TIDMAAS
RNS Number : 9552T
Aberdeen Standard Asia Focus PLC
30 November 2021
ABERDEEN STANDARD ASIA FOCUS PLC
Legal Entity Identifier (LEI): 5493000FBZP1J92OQY70
ANNUAL FINANCIAL REPORT FOR THE YEARED 31 JULY 2021
STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS
Financial Highlights
Net asset value total return MSCI AC Asia Pacific MSCI AC Asia Pacific
(diluted){AB} ex Japan Index total ex Japan Small Cap
return{C} Index total return{C}
2021: +41.9% 2021: +14.1% 2021: +37.2%
2020: -13.6% 2020: +1.9% 2020: -2.5%
-------------------------------------- ---------------------- -----------------------
Share price total return{A} Discount to net asset Dividends per Ordinary
value{AB} share{D}
2021: +38.2% 2021: 13.9% 2021: 6.00p
2020: -13.2% 2020: 11.4% 2020: 19.00p
-------------------------------------- ---------------------- -----------------------
{A} Alternative Performance Measure (see below for definition).
{B} Presented on a diluted basis as the Convertible Unsecured Loan
Stock ("CULS") is "in the money" (2020 not "in the money" so basic
net asset value used).
{C} Currency adjusted, capital gains basis.
{D} Dividends are subject to shareholder approval at the Annual General
Meeting.
STRATEGIC REPORT - CHAIRMAN'S STATEMENT
Results
I am very pleased to not only announce the annual results for
the year ended 31 July 2021 but also to announce a series of
changes that follow from a comprehensive strategic review, that the
Board has undertaken during the last 12 months.
In large part thanks to the work of Hugh Young, and his team in
Singapore, this Company has achieved, since it was founded in 1995,
an outstanding result for shareholders, delivering some of the best
returns available from funds quoted on the London Stock Exchange.
The purpose of the review and the introduction of new talent to the
abrdn team, outlined in more detail below, is to put the Company in
a position whereby it can repeat the success of the last quarter
century in the next; to turn GBP1,000 invested in 1995 into
GBP22,500 today (share price at close on 26 November 2021 with
dividends reinvested).
The Board has also proposed a number of changes including a
reduction in the management fee to significantly reduce the running
costs of the Company, an increase in the dividend target for the
current financial year and the introduction of a performance based
tender offer in five years.
Year Under Review
The past year and more has been an unprecedented time, with the
world as a whole having to deal with the shape-shifting Covid-19
virus. And yet, stock markets have continued to mark new highs,
even as the pandemic upended everyday routines and threw supply
chains into disarray. Stock investors found themselves in a sweet
spot, as the largesse of governments and support of central banks
not only helped fuel a nascent recovery in the global economy, but
also pumped ample liquidity into asset prices.
Asia, the first region to emerge from the depths of the
pandemic, was also among the first to mull over monetary policy
tightening, especially in markets such as China and South Korea.
While regulatory fears in China hit the share prices of a variety
of major oligopolistic companies hard, small cap stocks were far
less affected. As a result, the MSCI Asia Pacific ex-Japan Small
Cap Index, outpaced its large-cap counterpart, rebounding 37.2%
over the year under review. With such a strong performance it is
pleasing, therefore, to report that your Company's net asset value
("NAV") outperformed that Index during the year, rising by 41.9% on
a total return basis. The Company's share price also outperformed
the Index, despite the discount widening slightly (from 11.4% to
13.9%), rising by 38.2% on a total return basis.
This theme of much-improved performance also means that, over
three years to 31 July 2021, the Company's performance, in share
price and NAV terms, is broadly in line with the MSCI Asia Pacific
ex-Japan Small Cap Index and comfortably ahead of the MSCI AC Asia
Pacific ex-Japan Index. Strong outperformance has been compounded
for our loyal long term shareholders who have enjoyed NAV returns
over ten years and since inception of 161% and 2,160% respectively,
compared to 116% and 487% for the MSCI Asia Pacific ex-Japan Index
and 94% over ten years (figures since the Company's inception not
available) for the MSCI Asia Pacific ex-Japan Small Cap Index.
Market Overview
In the reporting period, liquidity and sentiment have continued
to underpin equity markets. Governments and central banks unleashed
their arsenals to counter the dampening effects of lockdowns,
ranging from direct cash transfers to interest rate cuts and asset
purchases. With social-distancing measures stifling both consumer
spending and businesses, a surfeit of money found its way into
financial markets, lifting asset prices. In the summer, with the
virus seemingly under control, regional economies reopened and
demand returned. But as supply chains ran into bottlenecks, arising
largely from mobility restrictions on labour, prices rose across
products like smartphones and cars. This boosted companies' bottom
lines which, in turn, added to the market euphoria. Subsequently,
fresh waves of outbreaks that resulted in localised lockdowns in
various countries only slightly tempered investor optimism, as
consumers and businesses adapted better to the challenging
conditions.
Nowhere was this more apparent than China, one of Asia's two
economic giants. It was "first in, first out" of the pandemic for
the world's most populous nation, after an aggressive countrywide
lockdown in the initial months of 2020. Its economy had mostly
bounced back to normal by mid-2020. But by then, Beijing had also
decided to set a new policy course, one that would evoke growing
consternation among investors. As I intimated in the Half-Yearly
Report, Beijing was pivoting from its focus on industry upgrading
to spurring consumption through fairer wealth distribution. In the
past 12 months, policymakers strengthened their focus on this goal,
introducing a raft of reforms across various sectors, from internet
and e-commerce, to private tutoring and healthcare. Whilst such
measures caused a retreat in the broad stock market indices due to
the sheer size of some of the companies involved, the situation
proved fortuitous for your Manager, who identified bargains in
downtrodden quality names and added to your Company's exposure. The
spirit of private enterprise remains strong in China, which after
all is the world's second-largest economy. Now boasting a highly
developed infrastructure, a well-educated workforce and cutting
edge technology, China still presents a great opportunity for the
diligent stock picker and your Manager is keen to add more Chinese
exposure to your Company's holdings as the opportunity presents
itself.
In neighbouring India, the other Asian behemoth that makes up
the largest part of the portfolio, stocks jumped nearly 80% in
spite of very real challenges, including fresh waves of Covid-19
outbreaks. A fruitful monsoon in late 2020, which supported rural
spending, along with a pro-growth Budget in early 2021 lifted stock
prices. Even when the country slipped into the death-grip of the
pandemic's second wave in April, markets stayed resilient, with
investors looking past the immediate crisis on hopes of a quick
rebound. Also underpinning share prices were surprisingly good
corporate earnings growth, as well as New Delhi's preference to
leave mobility restrictions to the discretion of states rather than
a one-size-fits-all approach. Meanwhile, a rich seam of initial
public offerings allowed your Manager to subscribe to a couple of
high quality names that raised the Company's exposure to
new-economy growth stocks. Overall, the portfolio has a broad
exposure to key sectors, from new-economy software firms to more
traditional ones, such as energy and real estate, all of which
stand to benefit from the massive domestic market.
Elsewhere, the Company's exposure to Taiwan was a key
contributor to the Company's outsized returns. Over the period,
your Manager also put more money in the market, bolstering the
portfolio's exposures to tech hardware and digital services.
Conversely, the Company's gains were capped by poor performance in
parts of Southeast Asia, which struggled to contain the
coronavirus. As a result, your Manager divested a number of
underlying holdings and reduced positions in Thailand and Malaysia,
which now have dimmer growth outlooks. A more detailed report of
the Company's performance and portfolio changes can be found in the
Manager's review.
Dividend
As highlighted in last year's Annual Report the Board intends to
smooth out the short-term impact of the pandemic on earnings by
using revenue reserves where necessary, and is therefore
recommending an increased final dividend of 15.0p per share (2020
14.5p) together with a special dividend of 1.0p (2020: 4.5p). The
payments will necessitate a small distribution of GBP2.55m from the
Company's brought forward revenue reserves to cover this shortfall
in revenue, and following the payment there will be over 24p per
share of reserves available for future years' dividends. If
approved by shareholders at the Annual General Meeting of the
Company on 27 January 2022, both dividends will be paid on 2
February 2022 to shareholders on the register as at 7 January
2022.
The proposed future dividend policy of the Company is outlined
below and will apply to the current financial year ending 31 July
2022.
Gearing and Share Capital Management
The Company's year-end net gearing was 10.0%. The gearing is
provided by the GBP36.68 million of Convertible Unsecured Loan
Stock 2025 ("CULS 2025") together with the new GBP30 million 15
year Senior Unsecured Loan Note (the "Loan Note"). The new Loan
Note was drawn down on 1 December 2020 and used to repay, and
cancel in full, the Company's GBP20 million Revolving Credit
Facility with the Royal Bank of Scotland. Under the terms of the
Loan Note, an additional GBP35 million is available for drawdown by
the Company for a five-year period. The Board's current intention
would be to only draw this down to repay any of the Company's
existing CULS 2025, either at their redemption in 2025, or
before.
The level of gearing is managed actively by the Investment
Manager and at the time of writing total debt amounted to GBP65.6
million representing net gearing of 10%.
During the year the Company purchased for treasury 1,055,000
Ordinary shares at a discount to the prevailing NAV (exclusive of
income). Share buy backs can provide liquidity to the market and
reduce the volatility of any discount as well as modestly enhancing
the NAV for shareholders.
Annual General Meeting
The Board has been considering how best to deal with the
continuing risks and impacts of the Covid-19 pandemic on
arrangements for the Company's AGM. The Board has decided to hold a
functional only AGM on Thursday 27 January 2022 in London at which
the usual formal business will be proposed.
In advance of the AGM, in order to provide certainty, whilst
encouraging and promoting interaction and engagement with our
shareholders, the Board has decided to hold an interactive Online
Shareholder Presentation which will be held at 11:00 a.m. on
Wednesday 19 January 2022. At the presentation, shareholders will
receive updates from the Chairman and Manager and there will be the
opportunity for an interactive question and answer session.
Following the online presentation, shareholders will still have
time to submit their proxy votes prior to the AGM and I would
encourage all shareholders to lodge their votes in advance in this
manner. Full details on how to how to register for the Online
Shareholder Presentation can be found at
https://www.workcast.com/register?cpak=5119566346944925 .
A copy of the online presentation, including the detailed
presentation from the Manager, along with the AGM results, will be
made available to shareholders on the Company's website shortly
after the AGM.
Shareholders are encouraged to raise any questions in advance of
the AGM by registering for the Online Presentation or alternatively
via email at Asia.Focus@abrdn.com. Any questions received will be
replied to by either the Manager or Board via the Company
Secretary.
We will keep shareholders updated of any changes through the
Company's website (asia-focus.co.uk) and announcements to the
London Stock Exchange. We trust that shareholders will be
understanding of this approach.
The Board strongly encourages all shareholders to exercise their
votes in respect of the meeting in advance by completing the
enclosed form of proxy, or letter of direction for those who hold
shares through the abrdn savings plans. This should ensure that
your votes are registered in the event that physical attendance at
the AGM is not possible or restricted.
In addition to the usual ordinary business being proposed at the
AGM, as special business the Board is seeking to renew the
authority to issue new shares and sell treasury shares for cash at
a premium without pre-emption rules applying and to renew the
authority to buy back shares and either hold them in treasury for
future resale (at a premium to the prevailing NAV per share) or
cancel them.
Directorate
As previously advised, Martin Gilbert retired from the Board on
27 November 2020 and Philip Yea retired from the Board at the AGM
on 1 December 2020. On behalf of the Board I would like to
reiterate our thanks for their dedication and service to the
Company. Following the AGM, Debby Guthrie became Audit Committee
Chair.
As part of its on-going succession planning, the Board intends
to undertake a search for two further independent non-executive
Directors shortly. I do not intend to stand for election beyond
this year and therefore the Company will be announcing my successor
during the course of 2022.
The Future
In the last twelve months, the Board has conducted a
comprehensive review of the Company's long-term strategy to ensure
that the investment policy captures the immense opportunities that
exist in the Asian small cap market. This applies to both South
Asia but also North Asia with the emergence of China as the world's
second largest economy and fast expanding stock markets to
match.
As part of the review, the Board also addressed the issue of how
to give shareholders and, in particular, retail investors a more
meaningful participation in the Company's ongoing success. The
Board believes that the measures proposed below will assist in the
marketability of the Company's shares thus increasing the potential
to narrow the discount to NAV, which has been a long standing
ambition of the Company.
During the course of the review the Board has consulted with
abrdn, external specialists in the Asian markets and the Company's
major shareholders.
As a result of this, the Board intends to propose the following
changes to the Company.
- Amend the investment policy to allow more flexibility to
invest in growing small companies across Asia;
- Strengthen the management team by adding Flavia Cheong, Head
of Equities, Asia as joint lead manager with Hugh Young. The
investment management team will be bolstered to reflect the
increasing importance of North Asia including China;
- Increase the target dividend by 100% to 32.0p for the
financial year ending 31 July 2022, payable quarterly and
thereafter maintain the progressive dividend policy of the last 25
years
- Reduce the running costs of the Company. abrdn have agreed to
an amended, tiered, management fee, still payable on market
capitalisation. The tiers are 0.85% for the first GBP250m, 0.6% for
the next GBP500m and 0.5% for market capitalisation of GBP750m and
above. It was previously set at 0.96% of market capitalisation;
- Increase marketability of the shares for small investors by
introducing a five for one share split; and
- Introduce a performance-linked tender offer, which would be
triggered in the event of underperformance of the NAV per share
versus the MSCI AC Asia ex-Japan Small Cap Index over a five-year
period commencing 1 August 2021.
We have also made an announcement to the stock market
contemporaneously with the announcement of these results. These
changes are subject to regulatory and shareholder approvals.
It is currently envisaged that the circular and notice of
General Meeting setting out further details of these proposed
changes will be sent to shareholders in December 2021 along with
the Annual Report and notice of the Annual General Meeting, to seek
necessary shareholder approvals to implement these proposals. The
webinar presentation for shareholders on 19 January 2022 will
provide further details on this future strategy and shareholders
will have an opportunity to put questions to the Board and Manager.
The General Meeting to approve the proposals is expected to be
convened on 27 January 2022, following the Annual General
Meeting.
Changes to Investment Policy
The Company will continue to focus on offering investors
exposure to attractive small, quoted companies in Asia that have
excellent prospects for strong growth in shareholder value, good
balance sheets and skilled, experienced management. As has been
demonstrated over the last 26 years where GBP1,000 invested in 1995
is now worth approximately GBP22,500 (share price at close on 26
November 2021 with dividends reinvested) with the dividends
(including special dividends) to shareholders going from 1.2p in
1996 to 16.0p in 2021. The Board and abrdn believe that this area
of the market will continue to deliver strong growth over the
medium to long term.
Over the same period, the stock markets of the region have
developed from small emerging markets to some of the largest in the
world. Therefore, the Board believes it is necessary to make
changes to the Company's investment objective and policy to ensure
abrdn can continue to invest in companies that can deliver the best
returns for shareholders and despite the enormous difference in the
relative size of the Asian markets. The definition of a small cap
company varies from market to market with China and India at one
end of the scale and very small markets such as Sri Lanka at the
other end.
The Company's current investment objective limits investment
into companies that have a market capitalisation of up to
approximately US$1.5 billion. The Board strongly believes this is
limiting the portfolio managers from investing in the high growth
companies particularly in larger markets like China and India. As a
result, the Board proposes to remove this market capitalisation
limit from the investment policy while stressing that the
investment managers will continue to identify small companies
capable of delivering exceptional growth.
Historically, the Company has had limited investments in
Australasia and the Board does not believe the outlook for this
region will offer the same growth prospects as other parts of Asia.
Therefore, the Board proposes to amend the investment policy to
clarify that no new investments will be made in Australasia. The
Company currently has three holdings in Australasia and the Manager
does not intend to dispose of these should shareholders approve the
change in investment policy.
Full details of the changes to the investment objective and
investment policy are subject to FCA and shareholder approval.
abrdn Investment Team
The Board is delighted to announce that Flavia Cheong, abrdn's
Head of Equities - Asia, will be joining the management team of the
Company, as joint lead manager alongside Hugh Young and Gabriel
Sacks. Neil Sun will also join the team, and will be directly
responsible for managing the potential increased weighting in North
Asia.
Flavia Cheong is the Head of Asia Pacific Equities at abrdn,
where, as well as sharing responsibility for company research, she
oversees regional portfolio construction. Before joining abrdn in
1996, she was an economist with the Investment Company of the
People's Republic of China, and earlier with the Development Bank
of Singapore. Flavia graduated with a BA in Economics and an MA
(Hons) in Economics from the University of Auckland. She is a CFA
charter holder.
Neil Sun is an Investment Manager within the Asian Equities Team
at abrdn. Neil joined the company in 2018. Previously, Neil worked
as a Research Analyst at Deutsche Bank covering lithium battery
supply chain in Hong Kong. Prior to that, Neil worked for JPMorgan
Asset Management as a Research Analyst covering both China and
Taiwan equities. Neil graduated with a BBA in Finance from National
Taiwan University, and passed level II of the CFA Program.
abrdn continues to build out its presence in Shanghai and Hong
Kong, with a team of eight investment professionals expected to
grow to ten during 2022, focusing on researching Chinese equities.
The Company and the investment team will be able to draw on the
knowledge and expertise of these individuals, giving the Company
access to Chinese small cap companies. Over time, it is envisaged
that they will also take on greater individual responsibility for
overseeing the Company's Chinese holdings.
Future Dividend Policy
The Company's policy remains to provide long-term capital
growth, but the Board is aware that some investors are looking for
a regular level of income alongside capital growth, particularly in
the current low interest rate environment.
The Board is therefore proposing to increase the level of target
dividends paid by the Company through distribution from capital
reserves as well as income. Under this new policy, the Board aims
to set a target dividend of 32.0p per Ordinary share for the
financial year ending 31 July 2022 and progressively to grow it
thereafter. This would represent a 100% increase in the dividend
based on 16.0p recommended in the financial
year ended 31 July 2021. This target dividend would be paid in equal quarterly instalments.
Assuming that the changes are approved at the General Meeting on
27 January 2022, the Company intends to declare in February 2022 an
initial target dividend of 16.0p per Ordinary share relating to the
six month period from 1 August 2021 to 31 January 2022 and
thereafter 8.0p per Ordinary share per quarter. In the current
year, we estimate that this level of dividend would require a 5.0p
per Ordinary share (GBP1.6m) distribution from capital
reserves.
As previously stated, our dividend record is very strong with
the Ordinary dividend having been maintained or increased in 24 out
of 25 years. This one-time step change will mean that in future it
is unlikely we will be paying special dividends but absent a market
collapse, we will aim to maintain our progressive approach albeit
off a higher base.
I would like to emphasise that the Board has no desire to change
how the portfolio Manager selects stocks for the portfolio.
Management Fees
The Company currently pays a management fee at the rate of 0.96%
per annum of the Company's market capitalisation. Following
discussions with abrdn, the Board is pleased to announce a new,
tiered management fee, still based on market capitalisation. The
tiers are 0.85% of the first GBP250m, 0.6% of the next GBP500m and
0.5% of GBP750m and above. This represents a fee of 0.74% based on
the Company's last closing share price of 1465.0p and is a
reduction of 23% in the management fee. This change will be
conditional on shareholder approval of the proposals outlined above
and will be back dated as if it had been effective from 1 August
2021.
Share Split
The Board is proposing to implement a sub-division of the
Company's share capital. This is intended to improve the liquidity
of the Company's shares and enhance the ability of investors to
make more efficient regular monthly investments.
The Directors are recommending a five for one share split which
will increase the number of Ordinary shares in issue by a factor of
five.
The Conversion Price of the 2.25 per cent. convertible unsecured
loan stock 2025 (the "CULS") will be automatically and pro-rata
adjusted should shareholders approve the share split.
Introduction of Tender Offer
The Board is proposing the introduction of a performance linked
tender offer. If the Company's NAV total return is less than that
of the MSCI AC Asia ex-Japan Small Cap Index over a five-year
assessment period (commencing 1 August 2021), shareholders should
be offered the opportunity to realise a proportion of their holding
for cash at a level close to NAV less costs of the tender offer.
The tender offer would be capped at a maximum of 25% of the issued
share capital of the Company at that time.
Outlook
The excellent performance over both the long and short term, the
reduction in the running costs of the Company, the structural
increase in the dividend, a possible tender offer in five years in
the event the performance of the Company were to falter (though we
believe the strong economic prospects in Asia make this unlikely),
succession planning and the increasing breadth of management
expertise being brought to the abrdn management team all form the
basis of optimism.
The maturing of the stock markets in China over the last ten
years opens up another fertile field for managers to identify small
growing companies capable of delivering exceptional returns
particularly when combined with the rigorous abrdn investment
process that has served the Company so well in the past. As Hugh
Young has cited in today's announcement to the Stock Exchange, he
remains as excited by the opportunities in Asia as he did when he
first arrived in Singapore 30 years ago and believes that the
changes announced today will strengthen both the investment
proposition and underpin the future prospects of the Company.
