treasury) during the period ended 30 April 2022.
Supplementary information is provided as follows: revenue per share is based
on the net revenue loss of
£221,000 (30 April 2021: revenue profit of £4,000) and capital earnings per
share is based on the net capital loss of £82,836,000 (30 April 2021: capital
gain of £68,728,000) attributable to the above Ordinary shares.
7. Share capital
Ordinary shares with voting rights (excluding
treasury shares)
Ordinary shares of 1p nominal value Allotted, issued and fully paid
For the six month period ended 30 April 2022 £'000 Treasury shares
Authorised
Opening number of shares Unlimited 546 54,618,507 45,965,159 8,653,348
Scheme of reconstruction:
Ordinary shares issued - 76 7,554,440 7,554,440 -
Ordinary shares repurchased - - - (6,894,773) 6,894,773
Purchase of own shares - - - (134,749) 134,749
Closing number of shares Unlimited 622 62,172,947 46,490,077 15,682,870
Ordinary shares with voting rights (excluding
treasury shares)
Ordinary shares of 1p nominal value Allotted, issued and fully paid
For the year ended 31 October 2021* £'000 Treasury shares
Authorised
Opening number of shares Unlimited 546 54,618,507 45,965,159 8,653,348
Purchase of own shares - - - - -
Closing number of shares Unlimited 546 54,618,507 45,965,159 8,653,348
*Audited
Purchase of own shares
Excluding the effect of the tender offer (see below) 134,749 Ordinary shares
were purchased during the six months ended 30 April 2022 at an aggregate cost
to the Company of £842,000 (year to 31 October 2021: £nil).
Scheme of Reconstruction
As announced on 9 November 2021, the Company completed its Scheme of
Reconstruction (the "Scheme"). As a result of the Scheme, the change in
Ordinary share capital of the Company was as follows:
Share issue - The Company received approximately £62 million of net assets
from New Thai in consideration for the issue of 7,554,440 new Ordinary shares
in the Company.
Tender Offer - A total of 6,894,773 Ordinary shares were repurchased by the
Company on 10 November 2021 under the Tender Offer and held in treasury at an
aggregate cost to the Company of £55 million.
The costs incurred in implementing the Scheme amounted to £1,057,493. During
the financial year ended 31 October 2021 £880,164 was accrued as a cost to
the Company of which £668,164 was paid. During the six month period ended 30
April 2022, £389,329 was paid and the balance of £177,329 was accrued as a
cost in the accounts.
Share capital account
The aggregate balance (including share premium) standing to the credit of the
share capital account at 30 April 2022 was £154,462,000 (31 October 2021:
£148,735,000).
8. Net asset value per Ordinary share
Net asset value per Ordinary share is based on net assets of £296,458,000 (31
October 2021: £373,788,000) divided by 46,490,077 (31 October 2021:
£45,965,159) Ordinary shares in issue (excluding treasury shares) at the
period end.
The table below is a reconciliation between the NAV per Ordinary share
announced on the London Stock Exchange and the NAV per Ordinary share
disclosed in these financial statements.
As at 30 April 2022 As at 30 April 2021
NAV per NAV per
Net assets Ordinary Net assets Ordinary
(£'millions) share (p) (£'millions) share (p)
NAV as published on 3 May 2022 and
1 November 2021 respectively 296.6 638.01 373.7 813.09
Revaluation adjustments - delayed prices (0.1) (0.33) 0.1 0.11
NAV as disclosed in these financial statements 296.5 637.68 373.8 813.20
9. Dividends paid
There were no dividends paid or declared in respect of the six months ended 30
April 2022:
10. Related party disclosures Manager
Management fees payable are shown in profit or loss in the Condensed Unaudited
Statement of Comprehensive Income.
At 30 April 2022, management fees of £75,000 (30 April 2021: £462,000) were
accrued in the Condensed Unaudited Statement of Financial Position. Total
management fees for the period were £75,000 (30 April 2021:
£1,346,000) .
Following completion of the Scheme of reconstruction, on 9 November 2021, the
Company entered into a new management agreement (the "Management Agreement")
with Aberdeen Standard Fund Managers Limited ("ASFML"), pursuant to which the
management fee payable by the Company to ASFML will be calculated by reference
to the market capitalisation of the Company, rather than its net assets (as
was the case previously). The new management fee will be structured on a
tiered basis, with the first £150 million of market capitalisation being
charged at 0.80%, the next £150 million being charged at 0.75%. and amounts
thereafter being charged at 0.65%.
Furthermore, ASFML agreed to make a contribution to the costs of implementing
the Scheme of reconstruction by means of a waiver of the management fee for
the first six months following the completion of the Scheme.
