Half-year Report
25/01/2024 07:00
LEGAL ENTITY IDENTIFIER: 549300YM9USHRKIET173
INVESCO ASIA TRUST PLC
Half-Yearly Financial Report for the Six Months to 31 October 2023
The following text is extracted from the Half-Yearly Financial Report for the
Six Months to 31 October 2023. All page numbers below refer to the Half-Yearly
Financial Report which will be made available on the Company's website.
Investment Objective
The Company’s objective is to provide long-term capital growth and income by
investing in a diversified portfolio of Asian and Australasian companies. The
Company aims to achieve growth in its net asset value (NAV) total return
in excess of the Benchmark Index, the MSCI AC Asia ex Japan Index
(total return, net of withholding tax, in sterling terms).
Financial Information and Performance Statistics
The benchmark index of the Company is the MSCI AC Asia ex Japan Index (total
return, net of withholding tax, in sterling terms)
Six Months to Year ended
31 October 30 April
Total Return Statistics (1) (dividends reinvested) 2023 2023
Net asset value (NAV) total return (2) –5.9% 1.3%
Share price total return (2) –7.8% 1.2%
Benchmark index total return (3) –2.9% –6.0%
Capital Statistics
At At
31 October 30 April
2023 2023 change %
Net assets (£’000) 230,572 245,004 –5.9
NAV per share 344.89p 366.48p –5.9
Share price (1) 296.00p 321.00p –7.8
Benchmark index (capital) 895.70 938.42 –4.6
Discount (2) per ordinary share (14.2)% (12.4)%
Average discount over the six months/year (1)(2) (10.8)% (11.6)%
Gearing (2):
– gross 1.3% 5.9%
– net 0.7% 5.3%
(1) Source: LSEG Data & Analytics.
(2) Alternative Performance Measures (APM), see pages 19 to 21 for the
explanation and reconciliations of APMs. Further details are provided in the
Glossary of Terms and Alternative Performance Measures in the Company’s 2023
Annual Financial Report.
(3) Index returns are shown on a total return basis, with dividends
reinvested net of withholding taxes.
Chairman’s Statement
Highlights:
• NAV total return of –5.9% and share price total return of –7.8% both
underperformed the benchmark index total return of –2.9%.
• Not only are the valuations of the underlying investments at unusually
attractive levels but you have the double discount of the share price relative
to the net asset value.
• On top of this comes a 5% annual dividend yield based on the share price
as at 31 October 2023, approximately half of which is effectively a return of
capital at net asset value.
After a strong run of outperformance the Company’s NAV total return over the
six months to 31 October 2023 of –5.9% was below our benchmark (MSCI AC Asia
ex Japan Index) total return of –2.9%. The share price total return was
–7.8% with the discount widening from 12.4% to 14.2% over the period.
Despite the short term underperformance, the NAV and share price performance
remains superior to that of the benchmark index over one year, three years,
five years and ten years as the table below demonstrates.
Cumulative Total Return (dividends reinvested) to 31 October 2023(1)
One Three Five Ten
Year Years Years Years
Net asset value (NAV) 9.7% 12.1% 40.5% 136.4%
Share price 10.4% 11.0% 42.4% 136.5%
Benchmark index (2) 7.7% –9.9% 16.8% 64.5%
(1) Source: LSEG Data & Analytics.
(2) The benchmark index of the Company was changed on 1 May 2015 to the MSCI
AC Asia ex Japan Index from the MSCI AC Asia Pacific ex Japan Index (both
indices total return, net of withholding tax, in sterling terms).
A half-yearly dividend of 7.20p was paid on 23 November 2023 in accordance
with our policy of paying two dividends over a year amounting to approximately
4.0% of NAV. This puts the annual dividend yield on the share price at 5.0%,
based on the share price of 296.00p at 31 October 2023.
In August 2020, the Board undertook to effect a tender offer for up to 25% of
the Company’s issued share capital at a discount of 2.0% to the prevailing
NAV per share (after deduction of tender costs) in the event that the
Company’s NAV cum-income total return performance over the five year period
to 30 April 2025 fails to exceed the Company’s comparator index, the MSCI AC
Asia ex Japan Index (net of withholding tax, total return in sterling terms)
by 0.5% per annum over the five years on a cumulative basis. Shareholders
already have the opportunity to vote on the continuation of the Company every
three years, but the Board believes that also providing shareholders with the
option to tender a proportion of their shares for a cash price close to NAV if
the Company underperforms, constitutes a pragmatic and attractive initiative,
particularly if the shares were to be trading at a material discount at the
time.
As at the date of this report, we now have 15 months to run of the five-year
period over which the performance of the Company will be assessed. As at 31
October 2023, the Company’s NAV was up by 39.0% over the 3.5 years while the
index was up by 7.1%. On an annualised basis, NAV was up by 9.9% p.a. while
the index was up by 2.0% p.a.
Shareholders will know that we believe that the discount is determined by a
combination of demand for Asian equity investment vehicles, the Investment
Case for Invesco Asia Trust and the Corporate Proposition that we offer. In
order to stimulate more demand for the Company’s shares, we aim to provide a
strong investment case and a strong corporate proposition at the same time.
The Investment Case rests on accessing the attractive opportunities of Asian
equity markets through the institutional expertise of Ian Hargreaves and Fiona
Yang’s team at Invesco. The Co-Portfolio Managers’ investment process can
be summarised as ‘valuation not value’ and has been very successful in
attracting institutional investors such as pension funds and sovereign wealth
investors. In times like these of great change, we would argue that this
forward-looking active approach (as opposed to a backward-looking index or
passive style) is exactly what is needed. Invesco Asia Trust is the only way
for individual investors to access Ian and Fiona’s expertise. We are
delighted to announce that from 1 May 2024, our two Co-Portfolio Managers will
swap roles with Fiona Yang taking the lead from Ian Hargreaves but will both
continue to work very closely together on the Company’s portfolio. The
Directors have been impressed by Fiona’s contribution over the past five
years and are pleased to support her promotion.