The results since the year end bear this out. In this period
since 31 July 2021, the NAV per share has advanced another 8.3% to
GBP1683.3p - a far cry from the 97p per share achieved on listing
in 1995. Against this background, your Board has every confidence
in the future of your company.
Nigel Cayzer,
Chairman
29 November 2021
STRATEGIC REPORT - OVERVIEW OF STRATEGY
Business Model
The business of the Company is that of an investment company
which seeks to qualify as an investment trust for UK capital gains
tax purposes.
Investment Objective*
The Company aims to maximise total return to shareholders over
the long term from a portfolio made up predominantly of smaller
quoted companies (with a market capitalisation of up to
approximately US$1.5 billion at the time of investment which was
raised to this level on 23 May 2018 from the previous ceiling of
US$1bn) in the economies of Asia and Australasia excluding Japan,
by following the investment policy described below. When it is in
shareholders' interests to do so, the Company reserves the right to
participate in the rights issue of an investee company
notwithstanding that the market capitalisation of that investee may
exceed the stated ceiling. The Directors envisage no change in this
activity in the foreseeable future.
Investment Policy*
The Company's assets may be invested in a diversified portfolio
of securities (including equity shares, preference shares,
convertible securities, warrants and other equity-related
securities) predominantly in quoted smaller companies spread across
a range of industries and economies in the investment region
including Australia, Bangladesh, Cambodia, China, Hong Kong, India,
Indonesia, Korea, Laos, Malaysia, Myanmar, New Zealand, Pakistan,
The Philippines, Singapore, Sri Lanka, Taiwan, Thailand and
Vietnam, together with such other economies in Asia as the
Directors may from time to time determine, (collectively, the
"Investment Region"). Investments may also be made through
collective investment schemes, in unquoted equities (up to 10% of
the net assets of the Company, calculated at the time of
investment) and in companies traded on stock markets outside the
Investment Region provided that over 75% of their consolidated
revenue, operating income or pre-tax profit is earned from trading
in the Investment Region or they hold more than 75% of their
consolidated net assets in the Investment Region.
Risk Diversification
The Company does not invest more than 15% of its gross assets at
the time of investment either in other listed investment companies
(including listed investment trusts), or in the shares of any one
company. The Manager is authorised to invest up to 15% of the
Company's gross assets in any single stock.
Gearing
The Board is responsible for determining the gearing strategy
for the Company. Gearing is used selectively to leverage the
Company's portfolio in order to enhance returns where and to the
extent this is considered appropriate to do so. Gearing is subject
to a maximum gearing level of up to 25% of adjusted NAV at the time
of draw down.
Delivering the Investment Policy
The Directors are responsible for determining the investment
policy and the investment objective of the Company. Day to day
management of the Company's assets has been delegated, via the
AIFM, to the Investment Manager, abrdn Asia. abrdn Asia invests in
a diversified range of companies throughout the Investment Region
in accordance with the investment policy. abrdn Asia follows a
bottom-up investment process based on a disciplined evaluation of
companies through direct visits by its fund managers. Stock
selection is the major source of added value. No stock is bought
without the fund managers having first met management. abrdn Asia
estimates a company's worth in two stages, quality then price.
Quality is defined by reference to management, business focus, the
balance sheet and corporate governance. Price is calculated by
reference to key financial ratios, the market, the peer group and
business prospects. Top-down investment factors are secondary in
the abrdn Asia's portfolio construction, with diversification
rather than formal controls guiding stock and sector weights.
Except for the maximum market capitalisation limit, little regard
is paid to market capitalisation.
A detailed description of the investment process and risk
controls employed by abrdn Asia is disclosed in the published
Annual Report and financial statements for the year ended 31 July
2021. A comprehensive analysis of the Company's portfolio is
disclosed in the published Annual Report and financial statements
for the year ended 31 July 2021 including a description of the ten
largest investments, the portfolio investments by value,
sector/geographical analysis and currency/market performance. At
the year end the Company's portfolio consisted of 64 holdings.
* Shareholders' attention is drawn to the detailed proposed
changes to the Objective and Policy in the Chairman's Statement
Investment Manager and Alternate Investment Fund Manager
The Company's Alternative Investment Fund Manager, appointed as
required by EU Directive 2011/61/EU, is Aberdeen Standard Fund
Managers Limited ("ASFML") which is authorised and regulated by the
Financial Conduct Authority. Day to day management of the portfolio
is delegated to abrdn Asia Limited ("abrdn Asia", the "Manager" or
the "Investment Manager"). ASFML and abrdn Asia are wholly owned
subsidiaries of abrdn plc (previously known as Standard Life
Aberdeen plc).
Comparative Indices
The Company does not have a benchmark. abrdn Asia utilises two
general regional indices, the MSCI AC Asia Pacific ex Japan Index
(currency adjusted) and the MSCI AC Asia Pacific ex Japan Small Cap
Index (currency adjusted), as well as peer group comparisons for
Board reporting. It is likely that performance will diverge,
possibly quite dramatically in either direction, from these or any
other indices. abrdn Asia seeks to minimise risk by using in depth
research and does not see divergence from an index as risk.
Promoting the Company's Success
In accordance with corporate governance best practice, the Board
is now required to describe to the Company's shareholders how the
Directors have discharged their duties and responsibilities over
the course of the financial year following the guidelines set out
under section 172 (1) of the Companies Act 2006 (the "s172
Statement"). This Statement, from 'Promoting the Success of the
Company' to "Long Term Investment", provides an explanation of how
the Directors have promoted the success of the Company for the
benefit of its members as a whole, taking into account the likely
long term consequences of decisions, the need to foster
relationships with all stakeholders and the impact of the Company's
operations on the environment.
The purpose of the Company is to act as a vehicle to provide,
over time, financial returns to its shareholders. The Company's
Investment Objective is disclosed below. The activities of the
Company are overseen by the Board of Directors of the Company.
The Board's philosophy is that the Company should operate in a
transparent culture where all parties are treated with respect and
provided with the opportunity to offer practical challenge and
participate in positive debate which is focused on the aim of
achieving the expectations of shareholders and other stakeholders
alike. The Board reviews the culture and manner in which the
Manager operates at its regular meetings and receives regular
reporting and feedback from the other key service providers.
Investment trusts, such as the Company, are long-term investment
vehicles, with a recommended holding period of five or more years.
Typically, investment trusts are externally managed, have no
employees, and are overseen by an independent non-executive board
of directors. Your Company's Board of Directors sets the investment
mandate, monitors the performance of all service providers
(including the Manager) and is responsible for reviewing strategy
on a regular basis. All this is done with the aim of preserving
and, indeed, enhancing shareholder value over the longer term.
Stakeholders
The Company's main stakeholders have been identified as its
shareholders, the Manager (and Investment Manager), service
providers, investee companies and debt providers. More broadly, the
environment and community at large are also stakeholders in the
Company. The Board is responsible for managing the competing
interests of these stakeholders. Ensuring that the Manager delivers
out performance for Ordinary shareholders over the longer term
without adversely affecting the risk profile of the Company which
is known and understood by the loan note holders and CULS holders.
This is achieved by ensuring that the Manager stays within the
agreed investment policy.
Shareholders
The following table describes some of the ways we engage with
our shareholders:
AGM The AGM normally provides an opportunity for
the Directors to engage with shareholders,
answer their questions and meet them informally.
The next AGM will take place on 27 January
2022 in London. We encourage shareholders to
lodge their vote by proxy on all the resolutions
put forward.
Annual Report We publish a full annual report each year that
contains a strategic report, governance section,
financial statements and additional information.
The report is available online and in paper
format.
Company Announcements We issue announcements for all substantive
news relating to the Company. You can find
these announcements on the website.
Results Announcements We release a full set of financial results
at the half year and full year stage. Updated
net asset value figures are announced on a
daily basis.
Monthly Factsheets The Manager publishes monthly factsheets on
the Company's website including commentary
on portfolio and market performance.
Website Our website contains a range of information
on the Company and includes a full monthly
portfolio listing of our investments as well
as podcasts by the Investment Manager. Details
of financial results, the investment process
and Investment asia-focus.co.uk
Investor Relations The Company subscribes to the Manager's Investor
Relations programme (further details are disclosed
in the published Annual Report and financial
statements for the year ended 31 July 2021).
The Manager
The key service provider for the Company is the Alternative
Investment Fund Manager and the performance of the Manager is
reviewed in detail at each Board meeting. The Manager's investment
process is outlined in the published Annual Report and financial
statements for the year ended 31 July 2021. Shareholders are key
stakeholders in the Company - they are looking to the Manager to
achieve the investment objective over time and to deliver a regular
growing income together with some capital growth. The Board is
available to meet at least annually with shareholders at the Annual
General Meeting and this includes informal meetings with them over
lunch following the formal business of the AGM. This is seen as a
very useful opportunity to understand the needs and views of the
shareholders. In between AGMs, the Directors and Manager also
conduct programmes of investor meetings with larger institutional,
private wealth and other shareholders to ensure that the Company is
meeting their needs. Such regular meetings may take the form of
joint presentations with the Investment Manager or meetings
directly with a Director where any matters of concern may be raised
directly.
Other Service Providers
The other key stakeholder group is that of the Company's third
party service providers. The Board is responsible for selecting the
most appropriate outsourced service providers and monitoring the
relationships with these suppliers regularly in order to ensure a
constructive working relationship. Our service providers look to
the Company to provide them with a clear understanding of the
Company's needs in order that those requirements can be delivered
efficiently and fairly. The Board, via the Management Engagement
Committee, ensures that the arrangements with service providers are
reviewed at least annually in detail. The aim is to ensure that
contractual arrangements remain in line with best practice,
services being offered meet the requirements and needs of the
Company and performance is in line with the expectations of the
Board, Manager, Investment Manager and other relevant stakeholders.
Reviews include those of the Company's depositary and custodian,
share registrar, broker and auditors.
Principal Decisions
Pursuant to the Board's aim of promoting the long term success
of the Company, the following principal decisions have been taken
during the year:
Portfolio The Investment Manager's Review details the key
investment decisions taken during the year and subsequently. The
Investment Manager has continued to monitor the investment
portfolio throughout the year under the supervision of the Board. A
list of the key portfolio changes can be found in the Investment
Manager's Report.
Gearing The Company utilises gearing in the form of CULS and
Loan Notes with the aim of enhancing shareholder returns over the
longer term. The Board has adopted a pro-active approach to gearing
with the aim of locking in attractive interest rates over the
longer term. On 1 December 2020, the Company issued a GBP30 million
15 year Senior Unsecured Loan Note (the "Loan Note") at an
annualised interest rate of 3.05%. The Loan Note is be unsecured,
unlisted and denominated in sterling. The Loan Note ranks pari
passu with the Company's other unsecured and unsubordinated
financial indebtedness. The Loan Note was used to repay the
Company's revolving credit facility with the Royal Bank of
Scotland.
Share Buybacks During the year, the Board has continued to buy
back Ordinary shares opportunistically in order to manage the
discount by providing liquidity to the market.
Board Investment Review During the year the Board has conducted
a comprehensive investment review which has culminated in a number
of proposals which are explained in detail in the Chairman's
Statement.
Long Term Investment
The Investment Manager's investment process seeks to outperform
over the longer term. The Board has in place the necessary
procedures and processes to continue to promote the long term
success of the Company. The Board will continue to monitor,
evaluate and seek to improve these processes as the Company
continues to grow over time, to ensure that the investment
proposition is delivered to shareholders and other stakeholders in
line with their expectations.
Key Performance Indicators (KPIs)
The Board uses a number of financial performance measures to
assess the Company's success in achieving its objective and to
determine the progress of the Company in pursuing its investment
policy. The main KPIs identified by the Board in relation to the
Company, which are considered at each Board meeting, are as
follows:
KPI Description
------------------------------- ------------------------------------------------------
NAV Return (per share) The Board considers the Company's NAV total
return figures to be the best indicator of
performance over time and is therefore the
main indicator of performance used by the Board.
The figures for this year and for the past
1, 3, 5, 10 years and since inception are set
out in the published Annual Report and financial
statements for the year ended 31 July 2021
.
=============================== ======================================================
Performance against comparative The Board also measures performance against
indices a combination of two regional indices - the
MSCI AC Asia Pacific ex Japan Index (currency
adjusted) and the MSCI AC Asia Pacific ex Japan
Small Cap Index (currency adjusted). Graphs
showing performance are shown in the published
Annual Report and financial statements for
the year ended 31 July 2021 . At its regular
Board meetings the Board also monitors share
price performance relative to competitor investment
trusts over a range of time periods, taking
into consideration the differing investment
policies and objectives employed by those companies.
=============================== ======================================================
Share price The Board also monitors the price at which
(on a total return basis) the Company's shares trade relative to the
MSCI Asia Pacific ex Japan Index (sterling
adjusted) on a total return basis over time.
A graph showing the total NAV return and the
share price performance against the comparative
index is shown in the published Annual Report
and financial statements for the year ended
31 July 2021.
=============================== ======================================================
Discount/Premium to NAV The discount/premium relative to the NAV per
share represented by the share price is closely
monitored by the Board. The objective is to
avoid large fluctuations in the discount relative
to similar investment companies investing in
the region by the use of share buy backs subject
to market conditions. A graph showing the share
price premium/(discount) relative to the NAV
is also shown in the published Annual Report
and financial statements for the year ended
31 July 2021 .
=============================== ======================================================
Dividend The Board's aim is to maintain or increase
the Ordinary dividend so that shareholders
can rely on a consistent stream of income.
Dividends paid over the past 10 years are set
out in the published Annual Report and financial
statements for the year ended 31 July 2021
.
------------------------------- ------------------------------------------------------
Principal Risks and Uncertainties
There are a number of risks which, if realised, could have a
material adverse effect on the Company and its financial condition,
performance and prospects. The Board has undertaken a robust review
of the principal risks and uncertainties facing the Company
including those that would threaten its business model, future
performance, solvency or liquidity. Those principal risks are
disclosed in the table below together with a description of the
mitigating actions taken by the Board. The principal risks
associated with an investment in the Company's Shares are published
monthly on the Company's factsheet or they can be found in the
pre-investment disclosure document published by the Manager, both
of which are available on the Company's website.
The Board also has a process to consider emerging risks and if
any of these are deemed to be significant these risks are
categorised, rated and added to the risk matrix. Although the
uncertainty surrounding the timing of Brexit has now abated,
economic risk for the Company remains, in particular currency
volatility may adversely affect the translation rates of future
earnings from the portfolio following the expiry of the
transitional arrangements in January 2021.
The Board notes that there are a number of contingent risks
stemming from the Covid-19 pandemic that may impact the operation
of the Company. These include investment risks surrounding the
companies in the portfolio such as employee absence, reduced
demand, reduced turnover and supply chain breakdowns. The
Investment Manager will continue to review carefully the
composition of the Company's portfolio and to be pro-active in
taking investment decisions where necessary. Operationally,
Covid-19 is also affecting the suppliers of services to the Company
including the Manager, Investment Manager and other key third
parties. To date these services have continued to be supplied
seamlessly and the Board will continue to monitor arrangements in
the form of periodic updates from the Manager and Investment
Manager.
In addition to the risks listed below, the Board is also very
conscious of the risks emanating from increased environmental,
social and governance challenges. The recent scrutiny by western
governments of human rights violations in Xinjiang is an example of
the need for continued vigilance regarding the supply chain
exposure of investee companies and the fair and humane treatment of
workers. Likewise, as climate change pressures mount, the Board
continues to monitor, through its Manager, the potential risk that
investee companies may fail to keep pace with the appropriate rates
of change and adaption.
In all other respects, the Company's principal risks and
uncertainties have not changed materially since the date of this
Annual Report and are not expected to change materially for the
current financial year.
Description Mitigating Action
-------------------------------------------- ---------------------------------------------
Investment strategy and objectives The Board keeps the level of discount
- the setting of an unattractive at which the Company's shares trade
strategic proposition to the market as well as the investment objective
and the failure to adapt to changes and policy under review and in particular
in investor demand may lead to the holds an annual strategy meeting
Company becoming unattractive to where the Board
investors, a decreased demand for reviews updates from the Investment
shares and a widening discount. Manager, investor relations reports
and the Broker on the market. In
Risk Unchanged during Year particular, the Board is updated
at each Board meeting on the make-up
of and any movements in the shareholder
register.
============================================ =============================================
Investment portfolio and investment The Board sets, and monitors, its
management: investing outside of investment restrictions and guidelines,
the investment restrictions and and receives regular board reports
guidelines set by the Board could which include performance reporting
result in poor performance and inability on the implementation of the investment
to meet the Company's objectives, policy, the investment process and
as well as a weakening discount. application of the guidelines. The
Investment Manager is in attendance
Risk Unchanged during Year at all Board meetings. The Board
also monitors the Company's share
price relative to the NAV.
============================================ =============================================
Financial obligations (Gearing): The Board sets a gearing limit and
the requirement for the Company to receives regular updates on the
meet its financial obligations, or actual gearing levels the Company
increasing the level of gearing, has reached from the Investment
could result in the Company becoming Manager together with the assets
over-geared or unable to take advantage and liabilities of the Company and
of potential opportunities and result reviews these at each Board meeting.
in a loss of value to the Company's In addition, Aberdeen Standard Fund
shares. It could also result in the Managers Limited, as alternative
Company being unable to meet the investment fund manager, has set
interest repayments due on the CULS an overall leverage limit of 2x
and Loan Note holders. on a commitment basis (2.5x on a
gross notional basis) and includes
Risk Unchanged during Year updates in its reports to the Board.
============================================ =============================================
Financial and regulatory: the financial The financial risks associated with
risks associated with the portfolio the Company include market risk,
could result in losses to the Company. liquidity risk and credit risk,
In addition, failure to comply with all of which are mitigated by the
relevant regulation (including the Investment Manager. Further details
Companies Act, the Financial Services of the steps taken to mitigate the
and Markets Act, the Alternative financial risks associated with
Investment Fund Managers Directive, the portfolio are set out in note
Accounting Standards and the listing 19 to the financial statements.
rules, disclosure and prospectus The Board relies upon the abrdn
rules) may have an impact on the Group to ensure the Company's compliance
Company. with applicable regulations and
from time to time employs external
Risk Unchanged during Year advisors to advise on specific concerns.
============================================ =============================================
Operational: the Company is dependent The Board receives reports from
on third parties for the provision the Manager on internal controls
of all systems and services (in particular, and risk management at each board
those of abrdn) and any control failures meeting. It receives assurances
and gaps in these systems and services from all its significant service
could result in a loss or damage providers, as well as back to back
to the Company. assurances where activities are
themselves sub-delegated to other
Risk Unchanged during Year third party providers with which
the Company has no direct contractual
relationship. Further details of
the internal controls which are
in place are set out in the Directors'
Report.
============================================ =============================================
Investing in unlisted securities: The Board recognises that investing
the Company has the ability to invest in unlisted securities carries a
in unlisted securities, although higher risk/reward profile. Accordingly
no such investments have been made it seeks to mitigate this risk by
to date. Unquoted investments are limiting investment into such securities
long-term in nature and they may to 10% of the Company's net assets
take a considerable period to be (calculated at the time of investment).
realised. Unquoted investments are For the year ended 31 July 2021
less readily realisable than quoted no unlisted investments were made.
securities. Such investments may
therefore carry a higher degree of
risk than quoted securities. In valuing
investments the Company may rely
to a significant extent on the accuracy
of financial and other information
provided to the Manager as well as
the performance of listed peer multiples
which may impact unquoted valuations
negatively.
Risk Unchanged during Year
============================================ =============================================
Market and F/X: insufficient oversight The Manager's risk department reviews
or controls over financial risks, investment risk and a review of
including market risk, foreign currency credit worthiness of counterparties
risk, liquidity risk and credit risk is undertaken by its Counterparty
could result in a loss to the Company. Credit Risk team. The Company does
not hedge foreign currency exposure
Risk Unchanged during Year but it may, from time to time, partially
mitigate it by borrowing in foreign
currencies.
============================================ =============================================
Promoting the Company
The Board recognises the importance of promoting the Company to
prospective investors both for improving liquidity and enhancing
the value and rating of the Company's shares. The Board believes an
effective way to achieve this is through subscription to and
participation in the promotional programme run by the Manager on
behalf of a number of investment trusts under its management. The
Company's financial contribution to the programme is matched by the
Manager. The Manager reports quarterly to the Board giving analysis
of the promotional activities as well as updates on the shareholder
register and any changes in the make-up of that register.
The purpose of the programme is both to communicate effectively
with existing shareholders and to gain new shareholders with the
aim of improving liquidity and enhancing the value and rating of
the Company's shares. Communicating the long-term attractions of
your Company is key and therefore the Company also supports the
Manager's investor relations programme which involves regional
roadshows, promotional and public relations campaigns.
