Interim / Quarterly Report • May 12, 2022
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
(formerly Aberdeen Standard Asia Focus PLC )
Half Yearly Report 31 January 2022
A fundamental, high conviction portfolio of well-researched Asian small caps
"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"
Important Information 34
Nigel Cayzer, Chairman
| 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 +0.6% |
Six months ended 31 January 2022 +2.8% |
Six months ended 31 January 2022 –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 on pages 28 and 29. B Presented on a diluted basis as the Convertible Unsecured Loan Stock (CULS) is "in the money".
| 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 on pages 28 and 29.
| Financial year end | 31 July 2022 |
|---|---|
| Announcement of unaudited half yearly results for the six months ended 31 January 2022 |
13 April 2022 |
| Annual General Meeting (London) | December 2022 |
| Payment of interim dividends | 1st Interim 21 March 2022 2nd Interim 17 June 2022 3rd Interim 16 September 2022 |
"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%"
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 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 fastestgrowing 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.
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.
I would like to thank shareholders for supporting the Board's proposals at the General Meeting held on 27 January 2022
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:
· 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:
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.
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.
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
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.
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.
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%.
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.
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
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.
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.
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.
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.
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:
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.
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.
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:
Chairman 13 April 2022
4.8% Total assets
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.
Total assets
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.
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.
3.2% Total assets
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.
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
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).
2.9% Total assets
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 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.
Total assets
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.
| Company | Industry | Country | Valuation £'000 |
Total assets % |
|---|---|---|---|---|
| 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 |
| Company | Industry | Country | Valuation £'000 |
Total assets % |
|---|---|---|---|---|
| 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 |
| Company | Industry | Country | Valuation £'000 |
Total assets % |
|---|---|---|---|---|
| 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.
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%
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.
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.
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%
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.
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 immunityboosting 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 energyefficient lamps, as well as the use of chilled chlorofluorocarbon-free water for its air-conditioning units and solar power in its operations.
| Six months ended 31 January 2022 |
Six months ended 31 January 2021 |
||||||
|---|---|---|---|---|---|---|---|
| Notes | Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'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.
| Notes | As at 31 January 2022 £'000 |
As at 31 July 2021 (*Restated) £'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 |
| Share capital £'000 |
Capital redemption reserve £'000 |
Share premium account £'000 |
Equity component CULS 2025 £'000 |
Capital reserve (*Restated) £'000 |
Revenue reserve (*Restated) £'000 |
Total £'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 |
| Share capital £'000 |
Capital redemption reserve £'000 |
Share premium account £'000 |
Equity component CULS 2025 £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'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 |
| Six months ended 31 January 2022 £'000 |
Six months ended 31 January 2021 £'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 |
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.
| Income from investments | Six months ended 31 January 2022 £'000 |
Six months ended 31 January 2021 £'000 |
|
|---|---|---|---|
| Overseas dividends | 5,697 | 3,432 | |
| Stock dividends | 157 | 74 | |
| UK dividend income | 169 | 85 | |
| Total income | 6,023 | 3,591 |
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.
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.
| Six months ended 31 January 2022 |
Six months ended 31 January 2021 |
|
|---|---|---|
| p | p | |
| Basic | ||
| Revenue return | 14.50 | 1.60 |
| Capital return | (4.38) | 226.87 |
| Total return | 10.12 | 228.47 |
| £'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 | |
|---|---|---|
| DilutedB | 31 January 2022 p |
31 January 2021 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.
| Six months ended | Six months ended | |
|---|---|---|
| 31 January 2022 £'000 |
31 January 2021 £'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 |
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.
| Nominal £'000 |
Liability component £'000 |
Equity component £'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.
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.
| As at 31 January 2022 |
As at 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).