The Company’s Corporate Proposition was first introduced in 2018. Since
then, the Board has continued to review and adopt measures intended to create
additional demand for the Company’s shares, both from existing and new
shareholders, and to reduce the discount. We have been careful to ensure that
the measures chosen are in the best interests of all shareholders and combined
will make the Corporate Proposition as compelling as the investment case.
The multiple elements to our Corporate Proposition are detailed in the 2023
Annual Financial Report’s Chairman’s Statement and include: a three-yearly
continuation vote (the next one being due in September 2025); an enhanced
dividend policy; a performance conditional tender; a strong integrated
Environmental, Social and Governance (‘ESG’) approach; engaging more
individual shareholders; the ability for shareholders to meet both the
Co-Portfolio Managers and the Directors; close management of ongoing charges
and fees; the active use of gearing; the ‘skin in the game’ of
Directors’ and Managers’ shareholdings; and the authority to buy back
shares.
The average discount over the 6 months to 31 October 2023 has been 10.8%,
which is above our 10% tolerance. Discounts across the investment trust
industry have risen markedly in the last two years. Our relative discount has
improved over the period but the true test will be what happens to our
absolute discount when either the investment trust industry discount recovers
or Asian markets enter a bull phase. Our buyback policy will be fine-tuned
accordingly and, while we do not reveal details, we can say that it is more
likely to be active if performance disappoints.
Ratings
Your Company has recently been awarded several accolades including:
• The Citywire Winners award at the publication’s Investment Trust Awards
2023, for best risk-adjusted performance for the Asia Pacific Equities Sector.
• Awarded by Kepler Partners the “Kepler Income & Growth Rating 2024”.
• Square Mile Investment Consulting & Research have awarded your Company an
A-rating.
Please refer to the respective Company website for further information and
methodology.
Intention to Conduct Audit Tender
While the Company is required to carry out a tender at least every ten years
and no later than 30 April 2026, in view of increases in audit fees, the
Company is commencing a tender process for the role of external auditor for
the financial year ending 30 April 2025. The audit tender process will be
overseen by the Audit Committee and is expected to conclude in the coming
months.
This is no reflection on the quality of the existing auditor’s work or any
issue other than cost.
Update
From 31 October 2023 to 23 January 2024, the NAV total return has been -4.2%,
underperforming the index total return of -0.2%. The share price total return
has been 0.8%, with the discount narrowing to 10.0%.
Outlook
Headwinds remain: China’s recovery is being hampered most notably by
property oversupply and bad debts. Persistent inflation in the United States
has led to American interest rates being higher for longer, which puts
pressure on Asian currencies. Monetary tightening in the US and Europe will
depress economic activity at some point soon, even if recession is avoided.
This will further negatively reduce demand for Asian exports, which have
already been affected by the protectionist parts of President Biden’s
Inflation Reduction Act. The 2024 US Presidential election will provide lots
of noise and perhaps further reason to avoid risk assets. At best, you could
only argue that the headwinds are not becoming stronger.
The surprising thing is that favourable tailwinds have not yet appeared. There
is the possibility of a rapprochement between the US and China: China’s
economic needs plus the US stance against Russia would suggest a more
favourable relationship would help the US and China. Dollar interest rates and
US bond yields are close to peaking, even if they do not fall as much as some
are expecting. Asian corporate governance is much stronger these days, so many
companies can prosper even through harsh times. Asian economies are more
resilient than in previous cycles with larger domestic consumption meaning
they are less dependent on exports.
If we are becalmed for a time, the dilemma becomes should you invest now or
buy after things improve? If invested in Invesco Asia Trust, we would argue
that you are paid to wait. Not only are the valuations of the underlying
investments at unusually attractive levels but you have the double discount of
the share price relative to the net asset value. On top of this comes a 5%
annual dividend yield based on the share price as at 31 October 2023,
approximately half of which is effectively a return of capital at net asset
value.
Neil Rogan
Chairman
24 January 2024
Portfolio Managers’ Report
Q How has the Company performed in the period under review?
A The Company’s net asset value decreased by –5.9% (total return, in
sterling terms) over the six months to 31 October 2023, which compares to
the benchmark MSCI AC Asia ex Japan index total return of –2.9%.
The reporting period was a tough one for the portfolio in both absolute and
relative terms, as markets had to contend with pressure from rising US
interest rates and disappointment over the strength of China’s post-Covid
recovery. China’s economic woes, both cyclical and structural, have been
well publicised, but the macro situation is not as bad as presented by the
media in the UK. However, China has remained out of favour and any signs of
stabilisation in the economy have been overshadowed by general risk-aversion.
Over the period, the yield on US 10-year government bonds climbed by 150 basis
points to around 5.0%, with the dominant narrative being that rates would need
to stay “higher for longer”, although this is no longer the case.
Against this backdrop, the portfolio’s exposure to Hong Kong/China was a
drag on performance, with the biggest detractors coming from these markets.
The portfolio’s underweight position in India has also detracted, as this
was the region’s best performing market, although a positive impact from
stock selection partially offset this in terms of relative performance. Stock
selection elsewhere was generally positive, particularly in Korea and
Taiwanese tech names, with strong contributions from holdings in Thailand and
Singapore as well.
Q What have been the biggest detractors?