Board Diversity
The Board recognises the importance of having a range of
skilled, experienced individuals with the right knowledge
represented on the Board in order to allow the Board to fulfil its
obligations. The Board also recognises the benefits and is
supportive of the principle of diversity in its recruitment of new
Board members. The Board will not display any bias for age, gender,
race, sexual orientation, religion, ethnic or national origins, or
disability in considering the appointment of its Directors.
However, the Board will continue to ensure that all appointments
are made on the basis of merit against the specification prepared
for each appointment and, therefore, the Company does not consider
it appropriate to set diversity targets. At 31 July 2021, there
were three male Directors and two female Directors on the
Board.
Environmental, Social and Governance ("ESG") Engagement
Whilst the management of the Company's investments is not
undertaken with any specific instructions to exclude certain asset
types or classes, the Investment Manager embeds ESG into the
research of each asset class as part of the investment process. ESG
investment is about active engagement, with the goal of improving
the performance of assets held around the world.
The Investment Manager aims to make the best possible
investments for the Company, by understanding the whole picture of
the investments - before, during and after an investment is made.
That includes understanding the environmental, social and
governance risks and opportunities they present - and how these
could affect longer-term performance. Environmental, social and
governance considerations underpin all investment activities. With
1,000+ investment professionals, the Investment Manager is able to
take account of ESG factors in its company research, stock
selection and portfolio construction - supported by more than 50
ESG specialists around the world. Please refer to the published
Annual Report and financial statements for the year ended 31 July
2021 for further detail on the Investment Manager's ESG policies
applicable to the Company.
The Company has no employees as the Board has delegated day to
day management and administrative functions to Aberdeen Standard
Fund Managers Limited. There are therefore no disclosures to be
made in respect of employees. The Company's socially responsible
investment policy is outlined above.
Due to the nature of the Company's business, being a company
that does not offer goods and services to customers, the Board
considers that it is not within the scope of the Modern Slavery Act
2015 because it has no turnover. The Company is therefore not
required to make a slavery and human trafficking statement. In any
event, the Board considers the Company's supply chains, dealing
predominantly with professional advisors and service providers in
the financial services industry, to be low risk in relation to this
matter.
The Company has no greenhouse gas emissions to report from the
operations of its business, nor does it have responsibility for any
other emissions producing sources under the Companies Act 2006
(Strategic Report and Directors' Reports) Regulations 2013.
Viability Statement
The Company does not have a formal fixed period strategic plan
but the Board formally considers risks and strategy at least
annually. The Board considers the Company, with no fixed life, to
be a long term investment vehicle, but for the purposes of this
viability statement has decided that a period of three years is an
appropriate period over which to report. The Board considers that
this period reflects a balance between looking out over a long term
horizon and the inherent uncertainties of looking out further than
three years.
In assessing the viability of the Company over the review period
the Directors have conducted a robust review of the principal
risks, focusing upon the following factors:
- The principal risks detailed in the Strategic Report;
- The ongoing relevance of the Company's investment objective in the current environment;
- The demand for the Company's Shares evidenced by the
historical level of premium and or discount;
- The level of income generated by the Company;
- The level of gearing and flexibility of the Company's Loan Stock and Loan Notes; and
- The liquidity of the Company's portfolio including the results
of stress test analysis performed by the Manager under a wide
number of market scenarios.
Accordingly, taking into account the Company's current position,
the fact that the Company's investments are mostly liquid and the
potential impact of its principal risks and uncertainties, the
Directors have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they fall
due for a period of three years from the date of this Report. In
making this assessment, the Board has considered that matters such
as significant economic or stock market volatility, a substantial
reduction in the liquidity of the portfolio or changes in investor
sentiment could have an impact on its assessment of the Company's
prospects and viability in the future.
Future
The Board's view on the general outlook for the Company can be
found in my Chairman's Statement whilst the Investment Manager's
views on the outlook for the portfolio are included in the
Investment Manager's Review.
Nigel Cayzer,
Chairman
29 November 2021
STRATEGIC REPORT - INVESTMENT MANAGER'S REVIEW
Overview
The share prices of Asian smaller companies rose sharply in
sterling terms in the year under review, far outpacing their
large-cap counterparts. Small caps continued to advance steadily
despite the upheaval wrought by the Covid-19 health crisis. The
rally was underpinned by the shift to work-from-home which
escalated demand for digital solutions. Investors were also hopeful
that the recovery led by China and massive US stimulus would boost
the region's exports. All this more than mitigated disappointment
over a slow vaccine rollout by several countries.
Leading the frontrunners was India. We were pleasantly surprised
by good earnings growth across most sectors. An accommodative
monetary policy, fiscal support for the rural economy, as well as
the significant spending boost for infrastructure, provided a
conducive environment. Also, flexible mobility restrictions during
a deadly second wave of the coronavirus softened the blow on its
economy.
Elsewhere in the region, South Korea and Taiwan's small caps
were propelled by record exports. Technology trends and the
resumption of economic activity worldwide, especially in China,
boosted demand for their semiconductors, electronics goods, cars
and petrochemicals.
Portfolio Review and Activity
The Company's NAV rose by 41.9% in sterling terms, comfortably
outperforming the MSCI AC Asia Pacific ex-Japan Small Cap Index's
gain of 37.2%.
Good stock choices in Taiwan and Hong Kong, as well as the
off-benchmark positions in Vietnam, accounted for the upbeat
performance. By sector, the exposure to retail and technology
proved prudent. In particular, the Trust's sizeable positions in
niche players with significant technology-related advantages were
highly favourable.
The share price of the period's top contributor, Momo.com, more
than tripled as changing consumer habits continued to support the
move to online shopping. The leading Taiwanese business-to-consumer
online retail platform also benefitted from its investments in
logistics and an expansion in product categories. Pacific Basin
further boosted the portfolio with absolute share price gains that
exceeded Momo.com's. The bulk shipping company based in Hong Kong
benefited greatly from rebounding economic activity, higher
commodities prices and consequently higher freight prices.
In Vietnam, technology conglomerate FPT and real estate
developer Nam Long supported the portfolio. We view FPT as one of
the market's best listed companies, with its exposure to the rising
global demand for technology services, particularly from Japan
where digital transformation continues to accelerate. This is
counterbalanced by its interests in domestic-oriented businesses,
such as telecoms, education and retail, which also have good growth
outlooks. Meanwhile, Nam Long is benefiting from a housing market
recovery. We believe its foray into integrated townships, which
include providing amenities such as schools and hospitals, will add
value to its residential projects.
Another standout was South Korea's Park Systems, which
manufactures microscopes integral in the production of increasingly
minuscule computer chips that enhance computing speed. Park
Systems, along with Hana Microelectronics are notable for their
roles in the semiconductor supply chain with the advent of
artificial intelligence, 5G communications networks, electric
vehicles and the Internet of Things.
Meanwhile, the Trust's Indian holdings that contributed included
technology services provider Cyient, consumer marketing technology
company Affle India as well as oil & gas services company Aegis
Logistics. Cyient was boosted by an improving demand outlook for
engineering and technology services, with expectations that it is
at the start of a multi-year upgrading cycle. In Affle's case,
investors were excited by its ability to crunch vast amounts of
data and reach targeted consumers on mobile devices. For Aegis, the
company's storage and logistics segment benefited from the
burgeoning flow of chemicals and fuels across the country. In
addition, the government's push for the adoption of cleaner energy
has also boosted its liquefied natural gas business.
Conversely, the Trust's positions in the financial sector were
hampered by the resurgence of the virus in certain parts of the
region, which in turn, clouded the outlook for these lenders' asset
quality. We remain confident that our financial holdings are of the
highest quality and that they will not be unduly affected. A
military coup in Myanmar in early 2021 also came as a surprise and
led to a sharp sell-off in the shares of Yoma Strategic. We remain
invested and so far the company has announced relatively resilient
results, but we will be monitoring developments closely and the
exposure is contained at less than 1% of the portfolio.
Turning to changes within the portfolio, we participated in the
initial public offerings (IPOs) of two companies in the materials
sector. First was surface materials specialist Nanofilm, which
performed well for your Company. Not only is its proprietary
cutting-edge technology used by the latest smartphones, laptops and
tablets, but it is also the sole supplier to nine of its top 10
customers, including Apple. We are confident about Nanofilm's
long-term prospects, as it embarks on commercialising innovative
products, such as corrosion-resistant coatings that enable the
hydrogen economy. Next was India-listed niche specialty chemicals
company Tatva Chintan. Its products are in high demand, helped by
favourable policies, especially in the area of emissions
control.
Other initiations tied to the accelerated demand for digital
services were Nazara Technologies, eCloudvalley, Taiwan Union
Technology, Aspeed and Pentamaster. An example is Nazara
Technologies, which is dominant in diversified gaming in India. The
company has a growing portfolio of successful titles in eSports,
mobile gaming and recreational e-learning for children. The
fast-paced competitive gaming industry in India is still in its
infancy and we see great potential in the company's gaming and
e-learning ecosystems.
In addition, we introduced a couple of new positions with
greater environmental and social credentials, including Medikaloka
Hermina. The company is a leading private hospital chain in
Indonesia which meets growing demand for services under the
country's new Mandatory Health Insurance Scheme (JKN). It has
proven adept at managing the provision of JKN-related services, and
has emerged as a leader in this area. We were also on the lookout
for companies that would gain from governments' efforts to avert
climate change. To this end, we established a position in KMC. We
expect the global leader in bicycle chains to benefit from higher
demand for cleaner modes of transport in developed markets, as well
as the growing popularity of electric bicycles.
Elsewhere, we initiated Credit Bureau Asia and Yantai Pet Foods.
Credit Bureau is Singapore's main credit bureau. In Cambodia and
Myanmar, it enjoys first-mover advantage as their sole license
holder. We believe it is well-positioned to benefit from steady
demand for high-quality credit, risk and business data. Yantai Pet
Foods is a pet food manufacturer with established credentials and a
diversified customer base of global brands. In addition, it is
developing its own local brand to tap into China's rising pet
ownership and demand for premium products.
Against these, we exited Kansai Nerolac to recycle capital into
more nascent opportunities, as the Indian paint company is
relatively mature and commanded a demanding valuation. We also sold
several companies as our conviction in their investment case waned.
They include Kingmaker Footwear, Mustika Ratu, SBS Transit, Eastern
Water Resources, AEON Co (Malaysia), Public Financial and CDL
Investments.
Outlook
The resurgence of coronavirus infections has given rise to
caution and is likely to delay economic recovery, particularly in
tourism-dependent countries in the region. The Trust's largest
exposure is to India, which is seeing the fruits of government
reform that attempts to reboot its economy after several years of
sluggish growth. Another sizeable allocation is in Taiwan, which
remains very well-positioned in the technology supply chain,
notwithstanding the spillover impact of the conflict between the US
and China. We believe the mainland remains pro-innovation despite
the recent tightening of regulatory oversight, and this should
continue to support export growth throughout the Asia-Pacific
region.
The portfolio provides exposure to high growth sectors that
supply hardware, software and platforms for the latest consumer
electronics, artificial intelligence and the Internet of Things. It
is also positioned in traditional sectors that address the region's
increasing urbanisation needs, as well as rising demand for better
healthcare and aspirational consumer goods in tandem with Asia's
growing affluence. Our focus remains on quality businesses that are
well-placed to benefit from these long-term trends that will power
the overall growth in the region.
Hugh Young and Gabriel Sacks
abrdn Asia Limited
Investment Manager
29 November 2021
STRATEGIC REPORT - RESULTS
FINANCIAL HIGHLIGHTS
31/07/2021 31/07/2020 % change
------------------------------------------ --------------- --------------- ---------
Total assets GBP557,183,000 GBP405,653,000 +37.4
Total equity shareholders' funds
(net assets) GBP487,958,000 GBP358,956,000 +35.9
Net asset value per share (basic) 1,554.52p 1,106.45p +40.5
Net asset value per share (diluted) 1,545.11p n/a
Share price (mid market) 1,330.00p 980.00p +35.7
Market capitalisation GBP417,483,000 GBP317,934,000 +31.3
Discount to net asset value (basic){A} 14.4% 11.4%
Discount to net asset value (diluted){A} 13.9% n/a
MSCI AC Asia Pacific ex Japan Index
(currency adjusted, capital gains
basis) 878.57 786.37 +11.7
MSCI AC Asia Pacific ex Japan Small
Cap Index (currency adjusted, capital
gains basis) 1,878.91 1,399.93 +34.2
Net gearing{A} 10.0% 9.9%
Dividends and earnings
Total return per share (basic){B} 461.70p (182.57)p
Revenue return per share (basic) 7.52p 21.45p -64.9
Dividends per share{C} 16.00p 19.00p -15.8
Dividend cover{A} 0.47 1.13
Revenue reserves{D} GBP12,618,000 GBP16,276,000 -22.5
Operating costs
Ongoing charges ratio{A} 1.10% 1.09%
------------------------------------------ --------------- --------------- ---------
{A} Considered to be an Alternative Performance Measure (see below).
{B} Measures the total earnings for the year divided by the weighted
average number of Ordinary shares in issue (see note 9).
{C} The figures for dividends per share reflect the dividends for
the year in which they were earned.
{D} Prior to payment of final and special dividends.
PERFORMANCE (TOTAL RETURN)
1 year 3 year 5 year 10 year Since
% return % return % return % return inception
------------------------------------- --------- --------- --------- --------- ----------
Share price{A} +38.2 +33.6 +55.8 +131.9 +2040.5
Net asset value per Ordinary share
- diluted{AB} +41.9 +31.3 +58.6 +161.1 +2159.9
MSCI AC Asia Pacific ex Japan Index
(currency adjusted) +14.1 +23.0 +64.1 +116.1 +487.6
MSCI AC Asia Pacific ex Japan Small
Cap Index (currency adjusted) +37.2 +33.1 +62.2 +94.3 n/a
------------------------------------- --------- --------- --------- --------- ----------
{A} Considered to be an Alternative Performance Measure.
{B} 1 year return calculated on a diluted basis as CULS is "in the money".
All other returns are calculated on a diluted basis.
Source: abrdn, Morningstar, Lipper & MSCI
DIVIDS
Rate xd date Record date Payment date
----------------------- ------- --------------- ----------------- ----------------
Proposed final 2021 15.00p 6 January 2022 7 January 2022 2 February 2022
Proposed special 2021 1.00p 6 January 2022 7 January 2022 2 February 2022
----------------------- ------- --------------- ----------------- ----------------
16.00p
----------------------- ------- --------------- ----------------- ----------------
Final 2020 14.50p 12 November 13 November 2020 9 December 2020
2020
Special 2020 4.50p 12 November 13 November 2020 9 December 2020
2020
----------------------- ------- --------------- ----------------- ----------------
19.00p
TEN YEAR FINANCIAL RECORD
Year to 31 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
July
--------------- -------- --------- -------- -------- --------- --------- --------- --------- --------- ---------
Total revenue
(GBP'000) 9,168 11,512 11,427 14,746 10,992 13,896 14,673 14,632 13,595 9,624
--------------- -------- --------- -------- -------- --------- --------- --------- --------- --------- ---------
Per share (p)
Net revenue
return 13.18 13.84 11.43 18.21 9.22 19.31 19.27 21.64 21.45 7.52
Total return 68.56 275.43 (31.46) (50.13) 165.38 172.29 36.78 78.18 (182.57) 461.70
Net ordinary
dividends
paid/proposed 9.50 10.00 10.00 10.50 10.50 12.00 13.00 14.00 14.50 15.00
Net special
dividends
paid/proposed 3.00 3.00 3.00 4.50 - 4.00 4.00 5.00 4.50 1.00
--------------- -------- --------- -------- -------- --------- --------- --------- --------- --------- ---------
Net asset
value
per share (p)
Basic 746.55 1,013.82 968.89 906.16 1,068.92 1,235.45 1,231.83 1,300.56 1,106.45 1,554.52
Diluted n/a 992.81 952.52 896.31 1,042.99 1,192.49 n/a n/a n/a 1,545.11
Shareholders'
funds
(GBP'000) 260,994 382,932 369,118 343,967 383,735 430,105 433,706 441,010 358,956 487,958
INVESTMENT PORTFOLIO
As at 31 July 2021
Investment Portfolio - Ten Largest Investments
MOMO.com Pacific Basin Shipping
Momo, the largest online retailer Pacific Basin is a Hong Kong-based
in Taiwan, serves as a nice proxy dry bulk shipping group with a
for consumer growth in the country, favourable demand outlook, supported
as it is benefiting from the shift by an improving global economy
to online from both consumers and and reopening prospects.
vendors.
Park Systems Corporation Affle India
The Korean company is the leading A consumer technology business
developer of atomic force microscopes, operating a data platform that
a nascent technology that could have helps direct digital advertising.
broad industrial application in sectors It is dominant in India where digitalisation
such as chip-making and biotechnology. has reached an inflection point.
The company's financials are sound, This should support growth for
despite significant upfront sales several years.
and distribution costs, which provides
a solid base for earnings to grow
when orders start to roll in.
Cyient Nam Long Invst Corporation
The Indian company provides engineering A reputable Vietnamese developer
and IT services to clients in developed in Ho Chi Minh City that focuses
markets, competing primarily on quality on the affordable housing segment,
of service and cost of delivery. with a decent land bank and promising
project pipeline.
Hana Microelectronics (Foreign) AEM Holdings
A Thai company with diversified product A Singapore-based provider of advanced
lines in IC packaging and microelectronics, semiconductor chip testing services
proven management ability to manage that has embedded itself in chipmaker
through cycles, debt-free balance Intel's global supply chain.
sheet and strong cash flow.
John Keells Holdings Aegis Logistics
A respected and reputable Sri Lanka A strong and conservative player
conglomerate with a healthy balance in India's gas and liquids logistics
sheet and good execution, John Keells sector, with a first mover advantage
has a hotels and leisure segment that in key ports and a fair amount
includes properties in the Maldives. of capacity expansion to come.
It has other interests in consumer
(food and beverages, ice cream, retail
and supermarket), transportation (bunkering
and container port) and financial
services (banking and life insurance).