The Management Agreement is terminable by either party on not less than six
months' written notice at any time.
Investments held by the Company which are managed by the abrdn Group
As at 30 April 2022, the Company held the following investments managed by the
abrdn Group;
As at As at
30 April 2022 31 October 2021
£'000 £'000
Aberdeen Standard SICAV I - China A Share Equity Fund 8,907 21,874
abrdn Asian Income Fund Limited - 6,215
Aberdeen New India Investment Trust PLC - 10,826
Total 8,907 38,915
Directors
Total fees for the Directors in the period ended 30 April 2022 were £88,800
(30 April 2021: £76,700). There were no outstanding fees due to the Directors
at the period end (30 April 2021: £nil).
As at 30 April 2022 and at the date of this report, the Directors held the
following Ordinary shares in the Company.
Ordinary shares At 30 April 2022 and at the date of this report
Ordinary shares At 31 October 2021
M Hadsley-Chaplin 35,000 30,000
H Green 1,800 1,800
E de Rochechouart 142 -
A Gilding 1,667 -
S MacAulay 2,779 -
W Collins N/A 15,000
11. Financial instruments
IFRS 13 requires the Company to classify its investments in a fair value
hierarchy that reflects the significance of the inputs used in making the
measurements. IFRS 13 establishes a fair value hierarchy that prioritises the
inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements). The three levels of fair value
hierarchy under IFRS 13 are
as follows:
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 asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices);
Level 3 - inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement in its entirety. For
this purpose, the significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses observable
inputs that require significant assumptions based on unobservable inputs, that
measurement is a Level 3 measurement. Assessing the significance of a
particular input to the fair value measurement in its entirety requires
judgement, considering factors specific to the asset or liability.
The determination of what constitutes 'observable' requires significant
judgement by the Company. The Company considers observable data to be that
market data that is readily available, regularly distributed or updated,
reliable and verifiable, not proprietary and provided by independent sources
that are actively involved in the relevant market.
The classification of the Company's investments held at fair value as at 30
April 2022 is detailed in the table below:
30 April 2022 31 October 2021
£'000 £'000
Instruments held at fair value through profit and loss
Level 1 281,974 69,419
Level 2 - 42,128
Level 3 1,038 1,358
Total 283,012 112,905
The Company recognises transfers between levels of fair value hierarchy as at
the date of the period end in which the change occurred.
There were no investments transferred between levels during the period (31
October 2021: £nil).
Level 1 classification basis
Investments, whose values are based on quoted market prices in active markets,
and therefore classified within Level 1, include listed equities in active
markets. The Company does not adjust the quoted price for these instruments.
Level 2 classification basis
Investments that trade in markets that are not considered to be active but are
valued based on quoted market prices, dealer quotations or alternative pricing
sources supported by observable inputs are classified within Level 2. These
include monthly priced investment funds. The underlying net asset values of
the open ended funds included under Level 2 are prepared using industry
accepted standards and the funds have a history of accepting and redeeming
funds on a regular basis at net asset value. The net asset values of regularly
traded open ended funds are considered to be reasonable estimates of the fair
values of those investments and such investments are therefore classified
within Level 2 if they do not meet the criteria for inclusion in Level 1.
Level 3 classification basis
Investments classified within Level 3 have significant unobservable inputs, as
they trade infrequently. The level 3 figure consists of an investment in
Komodo Fund. Komodo Fund is valued at the unadjusted net asset values provided
by the administrator of that fund.
The movement on the level 3 classified investments is shown below:
Six months to 30 April 2022 Year to
£'000 31 October 2021
£'000
Opening balance 1,358 2,129
Valuation adjustments* (320) (771)
Closing balance 1,038 1,358
*Total gains and losses for the period included in profit or loss relating to
assets held at the end of the period
12. Financial instruments - risk profile
The principal risks relating to financial instruments held by the Company
remain the same as at the Company's last financial year end.
13. Post balance sheet events
Since the period ended 30 April 2022, 228,610 Ordinary shares have been bought
back and held in treasury.
14. Financial information
The Half-Yearly Financial Report will be submitted to the National Storage
Mechanism and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
Alternative Performance Measures ("APMs")
The following APMs are presented to convey a view of the entity's performance
which is closer to the manager's view than what would result from the use
solely of accounting measures.
Discount
The amount, expressed as a percentage, by which the share price is less than
the NAV per Ordinary share.