A Chinese consumer confidence has been very weak, so it is no surprise that
stocks with exposure to this area of the market underperformed, as reopening
recovery momentum faded. China MeiDong Auto was the biggest single detractor,
with weak demand and increased competition from the electric vehicle
(‘EV’) segment being headwinds for the luxury auto dealership, although
business operations appear to be faring better than feared. Beijing Capital
International Airport has struggled as international routes have been slow to
re-start, especially from the US, while restaurant operator Jiumaojiu has not
been immune from the slower-than-expected recovery. ENN Energy underperformed
after first half earnings showed a sharp decline in volume to gas-fired power
plants and weaker demand from real estate related sectors (building
materials), although the company’s growth drivers remain intact with
underappreciated recovery potential.
In Korea, LG Household & Health Care detracted as the cosmetics manufacturer
saw declining revenues from its beauty business given the delayed turnaround
in China. Meanwhile, LG Chemical was impacted by weaker EV sales in the EU
and weakening chemical spreads. We believe that structural growth from EVs
will outweigh the negative impact of lower raw material prices on earnings,
with the shares attractively valued.
Q And contributors?
A The two biggest contributors were both from India. Aurobindo Pharma
benefitted from a pickup in US sales while reports that Revlimid (cancer drug)
had received approval in India were also supportive for the generics
manufacturer. Meanwhile, Shriram Transport Finance made strong gains after the
expected sale of large blocks of stock removed a significant overhang for the
share price, with the company also reporting resilient margins, low credit
costs and strong growth in key cross-sell products, using its extensive branch
network to good effect.
Elsewhere, Samsung Fire & Marine continued to outperform thanks to a positive
earnings outlook driven by continued underwriting margin improvement. Tech
stocks with exposure to the AI server supply-chain rallied after Nvidia’s
raised guidance pointed to an acceleration in demand sooner and greater than
people had expected, with Chroma ATE in Taiwan and Korean memory chip stocks
adding significant value. Chinese chip designer Will Semiconductor
outperformed, thanks to strong momentum in sales of chips for smartphones and
autos. Finally, stock selection in the Association of Southeast Asian Nations
(‘ASEAN’) was a positive, with contributions from the recently introduced
Sea, Kasikornbank and Vietnamese steel manufacturer Hoa Phat.
Q Where have you been finding new opportunities?
A Over the last few years, we have benefitted from avoiding fallen angels and
interest rate sensitives. Rising interest rates and the reversal of Covid
tailwinds have seen the market’s focus shift from revenue growth to
profitability. Previously well-loved stocks have endured peak-to-trough share
price declines of 60-90%, which caught our attention as we seek out new
contrarian ideas.
Recent introductions included: Sea, the largest ASEAN ecommerce company that
also owns the gaming studio behind Free Fire (developer of one of the most
downloaded mobile games in the world); Grab, the largest ride hailing and food
delivery company in ASEAN; and Full Truck Alliance, one of the largest digital
freight platforms in China. These types of business are not normally
associated with investors that take a valuation-driven approach. However, in
these instances we have found evidence of bearish consensus narratives,
compelling long-term fundamentals, strong balance sheets and underappreciated
hidden value, all key attributes of our valuation-driven process.
We also introduced Link REIT, a Hong Kong real estate investment trust with
exposure to retail (focus on consumer staples) and offices. Link REIT is
another new idea that feels very contrarian in the current environment with
valuations at record low levels, but the balance sheet is in good shape and
the dividend yield is 6%, while a pick-up in the Hong Kong economy and falling
interest rates offer potential tailwinds to earnings.
Q How else has portfolio positioning changed, are you more underweight in
India?
A We have increased the portfolio’s underweight position in India by around
2 percentage points, and the portfolio now has around 7% less than the
benchmark MSCI Asia ex Japan index, although we retain around 11% in Indian
companies. Over the period, we have sold Mahindra & Mahindra and started to
take profits from outperformers Larsen & Toubro and Aurobindo Pharma. The
outlook for India remains positive from a top-down perspective, but that is
reflected in the market’s valuation which remains elevated relative to its
history. More than one third of the companies in the MSCI India index
currently trade on a valuation multiple higher than 40 times expected
earnings for the fiscal year ending March 2025.
One attractively valued opportunity that we have identified is Power Grid, the
central transmission utility of India. The company has a solid track record,
enjoying a positive earnings trend over the last few years, with a robust
balance sheet, long-term growth potential and an attractive dividend yield.
Meanwhile, we have continued to take profits from outperformers, where share
prices are closer to our estimate of fair value. For example, we sold Newcrest
Mining, after US gold giant Newmont’s takeover appeared set for completion;
and POSCO, as the market’s valuation of the Korean steel manufacturer’s
lithium operations appeared increasingly stretched relative to peers.
Q What is your outlook for China?
A China’s reopening has disappointed, with the strength of the recovery
being overestimated by the market as well as by ourselves. After a
short-lived, organic recovery, consumer caution quickly returned, likely
linked to property market concerns. However, a crescendo of negativity has
built-up around China’s longer-term structural challenges and near-term
cyclical issues that now appear to be fully priced in.
The property market poses important structural concerns, but a positive
outlook is not required for investors to make money. Macroeconomic data in
China is starting to improve, suggesting we may have reached the bottom of the
cycle. The direction of policy is also clear, with greater urgency in
coordinated monetary and fiscal measures, the authorities’ priorities being
to stabilise the property market, reduce financial risk particularly at local
government financing vehicles (‘LGFV’) and reinvigorate capital markets.
If the property market does not deteriorate further it is reasonable to
anticipate a rebound in consumer confidence.
The strength of any market rebound is likely to be contingent on further signs
of improvement in the macro data, reflecting a degree of capitulation by weary
global investors. Herd mentality has shifted market sentiment out to extreme
levels. Our experience of investing in China suggests that these periods often
present the greatest opportunity. In recent quarters, we have seen decent
earnings growth among certain consumer-facing and internet companies.