Investment Portfolio - Other Investments
As at 31 July 2021
Valuation Total Valuation
2021 assets 2020
Company Industry Country GBP'000 % GBP'000
----------------------------- --------------------------- -------------- ---------- ------- ----------
MOMO.com Retailers Taiwan 33,767 6.1 16,146
Pacific Basin Shipping Industrial Transportation Hong Kong 24,170 4.3 4,476
Electronic and
Park Systems Corporation Electrical Equipment South Korea 21,736 3.9 11,377
Software and
Affle India Computer Services India 17,554 3.1 7,473
Software and
Cyient Computer Services India 17,445 3.1 6,151
Real Estate Investment
Nam Long Invst Corporation and Services Vietnam 15,279 2.7 8,370
Hana Microelectronics Technology Hardware
(Foreign) and Equipment Thailand 14,304 2.6 12,078
Technology Hardware
AEM Holdings and Equipment Singapore 14,267 2.6 14,611
John Keells Holdings General Industrials Sri Lanka 13,941 2.5 11,972
Aegis Logistics Industrial Transportation India 13,799 2.5 8,984
Top ten investments 186,262 33.4
-------------------------------------------------------------------------- ---------- ------- ----------
Bank OCBC NISP Banks Indonesia 13,593 2.5 13,769
Nanofilm Technologies
International Industrial Materials Singapore 13,347 2.4 -
Telecommunications
FPT Corporation Service Providers Vietnam 12,894 2.3 5,569
Precision Tsugami
China Corporation Industrial Engineering China 12,403 2.2 8,647
Real Estate Investment
Cebu Holdings and Services Philippines 12,069 2.2 12,271
Dah Sing Financial
Holdings Banks Hong Kong 11,709 2.1 9,256
Medikaloka Hermina Health Care Providers Indonesia 11,704 2.1 -
Godrej Agrovet Food Producers India 11,676 2.1 8,101
United
M.P. Evans Group Food Producers Kingdom 11,660 2.1 9,886
Technology Hardware
Taiwan Union and Equipment Taiwan 10,693 1.9 -
Top twenty investments 308,010 55.3
-------------------------------------------------------------------------- ---------- ------- ----------
Millennium & Copthorne
Hotels New Zealand{A} Travel and Leisure New Zealand 10,626 1.9 8,453
Mega Lifesciences Pharmaceuticals
(Foreign) and Biotechnology Thailand 10,578 1.9 10,539
Sunonwealth Electric Technology Hardware
Machinery Industry and Equipment Taiwan 10,423 1.9 7,425
United International
Enterprises Food Producers Denmark 10,157 1.8 8,187
Asian Terminals Industrial Transportation Philippines 9,852 1.8 12,315
Technology Hardware
Sporton International and Equipment Taiwan 9,619 1.7 10,030
AKR Corporindo Oil Gas and Coal Indonesia 9,589 1.7 4,939
Pharmaceuticals
Sanofi India and Biotechnology India 9,243 1.7 9,047
Real Estate Investment
Bukit Sembawang Estates and Services Singapore 9,186 1.6 6,598
Raffles Medical Health Care Providers Singapore 8,979 1.6 3,160
Top thirty investments 406,262 72.9
-------------------------------------------------------------------------- ---------- ------- ----------
Oriental Holdings Retailers Malaysia 8,792 1.6 9,762
Ultrajaya Milk Industry
& Trading Food Producers Indonesia 8,525 1.5 9,894
Electronic and
Koh Young Technology Electrical Equipment South Korea 8,347 1.5 4,798
AEON Credit Service Finance and Credit
(M) Services Malaysia 7,553 1.4 6,099
Absolute Clean Energy
(ACE) Electricity Thailand 7,313 1.3 5,784
Investment Banking
and Brokerage
NZX Services New Zealand 6,427 1.1 4,250
Shangri-La Hotels
Malaysia Travel and Leisure Malaysia 5,740 1.0 7,094
Nazara Technologies Leisure Goods India 5,583 1.0 -
Technology Hardware
Aspeed Technology and Equipment Taiwan 5,543 1.0 -
Real Estate Investment
Prestige Estates Projects and Services India 5,521 1.0 2,468
Top forty investments 475,606 85.3
-------------------------------------------------------------------------- ---------- ------- ----------
Yoma Strategic Holdings General Industrials Myanmar 5,392 1.0 8,628
Tisco Financial Group
(Foreign) Banks Thailand 5,154 0.9 4,263
Ecloudvalley Digital Software and
Technology Computer Services Taiwan 5,142 0.9 -
United Plantations Food Producers Malaysia 5,097 0.9 6,737
Thai Stanley Electric Automobiles and
(Foreign) Parts Thailand 4,680 0.8 7,034
Yantai China Pet Foods
(A) Food Producers China 4,619 0.8 -
Technology Hardware
Pentamaster International and Equipment Malaysia 4,271 0.8 -
Software and
Douzone Bizon Computer Services South Korea 4,157 0.8 5,308
Pharmaceuticals
Syngene International and Biotechnology India 3,976 0.7 3,205
Industrial Support
Credit Bureau Asia Services Singapore 3,778 0.7 -
Top fifty investments 521,872 93.6
-------------------------------------------------------------------------- ---------- ------- ----------
Personal Care
Convenience Retail Drug and Grocery
Asia Stores Hong Kong 3,467 0.6 10,064
Automobiles and
KMC Kuei Meng International Parts Taiwan 3,315 0.6 -
Ujjivan Financial Finance and Credit
Services Services India 3,257 0.6 6,999
Tatva Chintan Pharma Chemicals India 2,132 0.4 -
Manulife Holdings Non-life Insurance Malaysia 1,561 0.3 1,502
AEON Credit Service Finance and Credit
(Asia) Services Hong Kong 1,142 0.2 4,815
AEON Thana Sinsap Finance and Credit
Thailand (Foreign) Services Thailand 1,081 0.2 4,550
Goodyear Thailand Automobiles and
(Foreign) Parts Thailand 995 0.2 1,079
Finance and Credit
ORIX Leasing Pakistan Services Pakistan 927 0.2 1,063
AEON Stores Hong Kong Retailers Hong Kong 473 0.1 738
Top sixty investments 540,222 97.0
-------------------------------------------------------------------------- ---------- ------- ----------
Real Estate Investment
YNH Property and Services Malaysia 364 0.1 514
First Sponsor Group Real Estate Investment
(Warrants 21/03/2029) and Services Singapore 303 0.0 -
First Sponsor Group Real Estate Investment
(Warrants 30/05/2024) and Services Singapore 32 0.0 39
G3 Exploration Oil Gas and Coal China - - 123
Total investments 540,921 97.1
-------------------------------------------------------------------------- ---------- ------- ----------
Net current assets 16,262 2.9
-------------------------------------------------------------------------- ----------
Total assets{B} 557,183 100.0
-------------------------------------------------------------------------- ---------- ------- ----------
{A} Holding includes investment in
both common and preference lines.
{B} Total assets less current liabilities.
DIRECTORS' REPORT EXTRACTS
The Directors present their Report and the audited financial
statements for the year ended 31 July 2021.
Results and Dividends
Details of the Company's results and proposed dividends are
shown in the Chairman's Statement.
Investment Trust Status
The Company (registered in England & Wales No. 03106339) has
been accepted by HM Revenue & Customs as an investment trust
subject to the Company continuing to meet the relevant eligibility
conditions of Section 1158 of the Corporation Tax Act 2010 and the
ongoing requirements of Part 2 Chapter 3 Statutory Instrument
2011/2999 for all financial years commencing on or after 1 August
2012. The Directors are of the opinion that the Company has
conducted its affairs for the year ended 31 July 2021 so as to
enable it to comply with the ongoing requirements for investment
trust status.
Individual Savings Accounts
The Company has conducted its affairs so as to satisfy the
requirements as a qualifying security for Individual Savings
Accounts. The Directors intend that the Company will continue to
conduct its affairs in this manner.
Capital Structure, Buybacks and Issuance
The Company's capital structure is summarised in note 14 to the
financial statements. At 31 July 2021, there were 31,189,684 fully
paid Ordinary shares of 25p each (2020 - 32,442,209 Ordinary
shares) in issue with a further 10,348,918 Ordinary shares of 25p
held in treasury (2020 - 9,293,918 treasury shares). During the
year 1,055,000 Ordinary shares were purchased in the market for
treasury (2020 - 1,484,256). During the period and up to the date
of this report no new Ordinary shares were issued for cash at a
premium to the prevailing NAV per share and no shares were sold
from or purchased into treasury.
On 14 December 2020, 16,359 units of Convertible Unsecured Loan
Stock 2025 were converted into 1,110 new Ordinary shares. On 14
June 2021 20,117 units of Convertible Unsecured Loan Stock 2025
were converted into 1,365 new Ordinary shares. In accordance with
the terms of the CULS Issue, the conversion price of the CULS for
both conversions was determined at 1465.0 pence nominal of CULS for
one Ordinary share.
Voting Rights
Ordinary shareholders are entitled to vote on all resolutions
which are proposed at general meetings of the Company. The Ordinary
shares carry a right to receive dividends. On a winding up, after
meeting the liabilities of the Company, the surplus assets will be
paid to Ordinary shareholders in proportion to their
shareholdings.
CULS holders have the right to attend but not vote at general
meetings of the Company. A separate resolution of CULS holders
would be required to be passed before any modification or
compromise of the rights attaching to the CULS can be made.
Gearing
O n 1 December 2020 the Company issued a GBP30 million 15 year
Senior Unsecured Loan Note (the "Loan Note") at an annualised
interest rate of 3.05%. The Loan Note is unsecured, unlisted and
denominated in sterling. The Loan Note ranks pari passu with the
Company's other unsecured and unsubordinated financial
indebtedness. The Company used the proceeds of the Loan Note issue
to repay, and cancel in full, the Company's loan facility with RBS
and the remainder was invested in the portfolio by the Investment
Manager.
Management Agreement
The Company has appointed Aberdeen Standard Fund Managers
Limited ("ASFML"), a wholly owned subsidiary of abrdn plc, as its
alternative investment fund manager. ASFML has been appointed to
provide investment management, risk management, administration and
company secretarial services and promotional activities to the
Company. The Company's portfolio is managed by abrdn Asia Limited
(previously known as Aberdeen Standard Investments (Asia) Limited)
("abrdn Asia") by way of a group delegation agreement in place
between ASFML and abrdn Asia. In addition, ASFML has sub-delegated
administrative and secretarial services to Aberdeen Asset
Management PLC and promotional activities to Aberdeen Asset
Managers Limited ("AAML").
Management Fee
With effect from 1 November 2018, the management fee has been
payable monthly in arrears at the rate of 0.08% of the Market Cap
(as defined below) per calendar month, exclusive of Value Added Tax
where applicable. "Market Cap" for the above is defined as the
market capitalisation of the Company, based on the closing Ordinary
share price quoted on the London Stock Exchange multiplied by the
Ordinary shares in issue (less the number of any Ordinary shares
held in Treasury), as determined on the last business day of the
applicable calendar month to which the remuneration relates.
With effect from 1 January 2022 the management agreement may be
terminated by either the Company or the Manager on the expiry of
three months' written notice (reduced from 12 months). On
termination, the Manager would be entitled to receive fees which
would otherwise have been due to that date.
The Management Engagement Committee reviews the terms of the
management agreement on a regular basis and have confirmed that,
due to the long-term relative performance, investment skills,
experience and commitment of the investment management team, in
their opinion the continuing appointment of ASFML and abrdn Asia is
in the interests of shareholders as a whole.
Political and Charitable Donations
The Company does not make political donations (2020 - nil) and
has not made any charitable donations during the year (2020 -
nil).
Risk Management
Details of the financial risk management policies and objectives
relative to the use of financial instruments by the Company are set
out in note 19 to the financial statements.
The Board
The current Directors, N K Cayzer, Randal Dunluce (Viscount
Dunluce), C Black, D Guthrie and K Shanmuganathan, together with M
J Gilbert (and his alternate H Young) who retired on 27 November
2020 and P Yea who retired on 1 December 2020, were the only
Directors who served during the year. Pursuant to Principle 23 of
the AIC's Code of Corporate Governance which recommends that all
directors should be subject to annual re-election by shareholders,
all the members of the Board will retire at the AGM scheduled for
27 January 2022 and will offer themselves for re-election. Details
of each Director's contribution to the long term success of the
Company are provided under 'Nomination Committee' below..
The Board considers that there is a balance of skills and
experience within the Board relevant to the leadership and
direction of the Company and that all the Directors contribute
effectively.
In common with most investment trusts, the Company has no
employees. Directors' & Officers' liability insurance cover has
been maintained throughout the year at the expense of the
Company.
The Role of the Chairman
The Chairman is responsible for providing effective leadership
to the Board, by setting the tone of the Company, demonstrating
objective judgement and promoting a culture of openness and debate.
The Chairman facilitates the effective contribution, and encourages
active engagement, by each Director. In conjunction with the
Company Secretary, the Chairman ensures that Directors receive
accurate, timely and clear information to assist them with
effective decision-making. The Chairman leads the evaluation of the
Board and individual Directors, and acts upon the results of the
evaluation process by recognising strengths and addressing any
weaknesses. The Chairman also engages with major shareholders and
ensures that all Directors understand shareholder views.
The Company has not appointed a senior independent director.
Accordingly the Audit Committee Chairman in combination with the
other independent Directors fulfils the duties of the senior
independent director, acting as a sounding board for the Chairman
and acting as an intermediary for other directors as applicable.
The Audit Committee Chairman is also available to shareholders to
discuss any concerns they may have.
Corporate Governance
The Company is committed to high standards of corporate
governance. The Board is accountable to the Company's shareholders
for good governance and this statement describes how the Company
has applied the principles identified in the UK Corporate
Governance Code as published in July 2018 (the "UK Code"), which is
available on the Financial Reporting Council's (the "FRC") website:
frc.org.uk.
The Board has also considered the principles and provisions of
the AIC Code of Corporate Governance as published in February 2019
(the "AIC Code"). The AIC Code addresses the principles and
provisions set out in the UK Code, as well as setting out
additional provisions on issues that are of specific relevance to
the Company. The AIC Code is available on the AIC's website:
theaic.co.uk.
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the FRC
provides more relevant information to shareholders.
The Board confirms that, during the year, the Company complied
with the principles and provisions of the AIC Code and the relevant
provisions of the UK Code, except as set out below.
1. interaction with the workforce (provisions 2, 5 and 6);
2. the role and responsibility of the chief executive (provisions 9 and 14);
3. previous experience of the chairman of a remuneration committee (provision 32);
4. executive directors' remuneration (provisions 33 and 36 to 40);
5. senior independent director (provision 12); and
6. tenure of the Chairman (provision 19).
For the reasons set out in the AIC Code, and as explained in the
UK Corporate Governance Code, the Board considers that provisions 1
to 4 above are not relevant to the position of the Company, being
an externally-managed investment company. In particular, all of the
Company's day-to-day management and administrative functions are
outsourced to third parties. As a result, the Company has no
executive directors, employees or internal operations. The Company
has therefore not reported further in respect of provisions 1 to 4
above. The tenure of the Chairman is discussed further under
'Policy on Tenure', below. The full text of the Company's Corporate
Governance Statement can be found on the Company's website:
asia-focus.co.uk.
During the year ended 31 July 2021, the Board had five scheduled
meetings. In addition, the Audit Committee met twice and the
Management Engagement Committee met once and there has been a
number of ad hoc Board meetings to discuss investment strategy.
Between meetings the Board maintains regular contact with the
Manager. Directors have attended the following scheduled Board
meetings and Committee meetings during the year ended 31 July 2021
(with their eligibility to attend the relevant meeting in
brackets):
Management
Audit Nomination Engagement
Director Board Com. Com. Com.
------------------ ------- ------- ------------ ------------
N Cayzer (A) 5 (5) n/a 3 (3) 1 (1)
C Black 5 (5) 2 (2) 3 (3) 1 (1)
Viscount Dunluce 5 (5) 2 (2) 3 (3) 1 (1)
D Guthrie 5 (5) 2 (2) 3 (3) 1 (1)
K Shanmuganathan 5 (5) 2 (2) 3 (3) 1 (1)
M Gilbert (B) 1 (1) n/a n/a n/a
P Yea (C) 1 (1) 1 (1) 1 (2) 1 (1)
------------------ ------- ------- ------------ ------------
(A) Mr Cayzer is not a member of the Audit Committee
(B) Prior to his retirement on 27 November 2020 Mr Gilbert was
not a member of the Audit, Nomination or Management Engagement
Committees and his Board meeting attendance includes attendance by
Mr Young as Alternate Director to Mr Gilbert
(C) Mr Yea retired from the Board on 1 December 2020
Policy on Tenure - Chairman
The Company's policy, which is kept under very regular review,
is in line with the Listing Rules, the Chairman must remain
independent of the Manager and the Company. The independent
Directors believe that the independence of the Chairman should be
judged by the degree to which the interests of the shareholders and
stakeholders as a whole are being served. The Directors note that
the Chairman has successfully overseen the affairs of the Company
through a number of significant and tumultuous Asian investment
cycles and this experience and in-depth knowledge of the Company is
extremely beneficial to the Directors, shareholders and all
stakeholders alike. The independent Directors, excluding the
Chairman, have reviewed the Company's policy on the tenure of the
Chairman in the light of the recent changes to the UK Corporate
Governance Code. The review focused on the independence of the
Chairman from the Manager as well as the Company itself and
concluded that, notwithstanding the tenure of the Chairman he
remains completely independent. In forming this conclusion the
independent Directors were able to draw upon the Chairman's
demonstrable track record which includes:
- Overseeing the refreshment of the Board;
- Overseeing the introduction of a revised investment policy in 2018;
- Encouraging the Manager to proactively expand its focus on the
smaller company investment universe;
- Successfully negotiating a significant reduction in the level of management fee.
Policy on Tenure - Directors
The Board's policy on tenure is that Directors need not serve on
the Board for a limited period of time only. The Board does not
consider that the length of service of a Director is as important
as the contribution he or she has to make, and therefore the length
of service will be determined on a case-by-case basis. In
accordance with corporate governance best practice, all Directors,
including those who have served for more than nine years or who are
non-independent, voluntarily offer themselves for re-election on an
annual basis.
Board Committees
Audit Committee
The Audit Committee Report is on pages 57 to 59 of the published
Annual Report and financial statements for the year ended 31 July
2021.
Nomination Committee
All appointments to the Board of Directors are considered by the
Nomination Committee which comprises all of the Directors. The
Board's overriding priority in appointing new Directors to the
Board is to identify the candidate with the best range of skills
and experience to complement existing Directors. The Board also
recognises the benefits of diversity and its policy on diversity is
referred to in the Strategic Report.
The Board undertakes an annual evaluation of the Board,
Directors, the Chairman and the Audit Committee which is conducted
by questionnaires. The 2021 evaluation highlighted certain areas of
further focus such as continuing professional development which
will be addressed with input where necessary from the Company's
advisors. Overall, the Committee has concluded that the Board has
an excellent balance of experience, knowledge of investment
markets, legal regulation and financial accounting and continues to
work in a collegiate and effective manner.
The Nomination Committee has reviewed the contributions of each
Director ahead of their proposed election and re-elections at the
AGM on 27 January 2022. Notwithstanding that Mr Cayzer has served
on the Board for 26 years, the Committee is of the view that Mr
Cayzer remains very independent of the Manager. He has continued to
Chair meetings in an orderly, open and independent manner allowing
sufficient time for key areas of focus whilst allowing all
significant matters to be fully debated and has lead the Board's
investment review during the year. Ms Black has brought significant
financial promotion and marketing expertise to the Board; Ms
Guthrie has brought significant investment insight, investment
trust expertise and attention to detail to the Board during the
year; Viscount Dunluce has brought detailed wealth management
investment experience and insight to the Board; and Mr
Shanmuganathan has brought deep experience of Asia as well as
significant strategic and financial vision to the Board. For the
foregoing reasons, the independent members of the Nomination
Committee have no hesitation in recommending the
election/re-election of each Director who will be submitting
themselves for re-election at the AGM on 27 January 2022.
Management Engagement Committee
The Management Engagement Committee comprises all of the
Directors and with effect from Mr Yea's retirement on 1 December
2020 has been chaired by Ms Guthrie. The Committee reviews the
performance of the Investment Manager and its compliance with the
terms of the management and secretarial agreement. The terms and
conditions of the Investment Manager's appointment, including an
evaluation of fees, are reviewed by the Committee on an annual
basis. The Committee believes that the continuing appointment of
the Manager on the terms agreed is in the interests of shareholders
as a whole.
Remuneration Committee
Under the UK Listing Authority rules, where an investment trust
has only non-executive directors, the Code principles relating to
directors' remuneration do not apply. Accordingly, matters relating
to remuneration are dealt with by the full Board, which acts as the
Remuneration Committee, and is chaired by Mr Cayzer.
The Company's remuneration policy is to set remuneration at a
level to attract individuals of a calibre appropriate to the
Company's future development. Further information on remuneration
is disclosed in the Directors' Remuneration Report.
Terms of Reference
The terms of reference of all the Board Committees may be found
on the Company's website asia-focus.co.uk and copies are available
from the Company Secretary upon request. The terms of reference are
reviewed and re-assessed by the Board for their adequacy on an
annual basis.
Going Concern
In accordance with the Financial Reporting Council's guidance
the Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern. The Company's assets
consist of equity shares in companies listed on recognised stock
exchanges and are considered by the Board to be realisable within a
relatively short timescale under normal market conditions. The
Board has set overall limits for borrowing and reviews regularly
the Company's level of gearing, cash flow projections and
compliance with banking covenants. The Board has also reviewed
stress testing and liquidity analysis covering the impact of
significant historical market events such as the 1997 Asian Crisis
and 2008 Global Financial Crisis on the liquidity of the portfolio
to ensure that even in significant negative markets the Company
would still be able to raise sufficient capital to repay its
liabilities.
The Directors are mindful of the Principal Risks and
Uncertainties disclosed in the Strategic Report and they believe
that the Company has adequate financial resources to continue its
operational existence for a period of not less than 12 months from
the date of approval of this Annual Report. They have arrived at
this conclusion having confirmed that the Company's diversified
portfolio of realisable securities is sufficiently liquid and could
be used to meet short-term funding requirements were they to arise,
including in current market conditions caused by the Covid-19
pandemic. The Directors have also reviewed the revenue and ongoing
expenses forecasts for the coming year. Accordingly, the Directors
believe that it is appropriate to continue to adopt the going
concern basis in preparing the financial statements.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation
where a Director has a conflict of interest. As part of this
process, the Directors prepare a list of other positions held and
all other conflict situations that may need to be authorised either
in relation to the Director concerned or his connected persons. The
Board considers each Director's situation and decides whether to
approve any conflict, taking into consideration what is in the best
interests of the Company and whether the Director's ability to act
in accordance with his or her wider duties is affected. Each
Director is required to notify the Company Secretary of any
potential, or actual, conflict situations that will need
authorising by the Board. Authorisations given by the Board are
reviewed at each Board meeting.
No Director has a service contract with the Company although
Directors are issued with letters of appointment upon appointment.
The Directors' interests in contractual arrangements with the
Company are as shown in note 18 to the financial statements. No
other Directors had any interest in contracts with the Company
during the period or subsequently.
The Board has adopted appropriate procedures designed to prevent
bribery. The Company receives periodic reports from its service
providers on the anti-bribery policies of these third parties. It
also receives regular compliance reports from the Manager.
