Information  X 
Enter a valid email address

abrdn Asia Focus PLC (AAS)

  Print          Annual reports

Thursday 14 April, 2022

abrdn Asia Focus PLC

Half-year Report

RNS Number : 3284I
abrdn Asia Focus PLC
14 April 2022
 

abrdn Asia Focus plc

( formerly Aberdeen Standard Asia Focus PLC )

Legal Entity Identifier (LEI): 5493000FBZP1J92OQY70

 

ANNOUNCEMENT OF UNAUDITED HALF YEARLY RESULTS

for the six months ended 31 January 2022

 

 

Performance Highlights

 

Net asset value total return per Ordinary share (diluted)AB 

Share price total return per Ordinary shareA

MSCI AC Asia ex Japan Small Cap Index total return

Six months ended 31 January 2022

Six months ended 31 January 2022

Six months ended 31 January 2022

+0.6%

+2.8%

-0.8%

Year ended 31 July 2021

+41.9%

Year ended 31 July 2021

+38.2%

Year ended 31 July 2021

+39.6%

Discount to net asset valueAB

Ongoing charges ratioA

Total assets

As at 31 January 2022

As at 31 January 2022

As at 31 January 2022

12.2%

0.87%

£556.4m

As at 31 July 2021

13.9%

As at 31 July 2021

1.10%

As at 31 July 2021

£557.2m

Net Asset Value per Ordinary share (diluted)

Share price per Ordinary share

As at 31 January 2022

As at 31 January 2022

1,540.0p

1,352.5p

As at 31 July 2021

1,545.1p

As at 31 July 2021

1,330.0p

A Considered to be an Alternative Performance Measure as defined below..

B Presented on a diluted basis as the Convertible Unsecured Loan Stock (CULS) is "in the money".

Financial Highlights

Capital values

31 January 2022

31 July 2021

% change

Total assetsA

£556,429,000

£557,183,000

-0.1

Net asset value per share (basic)

1,548.64p

1,554.52p

-0.4

Net asset value per share (diluted)

1,540.03p

1,545.11p

-0.3

Share price (mid market)

1,352.50p

1,330.00p

+1.7

Discount to net asset value (basic)B

12.7%

14.4%

Discount to net asset value (diluted)B

12.2%

13.9%

Net gearingB

12.9%

10.0%

Ongoing charges ratioB

0.87%

1.10%

A Total assets less current liabilities (excluding prior charges such as bank loans) as per the Statement of Financial Position.

B Considered to be an Alternative Performance Measure as defined below .

 

Chairman's Statement

Background

Global markets have become extremely volatile at the time of writing, with Russia's war in Ukraine sending shock waves across the world. Events are still unfolding and remain highly unpredictable. Even before the onset of the conflict, global equities had experienced sharp bouts of volatility in the half year to 31 January 2022. Markets in Asia were not spared either. Smaller companies in the region outpaced their larger counterparts, extending their superior performance since the depths of the Covid-19 pandemic in early 2020. Nonetheless, they ended in negative territory as steep falls at the period-end amid heightened risk aversion erased all their earlier gains.

Under these conditions, your Company has built on last year's positive returns and delivered a resilient result. The net asset value ("NAV") total return was 0.6%, ahead of the recently adopted MSCI AC Asia ex-Japan Small Cap Index return of -0.8%.  In previous Annual and Half Yearly Reports we have also compared performance to the MSCI AC Asia Pacific ex-Japan Small Cap Index, which declined by 1.2% over the period, and to the broader MSCI AC Asia Pacific ex-Japan Index, which fell by 3.1%.  In the future, following the adoption of the new performance linked tender offer (see below) these two indices are now less relevant for the Company and so we will cease to use them for performance comparison purposes. The share price gained 2.8%. The commendable short-term result is mirrored by good long-term performance, with your Company's 10-year annualised return standing at 10.5%, compared with the new benchmark's return of 8.3%.

The performance, despite choppy markets, is particularly encouraging given the changes undertaken by the Board following our comprehensive strategic review, which I outlined in the most recent Annual Report.  These are also summarised below. The proposals were overwhelmingly endorsed by shareholders at the General Meeting. From a portfolio management perspective, the removal of the US$1.5 billion market capitalisation limit is perhaps the most meaningful change as it will allow your Manager to invest in high-growth companies, particularly in larger markets like China, India and South Korea. The Board is optimistic that the strengthening of the abrdn management team with the introduction of new talent will position your Company to continue the steady performance of the past quarter century.

The market tumult may worry investors, but your Manager notes that Asia enters the current crisis in a strong position. Although the region will not be immune to the economic fallout from the Russia-Ukraine conflict, most Asian policymakers have monetary and fiscal room for manoeuvre. The Board would also like to reiterate its confidence in the long-term potential for the region and its smaller companies. Asia remains the world's fastest-growing region, underpinned by powerful structural trends such as increasing affluence, rising urbanisation and growing technology adoption. Exciting opportunities continue to abound in its small and mid-cap investment universe, where companies tend to be domestically oriented and low research coverage leaves considerable scope for market mispricing. I remain confident that your Manager's meticulous process of identifying well-run companies with superior growth prospects and strong financials will stand the Company in good stead for the next 25 years.

At the time of writing, after adjusting for the five for one share split on 4 February 2022, the NAV per share is 306.6p, the share price is 277.0p and the Company is trading at a discount of 9.6% to the NAV per share.

Overview

Three broad themes captured investor attention over the period. The first was the pandemic and its repercussions. The discovery of a fast-spreading Covid strain roiled markets, though fears subsided as the new variant appeared less severe than initially thought. Most Asian governments have since begun charting a careful return to normal life amid widening vaccine coverage. Also keeping investors on edge was China's regulatory upheaval, as well as its property and energy woes. Towards the end of the period, markets saw a big swing from growth-oriented to value stocks as major central banks pivoted to monetary tightening in view of rapidly rising inflation.

Against this backdrop, there was a marked divergence in small-cap performance by country. Markets in South-East Asia, where your Company has a heavy exposure, were broadly resilient as economic prospects brightened and corporate earnings rebounded. India, another large market for the Company, outperformed on optimism about the domestic economy. After the period-end, policymakers in India unveiled a pro-growth budget with an emphasis on capital investment as well as incentives for domestic manufacturing and clean energy. The lack of big populist measures signalled a clear intent to cap social welfare spending and support growth through more sustainable capacity building.

In North Asian markets, Taiwan was helped by the strength of the semiconductor industry. Conversely, the tech-heavy market of South Korea, where your Company has a comparatively light exposure, suffered outsized losses amid the sector rotation. Stocks in China and Hong Kong were beset by regulatory noise and concerns about the mainland's economy. The People's Bank of China cut key lending rates to counter slowing economic momentum.

