Half-year Report
22/01/2025 07:00
LEGAL ENTITY IDENTIFIER: 549300YM9USHRKIET173
INVESCO ASIA TRUST PLC
Half-Yearly Financial Report for the Six Months to 31 October 2024
The following text is extracted from the Half-Yearly Financial Report for the
Six Months to 31 October 2024. 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 31 October 2024 Year ended 30 April 2024
Total Return Statistics (1) (dividends reinvested)
Net asset value (`NAV') total return (2) 6.3% 2.7%
Share price total return (2) 9.6% 2.2%
Benchmark index total return (3) 8.6% 7.9%
Capital Statistics
At 31 October 2024 At 30 April 2024 change %
Net assets (£'000) 249,277 238,266 4.6
NAV per share 384.15p 361.51p 6.3
Share price (1) 343.00p 313.00p 9.6
Benchmark index (capital) 1,059.47 989.35 7.1
Discount (2) per ordinary share (10.7)% (13.4)%
Average discount over the six months/year (1)(2) (12.4)% (11.3)%
Gearing (2) :
- gross 2.3% 5.3%
- net 2.1% 4.5%
(1) Source: LSEG Data & Analytics.
(2) Alternative Performance Measures (`APM'), see pages 18 to 20 for the
explanation and reconciliations of APMs. Further details are provided in the
Glossary of Terms and Alternative Performance Measures in the Company's 2024
Annual Financial Report.
(3) Index returns are shown on a total return basis, with dividends
reinvested net of withholding taxes.
Chairman's Statement
Highlights:
· Performance is behind the index benchmark over six months but well ahead
over three and five years.
· The announced combination of the Company with Asia Dragon Trust plc (`Asia
Dragon') is progressing smoothly and expected to complete on 14 February 2025.
· It is going to be an exciting period for Asian markets and especially for
us as we look forward to welcoming Asia Dragon shareholders.
Update on Combination with Asia Dragon Trust
The announced combination of the Company with Asia Dragon Trust plc (`Asia
Dragon') is progressing smoothly. The Company published a prospectus on 18
December 2024 for the issue of new shares to Asia Dragon shareholders. The
Company held its General Meeting to approve the combination on 16 January
2025. Asia Dragon has two General Meetings scheduled for 4 and 13 February
2025, following which the combination should complete on 14 February 2025. Our
Prospectus carries full details of the proposals, which include new measures
to enhance our Corporate Proposition: replacing the 25% performance
conditional tender and three-yearly continuation vote with a three-yearly 100%
unconditional tender; enhancing the dividend policy to pay out 1% of NAV
quarterly and, a generational reduction in the management fee and ongoing
charges ratio to a blended rate of 0.57% and a forecast of approximately 0.70%
respectively, these calculations exclude the benefit of Invesco's contribution
to the costs of the combination (see page 37 of the prospectus for full
details). The merged Company will be called Invesco Asia Dragon Trust plc and
will continue to be managed by Fiona Yang and Ian Hargreaves at Invesco in the
same way as this Company has been.
This combination is transformational for the Company and both sets of
shareholders. For our shareholders, apart from the lower fees and charges and
greater liquidity, it brings the scale to add to our existing buy ratings that
will spur future growth in demand for the Company's shares. For Asia Dragon's
shareholders, it gives continuity of mandate with a strong investment house,
proven and experienced managers, a repeatable investment process and a
successful long-term performance record. Our proposed discount management
policy is bold and provides the opportunity for us to break free from the
persistent double-digit discounts and locked registers from which so many
Asian and Emerging Markets trusts have suffered. Our aim is to make this the
go-to Asian trust, trading on a premium rating, growing organically and also
through further combinations.
Review of the six months to 31 October 2024
Over the six months to 31 October 2024 NAV total return of +6.3% was behind
our benchmark (MSCI AC Asia ex Japan Index) total return of +8.6%. The share
price total return was +9.6% with the discount narrowing from 13.4% to 10.7%
over the period. Attribution analysis shows that the underweight position in
Chinese financials, which performed strongly towards the end of the period,
was the main contributor to underperformance.
