REG - abrdn New Dawn IT - Annual Financial Report
17/08/2023 07:00
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RNS Number : 5490J abrdn New Dawn Invest Trust plc 17 August 2023
ABRDN NEW DAWN INVESTMENT TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 APRIL 2023
Legal Entity Identifier (LEI): 5493002K00AHWEME3J36
Investment Objective
To provide shareholders with a high level of capital growth through equity
investment in the Asia Pacific countries ex Japan.
Benchmark
MSCI All Countries Asia Pacific ex Japan Index (Sterling adjusted).
Website
Up to date information can be found on the Company's website:
www.newdawn-trust.co.uk (http://www.newdawn-trust.co.uk)
For further information, please contact:
Stephanie Hocking
abrdn Fund Managers Limited
0207 463 6403
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. Investors may not get back the amount they originally invested.
Performance Highlights
Net asset value total return(AB) Share price total return(AB)
-6.8% -7.3%
2022 -11.0% 2022 -11.8%
Benchmark total return(BC) Ongoing charges(A)
-5.2% 1.13%
2022 -9.2% 2022 1.13%
Revenue return per share Dividend per Ordinary share
4.82p 4.30p
2022 3.71p 2022 4.30p
(A) Alternative Performance Measure.
(B) Total return represents capital return plus dividends reinvested.
(C) MSCI AC Asia Pacific ex Japan Index
Financial Highlights
30 April 2023 30 April 2022
Total assets £342,765,000 £380,434,000
Total equity shareholders' funds (net assets) £314,133,000 £346,952,000
Market capitalisation £274,027,000 £305,154,000
Net asset value per Ordinary share (including current year income) 299.20p 325.17p
Net asset value per Ordinary share (excluding current year income)(AB) 295.34p 322.43p
Share price (mid market) 261.00p 286.00p
Discount to net asset value per Ordinary share (including current year 12.8% 12.0%
income)(B)
Discount to net asset value per Ordinary share (excluding current year 11.6% 11.3%
income)(AB)
MSCI AC Asia Pacific ex Japan Index (currency adjusted, capital gains basis) 765.99 834.02
Net gearing(B) 8.5% 7.7%
Dividend and earnings
Revenue return per share 4.82p 3.71p
Dividends per share(C) 4.30p 4.30p
Dividend cover(B) 1.12 0.86
Revenue reserves(D) £13,245,000 £12,705,000
Operating costs
Ongoing charges ratio(B) 1.13% 1.13%
(A) Based on capital only NAV.
(B) Considered to be an Alternative Performance Measure.
(C) The figures for dividends reflect the years in which they were earned (see
note 8).
(D) Prior to payment of the second interim dividend.
Chairman's Statement
Introduction
Before setting out my usual statement on the Company's annual results, I must
draw your attention to an important announcement made by the Company since the
year end. On 21 July 2023 the Board announced that it had agreed heads of
terms with the board of Asia Dragon Trust plc ("Asia Dragon") in respect of a
proposed combination of the Company with Asia Dragon. The combination, if
approved by each company's shareholders, will be effected by way of a scheme
of reconstruction and winding up of the Company under section 110 of the
Insolvency Act 1986 with the associated transfer of part of the assets and
undertaking of the Company to Asia Dragon in exchange for the issue of new
ordinary shares in Asia Dragon (the "Scheme"). Under the terms of the Scheme
an up to 25% cash exit opportunity will be offered to the Company's
shareholders to realise part of their investment in the Company at a 2%
discount to the formula asset value ("FAV") (less the costs of realigning the
portfolio).
abrdn Fund Managers Limited ("aFML"), will, following implementation of the
Scheme, continue to manage the enlarged Asia Dragon. The Asia Dragon board
will propose certain amendments to Asia Dragon's investment policy to its
shareholders which will principally align Asia Dragon's policy with the
Company's current investment policy in order to permit investment into
Australasia and provide the Investment Manager with equivalent geographic
flexibility. Asia Dragon's existing benchmark comparative index (MSCI AC Asia
(ex-Japan) Index) will be retained. The portfolio managers of the enlarged
Asia Dragon will be James Thom and Pruksa Iamthongthong, part of the same team
that currently manages the Company's portfolio. aFML has agreed that the
management fee payable by the enlarged Asia Dragon to aFML will be reduced to
0.75% (currently 0.85%) on the initial £350 million of Asia Dragon's net
assets and 0.5% on Asia Dragon's net assets in excess of £350 million.
Asia Dragon offers a five-yearly performance-related conditional tender with
the current performance period running from 1 September 2021 to 31 August 2026
("2026 CTO"). It is proposed that, in the light of the proposals and
conditional on the Scheme being implemented, the 2026 CTO will be amended such
that, in the event Asia Dragon underperforms its benchmark over the
performance period, Asia Dragon will offer shareholders the opportunity to
tender up to a maximum of 15% of their shares; a reduction from the maximum of
25% previously proposed. This reflects the revised conditional tender being of
broadly a similar size to that previously proposed for the 2026 CTO, given the
greater scale of the enlarged Asia Dragon. In addition to this, Asia Dragon's
shareholders will have the opportunity to vote on the continuation of Asia
Dragon at every fifth AGM with the next continuation vote to be put forward at
the AGM in December 2026.
Both the Company and Asia Dragon invest in the Asia Pacific (ex-Japan) region,
and both are managed by aFML with a high level of commonality across their
shareholder bases. In light of these similarities, the Board believes a
combination of the companies will create an enlarged vehicle that offers
similar investment exposure for each set of shareholders while offering
shareholders in the enlarged Asia Dragon (and therefore to Shareholders who
roll into Asia Dragon) benefits that include greater secondary liquidity in
Asia Dragon shares and cost efficiencies, including as result of the reduction
in the management fee as referred to above.
The Company and Asia Dragon have received irrevocable undertakings to support
the proposals from shareholders representing 27.0% of the Company's issued
share capital and 29.7% of Asia Dragon's issued share capital (as at
20 July 2023).
A circular to shareholders of the Company, providing details of the Scheme and
convening general meetings to approve the Scheme, together with a prospectus
published by Asia Dragon in respect of the issue of New Asia Dragon Shares in
connection with the Scheme are expected to be published in September 2023. If
approved, the proposals are anticipated to become effective in October 2023.
The Board believes that the proposals are in the best interests of
shareholders as a whole. In the event that the Scheme does not go ahead, then
the Company will make a separate announcement to shareholders in respect of
the future of the Company.
Overview of the Year
Over the 12 months to 30 April 2023, the performance of the Company reflected
a challenging environment for both Asian and global equity markets. The net
asset value ("NAV") declined by 6.8% on a total return basis, compared to a
fall of 5.2% in the benchmark, the MSCI All Countries Asia Pacific ex Japan
Index (in Sterling terms). The share price fell by 7.3% on a total return
basis, while the discount of the share price to the NAV was 12.8% at the year
end.
Despite the underperformance for the year, it is worth noting that, over the
longer term three and five year periods both the NAV and share price total
returns have outperformed the benchmark index.
Globally, concerns over the impact of monetary tightening, the threat of
recession and the ongoing conflict in Ukraine weighed heavily on markets. The
Company was not immune to this. But, while the Company's performance for the
12 months was challenging, it outperformed the more 'growth-centric' funds
that were heavily impacted by the growth-to-value rotation, triggered by the
abrupt shift in global monetary policy. This underlines the benefit of the
Company's focus on quality, investing in companies with real competitive
advantages, sound financial management and good corporate governance. It is
these sorts of companies that tend to be more resilient in a tougher
environment.
In the first half of the year, markets were unsettled by monetary tightening
in response to high inflation, with several major central banks raising
interest rates. Inflationary pressures in Asia have not been as acute as
elsewhere, but investors are alert to the possibility of price increases in
the region.
Market attention shifted to China in the second half of the year, with the
country's sudden decision to reverse its strict Covid-19 restrictions towards
the end of 2022. This move prompted hopes that a re-opening economy would
stimulate domestic consumer demand and benefit export-oriented markets such as
Taiwan and South Korea. Many Chinese stocks, including consumer discretionary
and information technology companies, benefited. Yet, despite the pent-up
domestic consumer demand, the potential positive effects have not yet fully
translated into earnings growth for many companies. Other factors, such as
worries over the health of the property sector and the regulatory crackdown on
technology companies, have made China a tricky market for investors to
navigate. Geopolitical tensions between the US and China have added to
share-price volatility, especially for several Chinese technology and biotech
companies. Against this backdrop, the Company's performance in China lagged
the benchmark over the period. However, the Board is confident in the approach
adopted by the Investment Manager, focusing on the long-term benefits of
quality companies in China and other countries in the region.
Detailed information on performance and portfolio activity for the year is
contained in the Investment Manager's Review.
Earnings and Dividend
Revenue earnings per share for the year were 4.82p (2022: 3.71p), an increase
of 29.9% compared to the previous year. The Company benefited from a small
number of special dividends from companies that had sustained strong earnings,
as well as higher distributions from the large Australian miners, Rio Tinto
and BHP following the spike in commodity prices.
A first interim dividend of 1.0p per share was paid on 10 February 2023. As
explained below, it is anticipated that the Company will convene an AGM to be
held in October at the same time as the first general meeting in relation to
the Scheme. Because of this, and in order to ensure that the Company's normal
dividend paying cycle is maintained, rather than proposing a final dividend as
we have done in previous years, the Board decided to declare a second interim
dividend. Accordingly, a second interim dividend of 3.3p per share was
declared on 31 July 2023 (2022: final dividend of 3.3p), making a total
dividend for the year of 4.3p per share, unchanged from the previous year. The
second interim dividend will be paid on 8 September 2023 to shareholders on
the register on 11 August 2023.
Gearing
At the end of the year, the Company's borrowing facilities amounted to £40
million, comprising a fixed rate loan of £20 million, which matures in
December 2023 (with an interest rate of 2.626%), and a £20 million
multi-currency revolving loan facility maturing in June 2024. An aggregate
Sterling equivalent of £28.6 million was drawn down at the year-end and
gearing (net of cash) was 8.5%, compared to 7.7% at the beginning of the year.
Share Buybacks
In common with other investment trusts, the Company has continued to buy back
shares with the aim of providing a degree of liquidity to the market at times
when the discount to the NAV has widened. It is the view of the Board that
this policy is in the interests of all shareholders. The Board closely
monitors the discount and reviews the operation of the share buy-back policy
at each Board meeting.
During the year, the Company bought back 1.7 million shares, representing 1.6%
of the issued share capital. These shares were bought back at a discount to
NAV and were accretive to the Company, and are held in treasury. The Company's
stated policy on treasury shares is that they can only be re-issued to the
market at a premium to the NAV per share at that time.
Annual General Meeting ("AGM")
As a result of the proposal for the Company to merge with Asia Dragon, it is
anticipated that the Company will convene an AGM to be held in October at the
same time as the first general meeting in relation to the Scheme. The notice
of the AGM will be contained in the Scheme circular.
For those shareholders who roll their holdings into Asia Dragon, the Directors
of abrdn New Dawn who join the Board of Asia Dragon very much look forward to
meeting you at Asia Dragon's AGM later this year.
Outlook
Growth forecasts in the Asia-Pacific region are ahead of many other parts of
the world, as domestic demand has remained robust in a tighter global monetary
environment. What lingers in investors' minds is whether these forecasts will
hold, in an environment that is becoming increasingly uncertain, with rising
geopolitical tensions, recessionary fears and higher interest rates slowly
making more of an impact.
In times like these, where markets are volatile and unsettled, an investment
process focused on quality can provide resilience. The benefits of an active
investment approach can bring opportunities and enable investors to sidestep
parts of the market that are most exposed to risks and uncertainties. The
Company has maintained a diverse portfolio of high-quality investments, well
positioned to navigate turbulent market conditions and take advantage of the
strong structural secular trends across Asia.
These long-term regional drivers include the aspirations of a growing middle
class, urbanisation, clean energy, and digitalisation, which are likely to
reward patient investors in a region where individual countries typically have
different outlooks. Despite short-term ebbs and flows, China and India, the
two most populous nations worldwide, offer attractive long-term growth
opportunities with the likelihood of positive effects on the other countries
in Asia.
Many of the challenges in the market over the past year undoubtedly remain,
but the Board continues to believe that the Investment Manager's focus on
quality and seeking out companies with sound fundamentals is the best approach
to ensure that the Company meets its stated investment objective, and that
shareholders will continue to benefit from this approach under the merger
proposals.
Donald Workman
Chairman
16 August 2023
Overview of Strategy
Business Model
The business of the Company is that of an investment company which seeks to
qualify as an investment trust for tax purposes.
Investment Objective
The Company's investment objective is to provide shareholders with a high
level of capital growth through equity investment in the Asia Pacific
countries ex Japan.
Investment Policy
Asset Allocation
The Company's assets are invested in a diversified portfolio of securities in
quoted companies spread across a range of industries and economies in the Asia
Pacific region excluding Japan. Investments may also be made through
collective investment schemes and in companies traded on stock markets outside
the Asia Pacific region provided that over 75% of their consolidated revenue
is earned from trading in the Asia Pacific region or they hold more than 75%
of their consolidated net assets in the Asia Pacific region.
Gearing
The Board is responsible for determining the gearing strategy for the Company.