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 31 January 2022 £'000 |
Six months ended 31 January 2021 £'000 |
|
|---|---|---|
| Purchases | 46 | 114 |
| Sales | 81 | 69 |
| 127 | 183 |
| At 31 July 2021 £'000 |
Currency differences £'000 |
Cash flows £'000 |
Non-cash movements £'000 |
At 31 January 2022 £'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 31 July 2020 £'000 |
Currency differences £'000 |
Cash flows £'000 |
Non-cash movements £'000 |
At 31 January 2021 £'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.
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:
| As at 31 January 2022 | Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'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 |
| As at 31 July 2021 | Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'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.
| Level 3 Financial assets at fair value through profit or loss | Six months ended 31 January 2022 £'000 |
Year ended 31 July 2021 £'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.
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.
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.
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.
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.
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") 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.
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 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 January 2022 | 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% |
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.
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 openended and closed-ended competitors, and the Reference Index, respectively.
| Six months ended 31 January 2022 | NAV | Share 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% |
| Year ended 31 July 2021 | NAV | Share 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.
For internet users, detailed data on the Company, including price, performance information and a monthly fact sheet is available from the Company's website (asia-focus.co.uk) and the TrustNet website (trustnet.co.uk). Alternatively you can call 0808 500 0040 (free when dialling from a UK landline) for investment company information.
LinkedIn: abrdn Investment Trusts
The Company has appointed Aberdeen Standard Fund Managers Limited as its alternative investment fund manager and BNP Paribas Securities Services as its depositary under the AIFMD. Details of the leverage and risk policies which the Company is required to have in place under AIFMD are published in the Company's PIDD which can be found on the website asia-focus.co.uk. The KID relating to the Company and published by the Manager can be found in the 'Literature Library' section of the Company's website.
Further information on abrdn Asia Focus plc can be found on its own dedicated website: asia-focus.co.uk. This allows web users to access information on the Company's share price performance, capital structure, stock exchange announcements and monthly reports.
abrdn has been made aware that some investors may have received telephone calls from people purporting to work for abrdn, or third parties, who have offered to buy their investment trust shares. These may be scams which attempt to gain personal information with which to commit identity fraud or could be 'boiler room' scams where a payment from an investor is required to release the supposed payment for their shares.
These callers do not work for abrdn and any third party making such offers has no link with abrdn. abrdn does not 'cold-call' investors in this way. If you have any doubt over the veracity of a caller, do not offer any personal information, end the call and contact our Customer Services Department using the details below.
The Financial Conduct Authority provides advice with respect to share fraud and boiler room scams at: fca.org.uk/consumers/scams.
In the event of queries regarding their holdings of shares, lost certificates dividend payments, registered details, etc shareholders holding their shares in the Company directly should contact the registrars, Equiniti Limited, Aspect House, Spencer Road, Lancing West Sussex BN99 6DA Tel: 0371 384 2416 Lines open 8:30am to 5:30pm (UK time), Monday to Friday, (excluding public holidays in England and Wales). Calls may be recorded and monitored randomly for security and training purposes. Changes of address must be notified to the registrars in writing.
Any general enquiries about the Company should be directed to the Company Secretary, abrdn Asia Focus plc, 1 George Street, Edinburgh EH2 2LL or by email [email protected].
If you have any questions about an investment held through the abrdn Share Plan, abrdn Investment Trusts ISA or abrdn Investment Plan for Children, please telephone the Manager's Customer Services Department on 0808 500 0040. Alternatively, email [email protected] or write to abrdn Investment Trusts, PO Box 11020, Chelmsford, Essex CM99 2DB.