A half-yearly dividend of 7.80p was paid on 29 November 2024 representing 2%
of NAV. This was in accordance with our previous policy of paying two
dividends per year amounting to 4% of NAV. A further dividend of 3.90p will be
paid on 31 January 2025 as we move to paying out 1% of NAV as a dividend every
quarter. A final dividend, also 1%, will be paid to all shareholders in April
2025, after the combination completion date.
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% 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.
We have now completed four and a half years of the five-year assessment
period: As at 31 October 2024, the Company's NAV was up by 61.2% over the
four and a half years while the index was up by 29.3%. On an annualised
basis, NAV was up by 11.2% p.a. while the index was up by 5.9% p.a.
Cumulative Total Return (dividends reinvested) to 31 October 2024(1)
One Three Five Ten
Year Years Years Years
Net asset value (`NAV') 16.0% 9.1% 50.2% 139.0%
Share price 21.4% 7.2% 55.9% 147.7%
Benchmark index (2) 20.8% 2.2% 26.1% 90.2%
(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).
The Investment Case and the Corporate Proposition
Shareholders will be aware that we believe that the discount is determined by
a combination of demand for Asian equity investment vehicles, the Investment
Case for the Company and the Corporate Proposition that we offer. In order to
stimulate more demand for the Company's shares, we aim to simultaneously
provide a strong investment case and a strong corporate proposition.
The Investment Case rests on accessing the attractions of Asian equity markets
through the institutional expertise of Fiona Yang and Ian Hargreaves' 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. The Company is the only way for individual investors to access
Fiona and Ian's expertise.
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. The
intention is that these gains will combine to make the corporate proposition
as compelling as the investment case.
The multiple elements to our Corporate Proposition are detailed in the 2024
Annual Financial Report's Chairman's Statement and include, as well as the
measures outlined above, an enhanced dividend policy, a strong integrated 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 six months to 31 October 2024 has been 12.4%,
which is above our 10% tolerance. Discounts across the investment trust
industry have widened over the last two years and remain elevated. Our
buybacks have accelerated, and for the six months to 31 October 2024, a total
of 1,017,000 shares were bought back into Treasury at a total cost of
£3,304,000, representing 1.5% of the starting number of shares in issue
(excluding treasury shares), which has been accretive to NAV by 0.15%.
Update
From 31 October 2024 to 20 January 2025, the NAV total return has been 1.9%,
outperforming the index return of 1.2%. The share price total return has been
3.4%, with the discount narrowing to 9.7%. The discount has narrowed since the
announcement of the combination with Asia Dragon. The last buyback was on 21
January 2025.
Outlook
In previous Chairman's Statements I lamented that not much had changed. Now
everything seems to be changing. The new Trump administration seems intent on
pursuing a protectionist trade policy with high tariffs, the deterrent or
punishment (depending on your point of view) for actions deemed unfair trade
practices. Loosening US fiscal policy through tax cuts will tend to put upward
pressure on US interest rates although the ultimate effect on the US dollar
will depend upon how much US government spending can be controlled. The
effects on Asia are not necessarily negative but the outcome is less
predictable and the tail risks are higher.
Meanwhile within Asia, China continues to wrestle with its problem of excess
property supply and bad debts within the housing and banking sectors. The
Chinese government's long game of prioritising domestic social stability will
be tested again if it has to replace lower export growth with stronger
domestic growth. But the economic resources are available to force that switch
if necessary and there has been a series of government announcements aimed at
boosting the property market to jump start economic growth.
India is at an interesting juncture following a long bull market, which has
seen the stock market gain 94% over the last five years. With the market now
trading on a 23x historic price to earnings multiple, it looks expensive and
it is concerning that many domestic investors are untested in a bear market.
Yet there is also the opportunity for India to be one of the biggest
beneficiaries of a US pivot of trade away from China and Europe.
Elsewhere the challenge is to what extent those Asian companies with high
levels of US sales can navigate Trump's new tariff regime. Increasing
production in the US or reducing production within China will help. At the
macroeconomic level, prioritising domestic growth over exports would also
help. However, these changes will take time to offset the immediate
dislocations from tariffs.