Valuations are deeply discounted, and Chinese equities could prove to be quite
sensitive to signs that corporate fundamentals are improving in a steady,
sustainable fashion. We do not look for catalysts, preferring to focus on the
fundamentals of the companies we are invested in, trying to establish what is
a reasonable price to pay for the growth that we expect. We believe that the
upside risk is now greater than the downside risk.
Q Final thoughts?
A Since peaking in early 2021, Asian equity markets have struggled amidst a
liquidity tightening cycle and a crescendo of negativity surrounding China.
Valuations for regional indices trade below long-term historic averages, at
around 1.6x price/book, in terms of price/book, and at a significant discount
to developed markets (as can be seen in table below), particularly the US. We
believe there is scope for this to narrow.
Forward P/E, x Forward Dividend Yield, % Free Cash Flow Yield, % 3yr EPS Growth, % Net Debt to Equity, %
Current P/B, x
Invesco Asia Trust plc 1.4 10.5 2.8 4.7 17.3 –8%
MSCI Asia ex Japan 1.6 11.5 2.6 5.2 10.4 2%
MSCI World 3.0 15.4 2.1 4.8 17.9 44%
S&P 500 4.1 17.2 1.6 4.0 18.9 47%
Asian equities are well placed to benefit from an improvement in liquidity
conditions, as we approach the peak in rate expectations, with US dollar
strength likely to cease being a headwind. Furthermore, compared to previous
tightening cycles, Asian economies enjoy relatively solid fundamentals,
suggesting greater monetary policy flexibility should growth headwinds start
to build.
Finally, consensus earnings growth expectations for 2024 are around 20% and we
believe that Asian companies may see less earnings vulnerability from a global
slowdown relative to expectations and to what is being implied in valuations.
In our view, the continued divergence in performance and valuations between
different countries and sectors within the emerging world is providing
interesting investment opportunities.
Ian Hargreaves & Fiona Yang
Portfolio Managers
24 January 2024
Principal Risks and Uncertainties
The Board has carried out a robust assessment of the principal and emerging
risks facing the Company. These include those that would threaten its business
model, future performance, solvency and liquidity. In carrying out this
assessment the Board together with the Manager have considered emerging risks
such as geopolitical risks, evolving cyber threats and climate related risks.
These risks also form part of the principal risks identified and the
mitigating actions are detailed below. In the view of the Board, these
principal risks and uncertainties are as much applicable to the remaining six
months of the financial year as they were to the six months under review.
Category and Principal Risk Description Mitigating Procedures and Controls Risk trend during the period
Strategic Risk
Market Risk The Company’s investments are mainly traded on Asian and Australasian stock markets as well as the UK. The principal risk for investors in the Company is a significant fall and/or a prolonged period of decline in these markets. This could be triggered by unfavourable developments within the region or events outside it. The Company has a diversified investment portfolio by country, sector and stock. Due to its investment trust structure, no forced sales need to take place and investments Increased
can be held over a longer term horizon. However, there are few ways to mitigate absolute market risk because it is engendered by factors which are outside the control of
the Board and the Manager. These factors include the general health of the world economy, interest rates, inflation, government policies, industry conditions, and
changing investor demand and sentiment. Such factors may give rise to high levels of volatility in the prices of investments held by the Company.
Geopolitical Risk Political risk has always been a feature of investing in stock markets and it is particularly so in Asia. Wider political developments in geographies beyond Asia, such as the US, Ukraine, Israel and Palestine can create risks to the value of the Company’s assets. Asia encompasses a variety of political systems. There are many examples of diplomatic skirmishes and military tensions and sometimes these resort to military engagement. Moreover, the involvement in Asian politics of the US and European countries can reduce or raise tensions. The Manager evaluates and assesses political risk as part of the stock selection and asset allocation policy which is monitored at every Board meeting. This includes Increased
political, military and diplomatic events and changes to legislation. Balancing political risk and reward is an essential part of the active management process.
Investment Objectives and Strategy The Company’s investment objectives and strategy are no longer meeting investors’ demands. The Board receives regular reports reviewing the Company’s investment performance against its stated objectives and peer group, and reports from discussions with its Unchanged
brokers and major shareholders. The Board also has a separate annual strategy meeting.
Widening Discount A lack of liquidity and/or lack of investor interest in the Company’s shares leads to a depressed share price and a widening discount to its NAV. A persistently high discount may lead to buybacks of the Company’s shares and result in the shrinkage of the Company. The Board receives regular reports from both the Manager and the Company’s broker on the Company’s share price performance, level of share price discount to NAV and Increased
recent trading activity in the Company’s shares. The Board has introduced initiatives to help address the Company’s share rating including a performance conditional
tender in 2025 and the enhanced dividend policy. It may seek to reduce the volatility and absolute level of the share price discount to NAV for shareholders through
buying back shares within the stated limit. The Board also receives regular reports on investor relation meetings with shareholders and prospective investors and works to
ensure that the Company’s investment proposition is actively marketed through relevant messaging across many distribution channels.
Investment Management Risk
Performance That the Portfolio Managers consistently underperform the benchmark and/or peer group over 3-5 years. The Board regularly compares the Company’s NAV performance over both the short and long term to that of the benchmark and peer group as well as reviewing the portfolio’s Unchanged
performance against benchmark (attribution) and risk adjusted performance (volatility, beta, tracking error, Sharpe ratio) of the Company and its peers.
ESG including climate risk Risks associated with climate change and ESG considerations could affect the valuation of the Company’s holdings. ESG considerations are integrated as part of the investment decision-making in constructing the portfolio. Such investment decisions include the transactions undertaken Unchanged
in the period, the review of active portfolio positions and consideration of the gearing position and, if applicable, hedging. The process around ESG is described in the
ESG Monitoring and Engagement section on pages 6 and 7.