Investors can buy and sell shares in the Company directly through a stockbroker or indirectly through a lawyer, accountant or other professional adviser. Alternatively shares can be bought directly through the abrdn Investment Plan for Children, abrdn Share Plan and abrdn Investment Trusts ISA.
abrdn runs an Investment Plan for Children (the "Children's Plan") which covers a number of investment companies under its management including the Company. Anyone can invest in the Children's Plan, including parents, grandparents and family friends (subject to the eligibility criteria as stated within the terms and conditions). All investments are free of dealing charges on the initial purchase of shares, although investors will suffer the bidoffer spread, which can, on some occasions, be a significant amount. Lump sum investments start at £150 per trust, while regular savers may invest from £30 per month. Investors simply pay Government Stamp Duty (currently 0.5%) where applicable on entry. Selling costs are £10 + VAT. There is no restriction on how long an investor need invest in the Children's Plan, and regular savers can stop or suspend participation by instructing abrdn in writing at any time. In common with other schemes of this type, all investments are held in nominee accounts. Investors have full voting and other rights of share ownership.
abrdn runs an Investment Trust Share Plan (the "Plan") through which shares in the Company can be purchased. There are no dealing charges on the initial purchase of shares, although investors will suffer the bid-offer spread, which can, on some occasions, be a significant amount. Lump sum investments start at £250, while regular savers may invest from £100 per month. Investors simply pay Government Stamp Duty (currently 0.5%) where applicable on entry. Selling costs are £10 + VAT. There is no restriction on how long an investor need invest in a Plan, and regular savers can stop or suspend participation by instructing abrdn in writing at any time. In common with other schemes of this type, all investments are held in nominee accounts. Investors have full voting and other rights of share ownership.
abrdn operates an Investment Trust ISA ("ISA") through which an investment may be made of up to £20,000 in the tax year 2022/2023.
There are no brokerage or initial charges for the ISA, although investors will suffer the bid-offer spread, which can, on some occasions, be a significant amount. Investors only pay Government Stamp Duty (currently 0.5%) on purchases where applicable. Selling costs are £15 + VAT. The annual ISA administration charge is £24 + VAT, calculated annually and applied on 31 March (or the last business day in March) and collected soon thereafter either by direct debit or, if there is no valid direct debit mandate in place, from the available cash in the Plan prior to the distribution or reinvestment of any income, or, where there is insufficient cash in the Plan, from the sale of investments held in the Plan. Investors have full voting and other rights of share ownership. Under current legislation, investments in ISAs can grow free of capital gains tax.
You can choose to transfer previous tax year investments to the abrdn Investment Trust ISA which can be invested in the Company while retaining your ISA wrapper. The minimum lump sum for an ISA transfer is £1,000 and is subject to a minimum per trust of £250.
For literature and information on the Investment Plan for Children, Investment Trust Share Plan, ISA or ISA Transfer including application forms for the Company and the Manager's investment trust products, please contact abrdn Investment Trust Administration, PO Box 11020, Chelmsford, Essex, CM99 2DB Telephone: 0808 500 00 40 (free when dialling from a UK landline). Terms and conditions for the abrdn-managed savings products can also be found under the literature section of invtrusts.co.uk.
There are a number of online dealing platforms for private investors that offer share dealing, ISAs and other means to invest in the company. Real-time execution-only stockbroking services allow you to trade online, manage your portfolio and buy UK listed shares. These sites do not give advice. Some comparison websites also look at dealing rates and terms. Some well-known online providers, which can be found through internet search engines, include: AJ Bell Youinvest; Barclays Smart Investor; Charles Stanley Direct; Fidelity; Halifax Share Dealing; Hargreaves Lansdown; Interactive Investor; Novia; Transact; Standard Life.
If you have a large sum to invest, you may wish to contact a discretionary private client stockbroker. They can manage your entire portfolio of shares and will advise you on your investments. To find a private client stockbroker visit the Personal Investment Management and Financial Advice Association at: pimfa.co.uk.
To find an adviser who recommends on investment trusts, visit unbiased.co.uk.
Before approaching a stockbroker, always check that they are regulated by the Financial Conduct Authority:
Tel: 0800 111 6768 or visit https://register.fca.org.uk Email: [email protected]
The Company's shares are intended for investors, primarily in the UK, including retail investors, professionallyadvised private clients and institutional investors who are seeking exposure to smaller companies in Asia, and who understand and are willing to accept the risks of exposure to equities. Investors should consider consulting a financial adviser who specialises in advising on the acquisition of shares and other securities before acquiring shares. Investors should be capable of evaluating the risks and merits of such an investment and should have sufficient resources to bear any loss that may result.
