Last checked at 
17 Aug 2023 07:00
abrdn Asian Income Fund Limited
Legal Entity Identifier: 549300U76MLZF5F8MN87
UNAUDITED HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2023
Performance Highlights
· The NAV fell by 3.7% on a total return basis for the six months ended 30 June 2023. This compares to a fall of 2.4% in the MSCI AC Asia Pacific ex Japan Index.
· The dividend yield at the end of the period was 5.3%.
Dividend yield A |
| Earnings per Ordinary share - basic (revenue) | ||
As at 30 June 2023 | 5.3% |
| Six months ended 30 June 2023 | 6.28p |
As at 31 December 2022 | 4.7% | Six months ended 30 June 2022 | 5.23p | |
Net asset value total return AB |
| Share price total return AB | ||
Six months ended 30 June 2023 | -3.7% |
| Six months ended 30 June 2023 | -4.0% |
Year ended 31 December 2022 | -3.6% | Year ended 31 December 2022 | -2.7% | |
MSCI AC Asia Pacific ex Japan Index total return (currency adjusted) B |
| MSCI AC Asia Pacific ex Japan High Dividend Yield Index total return (currency adjusted) B | ||
Six months ended 30 June 2023 | -2.4% |
| Six months ended 30 June 2023 | 1.4% |
Year ended 31 December 2022 | -6.8% | Year ended 31 December 2022 | 3.2% | |
| ||||
Discount to net asset value per Ordinary share A | Ongoing charges A | |||
As at 30 June 2023 | 12.3% |
| Six months ended 30 June 2023 | 1.01% |
As at 31 December 2022 | 11.7% | Year ended 31 December 2022 | 1.01% | |
Net gearing A |
| |||
As at 30 June 2023 | 10.0% |
|
|
|
As at 31 December 2022 | 8.1% | |||
A Alternative Performance Measure. | ||||
B Total return represents the capital return plus dividends reinvested. | ||||
Chairman's Statement
Highlights
· Despite the short term underperformance, the Company has outperformed the MSCI AC Asia Pacific ex Japan Index over 1, 3 and 5 years
· Our dividend for the year is expected to exceed 10.60p per share, an increase from last year, and if achieved would provide a yield of 5.4%
· New holdings have been added to the portfolio to further enhance the Company's income-generating capacity
· Environmental, social and governance ('ESG') analysis is firmly embedded in the research process and reflects our belief that companies with good ESG practices will be the winners over the longer term
Market Overview
The first half of 2023 was a challenging period for investors in Asian stock markets, as the macroeconomic environment and monetary policy moves continued to influence investor sentiment significantly more than individual company performance.
In my previous annual statement, I had highlighted three key areas of interest in the outlook: inflation, monetary policy, and China. Through this review period, we have seen how each theme proved pivotal in driving market direction. While recession risks persist in Europe and the US, owing to continued policy rate tightening, it bears noting that inflation remains lower in Asia. A positive development was a fall in the price of some key raw materials, which should help to relieve cost pressures faced by companies. As for China, optimism around a demand recovery from the country's Covid re-opening led to an initial rise in Asian stock markets. This, however, soon gave way to weakness on the back of signs that China's economic recovery might be stalling, although markets stabilised subsequently and traded in a narrow range.
The period was also characterised by fluctuating markets caused by uncertainty around inflation, the impact of the US Federal Reserve's ("Fed") long series of policy rate increases and whether a global recession could be avoided later in the year. The decision by the OPEC+ group of oil-producing countries to cut output sparked fears that this could further stoke inflation.
Performance
In this environment, over the six months to 30 June 2023, the net asset value ("NAV") total return declined by 3.7% on a total return basis, which compares to the MSCI AC Asia Pacific ex Japan Index's (the "Index") decline of 2.4%. The share price ended the period at 201p, representing a discount of 12.3% to the NAV per share.
Despite the short term underperformance, the Company has outperformed the Index over 1, 3 and 5 years, underlining the benefit of the Investment Manager's steadfast commitment to quality companies offering both capital and income growth.
Portfolio Activity
The Investment Manager took advantage of weakness in the market to add five holdings that should further enhance your Company's income-generating capacity; Tencent, Autohome, Telstra, SITC International and Astra International.
The positions in Medibank, Kasikornbank, and Macquarie Group were sold to manage the Company's exposure to the financial sector in the wake of the banking turmoil in the US and Europe. Stakes in Okinawa Cellular and Bank Rakyat Indonesia were divested in order to redirect the proceeds into higher yielding companies.