Key Person Dependency Either or both of the Portfolio Managers (Ian Hargreaves and Fiona Yang) ceases to be Portfolio Manager or are incapacitated or otherwise unavailable. The adoption of a Co-Portfolio Manager model has mitigated the risk of key person dependency. The Co-Portfolio Managers work within and are supported by the wider Invesco Unchanged
Asian and Emerging Markets Equities team, with Ian Hargreaves and William Lam as Co-Heads of this team.
Currency Fluctuation Risk Exposure to currency fluctuation risk negatively impacts the Company’s NAV. The movement of exchange rates may have an unfavourable or favourable impact on returns as nearly all of the Company’s assets are non-sterling denominated. With the exception of borrowings in foreign currency, the Company does not normally hedge its currency positions but may do so should the Portfolio Managers or the Board Unchanged
feel this to be appropriate. Contracts are limited to currencies and amounts commensurate with the asset exposure. The foreign currency exposure of the Company is
reviewed at Board meetings.
Third-Party Service Providers Risk
Unsatisfactory Performance of Third-Party Service Providers Failure by any Third Party Service Providers (‘TPP’) to carry out its obligations to the Company in accordance with the terms of its appointment could have a materially detrimental impact on the operations of the Company and could affect the ability of the Company to successfully pursue its investment policy and expose the Company to reputational risk. Disruption to the accounting, payment systems or custody records could prevent the accurate reporting and monitoring of the Company’s financial position. The Audit Committee closely monitors the services provided by the Manager and other TPPs. The details of how effective internal control is assured are set out in the Unchanged
internal control and risk management section on page 41 of the 2023 Annual Financial Report.
Information Technology Resilience and Security The Company’s operational structure means that all cyber risk (information and physical security) arises at its TPP. This cyber risk includes fraud, sabotage or crime perpetrated against the Company or any of its TPPs. The Audit Committee receives regular updates on the Manager’s information and cyber security. This includes updates on the cyber security framework, staff resource and Unchanged
training, and the testing of its security systems designed to protect against a cyber security attack. As well as conducting a regular review of TPPs audited service
organisation control reports, the Audit Committee monitors TPPs’ business continuity plans and testing including the TPPs’ and Manager’s regular ‘live’ testing of
workplace recovery arrangements should a cyber event occur.
Operational Resilience The Company’s operational capability relies upon the ability of its TPPs to continue working throughout the disruption caused by a major event such as the Covid-19 pandemic. The Manager’s business continuity plans are reviewed on an ongoing basis and the Directors are satisfied that the Manager has in place robust plans and infrastructure to Unchanged
minimise the impact on its operations so that the Company can continue to trade, meet regulatory obligations, report and meet shareholder requirements. The Manager has
arrangements and prioritises between work deemed necessary to be carried out on business premises and work from home arrangements should it be necessary, for instance due
to government restrictions. Any meetings are held in person, virtually or via conference calls. Similar working arrangements are in place for the Company’s TPPs. The
Audit Committee receives regular update reports from the Manager and TPPs on business continuity processes.
Twenty-five Largest Holdings
AT 31 OCTOBER 2023
Ordinary shares unless stated otherwise
† The sector group is based on MSCI and Standard & Poor’s Global Industry
Classification Standard.
At Market
Value % of
Company Sector † Country £’000 Portfolio
Taiwan Semiconductor Manufacturing Semiconductors and Semiconductor Equipment Taiwan 22,861 9.8
Samsung Electronics – ordinary share Technology Hardware and Equipment South Korea 12,238} 5,252} 7.5
– preference shares
Tencent R Media and Entertainment China 13,591 5.8
Alibaba R Consumer Discretionary Distribution and Retail China 11,738 5.0
HDFC Bank Banks India 10,463 4.5
AIA Insurance Hong Kong 7,786 3.3
Kasikornbank F Banks Thailand 7,494 3.2
Shriram Transport Finance Financial Services India 6,138 2.6
Samsung Fire & Marine Insurance South Korea 5,472 2.3
SK Hynix Semiconductors and Semiconductor Equipment South Korea 4,872 2.1
Yili A Food, Beverage and Tobacco China 4,638 2.0
Gree Electrical Appliances A Consumer Durables and Apparel China 4,584 2.0
Will Semiconductor A Semiconductors and Semiconductor Equipment China 4,460 1.9
LG Chemical Materials South Korea 4,351 1.9
Ping An Insurance H Insurance China 4,290 1.8
Largan Precision Technology Hardware and Equipment Taiwan 4,155 1.8
JD.com R Consumer Discretionary Distribution and Retail China 3,970 1.7
Link REIT Equity Real Estate Investment Trusts (REITs) Hong Kong 3,793 1.6
Yageo Technology Hardware and Equipment Taiwan 3,762 1.6
CK Asset Real Estate Management and Development Hong Kong 3,757 1.6
Astra International Capital Goods Indonesia 3,738 1.6
Hansoh Pharmaceutical R Pharmaceuticals, Biotechnology and Life Sciences China 3,460 1.5
Anglo American Materials United Kingdom 3,318 1.4
MINTH Automobiles and Components Hong Kong 3,292 1.4
Vinamilk Food, Beverage and Tobacco Vietnam 3,237 1.4
166,710 71.3
Other Investments (34) 67,032 28.7
Total Holdings (59) 233,742 100.0
H: H-Shares – shares issued by companies incorporated in the People’s
Republic of China (‘PRC’) and listed on the Hong Kong Stock Exchange.
R: Red Chip Holdings – holdings in companies incorporated outside the PRC,
listed on the Hong Kong Stock Exchange, and controlled by PRC entities by way
of direct or indirect shareholding and/or representation on the board.
A: A-shares – shares that denominated in Renminbi and traded on the
Shanghai and Shenzhen stock exchanges.