The Criminal Finances Act 2017 introduced a new corporate
criminal offence of "failing to take reasonable steps to prevent
the facilitation of tax evasion". The Board has confirmed that it
is the Company's policy to conduct all of its business in an honest
and ethical manner. The Board takes a zero-tolerance approach to
facilitation of tax evasion, whether under UK law or under the law
of any foreign country.
Accountability and Audit
The respective responsibilities of the Directors and the
auditors in connection with the financial statements are set out on
pages 56 and 67 of the published Annual Report and financial
statements for the year ended 31 July 2021 respectively.
Each Director confirms that:
- so far as he or she is aware, there is no relevant audit
information of which the Company's auditors are unaware; and,
- each Director has taken all the steps that they could
reasonably be expected to have taken as a Director in order to make
themselves aware of any relevant audit information and to establish
that the Company's auditors are aware of that information.
Additionally there have been no important events since the year
end that impact this Annual Report.
The Directors have reviewed the independent auditors' procedures
in connection with the provision of of non-audit services. No non
audit services were provided by the independent auditors during the
year and the Directors remain satisfied that the auditors'
objectivity and independence has been safeguarded.
Independent Auditors
At the 2020 AGM shareholders approved the appointment of
PricewaterhouseCoopers LLP ("PwC") as independent auditors to the
Company with effect from 1 December 2020. PwC has expressed its
willingness to continue to be the Company's auditors and a
Resolution to re-appoint PwC as the Company's auditors and to
authorise the Directors to fix the auditors' remuneration will be
put to the forthcoming Annual General Meeting.
Internal Control
The Board is ultimately responsible for the Company's system of
internal control and for reviewing its effectiveness and confirms
that there is an ongoing process for identifying, evaluating and
managing the significant risks faced by the Company. This process
has been in place for the year under review and up to the date of
approval of this Annual Report and Financial Statements. It is
regularly reviewed by the Board and accords with the FRC
Guidance.
The Board has reviewed the effectiveness of the system of
internal control. In particular, it has reviewed and updated the
process for identifying and evaluating the significant risks
affecting the Company and policies by which these risks are
managed.
The Directors have delegated the investment management of the
Company's assets to the abrdn Group within overall guidelines, and
this embraces implementation of the system of internal control,
including financial, operational and compliance controls and risk
management. Internal control systems are monitored and supported by
the abrdn Group's internal audit function which undertakes periodic
examination of business processes, including compliance with the
terms of the management agreement, and ensures that recommendations
to improve controls are implemented.
Risks are identified and documented through a risk management
framework by each function within the abrdn Group's activities.
Risk includes financial, regulatory, market, operational and
reputational risk. This helps the internal audit risk assessment
model identify those functions for review. Any weaknesses
identified are reported to the Board, and timetables are agreed for
implementing improvements to systems. The implementation of any
remedial action required is monitored and feedback provided to the
Board.
The significant risks faced by the Company have been identified
as being financial; operational; and compliance-related.
The key components of the process designed by the Directors to
provide effective internal control are outlined below:
- the Manager prepares forecasts and management accounts which
allow the Board to assess the Company's activities and review its
performance;
- the Board and Manager have agreed clearly defined investment
criteria, specified levels of authority and exposure limits.
Reports on these issues, including performance statistics and
investment valuations, are regularly submitted to the Board and
there are meetings with the Manager and Investment Manager as
appropriate;
- as a matter of course the Manager's compliance department
continually reviews abrdn's operations and reports to the Board on
a six monthly basis;
- written agreements are in place which specifically define the
roles and responsibilities of the Manager and other third party
service providers and, where relevant, ISAE3402 Reports, a global
assurance standard for reporting on internal controls for service
organisations, or their equivalents are reviewed;
- the Board has considered the need for an internal audit
function but, because of the compliance and internal control
systems in place within abrdn, has decided to place reliance on the
Manager's systems and internal audit procedures; and
- at its September 2021 meeting, the Audit Committee carried out
an annual assessment of internal controls for the year ended 31
July 2021 by considering documentation from the Manager, Investment
Manager and the Depositary, including the internal audit and
compliance functions and taking account of events since 31 July
2021. The results of the assessment, that internal controls are
satisfactory, were then reported to the Board at the next Board
meeting.
Internal control systems are designed to meet the Company's
particular needs and the risks to which it is exposed. Accordingly,
the internal control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives and by
their nature can only provide reasonable and not absolute assurance
against mis-statement and loss.
Substantial Interests
The Board has been advised that the following shareholders owned
3% or more of the issued Ordinary share capital of the Company at
31 July 2021:
No. of Ordinary
Shareholder shares held % held
--------------------------------------------- --------------- -------
City of London Investment Management Company 6,532,586 20.8
============================================= =============== =======
Wells Capital Management 3,089,631 9.8
============================================= =============== =======
abrdn Savings Scheme (non-beneficial) 2,573,091 8.2
============================================= =============== =======
Interactive Investor 2,504,659 8.0
============================================= =============== =======
Hargreaves Lansdown 2,233,499 7.1
============================================= =============== =======
Funds managed by abrdn 1,400,258 4.5
============================================= =============== =======
Charles Stanley 1,140,042 3.6
============================================= =============== =======
On 1 November 2021 the Company received notice that Wells
Capital Management had divested its stake in the Company which
represented 10.2% of the issued capital. On 2 November 2021 the
Company was notified that Allspring Global Investments Holdings LLC
had acquired an interest in 3,253,231 Ordinary shares, representing
10.4% of the issued capital. There have been no other significant
changes notified in respect of the above holdings between 31 July
2021 and 29 November 2021.
The UK Stewardship Code and Proxy Voting
Responsibility for actively monitoring the activities of
portfolio companies has been delegated by the Board to the AIFM
which has sub-delegated that authority to the Manager.
The Manager is a tier 1 signatory of the UK Stewardship Code
which aims to enhance the quality of engagement by investors with
investee companies in order to improve their socially responsible
performance.
Relations with Shareholders
The Directors place a great deal of importance on communication
with shareholders. The Annual Report is widely distributed to other
parties who have an interest in the Company's performance.
Shareholders and investors may obtain up to date information on the
Company through the Manager's freephone information service and the
Company's website asia-focus.co.uk. The Company responds to letters
from shareholders on a wide range of issues.
The Board's policy is to communicate directly with shareholders
and their representative bodies without the involvement of the
abrdn Group (either the Company Secretary or the Manager) in
situations where direct communication is required and usually a
representative from the Board meets with major shareholders on an
annual basis in order to gauge their views.
The Notice of the Annual General Meeting, included within the
Annual Report and Accounts, is sent out at least 20 working days in
advance of the meeting. All shareholders have the opportunity to
put questions to the Board or the Manager, either formally at the
Company's Annual General Meeting or, where possible, at the
subsequent buffet luncheon for shareholders. The Company Secretary
is available to answer general shareholder queries at any time
throughout the year.
Special Business at the Annual General Meeting
Directors' Authority to Allot Relevant Securities
Approval is sought in Resolution 11, an ordinary resolution, to
renew the Directors' existing general power to allot securities but
will also, provide a further authority (subject to certain limits),
to allot shares under a fully pre-emptive rights issue. The effect
of Resolution 11 is to authorise the Directors to allot up to a
maximum of 20,926,456 shares in total (representing approximately
2/3 of the existing issued capital of the Company, of which a
maximum of 10,463,228 shares (approximately 1/3 of the existing
issued share capital) may only be applied to fully pre-emptive
rights issues. This authority is renewable annually and will expire
at the conclusion of the next Annual General Meeting. The Board has
no present intention to utilise this authority.
Disapplication of Pre-emption Rights
Resolution 12 is a special resolution that seeks to renew the
Directors' existing authority until the conclusion of the next
Annual General Meeting to make limited allotments of shares for
cash of up to 10% of the issued share capital other than according
to the statutory pre-emption rights which require all shares issued
for cash to be offered first to all existing shareholders. This
authority includes the ability to sell shares that have been held
in treasury (if any), having previously been bought back by the
Company. The Board has established guidelines for treasury shares
and will only consider buying in shares for treasury at a discount
to their prevailing NAV and selling them from treasury at or above
the then prevailing NAV.
New shares issued in accordance with Resolution 12 and subject
to the authority to be conferred by Resolution 11 will always be
issued at a premium to the NAV per Ordinary share at the time of
issue. The Board will issue new Ordinary shares or sell Ordinary
shares from treasury for cash when it is appropriate to do so, in
accordance with its current policy. It is therefore possible that
the issued share capital of the Company may change between the date
of this document and the Annual General Meeting and therefore the
authority sought will be in respect of 10% of the issued share
capital as at the date of the Annual General Meeting rather than
the date of this document.
Purchase of the Company's Shares
Resolution 13 is a special resolution proposing to renew the
Directors' authority to make market purchases of the Company's
shares in accordance with the provisions contained in the Companies
Act 2006 and the Listing Rules of the Financial Conduct Authority.
The minimum price to be paid per Ordinary share by the Company will
not be less than 25p per share (being the nominal value) and the
maximum price should not be more than the higher of (i) 5% above
the average of the middle market quotations for the shares for the
preceding five business days; and (ii) the higher of the last
independent trade and the current highest independent bid on the
trading venue where the purchase is carried out.
The Directors do not intend to use this authority to purchase
the Company's Ordinary shares unless to do so would result in an
increase in NAV per share and would be in the interests of
shareholders generally. The authority sought will be in respect of
14.99% of the issued share capital as at the date of the Annual
General Meeting rather than the date of this document.
The authority being sought in Resolution 13 will expire at the
conclusion of the next Annual General Meeting unless it is renewed
before that date. Any Ordinary shares purchased in this way will
either be cancelled and the number of Ordinary shares will be
reduced accordingly or under the authority granted in Resolution 12
above, may be held in treasury. During the year the Company has
bought back 1,055,000 Ordinary shares for Treasury.
If Resolutions 11 to 13 are passed then an announcement will be
made on the date of the Annual General Meeting which will detail
the exact number of Ordinary shares to which each of these
authorities relate.
These powers will give the Directors additional flexibility
going forward and the Board considers that it will be in the
interests of the Company that such powers be available. Such powers
will only be implemented when, in the view of the Directors, to do
so will be to the benefit of shareholders as a whole.
Notice of Meetings
Resolution 14 is a special resolution seeking to authorise the
Directors to call general meetings of the Company (other than
Annual General Meetings) on 14 days' notice. This approval will be
effective until the Company's next Annual General Meeting in 2022.
In order to utilise this shorter notice period, the Company is
required to ensure that shareholders are able to vote
electronically at the general meeting called on such short notice.
The Directors confirm that, in the event that a general meeting is
called, they will give as much notice as practicable and will only
utilise the authority granted by Resolution 16 in limited and time
sensitive circumstances.
Recommendation
Your Board considers Resolutions 11 to 14 to be in the best
interests of the Company and its members as a whole and most likely
to promote the success of the Company for the benefit of its
members as a whole. Accordingly, your Board unanimously recommends
that shareholders should vote in favour of Resolutions 11 to 14 to
be proposed at the AGM, as they intend to do in respect of their
own beneficial shareholdings amounting to 9,565 Ordinary
shares.
By order of the Board
Aberdeen Asset Management PLC -Secretaries
Bow Bells House, 1 Bread Street
London EC4M 9HH
29 November 2021
DIRECTORS' REMUNERATION REPORT
The Board has prepared this report in accordance with the
regulations governing the disclosure and approval of Directors'
remuneration. This Directors' Remuneration Report comprises three
parts:
1. Remuneration Policy which is subject to a binding shareholder
vote every three years (or sooner if varied during this interval) -
most recently voted on at the AGM on 1 December 2020;
2. Implementation Report which provides information on how the
Remuneration Policy has been applied during the year and which is
subject to an advisory vote on the level of remuneration paid
during the year; and
3. Annual Statement.
The law requires the Company's auditors to audit certain of the
disclosures provided. Where disclosures have been audited, they are
indicated as such. The auditors' opinion is included in the report
on page 66 of the published Annual Report and financial statements
for the year ended 31 July 2021.
Remuneration Policy
The Directors' Remuneration Policy takes into consideration the
principles of UK Corporate Governance and there have been no
changes to the policy during the period of this Report nor are
there any proposals for the foreseeable future.
As the Company has no employees and the Board is comprised
wholly of non-executive Directors and, given the size and nature of
the Company, the Board has not established a separate Remuneration
Committee. Directors' remuneration is determined by the Board as a
whole.
The Directors are non-executive and the Company's Articles of
Association limit the annual aggregate fees payable to the Board of
Directors to GBP225,000 per annum. This cap may be increased by
shareholder resolution from time to time and was last increased at
the Annual General Meeting held in December 2013.
31 July 2021 31 July 2020
GBP GBP
---------------------------- ------------ ------------
Chairman 35,500 35,000
============================ ============ ============
Chairman of Audit Committee 30,500 30,000
============================ ============ ============
Director 27,500 27,000
---------------------------- ------------ ------------
Subject to this overall limit, the Board's policy is that the
remuneration of non-executive Directors should reflect the nature
of their duties, responsibilities and the value of their time spent
and be fair and comparable to that of other investment trusts that
are similar in size, have a similar capital structure and have a
similar investment objective.
Appointment
- The Company only intends to appoint non-executive Directors.
- All the Directors are non-executive appointed under the terms of Letters of Appointment.
- Directors must retire and be subject to re-election at the
first AGM after their appointment, and at least every three years
thereafter.
- New appointments to the Board will be placed on the fee
applicable to all Directors at the time of appointment (currently
GBP27,500 per annum).
- No incentive or introductory fees will be paid to encourage a Directorship.
- The Directors are not eligible for bonuses, pension benefits,
share options, long term incentive schemes or other benefits.
- Directors are entitled to re-imbursement of out-of-pocket
expenses incurred in connection with the performance of their
duties, including travel expenses.
- The Company indemnifies its Directors for all costs, charges,
losses, expenses and liabilities which may be incurred in the
discharge of duties, as a Director of the Company.
Performance, Service Contracts, Compensation and Loss of
Office
- The Directors' remuneration is not subject to any performance-related fee.
- No Director has a service contract.
- No Director has an interest in any contracts with the Company
during the period or subsequently.
- The terms of appointment provide that a Director may be removed upon three months' notice.
- Compensation will not be due upon leaving office.
- No Director is entitled to any other monetary payment or to any assets of the Company.
Directors' and Officers' liability insurance cover is maintained
by the Company on behalf of the Directors. Under the Articles, the
Company indemnifies each of the Directors out of the assets of the
Company against any liability incurred by them as a Director in
defending proceedings or in connection with any application to the
Court in which relief is granted and separate deeds of indemnity
exist in this regard between the Company and each Director.
Implementation Report
Directors' Fees
During the year the Board carried out its annual review of the
level of fees payable to Directors including a review of comparable
peer group directors' fees. Following the review it was concluded
that the fees should be increased by GBP500 per Director from 1
January 2021, broadly to reflect the impact of inflation in 2020.
The current levels are therefore GBP35,500, GBP30,500 and GBP27,500
for the Chairman, Audit Committee Chairman and other Directors,
respectively. The Directors' fees were previously last increased in
October 2017. There are no further fees to disclose as the Company
has no employees, chief executive or executive directors.
Company Performance
The following chart illustrates the total shareholder return
(including reinvested dividends) for a holding in the Company's
shares as compared to the MSCI AC Asia Pacific ex Japan Index (in
Sterling terms) for the ten year period to 31 July 2021 (rebased to
100 at 31 July 2011). Given the absence of any meaningful index
with which to compare performance, this index is deemed to be the
most appropriate one against which to measure the Company's
performance.
Statement of Voting at General Meeting
At the Company's last Annual General Meeting, held on 4 December
2019, shareholders approved the Directors' Remuneration Report in
respect of the year ended 31 July 2019 and the following proxy
votes were received on the resolutions:
Resolution For (A) Against Withheld
--------------------------------------------- ---------- --------- --------
(2) Receive and Adopt Directors'
Remuneration Report 17.4m 25,912 42,981
(99.85%) (0.15%)
--------------------------------------------- ---------- --------- --------
(3) To approve the Directors' Remuneration
Policy (B) 17.4m 37,646 44,790
(99.78%) (0.22%)
--------------------------------------------- ---------- --------- --------
(A) Including discretionary votes
(B) Approved at the AGM held on 1 December 2020
Spend on Pay
As the Company has no employees, the Board does not consider it
appropriate to present a table comparing remuneration paid to
Directors with distributions to shareholders. Fees are pro-rated
where a change takes place during a financial year.
The total fees paid to Directors are shown below.
Audited Information
Fees Payable
The Directors who served in the year received the following
fixed fees which exclude employers' NI and any VAT payable:
Director 2021 2020
GBP GBP
-------------------------------------- ------- -------
N K Cayzer (Chairman and highest paid
Director) 35,292 35,000
====================================== ======= =======
Viscount Dunluce 27,292 27,000
====================================== ======= =======
K Shanmuganathan (A) 27,292 4,350
====================================== ======= =======
C Black 27,292 27,000
====================================== ======= =======
D Guthrie 29,292 27,000
M J Gilbert (B) - -
P Yea (C) 10,081 30,000
H Fukuda (D) - 18,000
Total 156,541 168,350
-------------------------------------- ------- -------
(A) Mr Shanmuganathan was appointed to the Board on 3 June
2020
(B) Prior to his retirement on 27 November 2020 Mr Gilbert had
waived his fees
(C) Mr Yea retired from the Board on 1 December 2020
(D) Ms Fukuda retired from the Board on 31 March 2020
No taxable benefits were paid to Directors during the year.
Annual Percentage Change in Directors' Remuneration
The table below sets out the annual percentage change in
Directors' fees for the past two years.
31 July 2021 31 July 2020
Director % %
------------------------------------------------ ------------- -------------
N K Cayzer (Chairman and highest paid Director) 0.8% 0%
================================================ ============= =============
Viscount Dunluce 1.1% 0%
================================================ ============= =============
K Shanmuganathan (A) 84.1% n/a
================================================ ============= =============
C Black (B) 1.1% +45.7%
================================================ ============= =============
D Guthrie (B) 1.1% +45.7%
------------------------------------------------ ------------- -------------
(A) Mr Shanmuganathan was appointed to the Board on 3 June
2020
(B) Ms Black and Ms Guthrie were appointed to the Board on 16
January 2019
Sums Paid to Third Parties
None of the fees disclosed above were payable to third parties
in respect of making available the services of Directors. Up until
his retirement on 27 November 2020, Mr Gilbert had waived his
entitlement to receive non executive Director's fees. The amounts
paid by the Company to the Directors were for services as
non-executive Directors.
Directors' Interests in the Company
The Directors are not required to have a shareholding in the
Company. The Directors' interests in contractual arrangements with
the Company are as shown in note 18 to the financial statements.
The Directors (including connected persons) at 31 July 2021, and 31
July 2020, had no interest in the share capital of the Company
other than those interests, all of which are beneficial interests,
shown in the following table.
31 July 2021 31 July 2020
(A)
Ordinary shares Ordinary shares
------------------------ --------------- ---------------
N K Cayzer - -
Viscount Dunluce 800 800
K Shanmuganathan 1,054 1,054
C Black 958 958
D Guthrie 4,690 4,690
M J Gilbert (A) 106,250 106,250
P Yea (A) 2,063 2,063
H Young (alternate) (A) 149,535 149,535
------------------------ --------------- ---------------
(A) or date of retirement, if earlier
The above interests are unchanged at 29 November 2021, being the
nearest practicable date prior to the signing of this Report.
Annual Statement
On behalf of the Board and in accordance with Part 2 of Schedule
8 of the Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013, I confirm that the above
Report on Remuneration Policy and Remuneration Implementation
summarises, as applicable, for the year ended 31 July 2021:
- the major decisions on Directors' remuneration;
- any substantial changes relating to Directors' remuneration made during the year; and
- the context in which the changes occurred and in which decisions have been taken.
Nigel Cayzer,
Chairman
29 November 2021
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and financial statements, in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law).
Under Company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period.
In preparing these financial statements, the Directors are
required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent; and
- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions and which disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that its financial statements comply with the Companies Act
2006. They are also responsible for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors' Report including Strategic
Report, Business Review, Directors' Remuneration Report and
Statement of Corporate Governance that comply with that law and
those regulations.
The financial statements are published on asia-focus.co.uk which
is a website maintained by the Company's Manager. The Directors are
responsible for the maintenance and integrity of the corporate and
financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
The Directors, being the persons responsible, hereby confirm to
the best of their knowledge that:
- the financial statements, prepared in accordance with the
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company;
- that in the opinion of the Directors, the Annual Report and
financial statements taken as a whole, is fair, balanced and
understandable and it provides the information necessary to assess
the Company's performance, business model and strategy. In reaching
this conclusion the Board has assumed that the reader of the Annual
Report and financial statements would have a reasonable level of
general investment knowledge, and in particular, of investment
trusts; and
- the Strategic Report and Directors' Report include a fair
review of the development and performance of the business and the
position of the Company, together with a description of the
principal risks and uncertainties that the Company faces.