Gearing is used selectively to leverage the Company's portfolio in order to
enhance returns where and to the extent this is considered appropriate to do
so. As at 30 April 2023, the Company had net gearing of 8.5% which compares
with a current maximum limit set by the Board of 25%. Borrowings are short to
medium term and particular care is taken to ensure that any bank covenants
permit maximum flexibility of the investment policy.
Risk Diversification
It is the investment policy of the Company to invest no more than 15% of its
gross assets in other listed investment companies (including investment
trusts). As at 30 April 2023, 2.8% of the Company's gross assets were invested
in listed investment companies.
The Company may invest in derivatives, financial instruments, money market
instruments and currencies for the purposes 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).
The Company may only make material changes to its investment policy with the
approval of shareholders in the form of an ordinary resolution. In addition,
any material changes to the Company's investment policy will require the prior
approval of the Financial Conduct Authority.
Delivering the Investment Policy
The Directors are responsible for determining the Company's investment
objective and investment policy. Day-to-day management of the Company's assets
has been delegated, via the AIFM, to the Investment Manager.
Board Investment Limits
In addition to the limits set out in the investment policy, the Investment
Manager is authorised by the Board to invest up to 15% of the Company's gross
assets in any single stock, calculated at the time an investment is made.
Benchmark
The Company compares its performance to the MSCI All Countries Asia Pacific ex
Japan Index (Sterling adjusted).
Promoting the Success of the Company
The Board's statement below describes how the Directors have discharged their
duties and responsibilities over the course of the financial year under
section 172 (1) of the Companies Act 2006 and how they have promoted the
success of the Company for the benefit of the members as a whole.
Principal Risks and Uncertainties
The Company's statement of principal risks and uncertainties forms part of the
Strategic Report and is included beloe.
Key Performance Indicators ("KPIs")
The Board uses a number of financial performance measures to assess the
Company's success in achieving its objective and determining the progress of
the Company in pursuing its investment policy. The main KPIs, which are
considered at each Board meeting, are shown in the table below and further
commentary on the performance for the year is provided in the Chairman's
Statement.
KPI Description
Performance against benchmark index The Board measures performance against the benchmark index - the Sterling
-adjusted MSCI All Countries Asia Pacific ex Japan Index.
Revenue return per Ordinary share The Board monitors the Company's net revenue return.
Dividends per share The Board monitors the Company's annual dividends per Ordinary share.
Share price performance The Board monitors the performance of the Company's share price on a total
return basis.
Discount/premium to NAV The discount/premium of the share price relative to the NAV per share is
closely monitored by the Board, including the potential annual requirement to
hold a continuation vote at the Annual General Meeting, as set out under
"Duration. The discount at the year end is disclosed above.
Ongoing charges The Board regularly monitors the Company's operating costs. Ongoing charges
for the year and the previous year are disclosed above.
Promotional Activities
The Board recognises the importance of promoting the Company to prospective
investors both for improving liquidity and enhancing the rating of the
Company's shares. The Board believes one 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 trusts under its
management. The Company's financial contribution to the programme is matched
by the abrdn Group. The Company also supports the Manager's investments'
investor relations programme which involves regional roadshows to existing and
potential shareholders, promotional and public relations campaigns. The
Manager's promotional and investor relations teams report to the Board on a
quarterly basis giving analysis of the promotional activities as well as
updates on the shareholder register and any changes in the make-up of that
register.
The purpose of the promotional and investor relations programmes is both to
communicate effectively with existing shareholders and to gain new
shareholders, with the aim of improving liquidity and enhancing the value and
rating of the Company's shares. Communicating the long-term attractions of the
Company is key. The promotional programme includes commissioning independent
paid for research on the Company, most recently from Marten & Co. A copy
of the latest research note is available from the Company's website.
Environmental, Social and Human Rights Issues
The Company has no employees as the Board has delegated the day-to-day
management and administrative functions to the Manager. There are therefore no
disclosures to be made in respect of employees.
Modern Slavery Act
Due to the nature of its business, being a company that does not offer goods
and services to customers, the Board considers that the Company is not within
the scope of the Modern Slavery Act 2015. The Company is therefore not
required to make a slavery and human trafficking statement. In any event, the
Board considers the Company's supply chains, dealing predominantly with
professional advisers and service providers in the financial services
industry, to be low risk in relation to this matter.
The UK Stewardship Code and Proxy Voting
The Company supports the UK Stewardship Code, and seeks to play its role in
supporting good stewardship of the companies in which it invests.
Responsibility for actively monitoring the activities of portfolio companies
has been delegated by the Board to the Manager which has sub-delegated that
authority to the Investment Manager. abrdn plc is a tier 1 signatory of the UK
Stewardship Code which aims to enhance the quality of engagement by investors
with investee companies in order to improve their socially responsible
performance and the long term investment return to shareholders. While
delivery of stewardship activities has been delegated to the Manager, the
Board acknowledges its role in setting the tone for the effective delivery of
stewardship on the Company's behalf.
The Board has also given discretionary powers to the Manager to exercise
voting rights on resolutions proposed by the investee companies within the
Company's portfolio. The Manager reports on a quarterly basis on stewardship
(including voting) issues.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its operations, nor
does it have responsibility for any other emissions producing sources under
the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations
2013.
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-related
Financial Disclosures.
Duration
The Company does not have a fixed life. However, under its Articles of
Association, if, in the 90 days preceding the Company's financial year end (30
April), the Ordinary shares have been trading, on average, at a discount in
excess of 15% to the underlying NAV (including current year income, and with
borrowings stated at market value) over the same period, notice will be given
of an ordinary resolution to be proposed at the following Annual General
Meeting to approve the continuation of the Company. If the resolution for
the continuation of the Company is not passed at that Annual General Meeting
or at any adjournment thereof, the Directors will convene a general meeting to
be held not more than three months after the Annual General Meeting at which a
special resolution for the winding-up of the Company will be proposed. In
the 90 days to 30 April 2023 the average discount to the underlying NAV
(including current year income, and with borrowings stated at market value) of
the Ordinary shares was 12.6% and therefore no continuation resolution will be
put to the Company's shareholders at this year's Annual General Meeting.
Viability Statement
As set out in more detail in the Charman's Statement, it is proposed that the
Company combines with Asia Dragon Trust plc ("Asia Dragon"). The
combination, if approved by each company's shareholders, will be effected by
way of a scheme of reconstruction and winding up of the Company under section
110 of the Insolvency Act 1986 and the associated transfer of part of the
assets and undertaking of the Company to Asia Dragon in exchange for the issue
of new ordinary shares in Asia Dragon (the "Scheme"). The outcome of the
general meetings to make the Scheme effective represents a material
uncertainty in the context of the preparation of these financial statements on
a going concern basis.
Notwithstanding this material uncertainty, for the purposes of this viability
statement, the Board has decided that 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 also focused upon the following factors:
- The principal risks and uncertainties detailed below and the
steps taken to mitigate these risks.
- The role of the Audit and Risk Committee in reviewing and
monitoring the Company's internal control and risk management systems.
- The ongoing relevance of the Company's investment objective.
- The liquidity of the Company's portfolio. All of the Company's
investments are in quoted securities in active markets or in collective
investment schemes, and are considered to be liquid.
- The closed-ended nature of the Company which means that it is
not subject to redemptions.
- The use of the Company's share buy back and share issuance
policies to help address any imbalance of supply and demand for the Company's
shares.
- The current and maximum levels of gearing, compliance with loan
covenants and level of headroom within the financial covenants (see note 12 to
the financial statements for details of loan covenants).
- The ability of the Company to refinance its loan facilities, on
or before maturity.
- The potential requirement of the Board to propose a resolution
to approve the continuation of the Company at future Annual General Meetings.
As explained above, this is dependent upon the level of discount in the 90
days preceding the Company's financial year end and there is no requirement
for such a resolution to be proposed at the Annual General Meeting.
- Regulatory or market changes.
- The level of the Company's ongoing charges.
- The robustness of the operations of the Company's third party
service providers.
In making its assessment, the Board has considered that there are other
matters that could have an impact on the Company's prospects or viability in
the future, including the current conflict in Ukraine, economic shocks,
significant stock market volatility, and changes in regulation or investor
sentiment.
Outlook
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.
On behalf of the Board
Donald Workman
Chairman
16 August 2023
Promoting the Success of the Company
Introduction
Section 172 (1) of the Companies Act 2006 (the "Act") requires each Director
to act in the way he/she considers, in good faith, would be most likely to
promote the success of the Company for the benefit of its members as a whole.
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 under that provision of the Act (the "Section 172
Statement"). This statement 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, amongst 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 and Role of the Board
The purpose of the Company is to act as a vehicle to provide, over time,
financial returns (both income and capital) to its shareholders. Investment
trusts, such as the Company, are long-term investment vehicles and are
typically externally managed, have no employees, and are overseen by an
independent non-executive board of directors. The Company's investment
objective and investment policy are contained within the Overview of Strategy.
The Board, which at the end of the year comprised five non-executive
Directors, four of whom are independent of the Manager, has a broad range of
skills and experience across all major functions that affect the Company. The
Board retains responsibility for taking all decisions relating to the
Company's investment objective and policy, gearing, corporate governance and
strategy, and for monitoring the performance of the Company's service
providers.
The Board's philosophy is that the Company should operate in a transparent
culture where all parties are treated with respect and provided with the
opportunity to offer practical challenge and participate in positive debate
which is focused on the aim of achieving the expectations of shareholders and
other stakeholders alike. The Board reviews the culture and manner in which
the Manager and Investment Manager operate at its meetings and receives
regular reporting and feedback from the other key service providers. The
Board is very conscious of the ways it promotes the Company's culture and
ensures as part of its regular oversight that the integrity of the Company's
affairs is foremost in mind in the way that the activities are managed and
promoted. The Board works very closely with the Manager and Investment Manager
in reviewing how stakeholder issues are handled, ensuring good governance and
responsibility in managing the Company's affairs, as well as visibility and
openness in how the affairs are conducted.
The Company's main stakeholders are shareholders (who are also the Company's
'customers'), the Manager (and Investment Manager), service providers,
investee companies, the debt provider and, more broadly, the environment and
community.
How the Board Engages with Stakeholders
The Board considers its stakeholders at Board meetings and receives feedback
on the Manager's interactions with them.
Stakeholder How We Engage
Shareholders Shareholders are key stakeholders and the Board places great importance on
communication with them. The Board welcomes all shareholders' views and aims
to act fairly to all shareholders. The Manager and Company's Stockbroker
regularly meet with current and prospective shareholders to discuss
performance and shareholder feedback is discussed by the Directors at Board
meetings. In addition, Directors attend meetings with the Company's largest
shareholders and meet other shareholders at the Annual General Meeting.
The Company also supports the Manager's investor relations programme which
involves regional roadshows, promotional and public relations campaigns.
Regular updates are provided to shareholders through the Annual Report, Half
Yearly Report, monthly factsheets, Company announcements, including daily net
asset value announcements, and the Company's website.
Manager The Investment Manager's Review details the key investment decisions taken
(and Investment Manager) during the year. The Investment Manager has continued to manage the Company's
assets in accordance with the mandate provided by shareholders, with oversight
provided by the Board.
The Board regularly reviews the Company's performance against its investment
objective and the Board undertakes an annual strategy review meeting to ensure
that the Company is positioned well for the future delivery of its objective
for its stakeholders.
The Board receives presentations from the Investment Manager at every Board
meeting to help it to exercise effective oversight of the Investment Manager
and the Company's strategy.
The Board, through the Management Engagement Committee, formally reviews the
performance of the Manager at least annually.
Service Providers The Board seeks to maintain constructive relationships with the Company's
suppliers either directly or through the Manager with regular communications
and meetings.
The Management Engagement Committee conducts an annual review of the
performance, terms and conditions of the Company's main service providers to
ensure they are performing in line with Board expectations and providing value
for money.
Investee Companies Responsibility for monitoring the activities of portfolio companies has been
delegated by the Board to the Manager which has sub-delegated that authority
to the Investment Manager.
The Board has also given discretionary powers to the Manager to exercise
voting rights on resolutions proposed by the investee companies within the
Company's portfolio. The Manager reports on a quarterly basis on stewardship
(including voting) issues.
Through engagement and exercising voting rights, the Investment Manager
actively works with companies to improve corporate standards, transparency and
accountability.
The Manager reports regularly to the Board on investment and engagement
activity.
Debt Provider On behalf of the Board, the Manager maintains a positive working relationship
with The Royal Bank of Scotland International Limited, the provider of the
Company's loan facilities, and provides regular updates on business activity
and compliance with its loan covenants.
Environment and Community The Board and Manager are committed to investing in a responsible manner and
the Investment Manager embeds Environmental, Social and Governance ("ESG")
considerations into the research and analysis as part of the investment
decision-making process.
Specific Examples of Stakeholder Consideration During the Year
While the importance of giving due consideration to the Company's stakeholders
is not a new requirement, and is considered during every Board decision, the
Directors were particularly mindful of stakeholder considerations during the
following decisions undertaken during the year ended 30 April 2023. Each of
these decisions was made after taking into account the short and long terms
benefits for stakeholders.
Portfolio
The Investment Manager's Review details the key investment decisions taken
during the year. In the opinion of the Board, the performance of the
investment portfolio is the key factor in determining the long term success of
the Company. Accordingly, at each Board meeting the Directors discuss
performance in detail with the Investment Manager. In addition, the Board
considers how the Investment Manager incorporates ESG issues into its research
and analysis work that forms part of the investment decision process.