Outcome of Long Term Investment Strategy Review

On 11 January 2022 I wrote to shareholders to provide an update on the Board's comprehensive review of the Company's long-term strategy.  This was initiated to ensure that the Company's investment policy continues to capture the immense opportunities that exist in the Asian small cap market in both South Asia and North Asia with the emergence of China as the world's second-largest economy. As part of the Strategic Review, the Board addressed the issue of how to make the Company more competitive whilst giving shareholders, and in particular retail investors, a more meaningful participation in the Company's ongoing success. I would like to thank shareholders for supporting the Board's proposals at the General Meeting held on 27 January 2022 and can now confirm that each of the following measures recommended by the Board have now been implemented:

-  Amendment of the Company's Investment Policy (refer to 'Disclosures' below for new policy);

-  Adoption of a new Enhanced Dividend Policy;

-  Amendment of the Company's Articles in order to provide flexibility to pay dividends out of capital profits in the future, and refresh the Articles more generally, including in connection with the running of Shareholder meetings following the recent pandemic; and

-  A five for one Share split (with effect from 4 February 2022 each Ordinary share of 25p was sub-divided into five Ordinary shares of 5p each)

In addition, as part of the process, the following enhancements have now also successfully been implemented:

-  Changes to the Company's management team, in particular the addition of Flavia Cheong, abrdn's Head of Equities, Asia Pacific, as joint lead manager, and Neil Sun as an investment manager directly responsible for managing the potential increased weighting in North Asia. They will work alongside Hugh Young and Gabriel Sacks to bolster the investment management team to reflect the increasing importance of China;

-  Agreement with abrdn to amend the Company's management fee from 0.96% per annum of the Company's market capitalisation to a new, tiered management fee of 0.85% per annum for the first £250 million of the Company's market capitalisation, 0.6% per annum for the next £500 million, and 0.5% per annum for market capitalisation of £750 million and above, with effect from 1 August 2021; and

-  The Board's commitment to introducing a performance-linked tender offer which shall provide that, 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, shareholders will 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.

These changes have provided the expanded management team at abrdn with much greater flexibility to invest in small growth companies across Asia. By increasing the target dividend and aiming to maintain the Company's progressive dividend policy of the last 25 years (including with the flexibility to pay dividends out of capital reserves where merited in the future), investors will have an enhanced, regular level of income alongside capital growth prospects amid the current relatively low interest rate environment. Furthermore, we have reduced the running costs of the Company through the new fee arrangements and hope to be able to increase the marketability of the Company's Ordinary Shares for small investors through the share split. And finally, by implementing the Future Tender Offer we have provided Shareholders with a partial exit opportunity if the Company's performance does not exceed the MSCI AC Asia ex Japan Small Cap Index over the five-year period commencing 1 August 2021.

Dividend

On 17 February 2022 the Company declared a first interim dividend of 3.2p per Ordinary 5p share which was paid on 21 March 2022 to Ordinary shareholders on the register on 25 February 2022.  In accordance with the enhanced dividend policy approved by shareholders, the Board has set a target dividend of 6.4p per Ordinary Share for the financial year ending 31 July 2022 (adjusted for the five for one share split that occurred on 4 February 2022) (2021 equivalent full-year dividend 3.2p after adjustment for the five for one share split).  The 3.2p dividend declared in February represented the first two quarterly dividends for the initial six month period to 31 January 2022 and the Board expects to declare 1.6p per Ordinary share per quarter for the remainder of the Company's financial year.

Change of Company Name

In order to align the Company's name with the name of the Manager's business, which has changed to abrdn plc, the Board has resolved to change the Company's name to abrdn Asia Focus plc and the Company received confirmation from Companies House that the change became effective from 4 April 2022.

Portfolio Review

Your Company's outperformance was driven by both long-term holdings and relatively recent additions. Stock choice in the communication services sector proved prudent. Consumer marketing technology firm Affle, which was introduced in 2020, enjoyed solid gains on the back of healthy volume growth and pricing improvements. A dominant player in India, Affle is also well-placed to grow profitability in other emerging markets, as evident from its acquisition in Latin America.

The performance of your Company's real estate holdings was equally pleasing. Notable mentions include two relatively new additions, Nam Long in Vietnam and Prestige Estates in India. The former rallied on the property market recovery and expectations of continued loose monetary policy in Vietnam, while the latter reported record quarterly pre-sales. Both property developers are backed by decent land banks.

The investments in healthcare and industrials also did well. Thailand-based Mega Lifesciences, which manufactures and sells pharmaceutical and nutraceutical products, posted sharply higher quarterly earnings. The company stands to gain from its increasing exposure to key frontier markets that are structurally attractive over the long term. In industrials, the outlook for our long-held holding John Keells has improved, with the Sri Lankan conglomerate announcing a strong set of results despite the country's extremely challenging macroeconomic environment.

The information technology sector, which had contributed to the portfolio's prior outperformance, was hit by the shift from growth to value stocks. Not all holdings fared poorly. Singapore-based testing and handling solutions provider AEM and Taiwanese integrated circuit maker ASPEED Technology bucked the trend, and growth prospects for both companies remain promising.

Some of the portfolio's technology holdings tracked the broader market lower, however. Among these were Taiwan Union Technology as well as Park Systems and Koh Young Technology in Korea. It is worth noting that despite weaker share prices, there is little fundamental change to the companies' earnings potential and growth opportunities. Copper-clad laminate maker Taiwan Union Technology and Koh Young Technology, a global leader in 3D inspection for circuit boards, remain beneficiaries of favourable structural trends such as 5G telecommunications and demand for connectivity. Software company Park Systems' earnings are poised to grow when orders roll in.

Other detractors included Singapore-based advanced materials supplier Nanofilm Technologies, which fell after its major clients postponed projects due to semiconductor chip shortages, and Indian oil and gas logistics provider Aegis Logistics, which was pressured by worries over Covid-related disruptions. Also impeding performance were consumer holdings, Momo.com and Godrej Agrovet. Taiwanese online retailer Momo.com was another casualty of the switch from growth to value, while Indian diversified agri-business Godrej Agrovet weakened on muted results.

Turning to portfolio activity, two new holdings were initiated over the period. The first was Taiwanese computer chip maker Andes Technology, one of the top three companies globally for RISC-V, an open-source instruction set architecture that defines the way software 'talks' to a processor. Your Manager sees RISC-V gaining market share given its simplicity and efficiency. Another introduction was Australian intellectual property services provider IPH, which has performed steadily and is attractively valued at period end.

Your Manager also participated in the IPOs of two Indian companies. Vijaya Diagnostic Centre is a leading medical diagnostic chain in south India. Your Manager is impressed with its focus on service and experience, and sees Vijaya as a high-growth company in a very fragmented market. CE Info Systems (MapmyIndia), a pioneer of digital mapping in India, is a beneficiary of the country's revamped geospatial regulations, which subject foreign players to restrictions that limit their competitiveness. Your Manager sees this clear competitive advantage sustaining its growth prospects, as growing smartphone penetration and 5G adoption lead to rising investment in digital maps and location services technology.