Change is inevitable and outcomes are uncertain. Many have already defaulted
to a pessimistic scenario or are waiting on the sidelines but there is a
significant probability of a positive outcome. Even a muddling-through outcome
could produce positive returns, especially given the relatively low starting
valuations for many of Asia's stockmarkets. It is a fantastic opportunity for
active investors and stockpickers.
It is going to be an exciting period for the markets and even more so for us
as we look forward to welcoming Asia Dragon shareholders.
Neil Rogan
Chairman
21 January 2025
Portfolio Managers' Report
Q How has the Company performed in the period under review?
A The Company's net asset value grew by 6.3% (total return, in sterling
terms) over the six months to 31 October 2024, which compares to the benchmark
MSCI AC Asia ex Japan index return of 8.6%.
Asian equity markets performed well over the period, benefitting from: the
start of a global rate easing cycle, reasonable starting valuations and robust
corporate earnings. China has also accelerated its policy easing to try and
help stabilise asset prices and support its faltering economy, with the
portfolio's Chinese holdings making a strong contribution to overall
performance.
However, market volatility has also been a feature, with bifurcated
performance between different countries and sectors. Taiwan's equity market
was propelled to record highs by its tech sector, which has benefitted from
strong AI-related demand, and the portfolio benefitted from the positive
impact of our stock selection in this market. However, at the other end of the
scale (see chart in the report) South Korea has underperformed, reflecting a
waning of enthusiasm for the `Corporate Value-Up' theme, and the weak
performance of its tech giant Samsung Electronics, one of the portfolio's
largest holdings.
India's expensive equity market has delivered lacklustre returns, and the
portfolio's underweight position has started to contribute positively to
relative performance. Meanwhile, Association of Southeast Asian Nations
(`ASEAN') market performance has been mixed with strength in Singapore and
Thailand not matched by returns from Indonesia, where growth has slowed amidst
a period of uncertainty created by the long transition period between the
election and inauguration of the new President.
Our approach continues to be guided by valuations, with a focus on stock
picking, balance sheet strength, and maintaining a well-diversified portfolio,
rather trying to lean too heavily on a specific macro scenario occurring.
There continues to be significant valuation disparity across Asian markets,
and genuine progress in policies designed to improve shareholder returns is
providing fertile ground for active stock pickers.
Q What have been the biggest contributors to relative performance?
A Kasikornbank was the biggest single contributor, with a re-rating in the
Thai bank's share price reflecting improvements in asset quality and
government measures to boost consumption, such as a cash handout programme.
Given the bank is very well capitalised with a slow loan growth outlook, there
is also the prospect of higher dividends. Elsewhere, Singapore-listed Sea was
another notable performer, with market share gains for its ASEAN e-commerce
business suggesting a more rational competitive landscape. Stock selection in
India also added value, with notable contributions from Shriram Transport
Finance and HDFC Bank, supported by solid earnings results.
The remarkable September 2024 rally in Hong Kong and China markets stalled in
October, with some disappointment over a lack of detail on stimulus measures,
specifically those expected to support consumption and property prices.
However, the likes of Sands China, JD.com, Tencent and noodle and beverage
manufacturer Tingyi all delivered positively over the period, benefitting from
improving fundamentals as well as a reduction in the market risk premium for
Chinese stocks.
Q And detractors?
A Although Chinese stocks were amongst the biggest single contributors,
overall stock selection in China detracted from relative performance,
particularly given the portfolio's underweight position in outperforming
financials. Stock selection in consumer-related sectors was also a factor,
with a lack of exposure to large benchmark constituent Meituan having a
negative impact, while the macro backdrop proved challenging for the likes of
restaurant operator Jiumaojiu, dairy products manufacturer Yili and ENN
Energy. Meanwhile, online game developer NetEase, which had proven resilient
in recent years, saw its share price de-rate amidst concerns over changes to
the way it monetises games. In our view, the market has overreacted to the
near-term impact on earnings, underappreciating NetEase's impressive track
record of delivering blockbuster titles, with a strong pipeline of new games
to launch.