For Aberdeen Standard Asia Focus PLC
Nigel Cayzer,
Chairman
29 November 2021
STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 July 2021 Year ended 31 July 2020
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- -------- -------- -------- ------------ ------------ ---------
Gains/(losses) on
investments 10 - 148,078 148,078 - (67,561) (67,561)
Income 3 9,624 - 9,624 13,595 - 13,595
Exchange losses - (425) (425) - (76) (76)
Investment management
fees 4 (3,570) - (3,570) (3,121) - (3,121)
Administrative expenses 5 (1,386) - (1,386) (1,040) - (1,040)
------------------------------ -------- -------- -------- -------- ------------ ------------ ---------
Net return before
finance costs and
taxation 4,668 147,653 152,321 9,434 (67,637) (58,203)
Finance costs 6 (1,732) - (1,732) (1,539) - (1,539)
------------------------------ -------- -------- -------- -------- ------------ ------------ ---------
Net return before
taxation 2,936 147,653 150,589 7,895 (67,637) (59,742)
Taxation 7 (550) (3,556) (4,106) (802) 158 (644)
------------------------------ -------- -------- -------- -------- ------------ ------------ ---------
Net return after taxation 2,386 144,097 146,483 7,093 (67,479) (60,386)
------------------------------ -------- -------- -------- -------- ------------ ------------ ---------
Return per share (pence): 9
Basic 7.52 454.18 461.70 21.45 (204.02) (182.57)
------------------------------ -------- -------- -------- -------- ------------ ------------ ---------
Diluted n/a 420.95 429.73 n/a n/a n/a
------------------------------ -------- -------- -------- -------- ------------ ------------ ---------
For the year ended 31 July 2021 the conversion option for potential
Ordinary shares within the Convertible Unsecured Loan Stock was non-dilutive
to the revenue return per Ordinary share but dilutive to the capital
return per Ordinary share.
The total column of this statement represents the profit and loss account
of the Company. There is no other comprehensive income and therefore
the net return after taxation is also the total comprehensive income
for the year.
All revenue and capital items in the above statement derive from continuing
operations.
The accompanying notes are an integral part of the financial statements.
STATEMENT OF FINANCIAL POSITION
As at As at
31 July 2021 31 July 2020
Notes GBP'000 GBP'000
------------------------------------------ ------ ------------- -------------
Fixed assets
Investments at fair value through profit
or loss 10 540,921 394,467
------------------------------------------ ------ ------------- -------------
Current assets
Debtors and prepayments 11 5,107 1,541
Cash and short term deposits 14,577 10,919
------------------------------------------ ------ -------------
19,684 12,460
------------------------------------------ ------ ------------- -------------
Creditors: amounts falling due within
one year
Bank loans - (11,200)
Other creditors (3,422) (1,274)
12 (3,422) (12,474)
------------------------------------------ ------ ------------- -------------
Net current assets/(liabilities) 16,262 (14)
------------------------------------------ ------ ------------- -------------
Total assets less current liabilities 557,183 394,453
Non-current liabilities
2.25% Convertible Unsecured Loan Stock
2025 13 (35,708) (35,497)
3.05% Senior Unsecured Loan Note 2035 13 (29,886) -
Deferred tax liability on Indian capital
gains 13 (3,631) -
------------------------------------------ ------ ------------- -------------
(69,225) (35,497)
------------------------------------------ ------ ------------- -------------
Net assets 487,958 358,956
------------------------------------------ ------ ------------- -------------
Capital and reserves
Called-up share capital 14 10,435 10,434
Capital redemption reserve 2,062 2,062
Share premium account 60,412 60,377
Equity component of 2.25% Convertible
Unsecured Loan Stock 2025 13 1,057 1,057
Capital reserve 15 401,374 268,750
Revenue reserve 12,618 16,276
Equity shareholders' funds 487,958 358,956
------------------------------------------ ------ ------------- -------------
Net asset value per share (pence):
Basic 16 1,554.52 1,106.45
------------------------------------------ ------ ------------- -------------
Diluted 16 1,545.11 n/a
------------------------------------------ ------ ------------- -------------
The financial statements were approved by the Board of Directors and
authorised for issue on 29 November 2021 and were signed on behalf of
the Board by:
Nigel Cayzer
Chairman
The accompanying notes are an integral part of the financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended
31 July 2021
Capital Share Equity
Share redemption premium Component Capital Revenue
capital reserve account CULS 2025 reserve reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----- -------- ----------- -------- ---------- --------- -------- ---------
Balance at 1 August
2020 10,434 2,062 60,377 1,057 268,750 16,276 358,956
Conversion of 2.25%
CULS 2025 13 1 - 35 - - - 36
Purchase of own shares
to treasury 14 - - - - (11,473) - (11,473)
Return after taxation - - - - 144,097 2,386 146,483
Dividends paid 8 - - - - - (6,044) (6,044)
-----
Balance at 31 July
2021 10,435 2,062 60,412 1,057 401,374 12,618 487,958
------------------------ ----- -------- ----------- -------- ---------- --------- -------- ---------
For the year ended
31 July 2020
Capital Share Equity
Share redemption premium Component Capital Revenue
capital reserve account CULS 2025 reserve reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----- -------- ----------- -------- ---------- --------- -------- ---------
Balance at 1 August
2019 10,430 2,062 60,130 1,057 351,781 15,550 441,010
Conversion of 2.25%
CULS 2025 13 4 - 247 - - - 251
Purchase of own shares
to treasury 14 - - - - (15,552) - (15,552)
Return after taxation - - - - (67,479) 7,093 (60,386)
Dividends paid 8 - - - - - (6,367) (6,367)
-----
Balance at 31 July
2020 10,434 2,062 60,377 1,057 268,750 16,276 358,956
------------------------ ----- -------- ----------- -------- ---------- --------- -------- ---------
The accompanying notes are an integral part of the financial statements.
STATEMENT OF CASHFLOWS
Year ended Year ended
31 July 2021 31 July 2020
Notes GBP'000 GBP'000
------------------------------------------- ------ ------------- -------------
Cash flows from operating activities
Return before finance costs and tax 152,321 (58,203)
Adjustments for:
Dividend income 3 (9,620) (13,572)
Interest income 3 - (22)
Dividends received 9,880 13,677
Interest received - 22
Interest paid (1,346) (1,276)
(Gains)/losses on investments 10 (148,078) 67,561
Foreign exchange movements 425 76
Increase in prepayments (20) (3)
Decrease/(increase) in other debtors 5 (18)
Increase in other creditors 113 80
Stock dividends included in investment
income (233) (261)
Overseas withholding tax suffered 7 (690) (974)
------------------------------------------- ------ ------------- -------------
Net cash inflow from operating activities 2,757 7,087
Cash flows from investing activities
Purchase of investments (81,406) (67,809)
Sales of investments 81,562 92,454
Capital gains tax rebate on sales 101 102
------------------------------------------- ------ ------------- -------------
Net cash inflow from investing activities 257 24,747
Cash flows from financing activities
Purchase of own shares to treasury (11,570) (15,529)
Drawdown of loan - 18,200
Repayment of loan 12 (11,200) (26,852)
Drawdown of 3.05% Senior Unsecured
Loan Note 2035 13 29,882 -
Loan arrangement fees - (30)
2.25% Convertible Unsecured Loan Stock
2025 issue expenses rebate - 65
Equity dividends paid 8 (6,043) (6,367)
------------------------------------------- ------ ------------- -------------
Net cash inflow/(outflow) from financing
activities 1,069 (30,513)
Increase in cash and cash equivalents 4,083 1,321
------------------------------------------- ------ ------------- -------------
Analysis of changes in cash and cash
equivalents
Opening balance 10,919 10,239
Increase in cash and cash equivalents 4,083 1,321
Foreign exchange movements (425) (641)
------------------------------------------- ------ ------------- -------------
Closing balance 14,577 10,919
------------------------------------------- ------ ------------- -------------
The accompanying notes are an integral part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 July 2021
1. Principal activity. The Company is a closed-end investment company,
registered in England & Wales No 03106339, with its Ordinary shares
being listed on the London Stock Exchange.
2. Accounting policies
(a) Basis of preparation and going concern. The financial statements
have been prepared in accordance with Financial Reporting
Standard 102 and with the AIC's Statement of Recommended Practice
'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' issued in April 2021. The financial statements
are prepared in Sterling which is the functional currency
of the Company and rounded to the nearest GBP'000. They have
also been prepared on a going concern basis and on the assumption
that approval as an investment trust will continue to be granted
by HMRC.
The Company's assets consist substantially of equity shares
in companies listed on recognised stock exchanges and in most
circumstances, including in the current market environment,
are realisable within a short timescale. The Board has set
limits for borrowing and regularly reviews cash flow projections
and compliance with banking covenants, including the headroom
available. The Company has an unsecured loan note which expires
in December 2035. Having taken these factors into account
as well as the impact of Covid-19 and having assessed the
principal risks and other matters set out in the Viability
Statement, the Directors believe that, after making enquiries,
the Company has adequate resources to continue in operational
existence for the foreseeable future and has the ability to
meet its financial obligations as they fall due for a period
of at least twelve months from the date of approval of this
Report. Accordingly, they continue to adopt the going concern
basis of accounting in preparing the financial statements.
Further detail is included in the Directors' Report (unaudited).
Significant accounting judgements, estimates and assumptions.
The preparation of financial statements requires the use of
certain significant accounting judgements, estimates and assumptions
which requires management to exercise its judgement in the
process of applying the accounting policies and are continually
evaluated. Special dividends are assessed and credited to
capital or revenue according to their circumstances and are
considered to require significant judgement. The Directors
do not consider there to be any significant estimates within
the financial statements.
(b) Valuation of investments. The Company has chosen to apply
the recognition and measurement provisions of IAS 39 Financial
Instruments: Recognition and Measurement and investments have
been designated upon initial recognition at fair value through
profit or loss. Investments are recognised and de-recognised
at trade date where a purchase or sale is under a contract
whose terms require delivery within the time frame established
by the market concerned, and are initially measured at fair
value. Subsequent to initial recognition, investments are
measured at fair value. For listed investments, this is deemed
to be bid market prices. Gains and losses arising from changes
in fair value and disposals are included as a capital item
in the Statement of Comprehensive Income and are ultimately
recognised in the capital reserve.
(c) Borrowings. Bank loans are initially recognised at cost,
being the fair value of the consideration received, net of
any issue expenses. Subsequently, they are measured at amortised
cost using the effective interest method. Finance charges
are accounted for on an accruals basis using the effective
interest rate method and are charged 100% to revenue.
(d) Income. Dividends, including taxes deducted at source, are
included in revenue by reference to the date on which the
investment is quoted ex-dividend. Special dividends are reviewed
on a case-by-case basis and may be credited to capital, if
circumstances dictate. Dividends receivable on equity shares
where no ex-dividend date is quoted are brought into account
when the Company's right to receive payment is established.
Fixed returns on non-equity shares are recognised on a time
apportioned basis so as to reflect the effective yield on
shares. Other returns on non-equity shares are recognised
when the right to return is established. Where the Company
has elected to receive its dividends in the form of additional
shares rather than cash, the amount of the cash dividend is
recognised as income. Any excess in the value of the shares
received over the amount of the cash dividend is recognised
in capital reserves. Interest receivable on bank balances
is dealt with on an accruals basis.
(e) Expenses. All expenses are accounted for on an accruals basis.
Expenses, including management fees and finance costs, are
charged 100% through the revenue column of the Statement of
Comprehensive Income with the exception of transaction costs
incurred on the purchase and disposal of investments which
are charged to the capital column of the Statement of Comprehensive
Income and are separately identified and disclosed in note
10 within gains/(losses) on investments.
(f) Taxation. The tax expense represents the sum of tax currently
payable and deferred tax. Any tax payable is based on the
taxable profit for the year. Taxable profit differs from net
profit as reported in the Statement of Comprehensive Income
because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items
that are never taxable or deductible. The Company's liability
for current tax is calculated using tax rates that were applicable
at the Statement of Financial Position date.
Deferred taxation is recognised in respect of all timing differences
that have originated but not reversed at the Statement of
Financial Position date, where transactions or events that
result in an obligation to pay more tax in the future or right
to pay less tax in the future have occurred at the Statement
of Financial Position date. This is subject to deferred tax
assets only being recognised if it is considered more likely
than not that there will be suitable profits from which the
future reversal of the underlying timing differences can be
deducted. Timing differences are differences arising between
the Company's taxable profits and its results as stated in
the financial statements which are capable of reversal in
one or more subsequent periods. Deferred tax is measured on
a non-discounted basis at the tax rates that are expected
to apply in the periods in which timing differences are expected
to reverse, based on tax rates and laws enacted or substantively
enacted at the Statement of Financial Position date.
The tax effect of different items of income/gain and expenditure/loss
is allocated between capital and revenue within the Statement
of Comprehensive Income on the same basis as the particular
item to which it relates using the Company's effective rate
of tax for the year, based on the marginal basis.
(g) Foreign currency. Assets and liabilities in foreign currencies
are translated at the rates of exchange ruling on the Statement
of Financial Position date. Transactions involving foreign
currencies are converted at the rate ruling on the date of
the transaction. Gains and losses on dividends receivable
are recognised in the Statement of Comprehensive Income and
are reflected in the revenue reserve. Gains and losses on
the realisation of investments in foreign currencies and unrealised
gains and losses on investments in foreign currencies are
recognised in the Statement of Comprehensive Income and are
then transferred to the capital reserve.
(h) Convertible Unsecured Loan Stock. Convertible Unsecured Loan
Stock ("CULS") issued by the Company is regarded as a compound
instrument, comprising of a liability component and an equity
component. At the date of issue, the fair value of the liability
component of the 2.25% CULS 2025 was estimated by assuming
that an equivalent non-convertible obligation of the Company
would have an effective interest rate of 3.063%. The fair
value of the equity component, representing the option to
convert liability into equity, is derived from the difference
between the issue proceeds of the CULS and the fair value
assigned to the liability. The liability component is subsequently
measured at amortised cost using the effective interest rate
and the equity component remains unchanged.
Direct expenses associated with the CULS issue are allocated
to the liability and equity components in proportion to the
split of the proceeds of the issue. Expenses allocated to
the liability component are amortised over the life of the
instrument using the effective interest rate.
(i) Cash and cash equivalents. Cash comprises cash in hand and
demand deposits. Cash equivalents includes bank overdrafts
repayable on demand and short term, highly liquid investments,
that are readily convertible to known amounts of cash and
that are subject to an insignificant risk of change in value.
(j) Nature and purpose of reserves
Capital redemption reserve. The capital redemption reserve
arose when Ordinary shares were redeemed and cancelled, at
which point an amount equal to the par value of the Ordinary
share capital was transferred from the share capital account
to the capital redemption reserve. This is not a distributable
reserve.
Share premium account. The balance classified as share premium
includes the premium above nominal value from the proceeds
on issue of any equity share capital comprising Ordinary shares
of 25p. This is not a distributable reserve.
Capital reserve. This reserve reflects any gains or losses
on investments realised in the period along with any movement
in the fair value of investments held that have been recognised
in the Statement of Comprehensive Income. These include gains
and losses from foreign currency exchange differences arising
on monetary assets and liabilities except for dividend income
receivable. Share buybacks to be held in treasury, which is
considered to be a distribution to shareholders, is also deducted
from this reserve.
Revenue reserve . This reserve reflects all income and costs
which are recognised in the revenue column of the Statement
of Comprehensive Income. The revenue reserve represents the
amount of the Company's reserves distributable by way of dividend.
(k) Treasury shares. When the Company purchases the Company's
equity share capital as treasury shares, the amount of the
consideration paid, which includes directly attributable costs
is recognised as a deduction from equity. When these shares
are sold or reissued subsequently, the amount received is
recognised as an increase in equity, and the resulting surplus
or deficit on the transaction is transferred to or from the
capital reserve.
(l) Dividends payable. Final dividends are recognised in the
financial statements in the period in which Shareholders approve
them.
(m) Segmental reporting. The Directors are of the opinion that
the Company is engaged in a single segment of business activity,
being investment business. Consequently, no business segmental
analysis is provided however an analysis of the geographic
exposure of the Company's investments is provided in the published
Annual Report and financial statements for the year ended
31 July 2021.
3. Income
------------------------- -------- --------
2021 2020
GBP'000 GBP'000
------------------------- -------- --------
Income from investments
Overseas dividends 9,015 12,996
UK dividend income 372 300
Stock dividends 233 261
Fixed interest income - 15
9,620 13,572
------------------------------ -------- --------
Other income
Deposit interest - 22
Other income 4 1
------------------------------ -------- --------
4 23
Total income 9,624 13,595
4. Investment management fees
--------------------------------------------- ------------- ------------
2021 2020
GBP'000 GBP'000
------------- ------------
Investment management fees 3,570 3,121
-------------------------------------------------- ------------- ------------
The Company has an agreement with Aberdeen Standard Fund Managers
Limited ("ASFML") for the provision of management services, under
which investment management services have been delegated to abrdn
Asia Limited ("abrdn Asia").
The management fee is payable monthly in arrears at the rate of
0.08% of the Company's market capitalisation (as defined below)
per calendar month, exclusive of VAT where applicable. Market
capitalisation is defined as the Company's closing Ordinary share
price quoted on the London Stock Exchange multiplied by the number
of Ordinary shares in issue (excluding those held in Treasury),
as determined on the last business day of the calendar month to
which the remuneration relates. The balance due to the Manager
at the year end was GBP663,000 (2020 - GBP741,000) which represents
two months' fees (2020 - three months).
The management agreement may be terminated by either the Company
or the Manager on the expiry of twelve months' written notice.
On termination, the Manager would be entitled to receive fees
which would otherwise have been due to that date.
5. Administrative expenses
----------------------------------------------------------- --------- --------
2021 2020
GBP'000 GBP'000
----------------------------------------------------------- --------- --------
Administration fees{A} 99 97
Directors' fees{B} 157 168
Promotional activities{C} 219 219
Auditors' remuneration:
- fees payable to the auditors for the audit
of the annual accounts 44 35
- fees payable to the auditors and its associates
for other services
- interim review{D} - 6
Custodian charges 276 258
Depositary fees 47 49
Registrar fees 44 40
Legal and professional fees 331 47
Other expenses 169 121
1,386 1,040
----------------------------------------------------------- --------- --------
{A} The Company has an agreement with ASFML for the provision
of administration services. The administration fee is payable
quarterly in advance and is adjusted annually to reflect the movement
in the Retail Prices Index. The balance due to ASFML at the year
end was GBP25,000 (2020 - GBP24,000). The agreement is terminable
on six months' notice.
{B} No pension contributions were made in respect of any of the
Directors.
{C} Under the management agreement, the Company has also appointed
ASFML to provide promotional activities to the Company by way
of its participation in the abrdn Investment Trust Share Plan
and ISA. ASFML has delegated this role to abrdn plc. The total
fee paid and payable under the agreement in relation to promotional
activities was GBP219,000 (2020 - GBP219,000). There was a GBP73,000
(2020 - GBP73,000) balance due to abrdn at the year end.
{D} In 2020 the Company's previous auditor Ernst & Young LLP charged
GBP6,000 plus VAT relating to review work undertaken for the Half-Yearly
Report.
6. Finance costs
------------------------------------------------ -------- --------
2021 2020
GBP'000 GBP'000
------------------------------------------------ -------- --------
Loans repayable in less than one year 50 460
Interest on 3.05% Senior Unsecured Loan Note 611 -
2035
Interest on 2.25% CULS 2025 824 831
Notional interest on 2.25% CULS 2025 153 154
Amortisation of 2.25% CULS 2025 issue expenses 94 94
1,732 1,539
7. Tax expense
---------------------------------- --------------------------------------------------------------
2021 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- --------- --------- -------- --------- ---------
(a) Analysis of charge
for the year
Indian capital gains
tax charge on sales - - - - 302 302
Indian capital gains
tax charge rebate
on sales - (101) (101) - (403) (403)
Overseas taxation 550 26 576 802 - 802
-------------------------------------- -------- --------- --------- -------- --------- ---------
Total current tax
charge for the year 550 (75) 475 802 (101) 701
Deferred tax charge
on Indian capital
gains - 3,631 3,631 - (57) (57)
-------------------------------------- -------- --------- -------- --------- ---------
Total tax charge/(rebate)
for the year 550 3,556 4,106 802 (158) 644
-------------------------------------- -------- --------- --------- -------- --------- ---------
The Company has recognised a deferred tax liability of GBP3,631,000
(2020 - GBPnil) on capital gains which may arise if Indian
investments are sold.