Revenue and Dividends
Revenue earnings per share were 6.28p for the six month period ended 3 June 2023, an increase of 20.1% compared to the first six months of the previous year. The Company has continued to benefit from the Investment Manager's focus on high-yielding companies with strong fundamentals, where it believes there is room for significant increases in dividend receipts.
The Company has already declared first and second interim dividends of 2.50p per share in respect of the year ending 31 December 2023, with the second interim dividend payable on 25 August 2023 to shareholders on the register on 28 July 2023.
The Board is very aware of the importance of dividends to shareholders and is pleased to reiterate that, in the absence of unforeseen circumstances, the intention is to declare a total dividend exceeding 10.60p per Ordinary share in respect of the year to 31 December 2023, equating to a dividend yield of 5.4% based on the closing share price of 195.75p on 16 August 2023.
The level of the remaining two dividends for 2023 will be considered at each quarter end, at which point an announcement will be made by the Company. There are healthy revenue reserves built up by the Company that the Board will consider using as appropriate. Any decision as to whether revenue reserves will be utilised (and by how much) will be taken at the time of the declaration of the fourth interim dividend in January 2024.
This Company's history of increasing the dividend means that it continues to be a "next generation dividend hero" as recognised by the Association of Investment Companies. It is very much our intention to continue to extend this record.
Share Capital Management
In line with the Board's policy to buy back shares when the discount at which the Company's shares trade exceeds 5% to the underlying NAV (exclusive of income), the Company bought back 1.1 million shares during the period to be held in treasury, at a cost of £2.3 million.
These buybacks provide an enhancement to the Company's NAV and benefit all shareholders. The Company will continue selectively to buy back shares in the market, in normal market conditions and at the discretion of the Board.
Gearing
The Company has a £10 million fixed rate term loan and a £40 million revolving credit facility, both of which mature in March 2024. At the period end, £30.1 million of the revolving credit facility was drawn down, resulting in total borrowings of £40.1 million and gearing (net of cash) of 10.0%, compared to 8.1% at the beginning of the period.
Jersey Administrator
On 16 August 2023, we announced that the Company had appointed a new, Jersey based, regulated administrator, JTC Fund Solutions (Jersey) Limited ("JTC") to carry out the Jersey regulatory function with effect from 15 August 2023. All investment management and fund administration functions will continue to be provided by the abrdn group through its Singapore based Asian Equity team and UK fund administration team. As a result, day-to-day investment decisions and management of the Company will not be impacted by the reorganisation. There are no changes to the management fee as a result of the reorganisation and the administration fee charged by JTC will be met by abrdn.
Outlook
Asian markets are likely to remain volatile until there is more clarity about the strength of China's economy. The central government will be watching economic data closely, and if the economy does not improve, we could see Beijing increase its support through targeted measures. The monetary tightening cycle in the US will also remain a significant factor. While it is likely that this tightening is close to its peak, recent comments by Fed chairman, Jerome Powell, that inflation remains too high and that he expected further tightening in the second half of the year did cause some market uncertainty in this regard. With some Asian currencies pegged to the US Dollar, any further interest rate rises will have an effect on the markets in which your Company operates.
However, despite the recent difficulties, the fundamental long-term rationale for investing in Asia remains compelling. Rising affluence is leading to growth in consumption in premium products in areas such as personal care, financial services and food and beverages. Ongoing urbanisation is driving an infrastructure boom which will benefit property developers and mortgage providers.
The Investment Manager's focus remains on quality companies with sustainable business models, strong cash flows and access to structural growth drivers across Asia, as these support growth in both capital and shareholder returns.