During the year the Management Engagement Committee decided that the
continuing appointment of the Manager was in the best interests of
shareholders.
Dividend
Since the year end, the Board has declared a second interim dividend in
respect of the year ended 30 April 2023, of 3.3p per Ordinary share.
Following payment of the second interim dividend on 8 September 2023, total
dividends for the year will amount to 4.3p per Ordinary share, unchanged
compared to the previous year.
Share Buy Backs
During the year the Company bought back 1,706,000 Ordinary shares to be held
in treasury, providing a small accretion to the NAV per share and a degree of
liquidity to the market at times when the discount to the NAV per share had
widened in normal market conditions. It is the view of the Board that this
policy is in the interest of all shareholders.
Proposed Combination with Asia Dragon plc
As set out in more detail in the Charman's Statement, following the year end,
on 21 July 2023, the Company announced a proposal for the Company to combine
with Asia Dragon Trust plc ("Asia Dragon"). The combination, if approved by
each company's shareholders, will be effected by way of a scheme of
reconstruction and winding up of the Company under section 110 of the
Insolvency Act 1986 and the associated transfer of part of the assets and
undertaking of the Company to Asia Dragon in exchange for the issue of new
ordinary shares in Asia Dragon (the "Scheme").
The Board believes a combination of the companies will create an enlarged
vehicle that offers similar investment exposure for each set of shareholders
while offering shareholders in the enlarged Asia Dragon (and therefore to
Shareholders who roll into Asia Dragon) benefits that include greater
secondary liquidity in Asia Dragon shares and cost efficiencies.
On behalf of the Board
Donald Workman
Chairman
16 August 2023
Performance
Performance (total return)
1 year return 3 year return 5 year return
% % %
Net asset value(A) -6.8 +18.9 +17.9
Share price(A) -7.3 +21.3 +19.9
MSCI AC Asia Pacific ex Japan Index (currency adjusted) -5.2 +16.7 +14.0
(A) Alternative Performance Measure.
Ten Year Financial Record
Year to 30 April 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Total revenue (£'000) 6,819 7,412 7,004 6,922 7,481 7,442 7,738 7,558 6,670 7,612
Per share (p)
Net revenue return 3.79 4.18 4.06 4.05 4.47 4.30 4.61 4.24 3.71 4.82
Total return (18.68) 31.74 (34.72) 68.66 30.97 11.88 (15.45) 112.18 (41.10) (22.18)
Net dividends paid/proposed 3.60 3.80 3.90 4.00 4.30 4.30 4.30 4.30 4.30 4.30
Net asset value 188.49 216.67 179.43 244.90 272.41 281.12 261.63 369.97 325.17 299.20
Shareholders' funds (£'000) 234,762 269,398 216,243 286,191 311,816 314,411 289,285 403,005 346,952 314,133
Dividends
Rate per share XD date Record date Payment date
First interim 2023 1.00p 5 January 2023 6 January 2023 10 February 2023
Second interim 2023 3.30p 10 August 2023 11 August 2023 8 September 2023
Total 2023 4.30p
Interim 2022 1.00p 6 January 2022 7 January 2022 11 February 2022
Final 2022 3.30p 4 August 2022 5 August 2022 9 September 2022
Total 2022 4.30p
Investment Manager's Review
Market and Portfolio Review
Asia Pacific equities declined over the 12 months to 30 April 2023, amid the
uncertainty that weighed on markets globally. A combination of higher
inflation, accelerated by the ongoing conflict in Ukraine, tightening monetary
policies, rising input costs and recent banking sector events in the West have
sparked fears of a global economic recession. Against this backdrop, the
Company's net asset value ("NAV") and share price, both in total returns
terms, declined 6.8% and 7.3%, respectively, and lagged the benchmark, which
declined by 5.2%. However, over the past three and five years, the Company's
NAV and share price total returns have done better than the benchmark,
highlighting the support from our high-quality holdings.
In terms of performance, the portfolio's direct exposure to China was the main
detractor, which was partly offset by the position in Hong Kong. Chinese
authorities announced an unexpected U-turn from their "zero-Covid" policy to a
complete re-opening in late 2022. However, the negative impacts from prolonged
lockdowns and regulatory pressures, especially on the property sector, could
not be quickly undone. While many of the holdings in the portfolio, especially
in the technology and consumer discretionary sectors, stand to benefit from
the re-opening, we have yet to see corporate earnings increase meaningfully.
To this end, gaming company Sands China was a key performer, being a direct
beneficiary of the re-opening and easing travel restrictions. Its recent
quarterly results were ahead of the market's expectations. Insurer AIA Group
and beer company Budweiser Brewing added to returns amid a recovery in the
Hong Kong market. We view both as high-quality exposures to China's growth.
The exposure to Chinese renewable energy companies was not beneficial to
performance, with poor share price performances from Yunnan Energy New
Material and LONGi Green Energy Technology, partly as investors chased
opportunities from the re-opening. Yunnan's shares were volatile after an
announcement of a probe into its chairman and vice chairman. We subsequently
sold the position as our conviction in the company diminished. Having said
that, on a positive note, the holding in Sungrow Power Supply was beneficial
following robust results, especially in the most recent quarter. China's
strained relations with the US was another aspect over the period that
affected investor sentiment. Pharmaceutical company Wuxi Biologics, a company
that has fundamentally performed well, detracted due to a series of regulatory
hurdles where two of its subsidiaries were temporarily added by the US to a
trade restriction list before being removed by the end of December.
Meanwhile, the Chinese government announced further supportive measures to
help the property sector recovery and appears to be easing its regulatory
scrutiny into technology companies. These changes, together with investors
moving towards value, benefited technology companies later in the financial
year. However, while technology companies, including Tencent, have started to
benefit from the re-opening, online retailer JD.com underperformed due to
concerns around slowing growth and high competition.
In terms of portfolio positioning and strategy, we added more positions in
China over the year as we remain confident in the holdings and the turnaround
potential post the re-opening, especially in the technology sector. We
therefore added to several internet and consumer holdings such as Tencent and
Kweichow Moutai that should benefit from an increase in consumer confidence
and spending. In the healthcare sector, we initiated Aier Eye Hospital,
China's largest domestic private eyecare hospital chain. Its demand is
supported by the ageing population, rising living standards, and government
policies to improve the accessibility and standards of drugs and healthcare.
We also bought Chinese food delivery and local services app company Meituan
Dianping, which we regard as a long-term growth story which should benefit
from China's shift towards a service-driven economy and increasing online
penetration. Against these additions to the portfolio, we exited the
industrial automation business Shenzhen Inovance Technology. It is a highly
cyclical business and felt the impact of a sharp drop in property
construction, while rising raw material and freight costs weighed on its
margins.
The portfolio's exposure to India, through the Aberdeen Standard SICAV I -
Indian Equity Fund, did not do well this year, as the market was dominated by
one conglomerate throughout the period - Adani Group. The Indian Equity Fund
does not hold any Adani companies as we consider the group to be low quality,
but this event had an impact on the market as a whole.
Elsewhere, in Vietnam, the holding in Mobile World lagged the benchmark. In
South Korea, LG Chem performed well as markets expect increased demand for its
petrochemical business after China's re-opening. We think the momentum of its
electric vehicle batteries business is attractive. The Australian holdings
also benefited performance as mining companies such as BHP performed well,
benefiting from the spike in commodity prices. During the year, we also
received shares in the oil and gas company Woodside Energy from a corporate
action.
The Company's holdings in the information technology ("IT") sector weighed on
performance, driven in part by the market's negative sentiment towards the
sector. The portfolio's positions in Taiwan Semiconductor Manufacturing
Company ("TSMC") and Samsung Electronics lagged the benchmark, while the
holding in ASML was beneficial. While ASML's shares rose in value due to a
gradual improvement of the macroeconomic outlook and better visibility of the
semiconductor cycle, an escalation of US-China tensions partly weighed on the
share price performance. Over the year, we responded to the looming fears of a
global recession and soft demand outlook for IT by reducing exposure to
internet companies. We remain optimistic for a sector-wide turnaround within
the next financial year and continue to gradually add back to the
semi-conductor and hardware positions. Elsewhere, the consumer discretionary
sector also weighed on performance due to relative weakness in consumer
confidence and spending. However, as mentioned above, we expect a turnaround
in consumption, especially with the re-opening in China.
Meanwhile, in the banking sector, the collapse of two US regional banks and
the takeover of Credit Suisse by UBS in Europe raised concerns of contagion
effects. However, the Company's holdings in Asians banks were not directly
impacted by these events and remain well insulated, with strong balance
sheets, while also benefiting from increasing net interest margins. On that
note, Indonesia's Bank Central Asia and Oversea-Chinese Banking Corporation
and DBS Group Holdings in Singapore contributed positively to performance.
Meanwhile, we maintain the overweight and well-diversified exposure to the
healthcare sector as we expect a turnaround in consumer spending to benefit
those holdings.
Environmental, Social and Governance ("ESG")
ESG remains a core focus area as we continue to invest in high-quality
companies. We are convinced that companies with strong ESG practices are more
resilient, especially during turbulent times. To that end, we have invested in
our resources to ensure we continue to identify strong stewards of ESG. For
instance, when investing in Woodside Energy, we considered the effect of its
decarbonisation strategy.
We frequently engage with investee companies to review their progress in ESG
matters and ensure they meet our standards. For example, during the year we
engaged with Tencent to better understand its policies and progresses around
data security and privacy. Tencent provided a comprehensive multi-vector
analysis of its data security and privacy management and noted the limited
instances where data might be shared with the government and its protection
policies around this process. Subsequently, we noted it had published several
privacy and data security policies on its website, following our suggestions
to improve disclosure. Tencent had also applied to become a United Nations
Global Compact signatory, highlighting its commitment to ESG. Furthermore, it
has removed the mandate to re-issue repurchased shares and reduced its general
issuance mandate from 20% to 10%. It is also committed to achieving 30% female
representation on its board by 2030, which we are monitoring.
Meanwhile, we continued our long-standing engagement with Samsung Electronics
by attending its annual general meeting ("AGM") in person in Suwon, South
Korea. While we had a one-to-one discussion with management ahead of the AGM
to engage on agenda items and enhanced disclosures, the AGM provided an
opportunity to meet the directors and show our support for the company's
ongoing efforts to make progress on governance and disclosure.
Outlook
Investors continue to navigate uncertain times due to global macroeconomic
challenges and geopolitical volatility. That said, inflation is more benign in
Asia, especially in China, providing support to the region's economic health.
Furthermore, Asian banks have not had any direct impact from the banking
sector events in the US and Europe. While China remains a challenging market,
we expect its re-opening to increase consumer confidence and consumption, as
well as support Southeast Asian economies.
The technology sector would benefit from re-opening tailwinds and an increase
in consumer spending. We think the technology cycle will bottom out in the
near future and see the potential for a meaningful recovery in this calendar
year. While there has been a lag of re-opening tailwinds translating into
earnings growth, markets expect technology companies to produce higher
earnings in the next financial year. Therefore, we are confident of the
portfolio's sizable exposure to the sector and continue to add to companies
with strong fundamentals and potential for outperformance. Elsewhere, we are
optimistic that a surge in consumption would support the holdings in the
consumer discretionary and healthcare sectors.
Within India, we expect the holdings in the commodities and financials sectors
to benefit from cyclical tailwinds and policy support. In Australia, the
inflationary effects on commodity prices should continue to help mining and
energy companies, despite a challenging macroeconomic backdrop.
Amid the ongoing uncertainty, we believe our focus on investing in quality
companies with solid fundamentals will prove beneficial over the long term and
help your Company navigate challenging market conditions.
James Thom and Xin-Yao Ng
abrdn Asia Limited
16 August 2023
Principal Risks and Uncertainties
The Board carries out a regular review of the risk environment in which the
Company operates, changes to the environment and individual risks. The Board
also considers emerging risks which might affect the Company. During the year,
the most significant emerging risks were inflation and rising interest rates
and the resultant volatility that these factors created in global stock
markets. In addition, the conflict in Ukraine and continued tensions between
China and the USA have created geo-political uncertainties which have further
increased market risk and volatility (see exogenous risks below).
There are a number of other risks which, if realised, could have a material
adverse effect on the Company and its financial condition, performance and
prospects. The Board has carried out a robust assessment of the Company's
principal and emerging risks, which include those that would threaten its
business model, future performance, solvency, liquidity or reputation.
The principal and emerging risks and uncertainties faced by the Company are
reviewed by the Audit and Risk Committee in the form of risk matrices. The
principal risks and uncertainties facing the Company at the current time,
together with a description of the mitigating actions the Board has taken, are
set out in the table below.
The principal risks associated with an investment in the Company's shares are
published monthly in the Company's factsheet and they can be found in the
pre-investment disclosure document ("PIDD") published by the Manager, both of
which are available on the Company's website.
Risk Mitigating Action
Investment strategy and objectives - the setting of an unattractive strategic The Board keeps the level of discount at which the Company's shares trade, as
proposition to the market and the failure to adapt to changes in investor well as the investment objective and policy, under review and holds an annual
demand may lead to the Company becoming unattractive to investors, a decreased strategy meeting where it reviews investor relations reports and updates from
demand for its shares and a widening discount. the Investment Manager and the Company's Stockbroker.
The Directors are updated at each Board meeting on the composition of, and any
movements in, the shareholder register.