Among the disposals were AEON Credit Service Asia and ORIX Leasing Pakistan. Ujjivan Financial Services and AEON Thana Sinsap were also divested owing to their challenging outlooks.

Share Capital Management and Gearing

During the period we have not bought back any Ordinary shares in the market. The Board will continue to consider the use of share buy backs to both reduce the volatility of any discount and to modestly enhance the NAV for shareholders.

The Company's net gearing at 31 January 2021 was 12.9% with the majority of the debt provided by the Loan Notes. Gearing is also provided by the Convertible Unsecured Loan Stock redeemable in 2025, of which approximately £36.6m million remains outstanding.  As at 11 April 2022, the latest practicable date, the net gearing stood at 12.2%.

Directorate

Debby Guthrie has decided to resign from the Board with effect from 13 April 2022 and I would like to thank her for her contribution to not only the Board but also as Chairman of the Audit Committee. As was announced at the time of the 2021 Annual Report, with the help of outside consultants, the Board is in the process of appointing two new independent non-executive Directors. Once these new appointments are made, the Board will then choose my successor so that I can retire from the Board at the conclusion of the AGM in December 2022. 

During the period Viscount Dunluce succeeded to the title Earl of Antrim following the death of his father.

Outlook

As ever, predicting the macroeconomic and geopolitical outlook is tricky. Big market swings in early 2022 have given us a foretaste of things to come as the US raises interest rates to tame inflation. The Russia-Ukraine conflict also creates further headwinds to the global recovery, not to mention the potential for a devastating loss of lives. Your Manager is keeping a watchful eye on developments, particularly on inflation and the impact of monetary policy on borrowing costs, companies and the wider economy. At the same time, the Covid shadow still lingers and further flare-ups cannot be ruled out. That said, Asia's vaccination drive could see a return to some normality, which is positive for consumption, businesses and overall growth.

The other big question in Asia and indeed globally is China, which faces a property-led slowdown. Stringent Covid controls could put further stress on the economy. Beijing has responded to the risks, however, moving toward policy loosening to stabilise growth. Meanwhile, relations with the US remain fraught. Your Manager believes this will continue to drive China's push for self-sufficiency, which in turn offers ample investment opportunities across diverse sectors such as consumption, technology and green energy.

As I mentioned at the outset, the attractions of Asia and its smaller companies are many and obvious. Economic growth should continue to outstrip the US and Europe, while corporate balance sheets remain broadly resilient. Global volatility seems inevitable, however. That is why it is imperative to underpin investment decisions with rigorous discipline, which is embedded in your Manager's process. Given our holdings' sound businesses and robust financials, I am cautiously optimistic that your Company can weather the choppy months ahead.

Nigel Cayzer
Chairman
13 April 2022

 

Disclosures

Revised Investment Objective and Policy (from 27 January 2022)

Investment Objective

The Company aims to maximise total return to shareholders over the long term from a portfolio made up predominantly of quoted smaller companies in the economies of Asia excluding Japan.

Investment Policy

The Company may invest in a diversified portfolio of securities (including equity shares, preference shares, convertible securities, warrants and other equity-related securities) predominantly issued by quoted smaller companies spread across a range of industries and economies in the Investment Region. The Investment Region includes Bangladesh, Cambodia, China, Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Myanmar, Pakistan, The Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam, together with such other economies in Asia as approved by the Board.

The Company may invest up to 10% of its net assets in collective investment schemes, and up to 10% of its net assets in unquoted companies, calculated at the time of investment.

The Company may also invest in companies traded on stock markets outside the Investment Region provided over 75% of each company's consolidated revenue, operating income or pre-tax profit is earned from trading in the Investment Region or the company holds more than 75% of their consolidated net assets in the Investment Region.

When the Board considers it in shareholders' interests, the Company reserves the right to participate in rights issues by an investee company.

Risk Diversification

The Company will invest no more than 15% of its gross assets in any single holding including listed investment companies at the time of investment.

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 25% of NAV at the time of draw down.

Principal Risks and Uncertainties

The principal risks and uncertainties affecting the Company are set out in detail on pages 17 to 19 of the Annual Report and Financial Statements for the year ended 31 July 2021 and these have not changed.

They can be summarised under the following headings:

-  Investment Strategy and Objectives;

-  Investment Portfolio and Investment Management Risks;

-  Financial Obligations (Gearing);

-  Financial and Regulatory;

-  Operational;

-  Investment in Unlisted Securities; and

-  Market and F/X Risks.

The Board is monitoring the current geo-political risks, market volatility and uncertainty associated with Russia's invasion of Ukraine, which are evolving day by day. The Board continues to note that there are a number of contingent risks stemming from the Covid-19 pandemic that may impact the operation of the Company and world markets. The Board is also very conscious of the risks emanating from increased environmental, social and governance challenges and mounting climate change pressure.  The Board continues to monitor, through its Manager, the potential risk that investee companies may fail to keep pace with the rates of ESG and Climate Change adaptation required. In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the 2021 Annual Report.

Going Concern

The Directors have conducted a thorough review of the Company's ability to continue as a going concern with particular focus on the impact of world events as well as the Covid-19 pandemic.  During the review period the Board has been regularly updated by the Manager on the resilience of the Manager's systems as well as those of the other key third party service providers.  The Board is satisfied that suitable business interruption plans are in place and working from home arrangements have proved effective throughout the course of the pandemic.

The Board monitors the Company's covenant compliance and gearing levels regularly and is satisfied that there is sufficient headroom in place and flexibility if required.

The Company's assets consist of a diverse portfolio of listed equities which in most circumstances are realisable within a short timescale. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for at least the next 12 months. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.

Directors' Responsibility Statement

The Directors are responsible for preparing this half-yearly financial report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

-  the condensed set of financial statements contained within the half-yearly financial report has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

-  the Interim Board Report (constituting the interim management report) includes a fair review of the information required by rule 4.2.7R of the UK Listing Authority Disclosure Guidance and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year) and 4.2.8R (being related-party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could so do).

Nigel Cayzer
Chairman
13 April 2022

 

Ten Largest Investments

As at 31 January 2022

4.8%

Total assets

 

Affle India

3.6%

Total assets

 

Park Systems Corporation

A consumer technology business operating a data platform that helps direct digital advertising. It is dominant in India where digitalisation has reached an inflection point. This should support growth for several years.

The Korean company is the leading developer of atomic force microscopes, a nascent technology that could have broad industrial application in sectors such as chip-making and biotechnology. The company's financials are sound, despite significant upfront sales and distribution costs. This provides a solid base for earnings to grow when orders return.

3.5%

Total assets

 

Pacific Basin Shipping

3.2%

Total assets

 

MOMO.com

Pacific Basin is a Hong Kong-based dry bulk shipping group with a favourable demand outlook, supported by an improving global economy and reopening prospects.