F: F-Shares – shares issued by companies incorporated in Thailand that are
available to foreign investors only. Thai laws have imposed restrictions on
foreign ownership of Thai companies so there is a pre-determined limit of
these shares. Voting rights are retained with these shares.
Governance
Going Concern
The financial statements have been prepared on a going concern basis.
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future,
being taken as at least 12 months after signing the financial statements for
the same reasons as set out in the Viability Statement in the Company’s 2023
Annual Financial Report. The Directors took into account the diversified
portfolio of readily realisable securities which can be used to meet the net
current liability position of the Company as at the balance sheet date; and
revenue forecasts for the forthcoming year.
Related Party Transactions
Under United Kingdom Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law), the Company has identified the Directors and
their dependents as related parties. No other related parties have been
identified. No transactions with related parties have taken place which have
materially affected the financial position or the performance of the Company.
Directors’ Responsibility Statement
In respect of the preparation of the half-yearly financial report
The Directors are responsible for preparing the half-yearly financial report
using accounting policies consistent with applicable law and UK Accounting
Standards.
The Directors confirm that to the best of their knowledge:
— the condensed set of financial statements contained within the
half-yearly financial report have been prepared in accordance with the FRC’s
FRS 104 Interim Financial Reporting;
— the interim management report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the FCA’s Disclosure Guidance and
Transparency Rules; and
— the interim management report includes a fair review of the information
required on related party transactions.
The half-yearly financial report has not been audited nor reviewed by the
Company’s auditor.
Signed on behalf of the Board of Directors.
Neil Rogan
Chairman
24 January 2024
Condensed Income Statement
For the six months ended For the six months ended
31 October 2023 31 October 2022
Revenue Capital Total Revenue Capital Total
return return return return return return
£’000 £’000 £’000 £’000 £’000 £’000
Losses on investments held at fair value – (16,696) (16,696) — (36,228) (36,228)
Losses on foreign exchange – (141) (141) — (316) (316)
Income – note 2 4,617 42 4,659 5,285 51 5,336
Investment management fee – note 3 (228) (685) (913) (222) (666) (888)
Other expenses (346) (3) (349) (332) (2) (334)
Net return before finance costs and
taxation 4,043 (17,483) (13,440) 4,731 (37,161) (32,430)
Finance costs – note 3 (66) (198) (264) (24) (72) (96)
Return on ordinary activities
before taxation 3,977 (17,681) (13,704) 4,707 (37,233) (32,526)
Tax on ordinary activities – note 4 (420) (308) (728) (450) (179) (629)
Return on ordinary activities after
taxation for the financial period 3,557 (17,989) (14,432) 4,257 (37,412) (33,155)
Return per ordinary share
Basic 5.32p (26.91)p (21.59)p 6.37p (55.96)p (49.59)p
Weighted average number of ordinary shares
in issue during the period 66,853,287 66,853,287
The total columns of this statement represent the Company’s profit and loss
account, prepared in accordance with UK Accounting Standards. The return on
ordinary activities after taxation is the total comprehensive income and
therefore no additional statement of other comprehensive income is presented.
The supplementary revenue and capital columns are presented for information
purposes in accordance with the Statement of Recommended Practice issued by
the Association of Investment Companies. All items in the above statement
derive from continuing operations of the Company. No operations were acquired
or discontinued in the period.
Condensed Statement of Changes in Equity
Capital
Share Redemption Special Capital Revenue
Capital Reserve Reserve Reserve Reserve Total
£’000 £’000 £’000 £’000 £’000 £’000
For the six months ended 31 October 2023
At 30 April 2023 7,500 5,624 34,827 195,713 1,340 245,004
Return on ordinary activities – – – (17,989) 3,557 (14,432)
At 31 October 2023 7,500 5,624 34,827 177,724 4,897 230,572
For the six months ended 31 October 2022
At 30 April 2022 7,500 5,624 34,827 202,814 1,411 252,176
Return on ordinary activities – – – (37,412) 4,257 (33,155)
At 31 October 2022 7,500 5,624 34,827 165,402 5,668 219,021
Condensed Balance Sheet
Registered Number 3011768
At 31 October 2023 £’000 At 30 April 2023 £’000
Fixed assets
Investments held at fair value through profit or loss – note 7 233,742 258,962
Current assets
Overseas withholding tax recoverable 213 145
VAT recoverable 19 19
Prepayments and accrued income 140 358
Cash and cash equivalents 863 1,337
1,235 1,859
Creditors: amounts falling due within one year
Bank facility (3,091) (13,593)
Bank overdraft – (740)
Accruals (592) (668)
(3,683) (15,001)
Net current liabilities (2,448) (13,142)
Total assets less current liabilities 231,294 245,820
Creditors: amounts falling due after more than one year
Provision for deferred Indian capital gains tax (722) (816)
Net assets 230,572 245,004
Capital and reserves
Share capital 7,500 7,500
Other reserves:
Capital redemption reserve 5,624 5,624
Special reserve 34,827 34,827
Capital reserve 177,724 195,713
Revenue reserve 4,897 1,340
Total shareholders’ funds 230,572 245,004
Net asset value per ordinary share
Basic 344.89p 366.48p
Number of 10p ordinary shares in issue at the period end – note 6 66,853,287 66,853,287
Signed on behalf of the Board of Directors.
Neil Rogan
Chairman
24 January 2024
Notes to the Condensed Financial Statements
1. Accounting Policies
The condensed financial statements have been prepared in accordance with
applicable United Kingdom Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice), including FRS 102 The Financial
Reporting Standard applicable in the UK and Republic of Ireland, FRS 104
Interim Financial Reporting and the Statement of Recommended Practice
Financial Statements of Investment Trust Companies and Venture Capital Trusts,
updated by the Association of Investment Companies in July 2022. The financial
statements are issued on a going concern basis.