Ian Cadby
Chairman17 August 2023
Investment Portfolio
As at 30 June 2023
Valuation | Total assets | ||
Company | Country | £'000 | % |
Taiwan Semiconductor Manufacturing Company | Taiwan | 31,768 | 7.4 |
Samsung Electronics (Pref) | South Korea | 22,550 | 5.3 |
BHP Group | Australia | 14,909 | 3.5 |
DBS Group | Singapore | 14,545 | 3.4 |
Oversea-Chinese Banking Corporation | Singapore | 14,167 | 3.3 |
Power Grid | India | 13,664 | 3.2 |
Hon Hai Precision Industry | Taiwan | 12,683 | 3.0 |
Venture Corporation | Singapore | 11,775 | 2.8 |
Charter Hall Long Wale REIT | Australia | 10,429 | 2.4 |
China Resources Land | China | 10,330 | 2.4 |
Top ten investments | 156,820 | 36.7 | |
Region RE | Australia | 10,209 | 2.4 |
AIA Group | Hong Kong | 10,139 | 2.4 |
Sunonwealth Electric Machine | Taiwan | 10,091 | 2.4 |
United Overseas Bank | Singapore | 9,989 | 2.3 |
Rio Tinto A | Australia | 9,870 | 2.3 |
Taiwan Mobile | Taiwan | 9,555 | 2.2 |
LG Chem (Pref) | South Korea | 9,492 | 2.2 |
Keppel Infrastructure Trust | Singapore | 7,857 | 1.8 |
Spark New Zealand | New Zealand | 7,776 | 1.8 |
Singapore Telecommunications | Singapore | 7,230 | 1.7 |
Top twenty investments | 249,028 | 58.2 | |
Commonwealth Bank of Australia | Australia | 6,638 | 1.6 |
Tisco Financial Group Foreign | Thailand | 6,622 | 1.5 |
Auckland International Airport | New Zealand | 6,407 | 1.5 |
Centuria Industries REIT | Australia | 6,185 | 1.5 |
Singapore Technologies Engineering | Singapore | 6,084 | 1.4 |
Hong Kong Exchanges & Clearing | Hong Kong | 6,024 | 1.4 |
Momo.com Inc | Taiwan | 5,886 | 1.4 |
Infosys | India | 5,682 | 1.3 |
Accton Technology | Taiwan | 5,650 | 1.3 |
Midea Group 'A' | China | 5,559 | 1.3 |
Top thirty investments | 309,765 | 72.4 | |
China Merchants Bank 'A' | China | 5,295 | 1.2 |
ASX | Australia | 5,097 | 1.2 |
Capitaland Investment | Singapore | 5,065 | 1.2 |
Hang Lung Properties | Hong Kong | 4,987 | 1.2 |
SAIC Motor 'A' | China | 4,954 | 1.2 |
Siam Cement B | Thailand | 4,941 | 1.2 |
Hana Microelectronics (Foreign) | Thailand | 4,898 | 1.1 |
Capitland India Trust | Singapore | 4,694 | 1.1 |
Tencent Holdings | Hong Kong | 4,620 | 1.1 |
Telstra Corporation | Australia | 4,459 | 1.0 |
Top forty investments | 358,775 | 83.9 | |
Tata Consultancy Services | India | 4,396 | 1.0 |
SITC International Holdings | Hong Kong | 4,395 | 1.0 |
Globalwafers | Taiwan | 4,368 | 1.0 |
Media Tek | Taiwan | 4,344 | 1.0 |
NZX | New Zealand | 4,169 | 1.0 |
National Australia Bank | Australia | 4,129 | 1.0 |
Amada Co | Japan | 3,953 | 0.9 |
Lotus Retail Growth Freehold And Leasehold Property Fund | Thailand | 3,859 | 0.9 |
Dah Sing Financial Holding | Hong Kong | 3,805 | 0.9 |
Autohome Adr | Cayman Islands | 3,759 | 0.9 |
Top fifty investments | 399,952 | 93.5 | |
China Vanke (H shares) | China | 3,586 | 0.8 |
KMC Kuei Meng | Taiwan | 3,539 | 0.8 |
ICICI Bank C | India | 3,405 | 0.8 |
Convenience Retail Asia | Hong Kong | 3,389 | 0.8 |
Land & Houses Foreign | Thailand | 3,267 | 0.8 |
Taiwan Union Technology | Taiwan | 2,228 | 0.5 |
AEM Holdings | Singapore | 2,156 | 0.5 |
Digital Core REIT | Singapore | 2,116 | 0.5 |
China Resources Gas | Hong Kong | 1,705 | 0.4 |
Capitaland Ascott Trust | Singapore | 94 | 0.0 |
Top sixty investments | 425,437 | 99.4 | |
Autohome (A shares) | Cayman Islands | 30 | 0.0 |
Capitaland India Trust(Dummy Rights) | Singapore | 0 | 0.0 |
G3 Exploration C | China | 0 | 0.0 |
Total value of investments |
| 425,467 | 99.4 |
Net current assets D |
| 2,582 | 0.6 |
Total assets |
| 428,049 | 100.0 |
A Incorporated in and listing held in United Kingdom. | |||
B Holding includes investment in common (£3,303,000) and non-voting depositary receipt (£1,638,000) lines. | |||
C Corporate bonds. | |||
D Excludes bank loans of £40,127,000. | |||
Condensed Statement of Comprehensive Income
Six months ended | Six months ended | |||||
30 June 2023 | 30 June 2022 | |||||
(unaudited) | (unaudited) | |||||
Revenue | Capital | Total | Revenue | Capital | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Investment income |
| |||||
Dividend income | 12,808 | - | 12,808 | 10,849 | - | 10,849 |