Momo, the largest online retailer in Taiwan, serves as a nice proxy for consumer growth in the country, as it is benefiting from the shift to online from both consumers and vendors.

3.2%

Total assets

 

Nam Long Invst Corporation

3.1%

Total assets

 

AEM Holdings

A reputable Vietnamese developer in Ho Chi Minh City that focuses on the affordable housing segment, with a decent land bank and promising project pipeline.

A Singapore-based provider of advanced semiconductor chip testing services that has embedded itself in chipmaker Intel's global supply chain.

3.0%

Total assets

 

John Keells Holdings

2.9%

Total assets

 

Cyient

A respected and reputable Sri Lanka conglomerate with a healthy balance sheet and good execution, John Keells has a hotels and leisure segment that includes properties in the Maldives. 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).

This Indian company provides engineering and IT services to clients in developed markets, competing primarily on quality of service and cost of delivery.

2.8%

Total assets

 

Dah Sing Financial Holdings

2.5%

Total assets

 

Mega Lifesciences (Foreign)

Dah Sing provides banking, insurance, and related services, primarily in Hong Kong, Macau, and mainland China. Its outlook is underpinned by economic recovery, the border re-opening between Hong Kong and China, and the upside to margins amid rising rates. At the same time, valuations remain undemanding. This limits the downside risks, while we could see a re-rating if the macro environment continues to improve.

The Thai group produces, sells and distributes health supplements and pharmaceutical products, mostly in the under-penetrated but fast-growing frontier and emerging markets. Its first mover advantage in these markets, coupled with a strong brand, has enabled Mega to maintain its high margins over the past several years, while growing revenue.

 

 

Investment Portfolio

 

As at 31 January 2022 

 

 

 

Total

 

 

 

Valuation

assets

Company

Industry

Country

£'000

%

Affle India

Media

India 

26,650

4.8

Park Systems Corporation

Electronic Equipment, Instruments & Components

South Korea

19,946

3.6

Pacific Basin Shipping

Marine

Hong Kong 

19,777

3.5

MOMO.com

Internet & Direct Marketing Retail

Taiwan 

17,966

3.2

Nam Long Invst Corporation

Real Estate Management & Development

Vietnam

17,929

3.2

AEM Holdings

Semiconductors & Semiconductor Equipment

Singapore 

17,122

3.1

John Keells Holdings

Industrial Conglomerates

Sri Lanka 

16,570

3.0

Cyient

Software

India 

16,265

2.9

Dah Sing Financial Holdings

Banks

Hong Kong 

15,358

2.8

Mega Lifesciences (Foreign)

Pharmaceuticals

Thailand 

13,905

2.5

Top ten investments

181,488

32.6

M.P. Evans Group

Food Products

United Kingdom 

13,773

2.5

Cebu Holdings

Real Estate Management & Development

Philippines 

13,469

2.4

Hana Microelectronics (Foreign)

Electronic Equipment, Instruments & Components

Thailand 

13,381

2.4

FPT Corporation

IT Services

Vietnam

12,764

2.3

Bank OCBC NISP

Banks

Indonesia 

12,493

2.2

Precision Tsugami China Corporation

Machinery

China

12,083

2.2

Sunonwealth Electric Machinery Industry

Machinery

Taiwan 

11,801

2.1

Medikaloka Hermina

Health Care Providers & Services

Indonesia 

11,415

2.1

United International Enterprises

Food Products

Denmark 

10,652

1.9

Aegis Logistics

Oil, Gas & Consumable Fuels

India 

10,310

1.9

Top twenty investments

303,629

54.6

Asian Terminals

Transportation Infrastructure

Philippines 

10,247

1.8

AKR Corporindo

Oil, Gas & Consumable Fuels

Indonesia 

10,090

1.8

Taiwan Union

Electronic Equipment, Instruments & Components

Taiwan 

9,889

1.8

Millennium & Copthorne Hotels New ZealandA

Hotels, Restaurants & Leisure

New Zealand 

9,768

1.8

Oriental Holdings

Automobiles

Malaysia 

9,693

1.7

AEON Credit Service (M)

Consumer Finance

Malaysia 

9,580

1.7

Ultrajaya Milk Industry & Trading

Food Products

Indonesia 

9,263

1.7

Godrej Agrovet

Food Products

India 

9,258

1.7

Sporton International

Professional Services

Taiwan 

9,039

1.6

Bukit Sembawang Estates

Real Estate Management & Development

Singapore 

8,630

1.5

Top thirty investments

 

399,086

71.7

Raffles Medical

Health Care Providers & Services

Singapore 

8,341

1.5

Vijaya Diagnostic Centre

Health Care Providers & Services

India 

8,278

1.5

Prestige Estates Projects

Real Estate Management & Development

India 

8,148

1.5

Sanofi India

Pharmaceuticals

India 

7,803

1.4

Yantai China Pet Foods - A

Food Products

China

7,492

1.4

Koh Young Technology

Semiconductors & Semiconductor Equipment

South Korea

6,900

1.2

IPH

Professional Services

Australia

6,899

1.2

Nazara Technologies

Entertainment

India 

6,623

1.2

Nanofilm Technologies International

Chemicals

Singapore 

6,343

1.1

Absolute Clean Energy (Foreign)

Independent Power and Renewable Electricity Producers

Thailand 

6,286

1.1

Top forty investments

472,199

84.8

Tisco Financial Group (Foreign)

Banks

Thailand 

5,918

1.1

Pentamaster International

Semiconductors & Semiconductor Equipment

Malaysia   

5,800

1.0

NZX

Capital Markets

New Zealand 

5,791

1.0

Shangri-La Hotels Malaysia

Hotels, Restaurants & Leisure

Malaysia 

5,709

1.0

United Plantations

Food Products

Malaysia 

5,498

1.0

Yoma Strategic Holdings

Real Estate Management & Development

Myanmar

5,472

1.0

Thai Stanley Electric (Foreign)

Auto Components

Thailand 

5,343

1.0

KMC Kuei Meng International

Leisure Products

Taiwan 

5,329

1.0

Andes Technology

Semiconductors & Semiconductor Equipment

Taiwan 

5,316

1.0

Aspeed Technology

Semiconductors & Semiconductor Equipment

Taiwan 

5,065

0.9

Top fifty investments

 

527,440

94.8

Douzone Bizon

Software

South Korea

5,013

0.9

Ecloudvalley Digital Technology

IT Services

Taiwan 

4,291

0.8

Syngene International

Life Sciences Tools & Services

India 

3,680

0.6

Convenience Retail Asia

Food & Staples Retailing

Hong Kong 

3,312

0.6

Credit Bureau Asia

Professional Services

Singapore 

3,192

0.5

Tatva Chintan Pharma

Chemicals

India 

2,938

0.5

Manulife Holdings

Insurance

Malaysia 

1,698

0.3

CE Info Systems

Software

India 

1,594

0.3

AEON Stores Hong Kong

Multiline Retail

Hong Kong 

311

0.1

Goodyear Thailand (Foreign)

Auto Components

Thailand 

293

0.1

Top sixty investments

553,762

99.5

First Sponsor Group (Warrants 21/03/2029)

Real Estate Management & Development

Singapore 

279

0.1

First Sponsor Group (Warrants 30/05/2024)

Real Estate Management & Development

Singapore 

139

-

YNH Property

Real Estate Management & Development

Malaysia 

50

-

G3 Exploration

Oil, Gas & Consumable Fuels

China

-

-

Total investments

554,230

99.6

Net current assets

2,199

0.4

Total assetsB

556,479

100.0

A Holding includes investment in both common and preference lines.