The Company currently conducts its affairs, and intends to continue to do so for the foreseeable future, in order that the shares issued by abrdn Asia Focus plc can be recommended by a financial adviser to ordinary retail investors in accordance with the FCA's rules in relation to non-mainstream pooled investments (NMPIs).
The Company's shares are excluded from the FCA's restrictions which apply to non-mainstream investment products because they are shares in an investment trust.
Please remember that past performance is not a guide to the future. Stock market and currency movements may cause the value of shares and the income from them to fall as well as rise and investors may not get back the amount they originally invested.
As with all equity investments, the value of investment trusts purchased will immediately be reduced by the difference between the buying and selling prices of the shares, the market maker's spread.
Investors should further bear in mind that the value of any tax relief will depend on the individual circumstances of the investor and that tax rates and reliefs, as well as the tax treatment of ISAs may be changed by future legislation.
The information above is issued and has been approved for the purposes of the Financial Services and Markets Act 2000 by Aberdeen Asset Managers Limited, Bow Bells House, 1 Bread Street, London EC4M 9HH which is authorised and regulated by the Financial Conduct Authority
Nigel Cayzer, Chairman Charlotte Black The Earl of Antrim (previously Viscount Dunluce) Debby Guthrie (resigned 13 April 2022) Krishna Shanmuganathan
Registration Number 03106339
abrdn Asia Limited 21 Church Street #01-01 Capital Square Two Singapore 049480
Aberdeen Standard Fund Managers Limited Authorised and regulated by the Financial Conduct Authority
Bow Bells House 1 Bread Street London EC4M 9HH (* appointed as required by EU Directive 2011/61/EU)
Aberdeen Asset Management PLC Bow Bells House 1 Bread Street London EC4M 9HH
Equiniti Aspect House Spencer Road Lancing West Sussex BN99 6DA
Panmure Gordon & Co 1 New Change London EC4M 9AF
Dentons UK and Middle East LLP Quartermile One 15 Lauriston Place Edinburgh, EH3 9EP
PricewaterhouseCoopers LLP 141 Bothwell Street, Glasgow, G2 7EQ
The Law Debenture Corporation p.l.c. Fifth Floor 100 Wood Street London EC2V 7EX
BNP Paribas Securities Services, London Branch 10 Harewood Avenue London NW1 6AA
asia-focus.co.uk
Foreign Account Tax Compliance Act ("FATCA") IRS Registration Number ("GIIN"): 5ITCFT.99999.SL.826
Legal Entity Identifier 5493000FBZP1J92OQY70
The Company is an investment trust and its Ordinary shares and Convertible Unsecured Loan Stock ("CULS") are listed on the premium segment of the London Stock Exchange. The Company aims to attract long-term private and institutional investors wanting to benefit from the growth prospects of Asia's smaller companies.
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. (On 27 January 2022 shareholders approved an amended investment objective.)
The Company aimed 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) in the economies of Asia and Australasia, excluding Japan, by following the investment policy. When it was in shareholders' interests to do so, the Company reserved 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.
On 27 January 2022 shareholders approved the introduction of a performance-linked tender offer, which provides that, in the event of underperformance of the NAV per Share versus the MSCI AC Asia ex Japan Small Cap Index over a fiveyear 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.
The Company does not have a benchmark. From 1 August 2021 the Manager has utilised the MSCI AC Asia ex Japan Small Cap Index (currency adjusted) as well as peer group comparisons for Board reporting. For periods prior to 1 August 2021, a composite index is used comprising the MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted) up to 31 July 2021 and the MSCI AC Asia ex Japan Small Cap Index (currency adjusted) thereafter. It is likely that performance will diverge, possibly quite dramatically in either direction, from the comparative index. The Manager seeks to minimise risk by using in-depth research and does not see divergence from an index as risk.
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).
For more information visit
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.