The market has been swift to de-rate Samsung's shares, which now trade below
book value, close to trough valuation levels. Whilst we do not have a clear
view on how and when Samsung's operational problems will be resolved, the
market is not pricing in a near-term resolution, with a degree of asymmetry to
the balance of risk and reward. We feel this is especially true given its
other businesses are performing reasonably well, and the company's very strong
balance sheet enabled it to recently propose a 10 trillion South Korean won
(£5.7 billion) share buyback program.
Q Has political instability ended all hope for Korea Value-up?
A South Korean politics have been in the headlines, with events escalating
dramatically in December 2024. President Yoon's decision to declare martial
law ultimately led to his downfall, with the National Assembly's vote to
impeach succeeding at the second time of asking. Removing Yoon is unlikely to
be straight-forward, but although this is a testing period we believe Korea's
democracy will withstand current pressures and stability will return.
The initial market response suggests these developments were perceived to be a
set-back for Korea's `Value-Up' initiatives, but investors' enthusiasm for the
theme had already started to wane after the surprise swing towards the
opposition Minjoo Party in April 2024's parliamentary elections. As we flagged
in our last report, this made Korean tax reform - an important element of the
`Value-up' agenda - less likely, but not a reason to lose all hope.
The left-leaning Minjoo Party launched its own "Korea Boost Up Project" in
July 2024, which proposes a change in the Commercial Law to ensure boards of
directors have a legal obligation to consider the interests of all
shareholders, not just majority shareholders. Meanwhile, changes to the
dividend tax system appear more likely to proceed under the current
administration than changes to inheritance tax.
Either way, we feel that policymakers remain committed to closing the `Korea
discount', with the focus on shareholder returns and efficient use of capital.
Domestic political uncertainty may have clouded the outlook in the near-term,
but companies are going to continue to feel pressure from regulators,
policymakers and minority shareholders to deliver better returns on equity and
get value up.
This is also not a theme we are looking to populate from the top-down. The
portfolio's exposure in this market reflects a belief that improvements in
corporate governance and dividend pay-outs are being underappreciated by the
market, and the `Korea discount' has provided opportunity to own operationally
solid companies, with good balance sheets, as well as an ability and desire to
improve shareholder returns over time.
Q What are your thoughts on China's stimulus measures?
A The most striking thing about the stimulus package is that it is larger and
more comprehensive than what has come before and was accompanied by the
endorsement of senior officials. This suggests a renewed determination to
support the economy and stabilise asset prices in both the property and equity
markets. Restoring market confidence is back on policymakers' agenda, which
could also help improve fundamentals.
However, we will not know how effective these stimulus measures will be until
after they are implemented. Policy announcements so far have been focussed on
lifting financial pressure off over-indebted local governments, giving them
room for manoeuvre. This has fallen short of market expectations, which were
elevated and hoped for more direct support for consumption.
Ultimately, we do not want to be reliant on a specific scenario to outperform,
preferring to focus on the bottom-up stock opportunities that give us reason
to maintain an overweight position in China. We expect further stimulus
measures, but history tells us the authorities are likely to tread carefully,
being wary of encouraging speculation, leverage and unnecessary financial
risks.
Q Has the US election result changed your view at all?
A The consensus view is that Trump 2.0 brings challenges and uncertainty for
global equity and bond markets. The promise of tax cuts and deregulation is a
likely positive for US growth but may come with inflationary pressures.
Tariffs are a concern, but Donald Trump is known to be transactional, and the
tariff agenda is about US reindustrialisation, to incentivise foreign
companies, including Chinese companies, to move production to America. If
markets feel there is a floor under US-China relations with Donald Trump in
the White House, then that could be supportive of sentiment.
Geopolitical risks are hard to analyse and price effectively, but we are alert
to what the market appears to be pricing in, as well as the potential for
other governments to respond with stimulus of their own, and for corporates to
take measures such as cutting costs and diverting business away from the US to
other markets. For example, China could further boost its economy, targeting
specific sectors, to try and offset any negative impact from tariffs.