B Total assets less current liabilities excluding bank loans.

 

Investment Case Studies

Nam Long Investment Corporation

In which year did we first invest?   2019
Where is their head office?  Ho Chi Minh City, Vietnam
What is their website?    namlongvn.com
Holding at period end:  3.2%

What does the company do?

Nam Long started out as the first non-state owned enterprise in Vietnam's construction sector in 1992. Since then, it has grown into a reputable property developer in Ho Chi Minh City, with a decent land bank and promising project pipeline.

Why do we like the investment?

Nam Long has the attributes that we like in a quality property developer. It is positioned in the affordable to mid-level segments of Vietnam's housing market where the structural growth is. Its affordable housing brand, Ehome, is well established. The company also develops reasonably priced mid-end housing in Ho Chi Minh City under the brands Flora and Valora, together with Japanese partners Hankyu Realty and Nishin Nippon.

While Nam Long continues to focus on affordable housing, its property mix has been shifting up to the mid-level segment through the years. This is partly due to rising affluence. It also reflects Nam Long's ambitions to become the leading integrated real estate group by 2030. The group is developing more integrated townships with offerings in the suburbs of large urban centres instead of single projects on smaller land parcels. Its multiple brands mean that it can be more flexible depending on the location and target market. This is supported by a large land bank of around 680 hectares in south Vietnam, mainly in Can Tho, Long An and Ho Chi Minh City.

The integrated townships satisfying the need to "live, work, play, shop and learn" are key to the Dragon Growth Transformation journey that Nam Long undertook in 2021. The company aims to increase its market penetration by developing new segments in priority districts in Ho Chi Minh City on top of its familiar products like EHome, Flora and Valora. Geographic expansion is also in the works. Nam Long is looking at Hanoi and priority Tier 2 cities that have potential for economic growth, attracting a large workforce who would need homes to live in.

Overseeing all this is a progressive management team with a strong track record. The performance-driven culture is aligned with minority interests, with checks and balances through its key shareholder, Singapore's Keppel Land, and Japanese project partners, which also provide the necessary skill and expertise in construction.

Meanwhile, Nam Long sits well with sustainability development, given its focus on providing affordable housing in a market where it is very much needed. It has three focus areas: sustainable business operations, protecting the environment and contributing to society. For instance its supplier Nam Long sets regulations on environmental standards and requires its contractors to use construction techniques that minimise environmental damage. As for sustainable urban planning, in the areas that Nam Long develops, the proportion of green habitats from low building density planning is 30% or higher, with most of such space given over to rivers, trees, landscape lakes and the like.

Finally, Nam Long's affordable housing product line has enabled nearly 3,300 low-income households in Ho Chi Minh City the opportunity to own their own apartments. The group has also donated about VND8 billion (£260,000) to support over 20,000 people through corporate social responsibility activities such as Support for Covid-19, support for flash floods in the central region, an education fund, and maintaining the "Swing for Dreams" scholarship fund.

Mega Lifesciences

In which year did we first invest?   2017
Where is their head office?   Bangkok, Thailand
What is their website   megawecare.com
Holding at period end:    2.5%

What does the company do?

This Thai company produces and sells nutritional products and prescription drugs domestically and across frontier markets, with a leading position in Indochina. Its Maxxcare brand covers prescription and OTC drugs, while its Mega We Care brand offers nutritional products.

Why do we like the investment?

Strong brand equity counts for a lot. The company has built a strong brand in Southeast Asia for its Mega We Care brand, making it a trusted producer of supplements and pharmaceutical products in the region, in the same league as Australia's Blackmores. Several of Mega's brands are ranked no. 1 in their respective categories, while others were consistently ranked in the top five in the home market of Thailand as well as in countries like Myanmar and Vietnam.

Mega focuses on being the first mover into a market for both its We Care and Maxxcare businesses, and niche markets at that.  This discourages competitors from entering once there is an incumbent of its size. For instance, its long-established distribution network in Myanmar and Vietnam gives access to more than 50,000 and 26,500 retail outlets, respectively. In such frontier markets, regulations are getting tougher and it is becoming harder to get regulatory approvals from various countries, but in a way this benefits Mega, as it raises the entry barriers for new competitors.

Branding is even more important in the pharmaceutical space and it also translates into high pricing power. Mega has maintained high margins over the past several years, while growing revenue. This is because it is able to charge relatively attractive prices versus pharmacies, hospitals, clinics, health practitioners and physicians, yet still at a cheaper level than imported pharmaceutical products. Mega's operating cash flow has been positive over the years, underpinning a net-cash balance sheet.

In the wake of the pandemic, demand for immunity-boosting products, such as supplements, has risen sharply. Although such sales are likely to normalise somewhat as pandemic effects recede and economies recover, Covid-19 has increased awareness of nutraceutical products and we would expect some of the higher demand to be sustained. There are also broader structural trends in Asia that support demand, as an increasingly affluent middle class turns more health conscious on the back of rapidly ageing populations. We see Mega's businesses benefiting from these longer-term trends.

For a company that sells products promoting health and well-being, Mega prides itself on being a people-centric organisation, too, with a "People First" culture listed as one of its competitive strengths. In addition to regular salaries, bonuses and provident funds, Mega provides staff awards based on years of service and medical insurance, along with diet and healthy living planning.

It also pays heed to environmental laws in its production process and in dealing with hazardous materials, receiving green industry certification for its facilities in Thailand. Its green initiatives include the move to more energy-efficient lamps, as well as the use of chilled chlorofluorocarbon-free water for its air-conditioning units and solar power in its operations.