The accounting policies applied to these condensed financial statements are
consistent with those applied in the Company’s 2023 Annual Financial Report.
2. Income
Six months to Six months to
31 October 31 October
2023 2022
£’000 £’000
Income from investments:
Overseas dividends – ordinary 4,547 4,956
– special 51 327
Deposit interest 19 2
Total income 4,617 5,285
Special dividends of £42,000 were recognised in capital during the period (31
October 2022: £51,000).
3. Management Fee and Finance Costs
Investment management fee and finance costs on any borrowings are charged 75%
to capital and 25% to revenue. A management fee is payable quarterly in
arrears and is equal to 0.75% per annum of the value of the Company’s total
assets less current liabilities (including any short term borrowings) under
management at the end of the relevant quarter and 0.65% per annum for any net
assets over £250 million.
4. Taxation and Investment Trust Status
It is the intention of the Directors to conduct the affairs of the Company
such that the conditions for approval as an investment trust company are
satisfied. As such, the Company has not provided any UK corporation tax on any
realised or unrealised capital gains or losses arising on investments. The
Company’s tax charge represents withholding tax suffered on overseas income
and Indian capital gains tax paid and provided for due to the holding of
Indian equity investments which are subject to Indian Capital Gains Tax
Regulations. Further details can be found in Note 6(d) of the Company’s 2023
Annual Financial Report on page 62.
5. Dividends paid on Ordinary Shares
As noted in the Chairman’s Statement, a first interim dividend of 7.20p per
share was paid on 23 November 2023 to shareholders on the register on 3
November 2023. Shares were marked ex-dividend on 2 November 2023.
In accordance with accounting standards, dividends payable after the period
end have not been recognised as a liability.
6. Share Capital, including Movements
Share capital represents the total number of shares in issue, including
treasury shares.
(a) Ordinary Shares of 10p each
Six months to Year to
31 October 30 April
2023 2023
Number of ordinary shares in issue:
Brought forward 66,853,287 66,853,287
Shares bought back into treasury – –
Carried forward 66,853,287 66,853,287
(b) Treasury Shares
Six months to Year to
31 October 30 April
2023 2023
Number of treasury shares held:
Brought forward 8,146,594 8,146,594
Shares bought back into treasury – –
Carried forward 8,146,594 8,146,594
Total ordinary shares 74,999,881 74,999,881
During the period the Company has not bought back nor re-issued any shares
into or from treasury (30 April 2023: nil).
Subsequent to the period end 31 October 2023 no ordinary shares were issued,
bought back into treasury nor cancelled.
7. Classification Under Fair Value Hierarchy
FRS 102 sets out three fair value levels. These are:
Level 1 – The unadjusted quoted price in an active market for identical
assets that the entity can access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data) for the asset or liability,
either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
The fair value hierarchy analysis for investments and related forward currency
contracts held at fair value at the period end is as follows:
31 October 30 April
2023 2023
£’000 £’000
Financial assets designated at fair value through profit or loss:
Level 1 225,614 252,244
Level 2 8,089 6,680
Level 3 39 38
Total for financial assets 233,742 258,962
The Level 2 investment consists of two holdings: (i) Invesco Liquidity Funds
– US Dollar money market fund valued at £595,000 and (ii) Kasikornbank
valued at £7,494,000 (30 April 2023: one holding in Kasikornbank valued at
£6,680,000).
The Level 3 investment consists of one holding in Lime Co. (30 April 2023:
Lime Co.).
8. Status of Half-Yearly Financial Report
The financial information contained in this half-yearly report does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. The financial information for the half years ended 31 October 2023 and
31 October 2022 have not been audited. The figures and financial information
for the year ended 30 April 2023 are extracted and abridged from the latest
audited accounts and do not constitute the statutory accounts for that year.
Those accounts have been delivered to the Registrar of Companies and included
the Report of the Independent Auditor, which was unqualified and did not
include a statement under section 498 of the Companies Act 2006.
The Half-Yearly Financial Report for the Six Months to 31 October 2023 will be
available to shareholders, and copies may be obtained during normal business
hours from the Company’s Registered Office, from its correspondence address,
43-45 Portman Square, London W1H 6LY, and via www.invesco.co.uk/invescoasia.
A copy of the Half-Yearly Financial Report will be submitted shortly to the
National Storage Mechanism ("NSM") and will be available for inspection at the
NSM, which is situated at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
By order of the Board
Invesco Asset Management Limited
Corporate Company Secretary
24 January 2024
Glossary of Terms and Alternative Performance Measures
Glossary of Terms
(Discount)/Premium
Discount is a measure of the amount by which the mid-market price of an
investment company share is lower than the underlying net asset value (NAV) of
that share. Conversely, Premium is a measure of the amount by which the
mid-market price of an investment company share is higher than the underlying
net asset value of that share. In this interim financial report the discount
is expressed as a percentage of the net asset value per share and is
calculated according to the formula set out below. If the shares are trading
at a premium the result of the below calculation will be positive and if they
are trading at a discount it will be negative.
Gearing
The gearing percentage reflects the amount of borrowings that a company has
invested. This figure indicates the extra amount by which net assets, or
shareholders’ funds, would be expected to move if the value of a company’s
investments were to rise or fall. A positive percentage indicates the extent
to which net assets are geared; a nil gearing percentage, or ‘nil’, shows
a company is ungeared. A negative percentage indicates that a company is not
fully invested and is holding net cash as described in the Alternative
Performance Measures section below.
Leverage
Leverage, for the purposes of the Alternative Investment Fund Managers
Directive (AIFMD), is not synonymous with gearing as defined above. In
addition to borrowings, it encompasses anything that increases the Company’s
exposure, including foreign currency and exposure gained through derivatives.