Investment management - poor stock selection or investing outside of the The Board meets the Manager on a regular basis and keeps investment
investment restrictions and guidelines set by the Board could result in poor performance under close review. Representatives of the Investment Manager
performance and an inability to meet the Company's objectives, as well as a attend all Board meetings and a detailed formal appraisal of the abrdn Group
widening discount. is carried out annually by the Management Engagement Committee.
The Board sets, and monitors, the investment restrictions and guidelines, and
receives regular reports which include performance reporting on the
implementation of the investment policy, the investment process and
application of the guidelines. The Board also monitors the Company's share
price relative to the NAV per share.
Income/dividends - the level of the Company's dividends and future dividend The Directors review detailed income forecasts at each Board meeting. The
growth will depend on the performance of the underlying portfolio. Any change Company has built up significant revenue reserves which can be drawn upon if
in the tax treatment of dividends or interest received by the Company may required should there be a shortfall in revenue returns.
reduce the level of
net income available for the payment of dividends
to shareholders.
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, to some extent, by the
Investment Manager. Further details of the steps taken to mitigate the
financial risks associated with the portfolio are set out in note 17 to the
financial statements.
Gearing - a fall in the value of the Company's investment portfolio could be The Board sets the gearing limits within which the Investment Manager can
exacerbated by the impact of gearing. It could also result in a breach of loan operate. Gearing levels and compliance with loan covenants are monitored on an
covenants. ongoing basis by the Manager and at regular Board meetings. In the event of a
possible impending covenant breach, appropriate action would be taken to
reduce borrowing levels.
In addition, abrdn Fund Managers Limited, as the Alternative Investment Fund
Manager, has set overall leverage limits.
Regulatory - failure to comply with relevant laws and regulations (including The Board and Manager monitor changes in government policy and legislation
the Companies Act, The Financial Services and Markets Act, The Alternative which may have an impact on the Company, and the Audit and Risk Committee
Investment Fund Managers Directive, accounting standards, investment trust monitors compliance with regulations by reviewing internal control reports
regulations, the Packaged Retail and Insurance-based Investment Products from the Manager. From time to time the Board employs external advisers to
Regulations, the Listing Rules, Disclosure Guidance and Transparency Rules, advise on specific matters.
Prospectus Rules and corporate governance regulations) could result in fines,
loss of reputation and potentially loss of an advantageous tax regime.
Operational - the Company is dependent on third parties for the provision of The Board receives reports from the Manager on its internal controls and risk
all systems and services (in particular, those of the abrdn Group) and any management throughout the year, including those relating to cyber crime, and
control failures and gaps in their systems and services, including in relation receives assurances from all its other significant service providers on at
to cyber security, could result least an annual basis.
in fraudulent activities or a loss or damage to
the Company. The Manager monitors closely the control environments and quality of services
provided by third parties, including those of the Depositary, through service
Written agreements are in place with all third party service providers. level agreements, regular meetings and key performance indicators.
Exogenous risks such as health, social, financial, economic and geo-political Exogenous risks over which the Company has no control are always a risk. The
- the financial impact of such risks, associated with the portfolio or the diversified nature of the portfolio and a managed level of gearing all serve
Company itself, could result in losses to the Company. to provide a degree of protection in times of volatile markets.
Investment Portfolio
As at 30 April 2023
Valuation Total Valuation
2023 assets(A) 2022
Company Industry Country £'000 % £'000
abrdn SICAV I - Indian Equity Fund(B) Collective Investment Scheme India 48,348 14.1 48,696
Taiwan Semiconductor Manufacturing Company Semiconductors & Taiwan 27,125 7.9 32,261
Semiconductor Equipment
AIA Group Insurance Hong Kong 21,690 6.3 19,372
Tencent Holdings Interactive Media & Services China 18,908 5.5 16,844
Samsung Electronics Pref Technology Hardware, South Korea 16,637 4.8 27,893
Storage & Peripherals
BHP Group Metals & Mining Australia 12,892 3.8 12,401
CSL Biotechnology Australia 10,574 3.1 11,785
Budweiser Brewing Beverages Hong Kong 9,894 2.9 5,320
ASML Semiconductors & Netherlands 8,798 2.6 7,828
Semiconductor Equipment
LG Chem Chemicals South Korea 7,766 2.3 5,654
Top ten investments 182,632 53.3
Bank Central Asia Banks Indonesia 7,759 2.3 9,921
Alibaba Group Broadline Retail China 7,671 2.2 5,801
Oversea-Chinese Banking Corporation Banks Singapore 7,380 2.2 9,261
abrdn New India Investment Trust(B) Closed End Investments India 6,985 2.0 7,384
DBS Group Holdings Banks Singapore 6,833 2.0 10,871
Woodside Energy Oil, Gas & Consumable Fuels Australia 6,665 2.0 -
Cochlear Health Care Equipment & Supplies Australia 6,373 1.9 7,097
Kweichow Moutai - A shares Beverages China 5,966 1.7 4,210
M.P. Evans Group Food Products United Kingdom 4,949 1.4 5,512
China Tourism Group Duty Free(C) Specialty Retail China 4,942 1.4 6,120
Top twenty investments 248,155 72.4
Ayala Land Real Estate Management Philippines 4,909 1.4 6,270
& Development
Meituan Dianping - Class B Hotels, Restaurants & Leisure China 4,902 1.4 -
Hong Kong Exchanges & Clearing Capital Markets Hong Kong 4,859 1.4 6,462
Shenzhen Mindray Bio-Medical Electronics - A shares Health Care Equipment & Supplies China 4,836 1.4 4,271
Telekom Indonesia Telecommunications Indonesia 4,748 1.4 -
Service Providers
Samsung Biologics Life Sciences Tools & Services South Korea 4,379 1.3 5,013
China Merchants Bank - A shares Banks China 4,228 1.2 5,893
Sands China Hotels, Restaurants & Leisure Hong Kong 4,175 1.2 2,649
Wuxi Biologics (Cayman) Life Sciences Tools & Services China 4,021 1.2 6,019
FPT Group IT Services Vietnam 3,920 1.2 3,970
Top thirty investments 293,132 85.5
Rio Tinto (London Listing) Metals & Mining Australia 3,699 1.1 4,182
JD.com Broadline Retail China 3,399 1.0 1,258
Cisarua Mountain Dairy Food Products Indonesia 3,284 0.9 2,900
Yonyou Network Technology - Software China 3,113 0.9 1,664
A shares
Aier Eye Hospital Group - A shares Health Care Providers & Services China 3,073 0.9 -
LONGi Green Energy Technology - A shares Semiconductors & China 3,036 0.9 4,644
Semiconductor Equipment
Sungrow Power Supply - A shares Electrical Equipment China 3,033 0.9 3,597
China Resources Land Real Estate Management China 2,996 0.9 3,435
& Development
Mobile World Specialty Retail Vietnam 2,977 0.9 5,175
abrdn Asia Focus (B) Closed End Investments Other Asia 2,959 0.8 3,310
Top forty investments 324,701 94.7
Foshan Haitan Flavouring & Food Co - A shares Food Products China 2,648 0.8 -
NARI Technology - A shares Electrical Equipment China 2,576 0.8 3,869
Venture Corp Electronic Equipment, Singapore 2,501 0.7 2,444
Instruments & Components
Zhongsheng Group Specialty Retail China 2,407 0.7 2,318
John Keells Holdings Industrial Conglomerates Sri Lanka 2,011 0.6 1,624
Centre Testing International Group - A shares Professional Services China 1,902 0.6 2,251
GDS - A shares IT Services China 1,853 0.5 3,114
Total investments 340,599 99.4
Net current assets(D) 2,166 0.6
Total assets(A) 342,765 100.0
(B) Holding also managed by the abrdn Group but not subject to double charging
of management fees.
(C) Holding comprises of A & H shares.
(D) Excluding short-term bank loans of £28,632,000
Note: Unless otherwise stated, foreign stock is held and all investments are
equity holdings.
Changes in Asset Distribution
Value at Sales Appreciation/ Value at
30 April 2022 Purchases proceeds (depreciation) 30 April 2023
Country £'000 £'000 £'000 £'000 £'000
Australia 45,187 10,903 (15,530) (357) 40,203
China 83,286 36,026 (18,519) (15,283) 85,510
Hong Kong 38,038 5,417 (6,172) 3,335 40,618
India 56,080 4,250 - (4,997) 55,333
Indonesia 12,821 5,410 (3,587) 1,147 15,791
Netherlands 7,828 1,804 (1,249) 415 8,798
New Zealand 2,699 - (2,432) (267) -
Other Asia 3,310 - - (351) 2,959
Philippines 6,270 - - (1,361) 4,909
Singapore 22,576 653 (7,384) 869 16,714
South Korea 41,846 851 (10,960) (2,955) 28,782
Sri Lanka 1,624 - - 387 2,011
Taiwan 32,261 3,341 (5,015) (3,462) 27,125
Thailand 2,703 - (2,463) (240) -
United Kingdom 5,512 - - (563) 4,949
Vietnam 11,656 1,073 (2,469) (3,363) 6,897
Total investments 373,697 69,728 (75,780) (27,046) 340,599
Net current assets(A) 6,737 - - (4,571) 2,166
Total assets less current liabilities 380,434 69,728 (75,780) (31,617) 342,765
(A) Excluding short-term bank loans of £28,632,000 (2022 - £13,504,000).
Directors' Report (extract)
The Directors present their report and the audited financial statements for
the year ended 30 April 2023.
Results and Dividends
The financial statements for the year ended 30 April 2023 are contained below.
A first interim dividend of 1.0p per Ordinary share was paid on 10 February
2023 and the Board has declared a second interim dividend in respect of the
year ended 30 April 2023, of 3.3p per Ordinary share, payable on 8 September
2023 to shareholders on the register on 11 August 2023. The relevant
ex-dividend date is 10 August 2023.
Investment Trust Status
The Company is registered as a public limited company (registered in England
and Wales No. 02377879) and is an investment company within the meaning of
Section 833 of the Companies Act 2006. The Company has been approved by HM
Revenue & Customs as an investment trust subject to it 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 May 2012. The
Directors are of the opinion that the Company has conducted its affairs for
the year ended 30 April 2023 so as to enable it to comply with the ongoing
requirements for investment trust status.
Individual Savings Accounts
The Company has conducted its affairs in such a way 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
The issued Ordinary share capital at 30 April 2023 consisted of 104,991,348
Ordinary shares of 5p and 7,874,351 shares held in treasury. During the year
the Company purchased 1,706,000 Ordinary shares to be held in treasury and it
cancelled 4,233,350 treasury shares. Since the end of the year, the Company
has purchased a further 420,000 Ordinary shares to be held in treasury. At the
date of approval of this Report there were 104,571,348 Ordinary shares of 5p
in issue and 8,294,351 shares held in treasury.
Voting Rights
Each Ordinary shareholder is entitled to one vote on a show of hands at a
general meeting of the Company and, on a poll, to one vote for every share
held. 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 from time to time be imposed by law.
Management Agreement
The Company has appointed abrdn Fund Managers Limited ("aFML"), a wholly owned
subsidiary of abrdn plc, as its alternative investment fund manager. aFML has
been appointed to provide investment management, risk management,
administration and company secretarial services and promotional activities to
the Company. The Company's portfolio is managed by abrdn Asia Limited
("abrdn Asia") by way of a group delegation agreement in place between aFML
and abrdn Asia. In addition, aFML has sub-delegated promotional activities
to abrdn Investments Limited and administration and company secretarial
services to abrdn Holdings Limited. Details of the management fee during the
year and fees payable for promotional activities are shown in notes 4 and 5 to
the financial statements.
The management agreement is terminable on not less than 12 months' notice. In
the event of termination by the Company on less than the agreed notice period,
compensation is payable to the Manager in lieu of the unexpired notice period.
Substantial Interests
At 30 April 2023 the following interests in the issued Ordinary share capital
of the Company had been disclosed in accordance with the requirements of the
FCA's Disclosure Guidance and Transparency Rules.
Shareholder Number of Ordinary shares held % held(B)
City of London Investment Management Company Limited 27,354,703 26.1
Allspring Global Investments Holdings LLC 11,663,340 11.1
abrdn Investment Trust 7,944,812 7.6
Share Plans(A)
Close Asset Management Limited 5,305,699 5.1
Lazard Asset Management LLC 5,182,427 4.9
1607 Capital Partners LLC 4,026,274 3.8
(A) Non-beneficial interest
(B) Based on 104,991,348 Ordinary shares in issue as at 30 April 2023
Since the end of the year, City of London Investment Management Company
Limited has notified the Company of a holding of 28,258,791 Ordinary shares
(27.0%). There have been no other changes notified to the Company as at the
date of approval of this Report.
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 can be found on its
website.
Directors
Throughout the year, the Board comprised five Directors, consisting of a
non-executive Chairman and four non-executive Directors. All Directors, with
the exception of Mr Young, are considered by the Board to be independent and
free of any material relationship with the abrdn Group. Mr Young is a director
of various entities connected with, or within, the abrdn Group and, as such,
is not considered to be independent.
The Directors attended scheduled Board and Committee meetings during the year
ended 30 April 2023 as shown in the table below (with their eligibility to
attend the relevant meeting in brackets).