We prefer looking at the potential impact of the US election on a case-by-case
basis, and so far have not made any changes to the portfolio. As active
investors, we need to navigate these complexities carefully and be open to
capitalizing on mispricing opportunities.
Q Are there any significant portfolio changes to report?
A There has been a pick-up in turnover in our Hong Kong/China portfolio, with
the sale of selected consumer and property related names, including: China
Overseas Land & Investment, Suofeiya Home Collection, Gree Electrical
Appliances, Ping An Insurance and Jiumaojiu. The valuations of these names
were undemanding, but we preferred to focus on undervalued Chinese companies
which are less sensitive to the downward trend in property completions, and
where we have greater conviction that earnings can surprise positively. In
turn, we introduced: Sands China, a hotel and casino operator in Macao well
positioned to benefit from improving visitor trends and the completion of some
significant renovations; and H World, a cash generative hotel brand operator
with structural growth potential from industry consolidation.
Elsewhere, we took profits from recent outperformers including trainer
manufacturer Yue Yuen Industrial and Chroma, a precision electronic
measurement company. Market weakness gave us the opportunity to introduce Bank
Rakyat (`BRI'), one of Indonesia's largest banks and its leading micro lender,
known for high returns on equity through economic cycles, with micro lending
being hard to replicate due to its human capital intensity.
Other portfolio activity includes the sale of the portfolio's holding in
Swatch, and introduction of Woodside Energy in Australia, South Korean
internet conglomerate Naver, Chinese ecommerce company PDD Holdings and mobile
phone manufacturer Shenzhen Transsion.
Outlook
Asian equities currently offer double-digit earnings growth, with reasonable
valuation levels across much of the universe. However, the asset class
continues to trade at a significant discount to global equities, particularly
the US market, and the implementation of China's stimulus measures could be a
turning point in 2025. Whilst we remain mindful of geopolitical risks and the
uncertainty that may come with the Trump administration's pursuit of
protectionist policies, Asian corporates have healthy balance sheets and
competitive advantages which could make them more resilient than what is being
implied in valuations.
Moreover, if specific channels of global trade are forced to reconfigure away
from China, other Asian countries could benefit, which would likely see
further growth in intra-Asian trade. There are signs of exuberance in India
and parts of Taiwan's tech sector, but for active managers there are
compelling opportunities across other markets.
As an investment destination, Asia offers access to world leading
manufacturing and technology companies in North Asia, including AI `picks &
shovels'. China, India, and Southeast Asia are hotbeds of consumer demand
growth, with innovative internet and e-commerce businesses. Exposure to rising
incomes and a growing middle class is also accessible through well capitalised
financials, while supply chains for AI, renewables, batteries and commodities
play an important role in trade and the energy transition. Asia is home to
some of the most exciting investment opportunities in the world and provides
diversification for investors with a global remit.
Fiona Yang & Ian Hargreaves
Portfolio Managers
21 January 2025
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 and technology threats including AI
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 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 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. ► Unchanged
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.
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 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 political, military and diplomatic events and changes to legislation. Balancing political risk and reward is an essential part of the active management process. ▲ Increased
the US, Ukraine and the Middle East, 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. There is also the risk of increased trade sanctions and the challenging regulatory environment that could adversely affect
imports and Foreign Direct Investment (`FDI') into China and financial decoupling could cause significant disruption to global markets.
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 brokers and major shareholders. The Board also has a separate annual strategy meeting. ► Unchanged
Widening Discount
A lack of liquidity and/or lack of investor interest in the Company's shares leads to a depressed share price, a persistent wide discount to its NAV. A persistently high 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 recent trading activity in the Company's shares. The Board regularly reviews initiatives to help address the Company's share rating. 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. ▼ Decreased
discount may lead to buybacks of the Company's shares and result in the shrinkage of the Company to unsustainable levels.