 

Condensed Statement of Comprehensive Income (unaudited)

 

 

Six months ended

Six months ended

 31 January 2022

 31 January 2021

 

Revenue

Capital

Total

Revenue

Capital

Total

Notes

£'000

£'000

£'000

£'000

£'000

£'000

Gains on investments

-

2,033

2,033

-

74,934

74,934

Income

2

6,023

-

6,023

3,591

-

3,591

Exchange losses

-

(60)

(60)

-

(287)

(287)

Investment management fees

(413)

(1,239)

(1,652)

(1,651)

-

(1,651)

Administrative expenses

3

(582)

(390)

(972)

(576)

-

(576)

Net return before finance costs and taxation

5,028

344

5,372

1,364

74,647

76,011

Finance costs

(252)

(755)

(1,007)

(746)

-

(746)

Net return before taxation

4,776

(411)

4,365

618

74,647

75,265

Taxation

4

(225)

(963)

(1,188)

(107)

(2,109)

(2,216)

Return attributable to equity shareholders

4,551

(1,374)

3,177

511

72,538

73,049

Return per share (pence)

5

Basic

14.50

(4.38)

10.12

1.60

226.87

228.47

Diluted

13.56

n/a

9.91

n/a

210.39

212.13

The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company.

There is no other comprehensive income and therefore the return attributable to equity shareholders is also the total comprehensive income for the period.

All revenue and capital items in the above statement derive from continuing operations.

The accompanying notes are an integral part of the condensed financial statements.

 

Condensed Statement of Financial Position (unaudited)

 

As at

As at

31 January 2022

31 July 2021

(*Restated)

Notes

£'000

£'000

Non-current assets

Investments at fair value through profit or loss

554,230

540,921

Current assets

Debtors and prepayments

608

5,107

Cash and short-term deposits

3,974

14,577

4,582

19,684

Creditors: amounts falling due within one year

Other creditors

(2,383)

(3,422)

Net current assets

2,199

16,262

Total assets less current liabilities

556,429

557,183

Non-current liabilities

2.25% Convertible Unsecured Loan Stock 2025

8

(35,819)

(35,708)

3.05% Senior Unsecured Loan Note 2035

7

(29,889)

(29,886)

Deferred tax liability on Indian capital gains

(4,594)

(3,631)

(70,302)

(69,225)

Net assets

486,127

487,958

Capital and reserves

Called-up share capital

9

10,435

10,435

Capital redemption reserve

2,062

2,062

Share premium account

60,426

60,412

Equity component of 2.25% Convertible Unsecured Loan Stock 2025

8

1,057

1,057

Capital reserve (*restated)

3,16

399,750

401,124

Revenue reserve (*restated)

3,16

12,397

12,868

Equity shareholders' funds

486,127

487,958

Net asset value per share (pence)

10

Basic

1,548.64

1,554.52

Diluted

1,540.03

1,545.11

The accompanying notes are an integral part of the condensed financial statements.

 

Condensed Statement of Changes in Equity (unaudited)

 

Six months ended 31 January 2022 

Capital

Share

Equity

Share

redemption

premium

component

Capital

Revenue

capital

reserve

account

CULS 2025

reserve

reserve

Total

(*Restated)

(*Restated)

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 July 2021 (*Restated - see note 16)

10,435

2,062

60,412

1,057

401,124

12,868

487,958

Conversion of 2.25% Convertible Unsecured Loan Stock 2025 (note 8)

-

-

14

-

-

-

14

Return after taxation

-

-

-

-

(1,374)

4,551

3,177

Dividends paid (note 6)

-

-

-

-

-

(5,022)

(5,022)

Balance at 31 January 2022

10,435

2,062

60,426

1,057

399,750

12,397

486,127

Six months ended 31 January 2021

Capital

Share

Equity

Share

redemption

premium

component

Capital

Revenue

capital

reserve

account

CULS 2025

reserve

reserve

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 July 2020

10,434

2,062

60,377

1,057

268,750

16,276

358,956

Purchase of own shares to treasury

-

-

-

-

(8,093)

-

(8,093)

Conversion of 2.25% Convertible Unsecured Loan Stock 2025 (note 8)

-

-

16

-

-

-

16

Return after taxation

-

-

-

-

72,538

511

73,049

Dividends paid (note 6)

-

-

-

-

-

(6,043)

(6,043)

Balance at 31 January 2021

10,434

2,062

60,393

1,057

333,195

10,744

417,885

The accompanying notes are an integral part of the condensed financial statements.

 

Condensed Statement of Cash Flows (unaudited)

 

Six months ended

Six months ended

31 January 2022

31 January 2021

£'000

£'000

Operating activities

Net gain before finance costs and taxation

5,372

76,011

Adjustments for:

Dividend income

(6,023)

(3,591)

Dividends received

6,599

4,396

Interest paid

(871)

(480)

Gains on investments

(2,033)

(74,934)

Currency losses

60

287

Decrease/(increase) in prepayments

11

(21)

Decrease in other debtors

8

9

Increase/(decrease) in other creditors

165

(30)

Stock dividends included in investment income

(157)

(74)

Overseas withholding tax suffered

(355)

(121)

Net cash inflow from operating activities

2,776

1,452

Investing activities

Purchases of investments

(44,447)

(37,146)

Sales of investments

36,150

41,074

Net cash (outflow)/inflow from investing activities

(8,297)

3,928

Cash flows from financing activities

Purchase of own shares to treasury

-

(8,190)

Repayment of loan

-

(11,200)

Issue of 3.05% Senior Unsecured Loan Note 2035

-

29,883

Equity dividends paid

(5,022)

(6,043)

Net cash (outflow)/inflow from financing activities

(5,022)

4,450

(Decrease)/increase in cash and cash equivalents

(10,543)

9,830

Analysis of changes in cash and cash equivalents during the period

Opening balance

14,577

10,919

(Decrease)/increase in cash and cash equivalents as above

(10,543)

9,830

Effect of exchange rate fluctuations on cash held

(60)

(287)

Closing balance

3,974

20,462

The accompanying notes are an integral part of the condensed financial statements.

 

Notes to the Financial Statements

 

1.

Accounting policies

Basis of accounting. The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and with the Statement of Recommended Practice (SORP) for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts', issued in April 2021 (The AIC SORP). 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.

With effect from 1 August 2021, management fees and finance costs are charged 25% to revenue and 75% to capital. With this exception, the interim financial statements have been prepared using the same accounting policies as the preceding annual financial statements.

 

2.

Income

Six months ended

Six months ended

31 January 2022

31 January 2021

£'000

£'000

Income from investments

Overseas dividends

5,697

3,432

 

Stock dividends

157

74

UK dividend income

169

85

Total income

6,023

3,591

 

3.

Administrative expenses

During the period from January 2021 through to 31 January 2022 the Board undertook a detailed and exhaustive review of the Company's long term investment strategy which culminated in shareholders approving a number of significant changes to the Company's investment objective and policy. Costs of £650,000 were incurred during this period in connection with the long term investment strategy review. In accordance with the guidelines provided by the AIC's SORP, £640,000 of these expenses have been adjudged by the Board to have been  incurred, wholly or partly, in connection with the maintenance or enhancement of the value of the investments in the portfolio, and as a result these costs have properly been allocated to capital.

 

4.