Director Board Audit and Risk Committee Meetings Nomination Committee Meetings Management Engagement Committee Meetings
Meetings
D Workman(A) 6 (6) - (-) 1 (1) 1 (1)
M Sears 6 (6) 2 (2) 1 (1) 1 (1)
S Souchon 6 (6) 2 (2) 1 (1) 1 (1)
H Young(B) 6 (6) - (-) 1 (1) - (-)
N Yuen 6 (6) 2 (2) 1 (1) 1 (1)
(A) Mr Workman is not a member of the Audit and Risk Committee.
(B) Mr Young is not a member of the Audit and Risk or Management Engagement
Committees.
The Board meets more frequently when business needs require. There were four
such additional Board and Board Committee meetings held during the year.
The Company's Articles of Association require that Directors must retire and
be subject to election at the first Annual General Meeting after their
appointment, and that one third of the Directors retire by rotation at each
Annual General Meeting, and that any Director who was not elected or
re-elected at one of the preceding two Annual General Meetings also retires by
rotation at the Annual General Meeting. However, the Board has decided that,
notwithstanding the provisions of the Articles of Association, all Directors
will retire at each Annual General Meeting and, if eligible, may seek
re-election.
The Board believes that all the Directors, other than Mr Young, remain
independent of the Manager and free from any relationship which could
materially interfere with the exercise of their judgement on issues of
strategy, performance, resources and standards of conduct. The Board believes
that each Director has the requisite high level and range of business,
investment and financial experience which enables the Board to provide clear
and effective leadership and proper governance of the Company. Following
formal performance evaluations, each Director's performance continues to be
effective and demonstrates commitment to the role, and their individual
performances contribute to the long-term sustainable success of the Company.
Mr Young was appointed as a Director in May 1989 and, as stated above, is not
independent due to his involvement with various entities within the abrdn
Group. Mr Young has significant experience of markets in the Asia Pacific
region and provides invaluable input to Board discussions.
Board's 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 regular refreshment 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/her appointment to the Board. However, this may be extended in certain
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.
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 acts upon the results of the Board evaluation
process by recognising strengths and addressing any weaknesses and also
ensures that the Board engages with major shareholders and 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 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.
Directors' and Officers' Liability Insurance
The Company's Articles of Association indemnify each of the Directors out of
the assets of the Company against any liabilities incurred by them as a
Director of the Company in defending proceedings, or in connection with any
application to the Court in which relief is granted. In addition, the Company
has entered into separate deeds of indemnity with each of the Directors,
reflecting the scope of the indemnity in the Articles. Directors' and
Officers' liability insurance cover has been maintained throughout the year at
the expense of the Company.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation where a Director
has a conflict of interest. As part of this process, each Director prepares a
list of other positions held and all other conflict situations that may need
to be authorised either in relation to the Director concerned or his 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 all Directors are
issued with letters of appointment. Other than Mr Young, and the deeds of
indemnity referred to above, there were no contracts during, or at the end of
the year, in which any Director was interested.
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 Manager 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 Manager's anti-bribery
and corruption policies are available on its website.
In relation to the corporate offence of failing to prevent tax evasion, it is
the Company's policy to conduct all business in an honest and ethical manner.
The Company takes a zero-tolerance approach to facilitation of tax evasion
whether under UK law or under the law of any foreign country and is committed
to acting professionally, fairly and with integrity in all its business
dealings and relationships.
Board Diversity
The Board recognises the importance of having a range of skilled and
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. The Board will not display any bias for age, gender, race,
sexual orientation, socio-economic background, 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 in the tables below.
The Board has resolved that the Company's year end date is the most
appropriate date for disclosure purposes. The following information has been
provided by each Director through the completion of questionnaires. There
have been no changes since the year end.
Board Gender as at 30 April 2023
Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, Chairman and SID) Number in executive management Percentage of executive management
Men 3 60% n/a n/a n/a
(note 3)
Women 2 40%
(note 1)
Not specified/prefer not to say - -
(
)
Board Ethnic Background as at 30 April 2023
Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, Chairman and SID) Number in executive management Percentage of executive management
White British or other White 4 80% n/a n/a n/a
(including minority-white groups)
(note 3)
Asian 1 20%
(note 2)
Other ethnic group - -
Not specified/prefer not to say - -
Notes:
1. Meets target of at least 40% as set out in LR 9.8.6R (9)(a)(i)
2. Meets target of at least 1 as set out in LR 9.8.6R (9)(a)(iii)
3. This column is inapplicable as the Company is externally managed
and does not have executive management functions, specifically it does not
have a CEO or CFO. The Company considers that the role of Chairman, Senior
Independent Director ("SID"), and the chairmen of the Audit and Risk
Committee, Nomination Committee and Management Engagement Committee are senior
positions. Of these five senior roles, four are performed by men and one by
a women, and all five are held by Directors classified as 'White British or
other White (including minority-white groups)'.
Going Concern
As set out in more detail in the Charman's Statement, it is proposed that the
Company combines with Asia Dragon Trust plc ("Asia Dragon"). The
combination, if approved by each company's shareholders, will be effected by
way of a scheme of reconstruction and winding up of the Company under section
110 of the Insolvency Act 1986 and the associated transfer of part of the
assets and undertaking of the Company to Asia Dragon in exchange for the issue
of new ordinary shares in Asia Dragon (the "Scheme"). The outcome of the
general meetings to make the Scheme effective represents a material
uncertainty which may cast significant doubt on the Company's ability to
continue as a going concern.
Notwithstanding this material uncertainty, the Board has concluded that it
remains appropriate to continue to prepare the financial statements on a going
concern basis. In reaching this conclusion, the Board has come to the view
that, as the Scheme is contingent on shareholder approval and the Company is
considered solvent in all other regards, there is no irrevocable path to
liquidation and thus going concern remains the most appropriate basis for
preparation. In reaching this conclusion, the Board has also given due
consideration to the risks associated with the Scheme.
The Board has also given consideration to the liquidity of the investment
portfolio. The Company's assets consist substantially of equity shares in
companies listed on recognised stock exchanges and in most circumstances are
realisable within a short timescale. The Board regularly reviews income and
expenditure projections and has set limits for borrowing and reviews
compliance with banking covenants, including the headroom available.
At the year end, the Company's borrowing facilities amounted to £40 million,
comprising a fixed rate loan of £20 million, which matures in December 2023,
and a £20 million multi-currency revolving loan facility maturing in June
2024. In the event of the Company being unable to renew the facilities on
their maturity, it is anticipated that they would be repaid from proceeds of
investment sales.
In considering the going concern basis of accounting, the Directors have also
taken into account the potential requirement of the Board to propose a
resolution to approve the continuation of the Company at future Annual General
Meetings. As explained under "Duration" above, this is dependent upon the
level of discount in the 90 days preceding the Company's financial year end
and there is no requirement for such a resolution to be proposed at the Annual
General Meeting .
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 they
have taken all the steps that they could reasonably be expected to have taken
as Directors in order to make themselves aware of any relevant audit
information and to establish that the Company's Auditor is aware of that
information.
Financial Instruments
The financial risk management objectives and policies arising from financial
instruments and the exposure of the Company to risk are disclosed in note 17
to the financial statements.
Relations with Shareholders
The Directors place a great deal of importance on communication with
shareholders. Shareholders and investors may obtain up to date information on
the Company through its website and the Manager's Customer Services Department
(see Contact Addresses).
The Board's policy is to communicate directly with shareholders and their
representative bodies without the involvement of the management group
(including the Company Secretary or the Manager) in situations where direct
communication is required, and representatives from the Board and Manager meet
with major shareholders on at least an annual basis in order to gauge their
views. In addition, the Company Secretary only acts on behalf of the Board,
not the Manager, and there is no filtering of communication.
At each Board meeting the Board receives full details of any communication
from shareholders to which the Chairman responds personally as appropriate.
The Company has adopted a nominee code which ensures that, when shares in the
Company are held in the name of nominee companies and notification has been
received in advance, nominee companies will be provided with copies of
shareholder communications for distribution to their investors. Nominee
investors may attend and speak at general meetings.
Participants in the abrdn Investment Plan for Children, Investment Trust Share
Plan and Investment Trust ISA, whose shares are held in the nominee name of
the plan administrator, are given the opportunity to vote at general meetings
of the Company by means of a Letter of Direction provided to them. When
forwarded to the plan administrator, the voting instructions given in the
Letter of Direction will in turn be reflected in the proxy votes lodged by the
plan administrator.
Share Buy Backs
The Company bought back 1,706,000 Ordinary shares during the year ended 30
April 2023, representing 1.6% of the issued share capital, with the aim of
providing a degree of liquidity to the market at times when the discount to
the net asset value per share has widened in normal market conditions. It is
the view of the Board that the Company's share buy back policy is in the
interests of all shareholders. The Board closely monitors the discount and
reviews the operation of the share buy back policy at each Board meeting as
well as considering other options for managing the discount.
Treasury Shares
As part of its liquidity management policy, the Company currently has powers
to buy back its own shares at a discount to the net asset value per share and
to hold them in treasury (instead of cancelling them) as well as to sell
treasury shares at a premium to the net asset value
per share.
It is the Company's policy that, in the event that the number of treasury
shares represents more than 10% of the Company's issued share capital
(excluding treasury shares) at the end of any financial year, the Company will
cancel a proportion of its treasury shares such that the remaining balance
will equal 7.5% of the issued share capital (excluding treasury shares).
Accordingly, 4,233,350 treasury shares were cancelled on 30 April 2023. Shares
remaining in treasury may be held indefinitely. No dividends will be paid on
treasury shares, and no voting rights attach to them. No treasury shares were
cancelled during the year.
By order of the Board
abrdn Holdings Limited
Company Secretary
16 August 2023
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 the Directors are required to prepare the financial
statements in accordance with UK accounting standards, including FRS 102 'The
Financial Reporting Standard Applicable in the UK and Republic
of Ireland'.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for that period.
In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and explained in the
financial statements;
- assess the Company's ability to continue as a going concern
disclosing, as applicable, matters related to going concern; and
- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Statement of Corporate Governance that comply with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website, but not
for the content of any information included on the website that has been
prepared or issued by third parties. Legislation in the UK governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Board confirms that to the best of its 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;
- the Strategic Report and Directors' Report include 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; and
- 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.
On behalf of the Board
Donald Workman
Chairman
16 August 2023
Statement of Comprehensive Income
Year ended 30 April 2023 Year ended 30 April 2022
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Losses on investments 10 - (27,046) (27,046) - (46,172) (46,172)
Income 3 7,612 - 7,612 6,670 - 6,670
Management fee 4 (945) (945) (1,890) (1,170) (1,170) (2,340)
Administrative expenses 5 (747) - (747) (723) - (723)
Exchange losses - (139) (139) - (640) (640)
Net return before finance costs and taxation 5,920 (28,130) (22,210) 4,777 (47,982) (43,205)
Finance costs 6 (473) (473) (946) (406) (406) (812)
Return before taxation 5,447 (28,603) (23,156) 4,371 (48,388) (44,017)
Taxation 7 (342) - (342) (366) - (366)
Return after taxation 5,105 (28,603) (23,498) 4,005 (48,388) (44,383)
Return per Ordinary share (pence) 9 4.82 (27.00) (22.18) 3.71 (44.81) (41.10)
The total column of this statement represents the profit and loss account of
the Company.
The Company does not have any income or expense that is not included in
"Return after taxation" and therefore this represents the "Total comprehensive
income for the year".
All revenue and capital items are derived from continuing operations.
The accompanying notes are an integral part of the financial statements.
Statement of Financial Position
As at As at
30 April 2023 30 April 2022
Notes £'000 £'000
Fixed assets
Investments at fair value through profit or loss 10 340,599 373,697
Current assets
Debtors 11 729 1,907
Cash and short-term deposits 2,166 7,824
2,895 9,731
Creditors: amounts falling due within one year 12
Loans (28,632) (13,504)
Other creditors (729) (2,994)
(29,361) (16,498)
Net current liabilities (26,466) (6,767)
Total assets less current liabilities 314,133 366,930
Non-current creditors 12
Loans - (19,978)
Net assets 314,133 346,952
Share capital and reserves
Share capital 13 5,643 5,855
Share premium account 17,955 17,955
Capital redemption reserve 10,911 10,699
Capital reserve 14 266,379 299,738
Revenue reserve 13,245 12,705
Equity shareholders' funds 314,133 346,952
Net asset value per Ordinary share (pence) 15 299.20 325.17
The financial statements were approved by the Board of Directors and
authorised for issue on 16 August 2023 and were signed on its behalf by:
Donald Workman
Chairman
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Equity
For the year ended 30 April 2023
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 April 2022 5,855 17,955 10,699 299,738 12,705 346,952
Buy back of Ordinary shares for treasury - - - (4,756) - (4,756)
Cancellation of Ordinary shares held in treasury (212) - 212 - - -
Return after taxation - - - (28,603) 5,105 (23,498)
Dividends paid 8 - - - - (4,565) (4,565)
Balance at 30 April 2023 5,643 17,955 10,911 266,379 13,245 314,133
For the year ended 30 April 2022
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 April 2021 5,855 17,955 10,699 355,134 13,362 403,005
Buy back of Ordinary shares for treasury - - - (7,008) - (7,008)
Return after taxation - - - (48,388) 4,005 (44,383)
Dividends paid 8 - - - - (4,662) (4,662)
Balance at 30 April 2022 5,855 17,955 10,699 299,738 12,705 346,952
The revenue reserve represents the amount of the Company's reserves
distributable by way of dividend.
The accompanying notes are an integral part of the financial statements.