Performance
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 performance against benchmark (attribution) and risk adjusted performance (volatility, beta, tracking error, Sharpe ratio) of the Company and its peers. ► Unchanged
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. The process around ESG is described in the ESG Monitoring and Engagement section on pages 6 and 7. ► Unchanged
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 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 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. ► Unchanged
nearly all of the Company's assets are non-sterling denominated.
Third-Party Service Providers Risk
Information Technology Resilience and Security
The Company's operational structure means that all risks relating to the integrity and availability of data or information control systems and physical security arise at The Audit Committee receives regular updates on the Manager's cyber and technology security. This includes updates on the cyber security framework, staff resource and 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. ► Unchanged
its Third Party Service Providers (`TPP'). Cyber and technology risk could result in adverse impacts and material disruption on the Company's operations and financial
condition.
Operational Resilience
The Company's operational capability relies upon the ability of its TPPs to continue working throughout disruption caused by a major event such as pandemics and cyber and 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 minimise the impact on its operations so that the Company can continue to trade, manage the portfolio and comply with regulatory obligations and report. ► Unchanged
technology threats.
Twenty-five Largest Holdings
AT 31 OCTOBER 2024
Ordinary shares unless stated otherwise
† The sector group is based on MSCI and Standard & Poor's Global Industry
Classification Standard.
Country At Market Value £'000 % of Portfolio
Company Sector †
Taiwan Semiconductor Manufacturing Semiconductors and Semiconductor Equipment Taiwan 24,764 9.7
Tencent R Media and Entertainment China 20,017 7.8
Samsung Electronics - ordinary share Technology Hardware and Equipment South Korea 9,389 3.7
Samsung Electronics - preference shares 5,670 2.2
15,059 5.9
HDFC Bank Banks India 12,972 5.1
AIA Insurance Hong Kong 10,623 4.1
Alibaba R Consumer Discretionary Distribution and Retail China 8,559 3.3
Kasikornbank F Banks Thailand 8,387 3.3
Shriram Transport Finance Financial Services India 6,869 2.7
NetEase R Media and Entertainment China 6,653 2.6
JD.com R Consumer Discretionary Distribution and Retail China 5,854 2.3
United Overseas Bank Banks Singapore 5,737 2.2
Anglo American Materials United Kingdom 5,621 2.2
Samsung Fire & Marine Insurance South Korea 5,200 2.0
Sands China Consumer Services Hong Kong 5,075 2.0
Wuliangye A Food, Beverage and Tobacco China 4,903 1.9
China Resources Beer Food, Beverage and Tobacco Hong Kong 4,573 1.8
Yageo Technology Hardware and Equipment Taiwan 4,561 1.8
Full Truck Alliance - ADS Transportation China 4,474 1.7
Grab Transportation Singapore 4,368 1.7
CK Asset Real Estate Management and Development Hong Kong 4,267 1.7
Astra International Capital Goods Indonesia 4,259 1.7
ICICI Bank - ADR Banks India 4,159 1.6
ENN Energy R Utilities China 3,972 1.6
PT Bank Negara Indonesia Persero Banks Indonesia 3,958 1.5
Largan Precision Technology Hardware and Equipment Taiwan 3,881 1.5
188,765 73.7
Other Investments (31) 67,194 26.3
Total Holdings (56) 255,959 100.0
ADR/ADS: American Depositary Receipts/Shares - are certificates that
represent shares in the relevant stock and are issued by a US bank. They are
denominated and pay dividends in US dollars.
A: A-Shares are shares that are 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.
R: Red Chip Holdings - holdings in companies incorporated outside the
People's Republic of China (`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.