Leverage expresses the Company’s exposure as a ratio of the Company’s net
asset value. Accordingly, if a Company’s exposure was equal to its net
assets it would have leverage of 100%. Two methods of calculating such
exposure are set out in the AIFMD, gross and commitment. Under the gross
method, exposure represents the aggregate of all the Company’s exposures
other than cash balances held in base currency and without any offsetting. The
commitment method takes into account hedging and other netting arrangements
designed to limit risk, offsetting them against the underlying exposure.
Net Asset Value (‘NAV’)
Also described as shareholders’ funds, the NAV is the value of total assets
less liabilities. The NAV per share is calculated by dividing the net asset
value by the number of ordinary shares in issue. The number of ordinary shares
for this purpose excludes those ordinary shares held in treasury.
Portfolio Beta
The portfolio beta is a measure of the portfolio’s sensitivity to market
movements. The beta of the market is 1.00 by definition. A beta of 1.10 shows
that the portfolio would be expected to perform 10% better than its benchmark
index in rising markets and 10% worse in falling markets, assuming all other
factors remain constant. Conversely, a beta of 0.90 indicates that the
portfolio would be expected to perform to perform 10% worse than the benchmark
index during rising markets and 10% better during falling markets. The beta of
the Company’s portfolio was 1.09 as at 31 October 2023.
Return
The return generated in a period from the investments including the increase
and decrease in the value of investments over time and the income received.
Capital Return
Reflects the return on NAV, from the increase and decrease in the value of
investments, but excluding any dividends reinvested.
Total Return
Total return is the theoretical return to shareholders that measures the
combined effect of any dividends paid, together with the rise or fall in the
share price or NAV. In this half-yearly financial report these return figures
have been sourced from LSEG Data & Analytics who calculate returns on an
industry comparative basis. The figures calculated below are six month and one
year total returns, however the same calculation would be used for three, five
and ten year total returns where quoted in this report, taking the respective
Net Asset Values and Share Prices period for the opening and closing periods
and adding the impact of dividend reinvestments for the relevant periods.
NAV Total Return
Total return on net asset value per share, assuming dividends paid by the
Company were reinvested into the shares of the Company at the NAV per share at
the time the shares were quoted ex-dividend.
Share Price Total Return
Total return to shareholders, on a mid-market price basis, assuming all
dividends received were reinvested, without transaction costs, into the shares
of the Company at the time the shares were quoted ex-dividend.
Benchmark Total Return
The benchmark of the Company is the MSCI AC Asia ex Japan Index (total return,
net of withholding tax, in sterling terms). Total return on the benchmark is
on a mid-market value basis, assuming all dividends received were reinvested,
without transaction costs, into the shares of the underlying companies at the
time the shares were quoted ex-dividend.
Alternative Performance Measures
An APM is a measure of performance or financial position that is not defined
in applicable accounting standards and cannot be directly derived from the
financial statements. The calculations shown in the corresponding tables are
for the six months ended 31 October 2023 and the year ended 30 April 2023. The
APMs listed here are widely used in reporting within the investment company
sector and consequently aid comparability.
(Discount)/Premium (APM)
At 31 October 2023 At 30 April 2023
Page
Share price 1 a 296.00p 321.00p
Net asset value per share 15 b 344.89p 366.48p
Discount c = (a-b)/b (14.2)% (12.4)%
The average discount for the period/year is the arithmetic average, over a
period/year, of the daily discount calculated on the same basis as shown
above.
Gross Gearing (APM)
This reflects the amount of gross borrowings in use by a company and takes no
account of any cash balances. It is based on gross borrowings as a percentage
of net assets. As at 31 October 2023 the Company had £3,091,000 gross
borrowings (30 April 2023: £14,333,000).
At 31 October 2023 At 30 April 2023
Page £’000 £’000
Bank facility 15 3,091 13,593
Overdraft 15 – 740
Gross borrowings a 3,091 14,333
Net assets 15 b 230,572 245,004
Gross gearing c = a/b 1.3% 5.9%
Net Gearing or Net Cash (APM)
Net gearing reflects the amount of net borrowings invested, i.e. borrowings
less cash and cash equivalents (incl. investments in money market funds). It
is based on net borrowings as a percentage of net assets. Net cash reflects
the net exposure to cash and cash equivalents, as a percentage of net assets,
after any offset against total borrowings.
At 31 October 2023 At 30 April 2023
Page £’000 £’000
Bank facility 15 3,091 13,593
Overdraft 15 – 740
Less: cash and cash equivalents including margin 15 (863) (1,337)
Less: Invesco Liquidity Fund – US Dollar (money market fund) (595) —
Net borrowings a 1,633 12,996
Net assets 15 b 230,572 245,004
Net gearing c = a/b 0.7% 5.3%
Total Return (APM)
Net Asset Share
Six Months Ended 31 October 2023 Page Value Price
As at 31 October 2023 1 344.89p 296.00p
As at 30 April 2023 1 366.48p 321.00p
Change in period a –5.9% –7.8%
Impact of dividend reinvestments(1) b 0.0% 0.0%
Total return for the period c = a+b –5.9% –7.8%
Net Asset Share
Year Ended at 30 April 2023 Page Value Price
As at 30 April 2023 1 366.48p 321.00p
As at 30 April 2022 377.21p 332.50p
Change in year a –2.8% –3.5%
Impact of dividend reinvestments(1) b 4.1% 4.7%
Total return for the year c = a+b 1.3% 1.2%
(1) No dividends have been paid during six months to 31 October 2023 (year
to 30 April 2023: 14.80p). NAV or share price movements subsequent to the
reinvestment date further impact the returns, rising if the NAV or share price
rises and falling if the NAV or share price falls.
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