Statement of Cash Flows
Year ended Year ended
30 April 2023 30 April 2022
Notes £'000 £'000
Operating activities
Net return before finance costs and taxation (22,210) (43,205)
Adjustment for:
Losses on investments 27,046 46,172
Currency losses 139 640
Dividend income (7,540) (6,667)
Dividend income received 7,502 7,112
Interest income (72) (3)
Interest income received 64 2
Increase in other debtors (5) (9)
Decrease in other creditors (12) (30)
Stock dividends included in investment income - (152)
Overseas withholding tax (253) (484)
Net cash flow from operating activities 4,659 3,376
Investing activities
Purchases of investments (71,965) (81,473)
Sales of investments 76,921 95,767
Net cash from investing activities 4,956 14,294
Financing activities
Equity dividends paid 8 (4,565) (4,662)
Interest paid (915) (799)
Buy back of Ordinary shares for treasury (4,790) (6,882)
Loan repayment (4,814) -
Net cash used in financing activities (15,084) (12,343)
(Decrease)/increase in cash (5,469) 5,327
Analysis of changes in cash during the year
Opening balance 7,824 2,364
Effect of exchange rate fluctuations on cash held (189) 133
(Decrease)/increase in cash as above (5,469) 5,327
Closing balance 2,166 7,824
The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements
For the year ended 30 April 2023
1. Principal activity
The Company is a closed-end investment company, registered in England &
Wales No 02377879, with its Ordinary shares being listed on the London Stock
Exchange.
2. Accounting policies
(a) Basis of accounting. The financial statements have been prepared in accordance
with Financial Reporting Standard 102 and with the Statement of Recommended
Practice 'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' (the "SORP") issued in July 2022. The financial statements are
prepared in Sterling which is the functional currency of the Company and
rounded to the nearest £'000. They have also been prepared on the assumption
that approval as an investment trust will continue to be granted by HMRC.
Going concern with a Material Uncertainty. As set out in more detail in the
Charman's Statement, it is proposed that the Company combines with Asia Dragon
Trust plc ("Asia Dragon"). The combination, if approved by each company's
shareholders, will be effected by way of a scheme of reconstruction and
winding up of the Company under section 110 of the Insolvency Act 1986 and the
associated transfer of part of the assets and undertaking of the Company to
Asia Dragon in exchange for the issue of new ordinary shares in Asia Dragon
(the "Scheme"). The outcome of the general meetings to make the Scheme
effective represents a material uncertainty which may cast significant doubt
on the Company's ability to continue as a going concern.
Notwithstanding this material uncertainty, the Board has concluded that it
remains appropriate to continue to prepare the financial statements on a going
concern basis. In reaching this conclusion, the Board has come to the view
that, as the Scheme is contingent on shareholder approval and the Company is
considered solvent in all other regards, there is no irrevocable path to
liquidation and thus going concern remains the most appropriate basis for
preparation. In reaching this conclusion, the Board has also given due
consideration to the risks associated with the Scheme.
The Board has also given consideration to the liquidity of the investment
portfolio. The Company's assets consist substantially of equity shares in
companies listed on recognised stock exchanges and in most circumstances are
realisable within a short timescale. The Board regularly reviews income and
expenditure projections and has set limits for borrowing and reviews
compliance with banking covenants, including the headroom available.
At the year end, the Company's borrowing facilities amounted to £40 million,
comprising a fixed rate loan of £20 million, which matures in December 2023,
and a £20 million multi-currency revolving loan facility maturing in June
2024. In the event of the Company being unable to renew the facilities on
their maturity, it is anticipated that they would be repaid from proceeds of
investment sales.
In considering the going concern basis of accounting, the Directors have also
taken into account the potential requirement of the Board to propose a
resolution to approve the continuation of the Company at future Annual General
Meetings. As explained under "Duration" above, this is dependent upon the
level of discount in the 90 days preceding the Company's financial year end
and there is no requirement for such a resolution to be proposed at the Annual
General Meeting.
The Company's investments and borrowings are made in a number of currencies,
however the Board considers the Company's functional currency to be Sterling.
In arriving at this conclusion, the Board considered that the shares of the
Company are listed on the London Stock Exchange, it is regulated in the United
Kingdom, principally having its shareholder base in the United Kingdom, pays
dividends and expenses in Sterling. Consequently, the Board also considers the
Company's presentational currency to be Sterling. At the year end, the
Company's borrowing facilities amounted to £40 million, comprising a fixed
rate loan of £20 million, which matures in December 2023, and a £20 million
multi-currency revolving loan facility maturing in June 2024.
Significant accounting judgements, estimates and assumptions. The preparation
of financial statements requires the consideration of certain significant
accounting judgements, estimates and assumptions when management may need to
exercise its judgement in the process of applying the accounting policies and
these are continually evaluated. The Directors consider the material
uncertainty present for the Company to continue as a going concern and the use
of Sterling as its functional currency to be significant accounting
judgements.
(b) Valuation of investments. The Company has applied the recognition and
measurement provisions of FRS 102 and investments have been designated upon
initial recognition at fair value through profit or loss. This is done because
all investments are considered to form part of a group of financial assets
which is evaluated on a fair value basis, in accordance with the Company's
documented investment strategy, and information about the grouping is provided
internally on that basis. Listed investments have been measured upon initial
recognition as fair value through profit or loss. Investments are recognised
and de-recognised on the trade date at cost. Subsequent to initial
recognition, investments are valued at fair value which for listed investments
is deemed to be bid market prices. The fair value of the Company's investments
in collective investment schemes has been determined by reference to their
quoted net asset values. Gains and losses arising from changes in fair value
are included as a capital item in the Statement of Comprehensive Income and
are ultimately recognised in the capital reserve.
(c) Income. Dividends, including taxes deducted at source, are included in revenue
by reference to the date on which the investment is quoted ex-dividend.
Special dividends are reviewed on a case-by-case basis and are credited to
capital, if circumstances dictate. Dividends receivable on equity shares where
no ex-dividend date is quoted are brought into account when the Company's
right to receive payment is established. Other returns on non-equity shares
are recognised when the right to return is established. Where the Company has
elected to receive its dividends in the form of additional shares rather than
cash, the amount of the cash dividend is recognised as revenue. Any excess in
the value of the shares received over the amount of the cash dividend is
recognised as capital. Interest receivable on bank balances is dealt with on
an accruals basis.
(d) Expenses. All expenses are accounted for on an accruals basis. Expenses are
charged through the revenue column of the Statement of Comprehensive Income
except as follows:
- expenses directly relating to the acquisition or disposal of an investment,
which are charged to the capital column of the Statement of Comprehensive
Income and are separately identified and disclosed in note 10; and
- the Company charges 50% of investment management fees and finance costs to
the capital column of the Statement of Comprehensive Income, 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.
(e) Taxation. The 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 expenditure that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible (see note 7 for a more detailed explanation).
Deferred taxation is provided on all timing differences, that have originated
but not reversed at the Statement of Financial Position date, where
transactions or events that result in an obligation to pay more or a right to
pay less tax in future have occurred at the Statement of Financial Position
date, measured on an undiscounted basis and based on enacted tax rates. This
is subject to deferred tax assets only being recognised if it is considered
more likely than not that there will be suitable profits from which the future
reversal of the underlying timing differences can be deducted. Timing
differences are differences arising between the Company's taxable profits and
its results as stated in the accounts which are capable of reversal in one or
more subsequent periods. Due to the Company's status as an investment trust
company, and the intention to continue to meet the conditions required to
obtain approval for the foreseeable future, the Company has not provided
deferred tax on any capital gains and losses arising on the revaluation or
disposal of investments.
(f) Foreign currencies. Assets and liabilities in foreign currencies are
translated at the rates of exchange ruling on the Statement of Financial
Position date. Transactions involving foreign currencies are converted at the
rate ruling on the date of the transaction. Gains and losses on the
realisation of foreign currencies are recognised in the Statement of
Comprehensive Income as capital or revenue, depending upon their nature.
(g) Dividends payable. Final dividends are recognised from the date on which they
are declared and approved by shareholders. Interim dividends are recognised
when paid.
(h) Nature and purpose of capital and reserves
Called up share capital. The Ordinary share capital on the Statement of
Financial Position relates to the number of shares in issue and in treasury.
Only when the shares are cancelled, either from treasury or directly, is a
transfer made to the capital redemption reserve.
Share premium account. The balance classified as share premium includes the
premium above nominal value from the proceeds on issue of any equity share
capital comprising Ordinary shares of 5p. This reserve is not distributable.
Capital redemption reserve. The capital redemption reserve is used to record
the amount equivalent to the nominal value of any of the Company's own shares
purchased and cancelled in order to maintain the Company's capital. This
reserve is not distributable.
Capital reserve. Gains or losses on disposal of investments and changes in
fair values of investments are transferred to the capital reserve. The capital
element of the management fee and relevant finance costs are charged to this
reserve. Any associated tax relief is also credited to this reserve. The costs
of share buybacks to be held in treasury have also been deducted from this
reserve. This reserve is not distributable.
Revenue reserve. This reserve reflects all income and costs which are
recognised in the revenue column of the Statement of Comprehensive Income. The
revenue is distributable, including by way of dividend.
(i) Borrowings. Bank loans are initially recognised at cost, being the fair value
of the consideration received, net of any issue expenses. Subsequently, they
are measured at amortised cost using the effective interest method. Finance
charges are accounted for on an accruals basis using the effective interest
rate method and are charged 50% to revenue and
50% to capital.
3. Income
2023 2022
£'000 £'000
Income from investments
UK dividend income 729 1,973
Overseas dividends 6,811 4,542
Stock dividends - 152
7,540 6,667
Other income
Deposit interest 72 3
Total income 7,612 6,670
4. Management fee
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fee 945 945 1,890 1,170 1,170 2,340
Management services are provided by abrdn Fund Managers Limited ("aFML").
With effect from 1 May 2022, the management fee has been payable monthly in
arrears based on an annual amount of 0.85% up to £350 million and 0.50%
thereafter of the net asset value of the Company valued monthly, previously
0.85% of net assets, with the following provisions for commonly managed funds:
- the Company's investments in Aberdeen Standard SICAV - Indian Equity Fund,
abrdn Asia Focus PLC and abrdn New India Investment Trust PLC are excluded
from the calculation of the investment management fee. The total value of such
commonly managed funds, on a bid price basis (basis on which the management
fee is calculated), at the year end was £58,292,000 (2022 - bid basis -
£59,390,000).
- the Company receives a rebate from the Manager for the amount of fees in
excess of the above rates charged by the Manager for any commonly managed
fund.
The balance due to aFML at the year end, net of any rebates, was £303,000
(2022 - £344,000).
The agreement is terminable by either party on not less than twelve months'
notice to the other. In the event of termination
by the Company on less than the agreed notice period, compensation is payable
to the Manager in lieu of the unexpired
notice period.
5. Administrative expenses
2023 2022
£'000 £'000
Promotional activities 185 177
Directors' fees 126 122
Safe custody fees 111 129
Depositary fees 34 39
Auditor's remuneration:
- fees payable for the audit of the Company's annual financial statements 30 29
Registrar's fees 62 67
Legal and professional fees 55 28
Other expenses 144 132
747 723
The Company has an agreement with aFML for the provision of promotional
activities. The total fees payable during the year were £185,000 (2022 -
£177,000) and the sum due to aFML at the year end was £54,000 (2022 -
£65,000).
The Company does not have any employees and no pension contributions were made
in respect of any of the Directors.
With the exception of Auditor's remuneration, all of the expenses above
include irrecoverable VAT where applicable.
6. Finance costs
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Bank loans and overdraft interest 473 473 946 406 406 812
7. Taxation
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(a) Analysis of charge for the year
Overseas tax 416 - 416 444 - 444
Overseas tax reclaimable (74) - (74) (78) - (78)
Total tax charge for the year 342 - 342 366 - 366
(b) Factors affecting the tax charge for the year. The UK corporation tax rate is
25% (2022 - 19%).The tax assessed for the year is higher (2022 -higher) than
the standard rate of corporation tax in the UK. The differences are explained
below:
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net return before taxation 5,447 (28,603) (23,156) 4,371 (48,388) (44,017)
Corporation tax at effective rate of 19.5% (2022 - standard rate of 19%) 1,062 (5,578) (4,516) 830 (9,194) (8,364)
Effects of: -
Non-taxable UK dividend income (142) - (142) (375) - (375)
Non-taxable overseas dividends (1,328) - (1,328) (892) - (892)
Overseas tax suffered 342 - 342 366 - 366
Expenses not deductible for tax purposes 3 - 3 4 - 4
Surplus management expenses and loan relationship deficits not relieved 405 277 682 433 299 732
Non-taxable exchange losses - 27 27 - 122 122
Non-deductible losses - 5,274 5,274 - 8,773 8,773
Total tax charge 342 - 342 366 - 366
(c) Provision for deferred taxation. No provision for deferred taxation has been
made in the current year or in the prior year. At 30 April 2023 the Company
had surplus management expenses and loan relationship debits with a tax value
of £10,395,000 (2022 - £9,522,000) in respect of which a deferred tax asset
has not been recognised. This is because the Company is not expected to
generate taxable income in a future period in excess of the deductible
expenses of that future period and, accordingly, it is unlikely that the
Company will be able to reduce future tax liabilities through the use of
existing surplus expenses.