Interest income on investments held at fair value through profit or loss | 219 | - | 219 | 159 | - | 159 |
Stock lending income | 3 | - | 3 | - | - | - |
Traded option premiums | - | - | - | 47 | - | 47 |
Total revenue | 13,030 | - | 13,030 | 11,055 | - | 11,055 |
Losses on investments held at fair value through profit or loss | - | (24,603) | (24,603) | - | (36,224) | (36,224) |
Net currency gains/(losses) | - | 811 | 811 | - | (2,313) | (2,313) |
| 13,030 | (23,792) | (10,762) | 11,055 | (38,537) | (27,482) |
Expenses |
| |||||
Investment management fee | (631) | (946) | (1,577) | (668) | (1,003) | (1,671) |
Other operating expenses | (415) | - | (415) | (496) | - | (496) |
Total operating expenses | (1,046) | (946) | (1,992) | (1,164) | (1,003) | (2,167) |
Profit/(loss) before finance costs and tax | 11,984 | (24,738) | (12,754) | 9,891 | (39,540) | (29,649) |
Finance costs | (428) | (643) | (1,071) | (169) | (254) | (423) |
Profit/(loss) before tax | 11,556 | (25,381) | (13,825) | 9,722 | (39,794) | (30,072) |
Tax expense | (924) | (154) | (1,078) | (784) | 319 | (465) |
Profit/(loss) for the period | 10,632 | (25,535) | (14,903) | 8,938 | (39,475) | (30,537) |
Earnings per Ordinary share (pence) (note 3) | 6.28 | (15.08) | (8.80) | 5.23 | (23.10) | (17.87) |
The Company does not have any income or expense that is not included in profit/(loss) for the period, and therefore the "Profit/(loss) for the period" is also the "Total comprehensive income for the period". | ||||||
The total columns of this statement represent the Condensed Statement of Comprehensive Income of the Company, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. | ||||||
All of the profit/(loss) and total comprehensive income is attributable to the equity holders of abrdn Asian Income Fund Limited. There are no non-controlling interests. | ||||||
Condensed Statement of Comprehensive Income (cont'd)
Year ended | |||
| 31 December 2022 | ||
| (audited) | ||
| Revenue | Capital | Total |
£'000 | £'000 | £'000 | |
Investment income | |||
Dividend income | 21,423 | - | 21,423 |
Interest income on investments held at fair value through profit or loss | 371 | - | 371 |
Stock lending income | - | - | - |
Traded option premiums | 47 | - | 47 |
Total revenue | 21,841 | - | 21,841 |
Losses on investments held at fair value through profit or loss | - | (29,033) | (29,033) |
Net currency gains/(losses) | - | (3,204) | (3,204) |
| 21,841 | (32,237) | (10,396) |
Expenses | |||
Investment management fee | (1,308) | (1,962) | (3,270) |
Other operating expenses | (939) | - | (939) |
Total operating expenses | (2,247) | (1,962) | (4,209) |
Profit/(loss) before finance costs and tax | 19,594 | (34,199) | (14,605) |
Finance costs | (470) | (704) | (1,174) |
Profit/(loss) before tax | 19,124 | (34,903) | (15,779) |
Tax expense | (1,695) | 408 | (1,287) |
Profit/(loss) for the period | 17,429 | (34,495) | (17,066) |
| |||
Earnings per Ordinary share (pence) (note 3) | 10.23 | (20.24) | (10.01) |
Condensed Balance Sheet
As at | As at | As at | ||
30 June2023 | 30 June2022 | 31 December 2022 | ||
(unaudited) | (unaudited) | (audited) | ||
Notes | £'000 | £'000 | £'000 | |
Non-current assets |
| |||
Investments held at fair value through profit or loss | 425,467 | 455,329 | 448,323 | |
Current assets |
| |||
Cash and cash equivalents | 4,894 | 4,434 | 7,328 | |
Other receivables | 3,600 | 2,194 | 1,175 | |
|
| 8,494 | 6,628 | 8,503 |
Creditors: amounts falling due within one year |
| |||
Bank loans | 6 | (40,127) | (39,158) | (30,986) |
Other payables | (5,912) | (2,821) | (1,288) | |
|
| (46,039) | (41,979) | (32,274) |
Net current liabilities |
| (37,545) | (35,351) | (23,771) |
Total assets less current liabilities |
| 387,922 | 419,978 | 424,552 |
Creditors: amounts falling due after more than one year |
| |||
Deferred tax liability on Indian capital gains | (1,134) | (1,297) | (1,124) | |
Bank loan | 6 | - | (9,973) | (9,981) |
|
| (1,134) | (11,270) | (11,105) |
Net assets |
| 386,788 | 408,708 | 413,447 |
| ||||
Stated capital and reserves |
| |||