Taxation

The taxation charge for the period allocated to revenue represents withholding tax suffered on overseas dividend income. The taxation charge for the period allocated to capital represents capital gains tax arising on the sale of Indian equity investments.

 

 

5.

Return per Ordinary share

 

Six months ended

Six months ended

 31 January 2022

 31 January 2021

p

p

Basic

Revenue return

14.50

1.60

Capital return

(4.38)

226.87

Total return

10.12

228.47

The figures above are based on the following:

£'000

£'000

Revenue return

4,551

511

Capital return

(1,374)

72,538

Total return

3,177

73,049

 

Weighted average number of shares in issueA

31,389,933

31,973,225

Six months ended

Six months ended

 31 January 2022

 31 January 2021

DilutedB

p

p

Revenue return

13.56

n/a

Capital return

n/a

210.39

Total return

9.91

212.13

The figures above are based on the following:

£'000

£'000

Revenue return

4,596

599

Capital return

(1,237)

72,538

Total return

3,359

73,137

Number of dilutive shares

2,501,986

2,504,428

Diluted shares in issueAB

33,891,919

34,477,653

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 2,501,986 (31 January 2021 - 2,504,428) to 33,891,919 (31 January 2021 - 34,477,653) Ordinary shares.

For the six months ended 31 January 2022 the assumed conversion for potential Ordinary shares was dilutive to the revenue return per Ordinary share (31 January 2021 - non-dilutive) and non-dilutive to the capital return per Ordinary share (31 January 2021 - dilutive). Where dilution occurs, the net returns are adjusted for interest charges and issue expenses relating to the CULS (31 January 2022 - £182,000; 31 January 2021 - £88,000). Total earnings for the period are tested for dilution. Once dilution has been determined individual revenue and capital earnings are adjusted.

 

6.

Dividends

Six months ended

Six months ended

 2022

31 January 2021

£'000

£'000

Final dividend for 2021 - 15.0p (2020 - 14.50p)

4,708

4,612

Special dividend for 2021 - 1.00p (2020 - 4.50p)

314

1,431

5,022

6,043

 

7.

Senior Unsecured Loan Note

On 1 December 2020 the Company issued a £30,000,000 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 £118,000 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 £225,000,000 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 January 2022 was £29,930,000, the value being based on a comparable quoted debt security.

 

8.

2.25% Convertible Unsecured Loan Stock 2025 ("CULS")

Liability

Equity

Nominal

 component

 component

£'000

£'000

£'000

Balance at beginning of period

36,658

35,708

1,057

Conversion of CULS into Ordinary shares

(14)

(14)

-

Notional interest on CULS

-

77

-

Amortisation of issue expenses

-

48

-

Balance at end of period

36,644

35,819

1,057

 

 

The 2.25% Convertible Unsecured Loan Stock 2025 ("CULS") can be converted at the election of holders into Ordinary shares during the months of May and November each year throughout its life until 31 May 2025 at a rate of 1 Ordinary share for every 1,465.0p nominal of CULS. Interest is paid on the CULS on 31 May and 30 November each year. With effect from 1 August 2021, 25% of the interest will be charged to revenue and 75% to capital (31 July 2021 - 100% to revenue) in line with the Board's expected long-term split of returns from the investment portfolio of the Company.

In the event of a winding-up of the Company the rights and claims of the Trustee and 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.

During the period ended 31 January 2022 the holders of £13,764 of 2.25% CULS 2025 exercised their right to convert their holdings into Ordinary shares. Following the receipt of the exercise instructions, the Company converted £13,764 (31 July 2021 - £36,476) nominal amount of CULS into 935 (31 July 2021 - 2,475) Ordinary shares.

As at 31 January 2022, there was £36,643,991 (31 July 2021 - £36,657,755) nominal amount of CULS in issue.

 

9.

Called-up share capital

During the six months ended 31 January 2022 no (31 January 2021 - 782,500) Ordinary shares were bought back to be held in treasury at a total cost of £nil (31 January 2021 - £8,093,000). During the six months ended 31 January 2022 an additional 935 (31 July 2021 - 2,475) Ordinary shares were issued after £13,764 nominal amount of 2.25% Convertible Unsecured Loan Stock 2025 were converted at 1465.0p each (31 July 2021 - £36,476). The total consideration received was £nil (31 July 2021 - £nil). At the end of the period there were 41,739,537 (31 July 2021 - 41,738,602) Ordinary shares in issue, of which 10,348,918 (31 July 2021 - 10,348,918) were held in treasury.

Subsequent to the period end, no Ordinary shares have been bought back.

 

10.

Net asset value per equity share

As at

As at

31 January 2022

31 July 2021

Basic

Net assets attributable

£486,127,000

£487,958,000

Number of Ordinary shares in issueA

31,390,619

31,389,684

Net asset value per Ordinary share

1,548.64p

1,554.52p

DilutedB

Net assets attributable

£521,946,000

£523,666,000

Number of Ordinary shares

33,891,915

33,891,920

Net asset value per Ordinary share

1,540.03p

1,545.11p

A Excludes shares in issue held in treasury.

B The diluted net asset value per Ordinary share has been calculated on the assumption that £36,643,991 (31 July 2021 - £36,657,755)  2.25% Convertible Unsecured Loan Stock 2025 ("CULS") are converted at 1,465.0p per share, giving a total of 33,891,915 (31 July 2021 - 33,891,920) 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 bond instruments are deemed to be 'in the money' if the cum income (debt at fair value) 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 January 2022 the NAV was 1,548.64p and thus the CULS were  'in the money' (31 July 2021 - same).

 

11.

Transaction costs

During the period 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 on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:

Six months ended

Six months ended

31 January 2022

31 January 2021

£'000

£'000

Purchases

46

114

Sales

81

69

127

183

 

12.

Analysis of changes in net debt

 At 

At

 31 July

Currency

Cash

Non-cash

31 January

2021

differences

flows

movements

2022

 '000 

£'000

£'000

£'000

£'000

Cash and short-term deposits

14,577

(60)

(10,543)

-

3,974

Debt due after more than one year

(65,594)

-

-

(114)

(65,708)

 

(51,017)

(60)

(10,543)

(114)

(61,734)

 

 At 

At

31-Jul

Currency

Cash

Non-cash

31-Jan

2020

differences

flows

movements

2021

 '000 

£'000

£'000

£'000

£'000

Cash and short-term deposits

10,919

(287)

9,830

-

20,462

Debt due within one year

(11,200)

-

11,200

-

-

Debt due after more than one year

(35,497)

-

(29,883)

(109)

(65,489)

(35,778)

(287)

(8,853)

(109)

(45,027)

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.

 

13.

Fair value hierarchy

FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications:

Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.

Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.