8. Dividends
2023 2022
£'000 £'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for 2022 - 3.3p (2021 - 3.3p) 3,507 3,587
Interim dividend for 2023 - 1.0p (2022 - 1.0p) 1,058 1,075
4,565 4,662
The second interim dividend in respect of the year ended 30 April 2023 has not
been included as a liability in these financial statements.
The table below sets out the dividends in respect of the financial year, which
is the basis on which the requirements of Section 1158 of the Corporation Tax
Act 2010 are considered. The revenue available for distribution by way of
dividend for the year is £5,105,000 (2022 - £4,005,000).
2023 2022
£'000 £'000
First interim dividend for 2023 - 1.0p 1,058 -
Second interim dividend for 2023 - 3.3p 3,451 -
Interim dividend for 2022 - 1.0p - 1,075
Final dividend for 2022 - 3.3p - 3,511
4,509 4,586
Subsequent to the year end the Company and up to the record date of the second
interim dividend for 2023 a further 420,000 Ordinary shares were purchased for
treasury. Therefore the amounts reflected above for the cost of the second
interim dividend for 2023 are based on 104,571,348 Ordinary shares, being the
number of Ordinary shares in issue excluding those held in treasury at the
date of this Report.
9. Return per Ordinary share
2023 2022
£'000 p £'000 p
Revenue return 5,105 4.82 4,005 3.71
Capital return (28,603) (27.00) (48,388) (44.81)
Total return (23,498) (22.18) (44,383) (41.10)
Weighted average number of Ordinary shares in issue(A) 105,932,290 107,976,263
(A) Calculated excluding shares held in treasury.
10. Investments at fair value through profit or loss
2023 2022
£'000 £'000
Opening book cost 253,386 243,269
Opening investment holding gains 120,311 188,217
Opening fair value 373,697 431,486
Analysis of transactions made during the year
Purchases at cost 69,728 82,957
Sales proceeds received (75,780) (94,574)
Losses on investments (27,046) (46,172)
Closing fair value 340,599 373,697
Closing book cost 264,474 253,386
Closing investment gains 76,125 120,311
Closing fair value 340,599 373,697
2023 2022
£'000 £'000
Investments listed on an overseas investment exchange 322,007 340,908
Investments listed on the UK investment exchange 18,592 32,789
340,599 373,697
The Company received £75,780,000 (2022 - £94,574,000) from investments sold
in the period. The book cost of these investments when they were purchased was
£58,640,000 (2022 - £72,840,000). These investments have been revalued over
time and until they were sold any unrealised gains/(losses) were included in
the fair value of the investments.
Transaction costs. During the year expenses were incurred in acquiring or
disposing of investments classified as fair value through profit or loss.
These have been expensed through capital and are included within losses on
investments in the Statement of Comprehensive Income. The total costs were as
follows:
2023 2022
£'000 £'000
Purchases 86 91
Sales 119 140
205 231
The above transaction costs are calculated in line with the AIC SORP. The
transaction costs in the Company's Key Information Document are calculated on
a different basis and in line with the PRIIPs regulations.
11. Debtors
2023 2022
£'000 £'000
Prepayments and accrued income 348 308
Amounts due from brokers - 1,141
Other loans and receivables 381 458
729 1,907
12. Creditors
Amounts falling due within one year: 2023 2022
a) Loans £'000 £'000
Foreign currency loans 3,640 8,504
Sterling loans 24,992 5,000
28,632 13,504
2023 2022
b) Other £'000 £'000
Amounts due to brokers 92 2,363
Other creditors 637 631
729 2,994
2023 2022
Non-current creditors: £'000 £'000
Sterling loan - 19,978
At the year end the Company had drawn down HK$21,000,000 (2022 -
HK$21,00,000), equivalent to £2,128,000 (2022 - £2,132,000), with a maturity
date of 19 May 2023 (2022 - 25 May 2022), US$1,900,000 (2022 - US$8,000,000),
equivalent to £1,512,000 (2022 - £6,372,000), with a maturity date of 19 May
2023 (2022 - 25 May 2022) and £5,000,000 (2022 - £5,000,000), with a
maturity date of 19 May 2023 (2022 - 25 May 2022), and a fixed rate bank loan
of £20,000,000 (2022 - £20,000,000), under the £40,000,000 multi-currency
credit facility with The Royal Bank of Scotland International Limited at
interest rates of 2.760%, 6.216%, 5.577% and 2.626% (2022 - 1.58839%,
2.06786%, 2.0905% and 2.626%) respectively.
As of the latest date prior to the signing of this Report the HK$21,000,000
loan had been drawn down to 18 August 2023 at an interest rate of 6.359%, the
US$1,900,000 loan had been drawn down to 18 August 2023 at an interest rate of
6.45% and the £5,000,000 loan had been drawn down to 18 August 2023 at an
estimated interest rate of 6.33%.
The terms of the bank loan with The Royal Bank of Scotland International
Limited state that:
- the net tangible assets of the Company must be not less than £125 million
at all times;
- the ratio of gross borrowings to adjusted assets must be less than 25% at
all times (adjusted assets are total gross assets less (i) the value of any
unlisted investment; (ii) the value in excess of 10% of total gross assets
invested in the largest single security or asset; (iii) the value of any
single security or asset (other than the largest security or asset referred to
above) exceeds 5% of gross assets; (iv) the value in excess of 60% of total
gross assets invested in the top twenty largest investments; (v) the extent to
which the value of securities in collective investment schemes exceeds 30% of
gross assets; and (vi) the extent to which the aggregated value of securities
or assets in countries with a Standard and Poor's foreign sovereign debt
rating lower than BBB exceeds 30% of gross assets.); and
- the facility, under which the loans are made, is split into two tranches, a
£20,000,000 fixed rate facility which will expire on 14 December 2023 and a
£20,000,000 revolving credit facility which will expire on 28 June 2024.
The Company has met all financial covenants throughout the period and up to
the date of this Report.
13. Share capital
2023 2022
£'000 £'000
Allotted, called up and fully paid:
104,991,348 (2022 - 106,697,348) Ordinary shares of 5p each 5,249 5,335
Held in treasury:
7,874,351 (2022 - 10,401,701) Ordinary shares of 5p each 394 520
5,643 5,855
During the year 1,706,000 (2022 - 2,232,000) Ordinary shares of 5p each were
repurchased by the Company at a total cost, including transaction costs, of
£4,756,000 (2022 - £7,008,000). All of the shares were placed in treasury.
On 30 April 2023 4,233,350 Ordinary shares held in treasury were cancelled.
Shares held in treasury represent 7.0% (2022 - 8.9%) of the Company's total
issued share capital of 112,865,699 Ordinary shares of 5p each at 30 April
2023. Shares held in treasury do not carry a right to receive dividends.
Subsequent to the year end the Company bought back for treasury a further
420,000 Ordinary shares for a total consideration of £1,253,000.
14. Capital reserve
2023 2022
£'000 £'000
At 1 May 2022 299,738 355,134
Movement in fair value gains (27,046) (46,172)
Foreign exchange movement (139) (640)
Buy back of Ordinary shares for treasury (4,756) (7,008)
Expenses allocated to capital (1,418) (1,576)
At 30 April 2023 266,379 299,738
The capital reserve includes investment holding gains amounting to
£76,125,000 (2022 - £120,311,000), as disclosed in note 10.
15. Net asset value per share
The net asset value per 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:
2023 2022
Net assets attributable £314,133,000 £346,952,000
Number of Ordinary shares in issue (excluding shares held in treasury) 104,991,348 106,697,348
Net asset value per share 299.20p 325.17p
16. Analysis of changes in net debt
At At
30 April Currency Cash Non-cash 30 April
2022 differences flows movements 2023
£'000 £'000 £'000 £'000 £'000
Cash and short term deposits 7,824 (189) (5,469) - 2,166
Debt due within one year (13,504) 50 4,814 (19,992) (28,632)
Debt due after more than one year (19,978) - - 19,978 -
(25,658) (139) (655) (14) (26,466)
At At
30 April Currency Cash Non-cash 30 April
2021 differences flows movements 2022
£'000 £'000 £'000 £'000 £'000
Cash and short term deposits 2,364 133 5,327 - 7,824
Debt due within one year (12,731) (773) - - (13,504)
Debt due after more than one year (19,965) - - (13) (19,978)
(30,332) (640) 5,327 (13) (25,658)
A statement reconciling the movement in net funds to the net cash flow has not
been presented as there are no differences from the above analysis.
17. Financial instruments
Risk management. The Company's investment activities expose it to various
types of financial risk associated with the financial instruments and markets
in which it invests. The Company's financial instruments comprise securities
and other investments, cash balances, loans and debtors and creditors that
arise directly from its operations; for example, in respect of sales and
purchases awaiting settlement, and debtors for accrued income.
The Board has delegated the risk management function to abrdn Fund Managers
Limited ("aFML") under the terms of its management agreement with aFML
(further details of which are included under note 4). The Board regularly
reviews and agrees policies for managing each of the key financial risks
identified with the Manager. The types of risk and the Manager's approach to
the management of each type of risk, are summarised below. Such approach has
been applied throughout the year and has not changed since the previous
accounting period.
Risk management framework. The directors of aFML collectively assume
responsibility for aFML's obligations under the AIFMD including reviewing
investment performance and monitoring the Company's risk profile during the
year.
aFML is a fully integrated member of the abrdn Group ("the Group"), which
provides a variety of services and support to aFML in the conduct of its
business activities, including the oversight of the risk management framework
for the Company. The AIFM has delegated the day to day administration of the
investment policy to abrdn Asia Limited, which is responsible for ensuring
that the Company is managed within the terms of its investment guidelines and
the limits set out in its pre-investment disclosures to investors (details of
which can be found on the Company's website). The AIFM has retained
responsibility for monitoring and oversight of investment performance, product
risk and regulatory and operational risk for the Company.
The Manager conducts its risk oversight function through the operation of the
Group's risk management processes and systems which are embedded within the
Group's operations. The Group's Risk Division supports management in the
identification and mitigation of risks and provides independent monitoring of
the business. The Division includes Compliance, Business Risk, Market Risk and
Risk Management. The team is headed up by the Group's Chief Risk Officer, who
reports to the Group CEO. 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 CEO and to the Audit Committee of the Group's
Board of Directors. The Internal Audit Department is responsible for providing
an independent assessment of the Group's control environment.
The Group's corporate governance structure is supported by several committees
to assist the board of directors, its subsidiaries and the Company to fulfil
their roles and responsibilities. The Group's Risk Division is represented on
all committees, with the exception of those committees that deal with
investment recommendations. The specific goals and guidelines on the
functioning of those committees are described on the committees' terms of
reference.
Risk management. The main risks the Company faces from its financial
instruments are (i) market risk (comprising interest rate risk, currency risk
and price risk), (ii) liquidity risk and (iii) credit risk.
(i) Market risk. The fair value of, or future cash flows from a financial
instrument held by the Company may fluctuate because of changes in market
prices. This market risk comprises three elements - interest rate risk,
foreign currency risk and other price risk.
Interest rate risk. Interest rate movements may affect:
- the level of income receivable on cash deposits; and,
- interest payable on the Company's variable rate borrowings.
Management of the risk. The possible effects on fair value and cash flows that
could arise as a result of changes in interest rates are taken into account
when making investment and borrowing decisions.
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. Current bank
covenant guidelines state that the total borrowings will not exceed 25% of the
adjusted net assets of the Company as defined in note 12.
Interest risk profile. The interest rate risk profile of the portfolio of the
Company's financial assets and liabilities, excluding equity holdings which
are all non-interest bearing, at the Statement of Financial Position date was
as follows:
Weighted average Weighted
period for which average Fixed Floating
rate is fixed interest rate rate rate
At 30 April 2023 Years % £'000 £'000
Assets:
China Yuan Renminbi - - - 3
Sterling - 3.18 - 2,134
Vietnam Dong - - - 29
- 2,166
Weighted average Weighted
period for which average Fixed Floating
rate is fixed interest rate rate rate
Years % £'000 £'000
Liabilities:
Bank loan - £20,000,000 0.62 2.63 19,992 -
Bank loan - £5,000,000 0.05 5.58 5,000 -
Bank loan - HK$21,000,000 0.05 2.76 2,128 -
Bank loan - US$1,900,000 0.05 6.22 1,512 -
28,632 -
Weighted average Weighted
period for which average Fixed Floating
rate is fixed interest rate rate rate
At 30 April 2022 Years % £'000 £'000
Assets:
China Yuan Renminbi - - - 3
Euro - - - 1
Sri Lankan Rupee - - - 7
Sterling - - - 7,798
Taiwan Dollar - - - 1
Vietnam Dong - - - 14
- 7,824
Weighted average Weighted
period for which average Fixed Floating
rate is fixed interest rate rate rate
Years % £'000 £'000
Liabilities:
Bank loan - £20,000,000 1.62 2.63 19,978 -
Bank loan - £5,000,000 0.07 2.09 5,000 -
Bank loan - HK$21,000,000 0.07 1.59 2,132 -
Bank loan - US$8,000,000 0.07 2.07 6,372 -
33,482 -
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 maturity date of the Company's loans are shown in note 12.
The floating rate assets consist of cash deposits on call earning interest at
prevailing market rates.
The Company's equity portfolio and short-term debtors and creditors (excluding
bank loans) have been excluded from the above tables.
Interest rate sensitivity. Movements in interest rates would not significantly
affect net assets attributable to the Company's shareholders and total profit.