Stated capital | 7 | 194,933 | 194,933 | 194,933 |
Capital redemption reserve | 1,560 | 1,560 | 1,560 | |
Capital reserve | 176,613 | 200,343 | 204,414 | |
Revenue reserve | 13,682 | 11,872 | 12,540 | |
Equity shareholders' funds |
| 386,788 | 408,708 | 413,447 |
| ||||
Net asset value per Ordinary share (pence) | 4 | 229.17 | 240.04 | 243.44 |
| ||||
The financial statements were approved by the Board of Directors and authorised for issue on 17 August 2023 and were signed on its behalf by: | ||||
Ian Cadby | ||||
Chairman | ||||
The accompanying notes are an integral part of the financial statements. | ||||
Condensed Statement of Changes in Equity
Six months ended 30 June 2023 (unaudited) |
|
|
|
| |
| Capital |
| |||
Stated | redemption | Capital | Revenue |
| |
capital | reserve | reserve | reserve | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | |
Opening balance | 194,933 | 1,560 | 204,414 | 12,540 | 413,447 |
Buyback of Ordinary shares for treasury | - | - | (2,266) | - | (2,266) |
(Loss)/profit for the period | - | - | (25,535) | 10,632 | (14,903) |
Dividends paid (note 5) | - | - | - | (9,490) | (9,490) |
Balance at 30 June 2023 | 194,933 | 1,560 | 176,613 | 13,682 | 386,788 |
| |||||
Six months ended 30 June 2022 (unaudited) |
|
|
| ||
| Capital |
| |||
Stated | redemption | Capital | Revenue |
| |
capital | reserve | reserve | reserve | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | |
Opening balance | 194,933 | 1,560 | 242,727 | 11,570 | 450,790 |
Buyback of Ordinary shares for treasury | - | - | (2,909) | - | (2,909) |
(Loss)/profit for the period | - | - | (39,475) | 8,938 | (30,537) |
Dividends paid (note 5) | - | - | - | (8,636) | (8,636) |
Balance at 30 June 2022 | 194,933 | 1,560 | 200,343 | 11,872 | 408,708 |
| |||||
Year ended 31 December 2022 (audited) |
|
|
| ||
| Capital |
| |||
Stated | redemption | Capital | Revenue |
| |
capital | reserve | reserve | reserve | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | |
Opening balance | 194,933 | 1,560 | 242,727 | 11,570 | 450,790 |
Buyback of Ordinary shares for treasury | - | - | (3,818) | - | (3,818) |
(Loss)/profit for the year | - | - | (34,495) | 17,429 | (17,066) |
Dividends paid (note 5) | - | - | - | (16,459) | (16,459) |
Balance at 31 December 2022 | 194,933 | 1,560 | 204,414 | 12,540 | 413,447 |
| |||||
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. | |||||
The stated capital in accordance with Companies (Jersey) Law 1991 Article 39A is £260,822,000 (30 June 2022 - £260,822,000; 31 December 2022 - £260,822,000). These amounts include proceeds arising from the issue of shares by the Company, but exclude the cost of shares purchased for cancellation or treasury by the Company. | |||||
Condensed Statement of Cash Flows
Six months ended | Six months ended | Year ended | |
| 30 June 2023 | 30 June 2022 | 31 December 2022 |
| (unaudited) | (unaudited) | (audited) |
£'000 | £'000 | £'000 | |
Cash flows from operating activities |
| ||
Dividend income received | 10,673 | 9,919 | 21,140 |
Interest income received | 237 | 153 | 354 |
Derivative income received | - | 47 | 47 |
Return of capital included in investment income | 313 | - | - |
Investment management fee paid | (786) | (1,784) | (5,169) |
Other cash expenses | (580) | (479) | (801) |
Cash generated from operations | 9,857 | 7,856 | 15,571 |
Interest paid | (1,096) | (435) | (1,041) |
Overseas taxation paid | (881) | (804) | (1,712) |
Net cash inflows from operating activities | 7,880 | 6,617 | 12,818 |
Cash flows from investing activities |
| ||
Purchases of investments | (66,923) | (47,167) | (55,017) |
Sales of investments | 68,545 | 53,206 | 75,625 |
Capital gains tax on sales | (144) | - | (83) |
Net cash inflow from investing activities | 1,478 | 6,039 | 20,525 |
Cash flows from financing activities |
| ||
Purchase of own shares for treasury | (2,266) | (2,909) | (3,818) |
Dividends paid | (9,490) | (8,636) | (16,459) |
Repayment of loans | - | - | (8,948) |
Net cash outflow from financing activities | (11,756) | (11,545) | (29,225) |
Net (decrease)/increase in cash and cash equivalents | (2,398) | 1,111 | 4,118 |