The financial assets measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:

 

Level 1

Level 2

Level 3

Total

As at 31 January 2022

£'000

£'000

£'000

£'000

Financial assets at fair value through profit or loss

Quoted equities

537,142

-

13,469

550,611

Quoted preference shares

-

3,201

-

3,201

Quoted warrants

-

418

-

418

Net fair value

537,142

3,619

13,469

554,230

Level 1

Level 2

Level 3

Total

As at 31 July 2021

£'000

£'000

£'000

£'000

Financial assets at fair value through profit or loss

Quoted equities

536,934

-

-

536,934

Quoted preference shares

-

3,652

-

3,652

Quoted warrants

-

335

-

335

Net fair value

536,934

3,987

-

540,921

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.

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.

Six months ended

Year ended

31 January 2022

31 July 2021

Level 3 Financial assets at fair value through profit or loss

£'000

£'000

Opening fair value

-

-

Transfers from level 2

13,469

-

Total gains or losses included in losses on investments in the Statement of Comprehensive Income:

- assets disposed of during the year

-

-

- assets held at the end of the year

-

-

Closing balance

13,469

-

During the period, the Company changed the basis for valuing its holding in Cebu Holdings. The investee company is due to merge with another company, Ayala Land, in the near future and the transaction will be satisfied by a share conversion. The valuation methodology employed is based on the underlying quoted price of Ayala Land and the implied conversion ratio.

         

 

14.

Related party disclosures

Mr Young is a director of abrdn Asia Limited,  which has been delegated, under an agreement with ASFML, to provide management services to the Company.  Mr Young is not a director of ASFML.

Transactions with the Manager.  The investment management fee is payable monthly in arrears based on the market capitalisation of the Company multiplied by the number of shares in issue (less those held in treasury) at the month end.  With effect from 1 August 2021 the annual management fee has been charged at 0.85% for the first £250,000,000, 0.60% for the next £500,000,000 and 0.50% over £750,000,000 . Previously, the monthly management fee was charged at 0.08%. During the period £1,652,000 (31 January 2021 - £1,651,000) of investment management fees were charged, with a balance of £586,000 (31 January 2021 - £594,000) being payable to ASFML at the period end. Investment management fees are charged 25% to revenue and 75% to capital (31 January 2021 - 100% to revenue).

The Company also has a management agreement with ASFML for, inter alia, the provision of both administration and promotional activities services which are, in turn, delegated to Aberdeen Asset Managers Limited ('AAML') respectively. The administration fee is payable quarterly in advance and is adjusted annually to reflect the movement in the Retail Price Index. It is based on a current annual amount of £105,000 (31 January 2021 - £99,000). During the period £51,000 (31 January 2021 - £49,000) of fees were charged, with a balance of £26,000 (31 January 2021 - £49,000) payable to AAML at the period end. The promotional activities costs are based on a current annual amount of £219,000 (31 January 2021 - £219,000), payable quarterly in arrears. During the period £110,000 (31 January 2021 - £110,000) of fees were charged, with a balance of £73,000 (31 January 2021 - £122,000) being payable to AAML at the period end.

 

15.

Segmental information

The Company is engaged in a single segment of business, which is to invest in equity securities and debt instruments. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment.

 

16.

Prior year adjustment

The financial statements for the year to 31 July 2021 have been restated to reallocate costs of £250,000 associated with the long term investment strategy review from revenue to capital.

 

17.

Subsequent events

On 4 February 2022 there was a sub-division of each existing Ordinary 25p share into five Ordinary shares of 5p each. As a result the conversion price of the CULS decreased from 1,465p to 293p.

 

18.

Half-Yearly Report

The financial information in this Report does not comprise statutory accounts within the meaning of Section 434 - 436 of the Companies Act 2006. The financial information for the year ended 31 July 2021 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified and contained no statement under Section 498 (2), (3) or (4) of the Companies Act 2006. The condensed interim financial statements have been prepared using the same accounting policies as the preceding annual accounts.

PricewaterhouseCoopers LLP has reviewed the financial information for the six months ended 31 January 2022 pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

 

19.

This Half-Yearly Report was approved by the Board and authorised for issue on 13 April 2022.

 

Alternative Performance Measures ("APMs")

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.  

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. This has been presented on a diluted basis as the Convertible Unsecured Loan Stock ("CULS") is "in the money".

31 January 2022

31 July 2021

Share price

1,352.50p

1,330.00p

Net Asset Value per share

1,540.03p

1,545.11p

Discount

12.2%

13.9%

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 amounts due from and to brokers at the period end as well as cash and short-term deposits.

31 January2022

31 July 2021

Borrowings (£'000)

a

65,708

65,594

Cash (£'000)

b

3,974

14,577

Amounts due to brokers (£'000)

c

784

1,997

Amounts due from brokers (£'000)

d

26

4,060

Shareholders' funds (£'000)

e

486,127

487,958

Net gearing

(a-b+c-d)/e

12.9%

10.0%

Ongoing charges ratio

The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average daily net asset values with debt at fair value published throughout the year. The ratio as at 31 January 2022 is based on forecast ongoing charges for the year ending 31 July 2022.

 

31 January 2022

31 July 2021

Investment management fees (£'000)

3,238

3,570

Administrative expenses (£'000)

1,502

1,386

Less: non-recurring charges (£'000)A

(390)

(297)

Ongoing charges (£'000)

4,350

4,659

Average net assets (£'000)

497,539

422,440

Ongoing charges ratio

0.87%

1.10%

A Professional fees comprising corporate and legal fees incurred associated with proposals approved by shareholders on 27 January 2022.

 

The ongoing charges ratio differs from the other costs figure reported in the Company's Key Information Document calculated in line with the PRIIPs regulations, which includes the ongoing charges ratio and the financing and transaction costs.

Total return

NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. Share price and NAV total returns are monitored against open-ended and closed-ended competitors, and the Reference Index, respectively.  

 

Share

Six months ended 31 January 2022

NAV

Price

Opening at 1 August 2021

a

1,545.11p

1,330.00p

Closing at 31 January 2022

b

1,540.03p

1,352.50p

Price movements

c=(b/a)-1

-0.3%

1.7%

Dividend reinvestmentA

d

0.9%

1.1%

Total return

c+d

+0.6%

+2.8%

Share

Year ended 31 July 2021

NAV

Price

Opening at 1 August 2020

a

1,106.45p

980.00p

Closing at 31 July 2021

b

1,545.11p

1,330.00p

Price movements

c=(b/a)-1

39.6%

35.7%

Dividend reinvestmentA

d

2.3%

2.5%

Total return

c+d

+41.9%

+38.2%

A NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend.  

 

 

Copies of the Company's Half Yearly Report for the six months ended 31 January 2022 will be posted to shareholders in April 2022 and will be available thereafter on the Company's website: asia-focus.co.uk *.

 

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements.  Investors may not get back the amount they originally invested.

 

* 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.

 

Aberdeen Asset Management PLC

Secretaries

13 April 2022

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
IR BLGDSSBBDGDX

a d v e r t i s e m e n t