Foreign currency risk. The Company's investment portfolio is primarily
invested in overseas securities and the Statement of Financial Position,
therefore, can be significantly affected by movements in foreign exchange
rates.
Management of the risk. It is not the Company's policy to hedge this risk on a
continuing basis but the Company may, from time to time, match specific
overseas investment with foreign currency borrowings. The Company's
borrowings, as detailed in note 12, are predominantly in sterling.
The revenue account is subject to currency fluctuation arising on dividends
paid in foreign currencies. The Company does not hedge this currency risk.
Foreign currency exposure by currency of denomination:
30 April 2023 30 April 2022
Net Total Net Total
monetary currency monetary currency
Investments assets exposure Investments assets exposure
£'000 £'000 £'000 £'000 £'000 £'000
Australian Dollar 36,504 - 36,504 31,303 157 31,460
China Yuan Renminbi 37,738 3 37,741 44,103 (747) 43,356
Euro 8,798 - 8,798 7,828 1 7,829
Hong Kong Dollar 88,390 (2,128) 86,262 77,221 (2,132) 75,089
Indonesian Rupiah 15,791 - 15,791 12,821 - 12,821
Philippine Peso 4,909 - 4,909 6,270 - 6,270
Singapore Dollar 16,714 - 16,714 22,576 (838) 21,738
South Korean Won 28,782 - 28,782 41,846 336 42,182
Sri Lankan Rupee 2,011 - 2,011 1,624 7 1,631
Taiwan Dollar 27,125 - 27,125 32,261 1 32,262
Thailand Baht - - - 2,703 - 2,703
US Dollar - (1,512) (1,512) - (6,372) (6,372)
Vietnam Dong 6,897 29 6,926 11,656 14 11,670
Total 273,659 (3,608) 270,051 292,212 (9,573) 282,639
Foreign currency sensitivity. The following table details the Company's
sensitivity to a 10% increase and decrease 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 3,650 3,146
China Yuan Renminbi 3,774 4,336
Euro 880 783
Hong Kong Dollar 8,626 7,509
Indonesian Rupiah 1,579 1,282
Philippine Peso 491 627
Singapore Dollar 1,671 2,174
South Korean Won 2,878 4,218
Sri Lankan Rupee 201 163
Taiwan Dollar 2,713 3,226
Thailand Baht - 270
US Dollar (151) (637)
Vietnam Dong 693 1,167
27,005 28,264
Price risk. Other price risks (ie changes in market prices other than those
arising from interest rate or currency risk) may affect the value of the
quoted investments.
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. Both
the allocation of assets and the stock selection process act to reduce market
risk. The Manager actively monitors market prices throughout the year and
reports to the Board, which meets regularly in order to review investment
strategy. The investments held by the Company are listed on various stock
exchanges worldwide.
Price risk sensitivity. If market prices at the Statement of Financial
Position date had been 10% higher or lower while all other variables remained
constant, the return attributable to Ordinary shareholders for the year ended
30 April 2023 would have increased/(decreased) by £34,060,000 (2022 -
increased/(decreased) by £37,370,000) and equity reserves would have
increased/(decreased) by the same amount.
(ii) Liquidity risk. This is the risk that the Company will encounter
difficulty in meeting obligations associated with financial liabilities as
they fall due in line with the maturity profile analysed below.
Within
1 year Total
At 30 April 2023 £'000 £'000
Bank loans 28,632 28,632
Interest cash flows on bank loans 430 430
Cash flows on other creditors 649 649
29,711 29,711
Within Within
1 year 1-2 years Total
At 30 April 2022 £'000 £'000 £'000
Bank loans 13,504 20,000 33,504
Interest cash flows on bank loans 548 396 944
Cash flows on other creditors 2,994 - 2,994
17,046 20,396 37,442
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 a £20,000,000 fixed rate credit facility, which
expires on 14 December 2023 and £20,000,000 revolving multi-currency credit
facility, which expires on 28 June 2024. The Board has imposed a maximum
gearing level, measured on the most stringent basis of calculation after
netting off cash equivalents, of 25%. Details of borrowings at 30 April 2023
are shown in note 12.
Liquidity risk is not considered to be significant as the Company's assets
comprise mainly readily realisable securities, which can be sold to meet
funding commitments if necessary. Short-term flexibility is achieved through
the use of the loan facility, details of which can be found in note 12. Under
the terms of the loan facility, the Manager provides the lender with loan
covenant reports on a monthly basis, to provide the lender with assurance that
the terms of the facility are not being breached. The Manager will also review
the credit rating of a lender on a regular basis. Details of the Board's
policy on gearing are shown in the interest rate risk section of this note.
(iii) Credit risk. This is the risk of failure of the counterparty to a
transaction to discharge its obligations under that transaction that could
result in the Company suffering a loss.
Management of the risk. Investment transactions are carried out with a large
number of brokers, whose credit-standing is reviewed periodically by the
Manager, and limits are set on the amount that may be due from any one broker.
Cash is held only with reputable banks with high quality external credit
enhancements.
Credit risk exposure. In summary, compared to the amounts in the Statement of
Financial Position, the maximum exposure to credit risk at 30 April was as
follows:
2023 2022
Statement of Statement of
Financial Maximum Financial Maximum
Position exposure Position exposure
£'000 £'000 £'000 £'000
Current assets
Loans and receivables 729 729 1,907 1,907
Cash at bank and in hand 2,166 2,166 7,824 7,824
2,895 2,895 9,731 9,731
None of the Company's financial assets are past due or impaired.
Fair values of financial assets and financial liabilities. The carrying values
of fixed asset investments are stated at their fair values, which have been
determined with reference to quoted market prices. For all other short-term
debtors and creditors, their book values approximate to fair values because of
their short-term maturity. Bank loans are valued at amortised cost in
accordance with the Company's stated accounting policy.
18. Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy has the following classifications:
Level 1: unadjusted quoted prices in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are
observable (ie developed using market data) for the asset or liability, either
directly or indirectly.
Level 3: inputs are unobservable (ie for which market data is unavailable) for
the asset or liability.
The financial assets and liabilities measured at fair value in the Statement
of Financial Position are grouped into the fair value hierarchy at the
reporting date as follows:
Level 1 Level 2 Level 3 Total
As at 30 April 2023 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities 292,251 - - 292,251
Collective investment schemes - 48,348 - 48,348
Total fair value 292,251 48,348 - 340,599
Level 1 Level 2 Level 3 Total
As at 30 April 2022 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities 325,001 - - 325,001
Collective investment schemes - 48,696 - 48,696
Total fair value 325,001 48,696 - 373,697
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.
Collective investment schemes. The fair value of the Company's investments in
collective investment schemes has been determined by reference to their quoted
net asset values at the reporting date and hence are categorised in Fair Value
Level 2.
19. Related party transactions and transactions with the Manager
Fees payable during the period to the Directors and their interests in shares
of the Company are disclosed within the Directors' Remuneration Report.
Mr Young is also a director of the Company's Investment Manager, abrdn Asia
Limited, which is a wholly-owned subsidiary of abrdn plc. Management,
promotional activities and secretarial and administration services are
provided to the Company by abrdn Fund Managers Limited. Details of
transactions during the year and balances outstanding at the year end
disclosed in notes 4 and 5.
20. Capital management policies and procedures
The investment objective of the Company is to provide shareholders with a high
level of capital growth through equity investment in the Asia Pacific
countries ex Japan.
The Company manages its capital to ensure that it will be able to continue as
a going concern while maximising the return to shareholders through the
optimisation of the debt and equity balance.
The Board 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 Manager's views on
the market;
- the level of equity shares in issue; 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.
The Company does not have any externally imposed capital requirements. As at
30 April 2023, the Company had net gearing of 8.5% which compares with a
current maximum limit set by the Board of 25%.
21. Subsequent events
On 21 July 2023 the Board announced that it had agreed heads of terms with the
board of Asia Dragon Trust plc ("Asia Dragon") in respect of a proposed
combination of the Company with Asia Dragon. The combination, if approved by
each company's shareholders, will be effected by way of a scheme of
reconstruction and winding up of the Company under section 110 of the
Insolvency Act 1986 with the associated transfer of part of the assets and
undertaking of the Company to Asia Dragon in exchange for the issue of new
ordinary shares in Asia Dragon (the "Scheme"). Under the terms of the Scheme
an up to 25% cash exit opportunity will be offered to the Company's
shareholders to realise part of their investment in the Company at a 2%
discount to the adjusted net asset value.
Alternative Performance 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 FRS 102 and
the AIC SORP.
Dividend cover
Dividend cover is the revenue return per share divided by dividends per share
expressed as a ratio.
2023 2022
Revenue return per share a 4.82p 3.71p
Dividends per share b 4.30p 4.30p
Dividend cover a/b 1.12 0.86
Discount to net asset value per Ordinary share (including current year income)
The amount by which the market price per Ordinary share is lower than the net
asset value per Ordinary share (including current year income), expressed as a
percentage of the net asset value per Ordinary share.
2023 2022
NAV per Ordinary share (p) a 299.20 325.17
Share price (p) b 261.00 286.00
Discount (a-b)/a 12.8% 12.0%
Discount to net asset value per Ordinary share (excluding current year income)
The amount by which the market price per Ordinary share is lower than the net
asset value per Ordinary share (excluding current year income), expressed as a
percentage of the net asset value per Ordinary share.
2023 2022
Net asset value per Ordinary share (p) a 295.34 322.43
Share price (p) b 261.00 286.00
Discount (a-b)/a 11.6% 11.3%
Net asset value per Ordinary share (excluding current year income)
The Company also uses net asset value (excluding current year income) per
share as an alternative performance measure. This is calculated as follows:
2023 2022
Net assets attributable (£'000) 314,133 346,952
Less: Revenue return after taxation for the year (£'000) (5,105) (4,005)
Add: Dividends paid during the year (£'000) 1,058 1,075
Net assets (ex income) (£'000) 310,086 344,022
Number of Ordinary shares in issue 104,991,348 106,697,348
NAV (ex income) per Ordinary share 295.34p 322.43p
Net gearing
Net gearing measures total borrowings less cash and cash equivalents divided
by shareholders' funds, expressed as a percentage. Under AIC reporting
guidance cash and cash equivalents includes net amounts due to and from
brokers at the period end as well as cash and short-term deposits.
2023 2022
Borrowings (£'000) a 28,632 33,482
Cash (£'000) b 2,166 7,824
Amounts due to brokers (£'000) c 92 2,363
Amounts due from brokers (£'000) d - 1,141
Shareholders' funds (£'000) e 314,133 346,952
Net gearing (a-b+c-d)/e 8.5% 7.7%
Ongoing charges
The ongoing charges ratio has been calculated in accordance with guidance
issued by the AIC as the total of investment management fees and
administrative expenses and expressed as a percentage of the average daily net
asset values published throughout the year.
2023 2022
Management fees (£'000) 1,890 2,340
Administrative expenses (£'000) 747 723
Less: non-recurring charges(A) (£'000) (14) -
Ongoing charges (£'000) 2,623 3,063
Average net assets (£'000) 336,444 383,039
Ongoing charges ratio (excluding look-through costs) 0.78% 0.80%
Look-through costs(B) 0.35% 0.33%
Ongoing charges ratio (including look-through costs) 1.13% 1.13%
(A) Legal and professional 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 ratio provided in the Company's Key Information Document
is calculated in line with the PRIIPs regulations, which includes amongst
other things, 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
Benchmark Index, respectively.
Share
Year ended 30 April 2023 NAV Price
Opening at 1 May 2022 a 325.17p 286.00p
Closing at 30 April 2023 b 299.20p 261.00p
Price movements c=(b/a)-1 -8.0% -8.7%
Dividend reinvestment(A) d 1.2% 1.4%
Total return c+d -6.8% -7.3%
Share
Year ended 30 April 2022 NAV Price
Opening at 1 May 2021 a 369.97p 328.50p
Closing at 30 April 2022 b 325.17p 286.00p
Price movements c=(b/a)-1 -12.1% -12.9%
Dividend reinvestment(A) d 1.1% 1.1%
Total return c+d -11.0% -11.8%
(A) NAV total return involves investing the net dividend in the NAV of the
Company with debt at fair value on the date on which that dividend goes
ex-dividend. Share price total return involves reinvesting the net dividend in
the share price of the Company on the date on which that dividend goes
ex-dividend.
Additional Notes to the Annual Financial Report
The Annual Financial Report Announcement is not the Company's statutory
accounts. The above results for the year ended 30 April 2023 have been agreed
with the auditor and are an abridged version of the Company's full accounts,
which have been approved and audited with an unqualified report. The 2022 and
2023 statutory accounts 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, and did not
contain a statement under s.498(2) or 498(3) of the Companies Act 2006. The
financial information for 2022 is derived from the statutory accounts for 2021
which have been delivered to the Registrar of Companies. The 2023 accounts
will be filed with the Registrar of Companies in due course.
The Annual Report and Accounts will be posted to shareholders in August 2023.
Copies will be available during normal business hours from the Secretary,
abrdn Holdings Limited, 1 George Street, Edinburgh EH2 2LL or from the
Company's website, www.newdawn-trust.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.
By order of the Board
abrdn Holdings Limited
Company Secretary
16 August 2023
* Neither the Company's website nor the content of any website accessible from
hyperlinks on it (or any other website) is (or is deemed to be) incorporated
into, or forms (or is deemed to form) part of this announcement.
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