Cash and cash equivalents at the start of the period | 7,328 | 3,268 | 3,268 |
Foreign exchange | (36) | 55 | (58) |
Cash and cash equivalents at the end of the period | 4,894 | 4,434 | 7,328 |
|
| ||
The accompanying notes are an integral part of the financial statements. | |||
Notes to the Financial Statements
For the year ended 30 June 2023
1. | Accounting policies - basis of preparation | |||
The Annual Report is prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC). The condensed Half Yearly Report has been prepared in accordance with International Accounting Standards (IAS) 34 - 'Interim Financial Reporting' and should be read in conjunction with the Annual Report for the year ended 31 December 2022. | ||||
The financial statements have been prepared on a going concern basis. In accordance with the Financial Reporting Council's guidance on 'Going Concern and Liquidity Risk' the Directors have undertaken a review of the Company's assets and liabilities. The Company's assets primarily consist of a diverse portfolio of listed equity shares which, in most circumstances, are realisable within a very short timescale. | ||||
The condensed interim financial statements have been prepared using the same accounting policies as the preceding annual financial statements. | ||||
During the period the following standards, amendments to standards and new interpretations became effective. The adoption of these standards and amendments did not have a material impact on the financial statements: | ||||
IAS 1 Amendments | Classification of Liabilities as Current or Non-Current | 1 January 2023 | ||
IAS 1 Amendments | Disclosure of Accounting Policies | 1 January 2023 | ||
IAS 8 Amendments | Definition of Accounting Estimates | 1 January 2023 | ||
IAS 12 Amendments | Deferred Tax related to Assets and Liabilities arising from a Single Transaction | 1 January 2023 | ||
IFRS 4 Amendments | Deferral of effective date of IFRS 9 | 1 January 2023 | ||
IFRS 17 Amendments | Insurance Contracts | 1 January 2023 | ||
IFRS 17 Amendments | Amendments (Effective Date) | 1 January 2023 | ||
IFRS 17 Amendments | (Initial Application of IFRS 17 and IFRS 9 - Comparative Information) | 1 January 2023 | ||
2. | Segmental information |
| For management purposes, the Company is organised into one main operating segment, which invests 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 upon analysis of the Company as one segment. The financial results from this segment are equivalent to the financial statements of the Company as a whole. |
3. | Earnings per Ordinary share | |||
Six months ended | Six months ended | Year ended | ||
| 30 June 2023 | 30 June 2022 | 31 December 2022 | |
| (unaudited) | (unaudited) | (audited) | |
| p | p | p | |
| Revenue return | 6.28 | 5.23 | 10.23 |
Capital return | (15.08) | (23.10) | (20.24) | |
Total return | (8.80) | (17.87) | (10.01) | |
| ||||
The figures above are based on the following: | ||||
Six months ended | Six months ended | Year ended | ||
| 30 June 2023 | 30 June 2022 | 31 December 2022 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Revenue return | 10,632 | 8,938 | 17,429 |
Capital return | (25,535) | (39,475) | (34,495) | |
Total return | (14,903) | (30,537) | (17,066) | |
|
|
|
|
|
| Weighted average number of Ordinary shares in issue | 169,308,308 | 170,797,870 | 170,411,839 |
4. | Net asset value per share |
| ||
Ordinary shares. The basic net asset value per Ordinary share and the net asset values attributable to Ordinary shareholders at the period end calculated in accordance with the Articles of Association were as follows: | ||||
| ||||
As at | As at | As at | ||
| 30 June 2023 | 30 June 2022 | 31 December 2022 | |
|
| (unaudited) | (unaudited) | (audited) |
| Attributable net assets (£'000) | 386,788 | 408,708 | 413,447 |
Number of Ordinary shares in issue (excluding shares in issue held in treasury) | 168,776,311 | 170,269,918 | 169,832,401 | |
Net asset value per Ordinary share (p) | 229.17 | 240.04 | 243.44 | |
5. | Dividends on equity shares | |||