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 2024
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
21 January 2025
Condensed Income Statement
For the six months ended For the six months ended
31 October 2024 31 October 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments held at fair value - 12,045 12,045 - (16,696) (16,696)
Gains/(losses) on foreign exchange - 43 43 - (141) (141)
Income - note 2 4,354 67 4,421 4,617 42 4,659
Investment management fee - note 3 (231) (693) (924) (228) (685) (913)
Other expenses (350) (2) (352) (346) (3) (349)
Net return before finance costs and
taxation 3,773 11,460 15,233 4,043 (17,483) (13,440)
Finance costs - note 3 (39) (117) (156) (66) (198) (264)
Net return on ordinary activities
before taxation 3,734 11,343 15,077 3,977 (17,681) (13,704)
Tax on ordinary activities - note 4 (335) (427) (762) (420) (308) (728)
Net return on ordinary activities after
taxation for the financial period 3,399 10,916 14,315 3,557 (17,989) (14,432)
Net return per ordinary share:
Basic 5.19p 16.66p 21.85p 5.32p (26.91)p (21.59)p
Weighted average number of ordinary shares
in issue during the period 65,512,581 66,853,287
The total column of this statement represents 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 and the financial impact of the anticipated
combination outlined in the Chairman's Statement will be reflected in the
Annual Report for the year ending 30 April 2025.
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 2024
At 30 April 2024 7,500 5,624 31,912 191,364 1,866 238,266
Net return on ordinary activities - - - 10,916 3,399 14,315
Shares bought back and held in treasury - - (3,304) - - (3,304)
At 31 October 2024 7,500 5,624 28,608 202,280 5,265 249,277
For the six months ended 31 October 2023
At 30 April 2023 7,500 5,624 34,827 195,713 1,340 245,004
Net 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
Condensed Balance Sheet
Registered Number 3011768
At 31 October At 30 April
2024 2024
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss - note 7 255,959 251,247
Current assets
Overseas withholding tax recoverable 194 227
VAT recoverable 13 14
Prepayments and accrued income 151 686
Cash and cash equivalents 499 537
857 1,464
Creditors: amounts falling due within one year
Bank facility (5,675) (12,626)
Bank overdraft - (50)
Share buybacks awaiting settlement (9) (320)
Accruals (661) (679)
(6,345) (13,675)
Net current liabilities (5,488) (12,211)
Total assets less current liabilities 250,471 239,036
Provision for deferred Indian capital gains tax (1,194) (770)
Net assets 249,277 238,266
Capital and reserves
Share capital 7,500 7,500
Other reserves:
Capital redemption reserve 5,624 5,624
Special reserve 28,608 31,912
Capital reserve 202,280 191,364
Revenue reserve 5,265 1,866
Total shareholders' funds 249,277 238,266
Net asset value per ordinary share
Basic 384.15p 361.51p
Number of 10p ordinary shares in issue at the period end - note 6 64,891,287 65,908,287
Signed on behalf of the Board of Directors.
Neil Rogan
Chairman
21 January 2025
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,
issued 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 2024 Annual Financial Report.
2. Income
Six months to Six months to
31 October 31 October
2024 2023
£'000 £'000
Income from investments:
UK dividends 73 -
Overseas dividends - ordinary 4,157 4,547
- special 99 51
Scrip dividends 13 -
Deposit interest 12 19
Total income 4,354 4,617
Special dividends of £67,000 were recognised in capital during the period (31
October 2023: £42,000).
3. Management Fee, Performance Fees 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.
Conditional on the announced combination with Asia Dragon becoming effective,
the Investment Management Agreement has been amended such that the existing
management fee shall be reduced as follows:
· 0.75% on the first £125 million of the Net Asset Value;
· 0.60% above £125 million and up to £450 million of the Net Asset Value;
and
· 0.50% on the Net Asset Value in excess of £450 million.
The Manager has agreed to waive the investment management fee which would
otherwise have been payable to the Manager in respect of the value of the
assets transferred by Asia Dragon to the Company pursuant to the combination,
and based on the value of those assets as at the calculation date for the
combination, for the nine months following the effective date of the
combination.
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 2024
Annual Financial Report on page 62.
5. Dividends paid on Ordinary Shares
As noted in the Chairman's Statement, a first interim dividend of 7.80p per
share was paid on 29 November 2024 to shareholders on the register on 8
November 2024. Shares were marked ex-dividend on 7 November 2024. A second
interim dividend of 3.90p will be paid on 31 January 2025 to shareholders on
the register on 17 January 2025 with the frequency of dividend payments moving
from half-yearly to quarterly. Shares were marked ex-dividend on 16 January
2025.