At 31 July 2021 the Company had surplus management expenses
and loan relationship deficits with a tax value of GBP16,051,000
(2020 - GBP10,954,000) in respect of which a deferred tax asset
has not been recognised. This is due to the Company having
sufficient excess management expenses available to cover the
potential liability and the Company is not expected to generate
taxable income in the future in excess of deductible expenses.
(b) Factors affecting the tax charge for the year. The tax assessed
for the year is lower (2020 - lower) than the current standard
rate of corporation tax in the UK for a large company of 19%
(2020 - 19%). The differences are explained below:
2021 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- --------- --------- -------- --------- ---------
Return before taxation 2,936 147,653 150,589 7,895 (67,637) (59,742)
Return multiplied
by the standard tax
rate of corporation
tax of 19% 558 28,054 28,612 1,500 (12,851) (11,351)
Effects of:
(Gains)/losses on
investments not taxable - (28,135) (28,135) - 12,837 12,837
Exchange losses - 81 81 - 14 14
Overseas tax 550 26 576 802 - 802
Indian capital gains
tax charge on sales - (101) (101) - (101) (101)
Movement in deferred
tax liability on
Indian capital gains - 3,631 3,631 - (57) (57)
UK dividend income (71) - (71) (57) - (57)
Non-taxable dividend
income (1,757) - (1,757) (2,519) - (2,519)
Expenses not deductible
for tax purposes 25 - 25 (2) - (2)
Tax effect of expensed
double taxation relief - - - (1) - (1)
Movement in unutilised
management expenses 916 - 916 793 - 793
Movement in unutilised
loan relationship
deficits 329 - 329 286 - 286
Total tax charge/(rebate)
for the year 550 3,556 4,106 802 (158) 644
8. Dividends
-------------------------------------------------------- --------- ---------
2021 2020
GBP'000 GBP'000
-------------------------------------------------------- --------- ---------
Final dividend for 2020 - 14.5p (2019 - 14.0p) 4,612 4,691
Special dividend for 2020 - 4.5p (2019 - 5.0p) 1,431 1,676
Write off 2018 dividend debtor 1 -
-------------------------------------------------------- --------- ---------
6,044 6,367
------------------------------------------------------------- --------- ---------
Proposed final and special dividends are subject to approval by
shareholders at the Annual General Meeting and are not included
as a liability in the financial statements.
We set out below the total dividends paid and proposed in respect
of the financial year, which is the basis on which the requirements
of Sections 1158 - 1159 of the Corporation Tax Act 2010 are considered.
The revenue available for distribution by way of dividend for
the current year is GBP2,386,000 (2020 - GBP7,093,000).
2021 2020
GBP'000 GBP'000
-------------------------------------------------------- --------- ---------
Proposed final dividend for 2021 - 15.0p (2020
- 14.5p) 4,708 4,612
Proposed special dividend for 2021 - 1.0p (2020
- 4.5p) 314 1,431
5,022 6,043
------------------------------------------------------------- --------- ---------
The amount reflected above for the cost of the proposed final
and special dividend for 2021 is based on 31,389,684 Ordinary
shares, being the number of Ordinary shares in issue excluding
shares held in treasury at the date of this Report.
9. Return per Ordinary
share
----------------------- -----------------------------------------------------------------
2021 2020
Revenue Capital Total Revenue Capital Total
----------------------- -------- -------- ----------- -------- --------- -----------
Basic
Return after taxation
(GBP'000) 2,386 144,097 146,483 7,093 (67,479) (60,386)
Weighted average
number of shares
in issue{A} 31,727,143 33,075,236
Return per Ordinary
share (p) 7.52 454.18 461.70 21.45 (204.02) (182.57)
---------------------------- -------- -------- ----------- -------- --------- -----------
2021 2020
Diluted Revenue Capital Total Revenue Capital Total
----------------------- -------- -------- ----------- -------- --------- -----------
Return after taxation
(GBP'000) 3,003 144,097 147,100 7,623 (67,479) (59,856)
Weighted average
number of shares
in issue{AB} 34,230,984 35,586,690
Return per Ordinary
share (p) n/a 420.95 429.73 n/a n/a n/a
---------------------------- -------- -------- ----------- -------- --------- -----------
{A} Calculated excluding shares held in treasury.
{B} The calculation of the diluted total, revenue and capital
returns per Ordinary share is carried out in accordance with IAS
33, "Earnings per Share". For the purpose of calculating total,
revenue and capital returns per Ordinary share, the number of
Ordinary shares used is the weighted average number used in the
basic calculation plus the number of Ordinary shares deemed to
be issued for no consideration on exercise of all 2.25% Convertible
Unsecured Loan Stock 2025 ("CULS"). The calculations indicate
that the exercise of CULS would result in an increase in the weighted
average number of Ordinary shares of 2,503,841 (2020 - 2,511,454)
to 34,230,984 (2020 - 35,586,690) Ordinary shares.
For the year ended 31 July 2021 the assumed conversion for potential
Ordinary shares was non-dilutive to the revenue return per Ordinary
share but dilutive to the capital return per Ordinary share. Where
dilution occurs, the net returns are adjusted for interest charges
and issue expenses relating to the CULS (2021 - GBP617,000; 2020
- GBP530,000). Total earnings for the period are tested for dilution.
Once dilution has been determined individual revenue and capital
earnings are adjusted.
10. Investments at fair value through profit or
loss
------------------------------------------------------ ---------- ---------
2021 2020
GBP'000 GBP'000
------------------------------------------------------ ---------- ---------
Opening book cost 314,306 314,799
Opening investment holding gains 80,161 169,910
------------------------------------------------------------ ---------- ---------
Opening fair value 394,467 484,709
Analysis of transactions made during the year
Purchases at cost 83,636 67,688
Sales proceeds received (85,260) (90,378)
Effective yield adjustment - 9
Gains/(losses) on investments 148,078 (67,561)
------------------------------------------------------------ ---------- ---------
Closing fair value 540,921 394,467
------------------------------------------------------------ ---------- ---------
Closing book cost 346,431 314,306
Closing investment gains 194,490 80,161
Closing fair value 540,921 394,467
------------------------------------------------------------ ---------- ---------
2021 2020
GBP'000 GBP'000
Investments listed on an overseas investment
exchange 529,261 384,458
Investments listed on the UK investment exchange 11,660 10,009
540,921 394,467
------------------------------------------------------------ ---------- ---------
The Company received GBP85,260,000 (2020 - GBP90,378,000) from
investments sold in the period. The book cost of these investments
when they were purchased was GBP51,511,000 (2020 - GBP68,190,000).
These investments have been revalued over time and until they
were sold any unrealised gains/losses were included in the fair
value of the investments.
Transaction costs. During the year expenses were incurred in acquiring
or disposing of investments classified as fair value through profit
or loss. These have been expensed through capital and are included
within gains/(losses) on investments in the Statement of Comprehensive
Income. The total costs were as follows:
2021 2020
GBP'000 GBP'000
Purchases 173 172
Sales 152 142
---------- ---------
325 314
------------------------------------------------------------ ---------- ---------
The above transaction costs are calculated in line with the AIC
SORP. The transaction costs in the Company's Key Information Document
are calculated on a different basis and in line with the PRIIPs
regulations.
11. Debtors: amounts falling due within one year
---------------------------------------------- -------- --------
2021 2020
GBP'000 GBP'000
---------------------------------------------- -------- --------
Amounts due from brokers 4,060 362
Other debtors 418 271
Prepayments and accrued income 629 908
5,107 1,541
---------------------------------------------------- -------- --------
None of the above amounts is past their due date or
impaired (2020 - same).
12. Creditors
-------------------------------------------------- --------- ---------
2021 2020
Amounts falling due within one year GBP'000 GBP'000
-------------------------------------------------- --------- ---------
Bank loans - 11,200
Amounts due to brokers 1,997 -
Amount due for the purchase of own shares
to treasury - 97
Other creditors 1,425 1,177
3,422 12,474
-------------------------------------------------------- --------- ---------
The Company's GBP20,000,000 multicurrency revolving loan facility
with The Royal Bank of Scotland International Limited ("RBSI")
matured on 1 December 2020 and the GBP11,200,000 that had been
drawn down was repaid in full (31 July 2020 - GBP11,200,000 drawn
down at an all in interest rate of 0.976%).
All financial liabilities are measured at amortised cost.
13. Non-current liabilities
----- ----------------------------- ----------------------------------------------------------------------------
2021 2020
Number Liability Equity Number Liability Equity
of of
units component component units component component
(a) CULS GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- ------------ ------------ -------- ---------- ------------
2.25% Convertible
Unsecured Loan
Stock 2025
Balance at beginning
of year 36,694 35,497 1,057 36,945 35,499 1,057
Conversion of
2.25% CULS 2025 (36) (36) - (251) (251) -
Notional interest
on CULS transferred
to revenue reserve - 153 - - 154 -
Amortisation
and issue expenses - 94 - - 95 -
Balance at end
of year 36,658 35,708 1,057 36,694 35,497 1,057
---------------------------------- ---------- ------------ ------------ -------- ---------- ------------
The 2.25% Convertible Unsecured Loan Stock 2025 ("2025 CULS")
can be converted at the election of holders into Ordinary shares
during the months of May and November each year throughout
their life, commencing 30 November 2018 to 31 May 2025 at a
rate of 1 Ordinary share for every 1465.0p nominal of CULS.
Interest is payable on the 2025 CULS on 31 May and 30 November
each year, commencing on 30 November 2018. 100% of the interest
will be charged to revenue in line with the Board's expected
long-term split of returns from the investment portfolio of
the Company.
The 2025 CULS has been constituted as an unsecured subordinated
obligation of the Company by the Trust Deed between the Company
and the Trustee, the Law Debenture Trust Corporation p.l.c.,
dated 23 May 2018. The Trust Deed details the 2025 CULS holders'
rights and the Company's obligations to the CULS holders and
the Trustee oversees the operation of the Trust Deed. In the
event of a winding-up of the Company the rights and claims
of the Trustee and 2025 CULS holders would be subordinate to
the claims of all creditors in respect of the Company's secured
and unsecured borrowings, under the terms of the Trust Deed.
In 2021 the Company received elections from 2025 CULS holders
to convert 36,476 (2020 - 251,001) nominal amount of CULS into
2,475 (2020 - 17,116) Ordinary shares.
The fair value of the 2025 CULS at 31 July 2021 was GBP37,941,000
(2020 - GBP34,988,000).
2021 2020
(b) Loan Note GBP'000 GBP'000
-------------------------------------------------------------------- -------- ------------------------
3.05% Senior Unsecured Loan Note 2035 30,000 -
Unamortised Loan Note issue expenses (114) -
--------------------------------------------------------------------------
29,886 -
-------------------------------------------------------------------------- -------- ------------------------
On 1 December 2020 the Company issued GBP30,000,000 of a 15
year loan note at a fixed rate of 3.05%. Interest is payable
in half yearly instalments in June and December and the Loan
Note is due to be redeemed at par on 1 December 2035. The issue
costs of GBP118,000 will be amortised over the life of the
loan note. The Company has complied with the Note Purchase
Agreement that the ratio of total borrowings to adjusted net
assets will not exceed 0.20 to 1.00, that the ratio of total
borrowings to adjusted net liquid assets will not exceed 0.60
to 1.00, that net tangible assets will not be less than GBP225,000,000
and that the minimum number of listed assets will not be less
than 40.
The fair value of the Senior Unsecured Loan Note as at 31 July
2021 was GBP30,713,000, the value being based on a comparable
quoted debt security.
2021 2020
GBP'000 GBP'000
-------------------------------------------------------------------------- -------- ------------------------
(c) Deferred tax liability on Indian capital 3,631 -
gains
14. Called up share capital
---------------------------------- ------------- ------------ -----------
2021 2020
GBP'000 GBP'000
---------------------------------- ------------- ------------ -----------
Allotted, called-up and fully
paid
Ordinary shares of 25p 7,848 8,111
Treasury shares 2,587 2,323
---------------------------------------- ------------- ------------ -----------
10,435 10,434
---------------------------------------- ------------- ------------ -----------
Ordinary Treasury Total
shares shares shares
Number Number Number
---------------------------------- ------------- ------------ -----------
At 31 July 2020 32,442,209 9,293,918 41,736,127
Conversion of CULS 2,475 - 2,475
Buyback of own shares (1,055,000) 1,055,000 -
At 31 July 2021 31,389,684 10,348,918 41,738,602
---------------------------------------- ------------- ------------ -----------
During the year 1,055,000 Ordinary shares of 25p were purchased
(2020 - 1,484,256 Ordinary shares purchased) by the Company at
a total cost of GBP11,473,000 (2020 - total cost of GBP15,552,000),
all of which were held in treasury (2020 - same). At the year end
10,348,918 (2020 - 9,293,918) shares were held in treasury, which
represents 24.79% (2020 - 22.27%) of the Company's total issued
share capital at 31 July 2021. During the year there were a further
2,475 (2020 - 17,116) Ordinary shares issued as a result of CULS
conversions.
Since the year end no further Ordinary shares of 25p have been
purchased by the Company.
15. Reserves
----------------------------------------------------- ---------- ---------
2021 2020
GBP'000 GBP'000
----------------------------------------------------- ---------- ---------
Capital reserve
At 31 July 2020 268,750 351,781
Movement in investment holdings fair value 114,329 (89,749)
Gains on realisation of investments at fair
value 33,749 22,188
Purchase of own shares to treasury (11,473) (15,552)
Indian capital gains tax charge on sales 101 101
Movement in deferred liability on Indian capital
gains (3,631) 57
Withholding tax charged on capital dividends (26) -
Foreign exchange movement (425) (76)
At 31 July 2021 401,374 268,750
----------------------------------------------------------- ---------- ---------
The capital reserve includes investment holding gains amounting
to GBP194,490,000 (2020 - GBP80,161,000) as disclosed in note
10. The above split in capital reserve is shown in accordance
with provisions of the Statement of Recommended Practice 'Financial
Statements Of Investment Trust Companies and Venture Capital Trusts'.
16. Net asset value per Ordinary share
------------------------------------------ --------------- ---------------
2021 2020
------------------------------------------ --------------- ---------------
Basic
Net assets attributable GBP487,958,000 GBP358,956,000
Number of Ordinary shares in issue{A} 31,389,684 32,442,209
Net asset value per Ordinary share 1,554.52p 1,106.45p
------------------------------------------------ --------------- ---------------
2021 2020
------------------------------------------ --------------- ---------------
Diluted
Net assets attributable GBP523,666,000 GBP394,453,000
Number of Ordinary shares in issue{A} 33,891,920 34,946,935
Net asset value per Ordinary share{B} 1,545.11p n/a
------------------------------------------------ --------------- ---------------
{A} Calculated excluding shares held in
treasury.
{B} The diluted net asset value per Ordinary share has been calculated
on the assumption that GBP36,657,755 (2020 - GBP36,694,231) 2.25%
Convertible Unsecured Loan Stock 2025 ("CULS") is converted at
1,465.0p per share, giving a total of 33,891,920 (2020 - 34,946,935)
Ordinary shares. Where dilution occurs, the net assets are adjusted
for items relating to the CULS.
Net asset value per share - debt converted. In accordance with
the Company's understanding of the current methodology adopted
by the AIC, convertible financial instruments are deemed to be
"in the money" if the cum income net asset value ("NAV") exceeds
the conversion price of 1,465.0p per share. In such circumstances
a net asset value is produced and disclosed assuming the convertible
debt is fully converted. At 31 July 2021 the cum income NAV was
1,554.52p (2020 - 1,106.45p) and thus the CULS were 'in the money'
(2020 - not "in the money").
17. Analysis of changes in net debt
-----------------------------------------------------------------------------
At At
31 July Currency Cash Non-cash 31 July
2020 differences flows movements 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and short
term deposits 10,919 (425) 4,083 - 14,577
Debt due within
one year (11,200) - 11,200 - -
Debt due after
more than one
year (35,497) - (29,882) (3,846) (69,225)
(35,778) (425) (14,599) (3,846) (54,648)
--------- ------------ --------- ---------- ---------
At At
31 July Currency Cash Non-cash 31 July
2019 differences flows movements 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and short
term deposits 10,239 (641) 1,321 - 10,919
Debt due within
one year (20,407) 565 8,652 (10) (11,200)
Debt due after
more than one
year (35,499) - - 2 (35,497)
(45,667) (76) 9,973 (8) (35,778)
--------- ------------ --------- ---------- ---------
A statement reconciling the movement in net funds to the net cash
flow has not been presented as there are no differences from the
above analysis.
18. Related party transactions and transactions with the Manager.
Fees payable during the year to the Directors and their interests
in shares of the Company are considered to be related party transactions
and are disclosed within the Directors' Remuneration Report. The
balance of fees due to Directors at the year end was GBPnil (2020
- GBPnil).
The Company's Investment Manager, abrdn Asia, is a wholly-owned
subsidiary of abrdn plc, which has been delegated, under an agreement
with Aberdeen Standard Fund Managers Limited, to provide management
services to the Company, the terms of which are outlined in notes
4 and 5 along with details of transactions during the year and
balances outstanding at the year end. Up until 27 November 2020
Mr Young, a director of abrdn Asia, was the Alternate Director
for Mr Martin Gilbert. Up until 1 December 2020 Mr Yea was a Director
of the Company as well as being a director of the Company's registrar,
Equiniti Limited.
19. Financial instruments
Risk management. The Company's investment activities expose it
to various types of financial risk associated with the financial
instruments and markets in which it invests. The Company's financial
instruments comprise equities and other investments, cash balances,
loans and debtors and creditors that arise directly from its operations;
for example, in respect of sales and purchases awaiting settlement,
and debtors for accrued income.
The Board has delegated the risk management function to ASFML under
the terms of its management agreement with ASFML (further details
of which are included under note 4 and in the Directors' Report)
however, it remains responsible for the risk and control framework
and operation of third parties. The Board regularly reviews and
agrees policies for managing each of the key financial risks identified
with the Manager. The types of risk and the Manager's approach
to the management of each type of risk, are summarised below. Such
approach has been applied throughout the year and has not changed
since the previous accounting period. The numerical disclosures
exclude short-term debtors and creditors.
Risk management framework. The directors of ASFML collectively
assume responsibility for ASFML's obligations under the AIFMD including
reviewing investment performance and monitoring the Company's risk
profile during the year.
ASFML is a fully integrated member of the abrdn Group ("the Group"),
which provides a variety of services and support to ASFML in the
conduct of its business activities, including in the oversight
of the risk management framework for the Company. The AIFM has
delegated the day to day administration of the investment policy
to abrdn Asia, which is responsible for ensuring that the Company
is managed within the terms of its investment guidelines and the
limits set out in its pre-investment disclosures to investors (details
of which can be found on the Company's website). The AIFM has retained
responsibility for monitoring and oversight of investment performance,
product risk and regulatory and operational risk for the Company.
The Group's Internal Audit Department is independent of the Risk
Division and reports directly to the Group CEO and to the Audit
Committee of the Group's Board of Directors. The Internal Audit
Department is responsible for providing an independent assessment
of the Group's control environment.
The Manager conducts its risk oversight function through the operation
of the Group's risk management processes and systems which are
embedded within the Group's operations. The Group's Risk Division
supports management in the identification and mitigation of risks
and provides independent monitoring of the business. The Division
includes Compliance, Business Risk, Market Risk, Risk Management
and Legal. The team is headed up by the Group's Head of Risk, who
reports to the CEO of the Group. The Risk Division achieves its
objective through embedding the Risk Management Framework throughout
the organisation using the Group's operational risk management
system ("SHIELD").
The Group's corporate governance structure is supported by several
committees to assist the board of directors, its subsidiaries and
the Company to fulfil their roles and responsibilities. The Group's
Risk Division is represented on all committees, with the exception
of those committees that deal with investment recommendations.
The specific goals and guidelines on the functioning of those committees
are described in the committees' terms of reference.
Risk management. The main risks the Company faces from these financial
instruments are (i) market risk (comprising interest rate, foreign
currency and other price risk), (ii) liquidity risk and (iii) credit
risk.
Market risk . The fair value of or future cash flows from a financial
instrument held by the Company may fluctuate because of changes
in market prices. This market risk comprises three elements - interest
rate risk, currency risk and other price risk.
Interest rate risk . Interest rate movements may affect:
- the level of income receivable on cash deposits;
- valuation of debt securities in the portfolio.
Management of the risk . The possible effects on fair value and
cash flows that could arise as a result of changes in interest
rates are taken into account when making investment and borrowing
decisions. When drawn down, interest rates are fixed on borrowings.