Six months ended | Six months ended | Year ended | ||
| 30 June 2023 | 30 June 2022 | 31 December 2022 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Amounts recognised as distributions to equity holders in the period: | |||
Second interim dividend 2022 - 2.30p per Ordinary share | - | - | 3,915 | |
Third interim dividend 2022 - 2.30p per Ordinary share | - | - | 3,908 | |
Fourth interim dividend for 2022 - 3.10p per Ordinary share (2021 - 2.75p) | 5,263 | 4,712 | 4,712 | |
First interim dividend for 2023 - 2.50p per Ordinary share (2022 - 2.30p) | 4,227 | 3,924 | 3,924 | |
| 9,490 | 8,636 | 16,459 | |
| ||||
A second interim dividend of 2.50p for the year to 31 December 2023 will be paid on 25 August 2023 to shareholders on the register on 28 July 2023. The ex-dividend date was 27 July 2023. | ||||
6. | Bank loans |
| At the period end approximately GBP 15.8 million, USD 8.85 million and HKD 73.5 million, equivalent to £30.1 million was drawn down from the £40 million multi-currency revolving facility with bank of Nova Scotia, London Branch. The interest rates attributed to the GBP, USD and HKD loans at the period end were 5.6609%, 6.36448% and 5.94964% respectively. |
In addition, the Company has an unsecured fixed £10 million credit facility with Bank of Nova Scotia, London Branch at an all-in interest rate of 1.53%. Both facilities mature on 2 March 2024. |
7. | Stated capital |
| The Company has issued 194,933,389 Ordinary shares of no par value, which are fully paid (30 June 2022 -194,933,389; 31 December 2022 - 194,933,389). |
During the period 1,056,090 Ordinary shares were bought back by the Company for holding in treasury at a cost of £2,266,000 (30 June 2022 - 1,288,978 shares were bought back at a cost of £2,909,000; 31 December 2022 - 1,726,495 shares were bought back for holding in treasury at a cost of £3,818,000). As at 30 June 2023 26,157,078 (30 June 2022 - 24,663,471; 31 December 2022 - 25,100,988) Ordinary shares were held in treasury. | |
A further 238,157 Ordinary shares have been bought back by the Company for holding in treasury, subsequent to the reporting period end, at a cost of £490,000. Following the share buybacks there were 168,538,154 Ordinary shares in issue excluding those held in treasury. |
8. | Related party disclosures |
| There have been no transactions with related parties during the period which have materially affected the financial position or the performance of the Company. |
9. | Fair value hierarchy | ||||
IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making measurements. The fair value hierarchy has the following levels: | |||||
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; | |||||
Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and | |||||
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). | |||||
The financial assets and liabilities measured at fair value in the Condensed Balance Sheet are grouped into the fair value hierarchy as follows: | |||||
Level 1 | Level 2 | Level 3 | Total | ||
| At 30 June 2023 (unaudited) | £'000 | £'000 | £'000 | £'000 |
| Financial assets at fair value through profit or loss |
| |||
Quoted equities | 422,062 | - | - | 422,062 | |
Quoted bonds | - | 3,405 | - | 3,405 | |
Total assets | 422,062 | 3,405 | - | 425,467 | |
Level 1 | Level 2 | Level 3 | Total | ||
| At 30 June 2022 (unaudited) | £'000 | £'000 | £'000 | £'000 |
| Financial assets at fair value through profit or loss |
| |||
Quoted equities | 451,557 | - | - | 451,557 | |
Quoted bonds | - | 3,772 | - | 3,772 | |
Total assets | 451,557 | 3,772 | - | 455,329 | |
Level 1 | Level 2 | Level 3 | Total | ||
| At 31 December 2022 (audited) | £'000 | £'000 | £'000 | £'000 |
| Financial assets at fair value through profit or loss |
| |||
Quoted equities | 444,727 | - | - | 444,727 | |
Quoted bonds | - | 3,596 | - | 3,596 | |
Total assets | 444,727 | 3,596 | - | 448,323 | |
10. | Subsequent Events |