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
2024 2024
Number of ordinary shares in issue:
Brought forward 65,908,287 66,853,287
Shares bought back into treasury (1,017,000) (945,000)
Carried forward 64,891,287 65,908,287
(b) Treasury Shares
Six months to 31 October 2024 Year to 30 April 2024
Number of treasury shares held:
Brought forward 9,091,594 8,146,594
Shares bought back into treasury 1,017,000 945,000
Carried forward 10,108,594 9,091,594
Total ordinary shares 74,999,881 74,999,881
During the period the Company has bought back, into treasury, 1,017,000
ordinary shares at a total cost of £3,304,000 (30 April 2024: 945,000
ordinary shares at a total cost of £2,915,000).
Subsequent to the period end 31 October 2024 and up until 20 January 2025,
210,000 ordinary shares were bought back into treasury at an average price of
340.60p. No ordinary shares were issued 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
2024 2024
£'000 £'000
Financial assets designated at fair value through profit or loss:
Level 1 247,536 242,722
Level 2 8,387 8,488
Level 3 36 37
Total for financial assets 255,959 251,247
The Level 2 investment consists of one holding: (i) Kasikornbank valued at
£8,387,000 (30 April 2024: two holdings: (i) Kasikornbank valued at
£6,994,000 and (ii) Invesco Liquidity Funds - US Dollar money market fund
valued at £1,494,000).
The Level 3 investment consists of one holding in Lime Co. (30 April 2024:
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 2024 and
31 October 2023 has not been audited. The figures and financial information
for the year ended 30 April 2024 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 2024 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
21 January 2025
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 10% worse than the benchmark index
during rising markets and 10% better during falling markets. The beta of the
Company's portfolio was 1.05 as at 31 October 2024.
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 2024 and the year ended 30 April 2024. The
APMs listed here are widely used in reporting within the investment company
sector and consequently aid comparability.
(Discount)/Premium (APM)
At 31 October At 30 April 2023
Page 2024
Share price 1 a 343.00p 313.00p
Net asset value per share 14 b 384.15p 361.51p
Discount c = (a-b)/b (10.7)% (13.4)%
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 2024 the Company had £5,675,000 gross
borrowings (30 April 2024: £12,676,000).
At 31 October At 30 April 2024
2024
Page £'000 £'000
Bank facility 14 5,675 12,626
Overdraft 14 - 50
Gross borrowings a 5,675 12,676
Net assets 14 b 249,277 238,266
Gross gearing c = a/b 2.3% 5.3%
Net Gearing or Net Cash (APM)
Net gearing reflects the amount of net borrowings invested, i.e. borrowings
less cash and cash equivalents (including 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 At 30 April 2024
2024
Page £'000 £'000
Bank facility 14 5,675 12,626
Overdraft 14 - 50
Less: cash and cash equivalents 14 (499) (537)
Less: Invesco Liquidity Fund - US Dollar (money market fund) - (1,494)
Net borrowings a 5,176 10,645
Net assets 14 b 249,277 238,266
Net gearing c = a/b 2.1% 4.5%
Total Return (APM)
Net Asset Share
Six Months Ended 31 October 2024 Page Value Price
As at 31 October 2024 1 384.15p 343.00p
As at 30 April 2024 1 361.51p 313.00p
Change in period a 6.3% 9.6%
Impact of dividend reinvestments (1) b - -
Total return for the period c = a+b 6.3% 9.6%
Net Asset Share
Year Ended at 30 April 2024 Page Value Price
As at 30 April 2024 1 361.51p 313.00p
As at 30 April 2023 366.48p 321.00p
Change in period a -1.4% -2.5%
Impact of dividend reinvestments (1) b 4.1% 4.7%
Total return for the period c = a+b 2.7% 2.2%
(1) No dividends have been paid during six months to 31 October 2024 (year to
30 April 2024: 14.10p). NAV or share price falls subsequent to the
reinvestment date consequently further reduce the returns, vice versa if the
NAV or share price rises.
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