Interest rate risk profile. The interest rate risk profile of
the Company's financial assets and liabilities, excluding equity
holdings which are all non-interest bearing, at the reporting date
was as follows:
Weighted
average
period for Weighted
which average Fixed Floating
rate is fixed interest rate rate
rate
At 31 July 2021 Years % GBP'000 GBP'000
--------------------------- -------------- --------- ---------------------------- ------------
Assets
Sterling - - - 13,712
Indian Rupee - - - 476
Pakistan Rupee - - - 14
Thailand Baht - - - 141
Vietnam Dong - - - 2
Malaysian Ringgit - - - 2
Taiwan Dollar - - - 230
--------------------------------- -------------- --------- ---------------------------- ------------
- - - 14,577
--------------------------------- -------------- --------- ---------------------------- ------------
Liabilities
2.25% Convertible Unsecured
Loan Stock 2025 3.83 3.1 35,708 -
3.05% Senior Unsecured
Loan Note 2035 14.35 3.1 29,886 -
--------------------------------- -------------- --------- ---------------------------- ------------
- - 65,594 -
--------------------------- -------------- --------- ---------------------------- ------------
Weighted
average
period for Weighted
which average Fixed Floating
rate is fixed interest rate rate
rate
At 31 July 2020 Years % GBP'000 GBP'000
--------------------------- -------------- --------- ---------------------------- ------------
Assets
Sterling - - - 10,091
Indian Rupee - - - 394
Pakistan Rupee - - - 14
Thailand Baht - - - 331
Vietnam Dong - - - 7
Malaysian Ringgit - - - 81
New Zealand Dollar - - - 1
--------------------------------- -------------- --------- ---------------------------- ------------
- - - 10,919
--------------------------------- -------------- --------- ---------------------------- ------------
Liabilities
Short-term loan 0.02 1.0 11,200 -
2.25% Convertible Unsecured
Loan Stock 2025 4.83 3.1 35,497 -
--------------------------------- -------------- --------- ---------------------------- ------------
- - 46,697 -
--------------------------- -------------- --------- ---------------------------- ------------
The weighted average interest rate is based on the current yield
of each asset, weighted by its market value. The weighted average
interest rate on bank loans is based on interest payable, weighted
by the value of the loan. Details of the Company's loan are shown
in note 12 to the financial statements.
The floating rate assets consist of cash deposits on call earning
interest at prevailing market rates.
The Company's equity portfolio and short term debtors and creditors
(excluding bank loans) have been excluded from the above tables.
Interest rate sensitivity . Movements in interest rates would
not significantly affect net assets attributable to the Company's
shareholders and total return.
Foreign currency risk. Most of the Company's investment portfolio
is invested in overseas securities and the Statement of Financial
Position, therefore, can be significantly affected by movements
in foreign exchange rates.
Management of the risk. It is not the Company's policy to hedge
this risk on a continuing basis but the Company may, from time
to time, match specific overseas investment with foreign currency
borrowings.
The revenue account is subject to currency fluctuations arising
on dividends receivable in foreign currencies and, indirectly,
due to the impact of foreign exchange rates upon the profits of
investee companies. It is not the Company's policy to hedge this
currency risk but the Board keeps under review the currency returns
in both capital and income.
Foreign currency risk exposure by currency of denomination:
31 July 2021 31 July 2020
Net monetary Total Net monetary Total
Overseas assets/ currency Overseas assets/ currency
investments (liabilities) exposure Investments (liabilities) exposure
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ------------ -------------- --------- ------------ -------------- ------------
Australian
Dollar - - - 260 - 260
Chinese Renminbi 4,619 - 4,619 - - -
Danish Krona 10,157 - 10,157 8,187 - 8,187
Hong Kong Dollar 57,636 - 57,636 41,200 - 41,200
Indian Rupee 90,186 476 90,662 56,026 394 56,420
Indonesian
Rupiah 43,412 - 43,412 28,732 - 28,732
Korean Won 34,240 - 34,240 21,482 - 21,482
Malaysian Ringgit 29,106 2 29,108 33,425 81 33,506
Taiwan Dollar 78,501 230 78,731 33,601 - 33,601
New Zealand
Dollar 17,054 - 17,054 13,359 1 13,360
Pakistan Rupee 927 14 941 1,063 14 1,077
Philippine
Peso 21,921 - 21,921 24,586 - 24,586
Singapore Dollar 55,283 - 55,283 44,480 - 44,480
Sri Lankan
Rupee 13,942 - 13,942 13,216 - 13,216
Thailand Baht 44,104 141 44,245 50,902 331 51,233
Vietnamese
Dong 28,173 2 28,175 13,939 7 13,946
------------------- ------------ -------------- --------- ------------ -------------- ------------
529,261 865 530,126 384,458 828 385,286
Sterling 11,660 (51,882) (40,222) 10,009 (36,606) (26,597)
------------------- ------------ -------------- --------- ------------ -------------- ------------
Total 540,921 (51,017) 489,904 394,467 (35,778) 358,689
------------------- ------------ -------------- --------- ------------ -------------- ------------
Foreign currency sensitivity. The Company's foreign currency financial
instruments are in the form of equity investments, fixed interest
investments, cash and bank loans. The sensitivity of the former
has been included within other price risk sensitivity analysis
so as to show the overall level of exposure. Due consideration
is paid to foreign currency risk throughout the investment process.
Other price risk. Other price risks (ie changes in market prices
other than those arising from interest rate or currency risk) may
affect the value of the quoted investments.
Investment in Far East equities or those of companies that derive
significant revenue or profit from the Far East involves a greater
degree of risk than that usually associated with investment in
the securities in major securities markets. The securities that
the Company owns may be considered speculative because of this
higher degree of risk. It is the Board's policy to hold an appropriate
spread of investments in the portfolio in order to reduce the risk
arising from factors specific to a particular country or sector.
Both the allocation of assets and the stock selection process act
to reduce market risk. The Manager actively monitors market prices
throughout the year and reports to the Board, which meets regularly
in order to review investment strategy. The investments held by
the Company are listed on various stock exchanges worldwide.
Other price risk sensitivity . If market prices at the reporting
date had been 20% (2020 - 20%) higher or lower while all other
variables remained constant, the return attributable to Ordinary
shareholders for the year ended 31 July 2021 would have increased/(decreased)
by GBP108,184,000 (2020 - increased/(decreased) by GBP78,894,000)
and equity reserves would have increased/(decreased) by the same
amount.
Liquidity risk. This is the risk that the Company will encounter
difficulty in meeting obligations associated with financial liabilities.
Management of the risk. The Board imposes borrowing limits to
ensure gearing levels are appropriate to market conditions and
reviews these on a regular basis. Gearing comprises both senior
unsecured loan notes and convertible unsecured loan stock. The
Board has imposed a maximum gearing level, measured on the most
stringent basis of calculation after netting off cash equivalents,
of 25%. Details of borrowings at the 31 July 2021 are shown in
note 13.
Liquidity risk is not considered to be significant as the Company's
assets comprise mainly readily realisable securities, which can
be sold to meet funding commitments if necessary. Details of the
Board's policy on gearing are shown in the investment policy section.
Liquidity risk exposure. At 31 July 2021 the Company had borrowings
in the form of the GBP36,658,000 (2020 - GBP36,694,000) nominal
of 2.25% Convertible Unsecured Loan Stock 2025 and GBP29,886,000
(2020 - GBPnil) in the form of the 3.05% Senior Unsecured Loan
Note 2035.
At 31 July 2021 the amortised cost of the Company's 3.05% Senior
Unsecured Loan Note 2035 was GBP29,886,000. At 31 July 2021 the
Company's rolling bank loan was fully repaid (2020 - GBP11,200,000;
repayment date 6 August 2020). The maximum exposure during the
year was GBP30,000,000 (2020 - GBP18,466,000) and the minimum exposure
during the year was GBP11,200,000 (2020 - GBP11,200,000).
The maturity profile of the Company's existing borrowings is set
out below.
Due
Due between
Expected within 3 months Due after
cashflows 3 months and 1 year 1 year
31 July 2021 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------------- --------- ---------------------------- ------------
2.25% Convertible Unsecured
Loan Stock 2025 39,692 - 826 38,866
3.05% Senior Unsecured Loan
Note 2035 43,268 - 915 42,353
--------------------------------- -------------- --------- ---------------------------- ------------
82,960 - 1,741 81,219
--------------------------------- -------------- --------- ---------------------------- ------------
Due
Due between
Expected within 3 months Due after
cashflows 3 months and 1 year 1 year
31 July 2020 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------------- --------- ---------------------------- ------------
2.25% Convertible Unsecured
Loan Stock 2025 40,306 - 826 39,480
--------------------------------- -------------- --------- ---------------------------- ------------
Short-term loan 11,200 11,200 - -
51,506 11,200 826 39,480
--------------------------------- -------------- --------- ---------------------------- ------------
Credit risk. This is the risk of failure of the counterparty to
a transaction to discharge its obligations under that transaction
that could result in the Company suffering a loss.
Management of the risk . Investment transactions are carried out
with a large number of brokers, whose credit-standing is reviewed
periodically by the Investment Manager, and limits are set on the
amount that may be due from any one broker. Settlement of investment
transactions are also done on a delivery versus payment basis;
* the risk of counterparty exposure due to failed
trades causing a loss to the Company is mitigated by
the review of failed trade reports on a monthly
basis. In addition, the third party administrator
carries out a stock reconciliation to Custodian
records on a monthly basis to ensure discrepancies
are picked up on a timely basis. The Manager's
compliance department carries out periodic reviews of
the Custodian's operations and reports its finding to
the Manager's risk management committee. This review
will also include checks on the maintenance and
security of investments held; and
* cash is held only with reputable banks with high
quality external credit ratings.
It is the Manager's policy to trade only with A- and above (Long
Term rated) and A-1/P-1 (Short Term rated) counterparties.
None of the Company's financial assets is secured by collateral
or other credit enhancements.
Credit risk exposure . In summary, compared to the amounts in
the Statement of Financial Position, the maximum exposure to credit
risk at 31 July was as follows:
2021 2020
Statement Statement
of Financial Maximum of Financial Maximum
Position exposure Position exposure
Current assets GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------------- --------- ---------------------------- ------------
Debtors 5,107 5,107 1,541 1,541
Cash and short term deposits 14,577 14,577 10,919 10,919
--------------------------------- -------------- --------- ---------------------------- ------------
19,684 19,684 12,460 12,460
--------------------------------- -------------- --------- ---------------------------- ------------
None of the Company's financial assets is past due or
impaired.
Fair values of financial assets and financial liabilities. The
fair value of the loan note has been calculated at GBP30,713,000
as at 31 July 2021 (2020 - GBPnil) compared to an accounts value
in the financial statements of GBP29,886,000 (2020 - GBPnil) (note
13). The fair value of the loan note is determined by aggregating
the expected future cash flows for that loan discounted at a rate
comprising the borrower's margin plus an average of market rates
applicable to loans of a similar period of time and currency. Investments
held at fair value through profit or loss are valued at their quoted
bid prices which equate to their fair values. The Directors are
of the opinion that the other financial assets and liabilities,
excluding CULS which are held at amortised cost, are stated at
fair value in the Statement of Financial Position and considered
that this approximates to the carrying amount.
20. Fair value hierarchy. FRS 102 requires an entity to classify
fair value measurements using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements.
Level 1: unadjusted quoted prices in an active market for identical
assets or liabilities that the entity can access at the measurement
date.
Level 2: inputs other than quoted prices included within Level
1 that are observable (ie developed using market data) for the
asset or liability, either directly or indirectly.
Level 3: inputs are unobservable (ie for which market data is
unavailable) for the asset or liability.
The financial assets measured at fair value in the Statement of
Financial Position are grouped into the fair value hierarchy at
31 July 2021 as follows:
Level 1 Level 2 Level 3 Total
As at 31 July 2021 Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- --------- --------- --------- --------
Financial assets and
liabilities at fair value
through profit or loss
Quoted equities a) 536,934 - - 536,934
Quoted preference shares b) - 3,652 - 3,652
Quoted warrants b) - 335 - 335
Net fair value 536,934 3,987 - 540,921
---------------------------------------- ---- --------- --------- --------- --------
Level 1 Level 2 Level 3 Total
As at 31 July 2020 Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- --------- --------- --------- --------
Financial assets and
liabilities at fair value
through profit or loss
Quoted equities a) 390,102 - - 390,102
Quoted preference shares b) 4,326 - - 4,326
Quoted warrants b) 39 - - 39
Net fair value 394,467 - - 394,467
---------------------------------------- ---- --------- --------- --------- --------
a) Quoted equities. The fair value of the Company's investments
in quoted equities has been determined by reference to their quoted
bid prices at the reporting date. Quoted equities included in
Fair Value Level 1 are actively traded on recognised stock exchanges.
b) Quoted preference shares and quoted warrants. The fair value
of the Company's investments in quoted preference shares and quoted
warrants has been determined by reference to their quoted bid
prices at the reporting date. Investments categorised as Level
2 are not considered to trade as actively as Level 1 assets.
During the period, investments valued at GBP3,684,000 were transferred
from Level 1 to Level 2 following a review of their trading activity.
21. Capital management policies and procedures. The Company manages
its capital to ensure that it will be able to continue as a going
concern while maximising the return to shareholders through the
optimisation of the debt (comprising CULS and Loan Note) and equity
balance.
The Company's capital comprises the following:
2021 2020
GBP'000 GBP'000
--------------------------------------------------------- --------- --------
Equity
Equity share capital 10,435 10,434
Reserves 477,523 348,522
Liabilities
Bank loans - 11,200
3.05% Senior Unsecured Loan Note 2035 29,886 -
2.25% Convertible Unsecured Loan Stock 2025 35,708 35,497
553,552 405,653
--------------------------------------------------------------- --------- --------
The Board's policy is to utilise gearing when the Manager believes
it appropriate to do so, up to a maximum of 25% geared at the
time of drawdown. Gearing for this purpose is defined as the excess
amount above shareholders' funds of total assets (including net
current assets/liabilities) less cash/cash equivalents, expressed
as a percentage of the shareholders' funds. If the amount so calculated
is negative, this is shown as a 'net cash' position.
2021 2020
GBP'000 GBP'000
--------------------------------------------------------- --------- --------
Investments at fair value through profit or
loss 540,921 394,467
Current assets excluding cash and cash equivalents 1,047 1,179
Current liabilities excluding bank loans (1,425) (1,274)
Deferred tax liability on Indian capital gains (3,631) -
536,912 394,372
--------------------------------------------------------------- --------- --------
Net assets 487,958 358,956
--------------------------------------------------------------- --------- --------
Gearing (%) 10.0 9.9
--------------------------------------------------------------- --------- --------
The Board monitors and reviews the broad structure of the Company's
capital on an ongoing basis. The review includes:
- the planned level of gearing which takes account of the Manager's
views on the market;
- the level of equity shares in issue;
- the extent to which revenue in excess of that which is required
to be distributed should be retained.
The Company's objectives, policies and processes for managing
capital are unchanged from the preceding accounting period.
The Company does not have any externally imposed capital requirements.
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures ("APMs") are numerical measures of
the Company's current, historical or future performance, financial position
or cash flows, other than financial measures defined or specified in
the applicable financial framework. The Company's applicable financial
framework includes FRS 102 and the AIC SORP. The Directors assess the
Company's performance against a range of criteria which are viewed as
particularly relevant for closed-end investment companies.
Total return. NAV and share price total returns show how the NAV and
share price has performed over a period of time in percentage terms,
taking into account both capital returns and dividends paid to shareholders.
NAV total return involves a calculation that invests the net dividend
in the NAV of the Company with debt at fair value on the date on which
that dividend goes ex-dividend. Share price total return involves a
calculation that invests the net dividend in the share price of the
Company on the date on which that dividend goes ex-dividend.
The tables below provide information relating to the NAVs and share
prices of the Company on the dividend reinvestment dates during the
years ended 31 July 2021 and 31 July 2020 and total return for the year.
Dividend Share
2021 rate NAV price
------------------------------------------- ------------ ------------- -----------
31 July 2020 N/A 1,106.45p 980.00p
12 November 2020 19.00p 1,188.97p 1,022.50p
31 July 2021 N/A 1,545.11p 1,330.00p
------------------------------------------- ------------ ------------- -----------
Total return +41.9% +38.2%
------------------------------------------- ------------ ------------- -----------
Dividend Share
2020 rate NAV price
------------------------------------------- ------------ ------------- -----------
31 July 2019 N/A 1,300.56p 1,150.00p
14 November 2019 19.00p 1,206.37p 1,050.00p
31 July 2020 N/A 1,106.45p 980.00p
------------------------------------------- ------------ ------------- -----------
Total return -13.6% -13.2%
------------------------------------------- ------------ ------------- -----------
Discount to net asset value per Ordinary share. The difference between
the share price and the net asset value per Ordinary share expressed
as a percentage of the net asset value per Ordinary share. 2021 has
been presented on a diluted basis as the Convertible Unsecured Loan
Stock ("CULS") is "in the money" (2020 not "in the money" so basic net
asset value used).
As at As at
31 July 2021 31 July
2020
------------------------------------------- ------------ ------------- -----------
NAV per Ordinary share (p) a 1,545.11 1,106.45
Share price (p) b 1,330.00 980.00
Discount (a-b)/a 13.9% 11.4%
------------------------------------------- ------------ ------------- -----------
Dividend cover . Revenue return per Ordinary share divided by dividends
declared for the year per Ordinary share expressed as a ratio.
Year ended Year ended
31 July 2021 31 July
2020
------------------------------------------- ------------ ------------- -----------
Revenue return per Ordinary share (p) a 7.52 21.45
Dividends declared (p) b 16.00 19.00
Dividend cover a/b 0.47 1.13
------------------------------------------- ------------ ------------- -----------
Net gearing . Net gearing measures the total borrowings less cash and
cash equivalents divided by shareholders' funds, expressed as a percentage.
Under AIC reporting guidance cash and cash equivalents includes net
amounts due from and to brokers at the year end as well as cash and
short term deposits.
Year ended Year ended
31 July 2021 31 July
2020
------------------------------------------- ------------ ------------- -----------
Borrowings (GBP'000) a 65,594 46,697
Cash (GBP'000) b 14,577 10,919
Amounts due to brokers (GBP'000) c 1,997 -
Amounts due from brokers (GBP'000) d 4,060 362
Shareholders' funds (GBP'000) e 487,958 358,956
Net gearing (a-b+c-d)/e 10.0% 9.9%
------------------------------------------- ------------ ------------- -----------
Ongoing charges. The ongoing charges ratio has been calculated in accordance
with guidance issued by the AIC as the total of investment management
fees and administrative expenses and expressed as a percentage of the
average net asset values with debt at fair value throughout the year.
2021 2020
------------------------------------------- ------------ ------------- -----------
Investment management fees (GBP'000) 3,570 3,121
Administrative expenses (GBP'000) 1,386 1,040
Less: non-recurring charges{A} (GBP'000) (297) (1)
Ongoing charges (GBP'000) 4,659 4,160
------------------------------------------- ------------ ------------- -----------
Average net assets (GBP'000) 422,440 380,361
------------------------------------------- ------------ ------------- -----------
Ongoing charges ratio 1.10% 1.09%
------------------------------------------- ------------ ------------- -----------
{A} Professional services comprising corporate and legal fees considered
unlikely to recur.
The ongoing charges ratio provided in the Company's Key Information
Document is calculated in line with the PRIIPs regulations, which includes
finance costs and transaction charges.
The Annual General Meeting will be held at 10:00 a.m. on 27
January 2022 at Bow Bells House, 1 Bread Street, London EC4M
9HH.
Please note that past performance is not necessarily a guide to
the future and that the value of investments and the income from
them may fall as well as rise and may be affected by exchange rate
movements. Investors may not get back the amount they originally
invested.
The Annual Financial Report Announcement is not the Company's
statutory accounts. The above results for the year ended 31 July
2021 are an abridged version of the Company's full financial
statements, which have been approved and audited with an
unqualified report. The 2020 and 2021 statutory accounts received
unqualified reports from the Company's auditors and did not include
any reference to matters to which the auditors drew attention by
way of emphasis without qualifying the reports, and did not contain
a statement under s.498(2) or 498(3) of the Companies Act 2006. The
financial information for 2020 is derived from the statutory
accounts for 2020 which have been delivered to the Registrar of
Companies. The 2021 financial statements will be filed with the
Registrar of Companies in due course.
The audited Annual Report and financial statements will be
posted to shareholders in November. Copies may be obtained during
normal business hours from the Company's Registered Office, Bow
Bells House, 1 Bread Street, London EC4M 9HH or from the Company's
website, asia-focus.co.uk*
* Neither the content of the Company's website nor the content
of any website accessible from hyperlinks on the Company's website
(or any other website) is (or is deemed to be) incorporated into,
or forms (or is deemed to form) part of this announcement.
By Order of the Board
Aberdeen Asset Management PLC
Secretary
29 November 2021
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END
FR FFFSLLELAFIL
(END) Dow Jones Newswires
November 30, 2021 02:01 ET (07:01 GMT)
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