As at As at
30 April 2022 30 April 2021
NAV per Ordinary share (pence) a 637.68 836.55
Ordinary share price (pence) b 536.00 714.00
Discount (b÷a)-1 15.9% 14.6%
Net cash / (gearing)
A way to magnify income and capital returns, but which can also magnify
losses. The revolving loan facility with ICBC is a common method of gearing.
As at As at
30 April 2022 30 April 2021
Total assets less cash/cash equivalents (£'000) a 284,573 385,771
Net assets (£'000) b 296,458 384,523
Net cash / (gearing) 1-(a÷b) 4.0% (0.3%)
Ongoing charges
A measure of the regular annual costs of running an investment company
expressed as a percentage of the average daily published NAV.
As at As at
30 April 2022 30 April 2021
Average NAV (£'000) a 340,371 368,076
Annualised expenses* (£'000) b 1,907 3,640
Ongoing charges b÷a 0.56% 0.99%
* The Company's ongoing charges figure does not reflect any costs of the
underlying funds as the underlying information is not readily available.
Total return
A measure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company into its Ordinary shares on the ex-dividend date.
Six months ended 30 April 2022 Ordinary Share price NAV
Opening at 1 November 2021 (pence) a 695.00 813.20
Closing at 30 April 2022 (pence) b 536.00 637.68
Share price/NAV movement (b ÷ a) - 1 c n/a -22.9% -21.5%
Dividend reinvestment d n/a 0.0% 0.0%
Total return (c+d) -22.9% -21.5%
n/a = not applicable
Year ended 31 October 2021 Ordinary share price NAV
Opening at 1 November 2020 (pence) a 2 605.00 698.29
Closing at 31 October 2021 (pence) b 2 695.00 813.20
Share price/NAV movement (b ÷ a) - 1 c n/a 14.9% 16.5%
Dividend reinvestment d n/a 3.8% 3.3%
Total return (c+d) 18.7% 19.8%
n/a = not applicable
Company Information
Directors
Mark Hadsley-Chaplin (Chairman)
Helen Green (Senior Independent Director)
Eleonore de Rochechouart
Anne Gilding (appointed on 9 November 2021)
Sarah MacAulay (appointed on 9 November 2021)
William Collins (Retired on 12 April 2022)
Registered Office
11 New Street St Peter Port
Guernsey GY1 2PF
Company Secretary and Administrator
Vistra Fund Services (Guernsey) Limited 11 New Street
St Peter Port Guernsey GY1 2PF
Alternative Investment Fund Manager
Aberdeen Standard Fund Managers Limited Bow Bells House
1 Bread Street London EC4M 9HH
Investment Manager
abrdn Hong Kong Limited 30/F LHT Tower
31 Queen's Road Central Hong Kong
UK Administration Agent
Sanne Fund Services (UK) Limited 6th Floor
125 London Wall London EC2Y 5AS
Registrars
Link Asset Services Longue Hougue House St Sampson
Guernsey GY2 4JN
Depository Services and Custodian
Northern Trust (Guernsey) Limited Trafalgar Court
Les Banques St Peter Port
Guernsey GY1 3DA
Financial Advisor and Joint Corporate Broker
Shore Capital Markets Limited Cassini House
57-58 St James's Street London SW1A 1LD
Joint Corporate Broker
Numis Securities Limited 45 Gresham Street London EC2V 7BF
Advisers as to Guernsey law
Mourant
Royal Chambers St Julian's Avenue
St Peter Port, Guernsey GY1 4HP
Independent Auditor
KPMG Channel Islands Limited Glategny Court
Glategny Esplanade St Peter Port Guernsey GY1 1WR
abrdn Customer Services Department, Investment Plan for Children, Share Plan and ISA Enquiries
abrdn Investment Trusts PO Box 11020
Chelmsford Essex CM99 2DB
Freephone: 0808 500 0040
(open Monday to Friday, 9.00 a.m. - 5.00 p.m., excluding public holidays in
England and Wales)
Email: inv.trusts@abrdn.com (mailto:inv.trusts@abrdn.com)
Company Registration Number
Incorporated in Guernsey Number 50900
Website
abrdnchina.co.uk
United States Internal Revenue Service FATCA Registration Number ("GIIN")
WLL8YJ.99999.SL.831
Legal Entity Identifier ("LEI")
213800RIA1NX8DP4P938
Enquiries:
Aberdeen Standard Fund Managers Limited (Alternative Investment Fund Manager
to the Company)
Evan Bruce-Gardyne
Tel: +44 (0)7720 073216
Luke Mason
Tel +44 (0)207 463 5971
Sanne Fund Services (UK) Limited (UK Administration Agent)Brian Smith
Tel: +44 (0)20 3327 9720
END
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