| On 16 August 2023, the Company announced that it had appointed a new, Jersey based, regulated administrator, JTC Fund Solutions (Jersey) Limited ("JTC") to carry out the Jersey regulatory function with effect from 15 August 2023. All investment management and fund administration functions will continue to be provided by the abrdn group through its Singapore based Asian Equity team and UK fund administration team. As a result, day-to-day investment decisions and management of the Company will not be impacted by the reorganisation. There are no changes to the management fee as a result of the reorganisation and the administration fee charged by JTC will be met by abrdn. |
11. | Half Yearly Financial Report |
| The financial information for the six months ended 30 June 2023 and 30 June 2022 has not been audited. |
Alternative Performance Measures
Alternative performance measures 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 IFRS 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 discount is the amount by which the share price is lower than the net asset value per share, expressed as a percentage of the net asset value. | |||
|
| 30 June 2023 | 31 December 2022 |
NAV per Ordinary share (p) | a | 229.17p | 243.44p |
Share price (p) | b | 201.00p | 215.00p |
Discount | (a-b)/a | 12.3% | 11.7% |
Dividend yield |
| ||
The yield for 30 June 2023 is calculated based on the prospective annual dividend for 2023 per Ordinary share in accordance with the Board's stated target divided by the share price, expressed as a percentage. The yield for 31 December 2022 is calculated based on the annual dividend for 2022 per Ordinary share divided by the share price, expressed as a percentage. | |||
|
| 30 June 2023 | 31 December 2022 |
Annual dividend per Ordinary share (p) | a | 10.60p | 10.00p |
Share price (p) | b | 201.00p | 215.00p |
Dividend yield | a/b | 5.3% | 4.7% |
Net gearing |
| ||
Net gearing measures the total borrowings less cash and cash equivalents dividend by shareholders' funds, expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due to and from brokers at the period end as well as cash and cash equivalents. | |||
|
| 30 June 2023 | 31 December 2022 |
Borrowings (£'000) | a | 40,127 | 40,967 |
Cash (£'000) | b | 4,894 | 7,238 |
Amounts due to brokers (£'000) | c | 3,938 | - |
Amounts due from brokers (£'000) | d | 473 | - |
Shareholders' funds (£'000) | e | 386,788 | 413,447 |
Net gearing | (a-b+c-d)/e | 10.0% | 8.1% |
| |||
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 published daily net asset values with debt at fair value throughout the year. The ratio for 30 June 2023 is based on forecast ongoing charges for the year ending 31 December 2023. | |||
30 June 2023 | 31 December 2022 | ||
Investment management fees (£'000) | 3,094 | 3,270 | |
Administrative expenses (£'000) | 850 | 939 | |
Less: non-recurring charges A (£'000) | (8) | (42) | |
Ongoing charges (£'000) | 3,936 | 4,167 | |
Average net assets (£'000) | 398,166 | 421,170 | |
Ongoing charges ratio (excluding look-through costs) | 0.99% | 0.99% | |
Look-through costs B | 0.02% | 0.02% | |
Ongoing charges ratio (including look-through costs) | 1.01% | 1.01% | |
A Professional services comprising advisory and legal fees considered unlikely to recur. | |||
B Calculated in accordance with AIC guidance issued in October 2020 to include the Company's share of costs of holdings in investment companies on a look-through basis. | |||
The ongoing charges percentage provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations which among other things, includes the cost of borrowings 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 30 June 2023 |
| NAV | Price |
Opening at 1 January 2023 | a | 243.44p | 215.00p |
Closing at 30 June 2023 | b | 229.17p | 201.00p |
Price movements | c=(b/a)-1 | -5.9% | -6.5% |
Dividend reinvestment A | d | 2.2% | 2.5% |
Total return | c+d | -3.7% | -4.0% |
Share | |||
Year ended 31 December 2022 |
| NAV | Price |
Opening at 1 January 2022 | a | 262.76p | 231.00p |
Closing at 31 December 2022 | b | 243.44p | 215.00p |
Price movements | c=(b/a)-1 | -7.4% | -6.9% |
Dividend reinvestment A | d | 3.8% | 4.2% |
Total return | c+d | -3.6% | -2.7% |
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. | |||
Interim Board Report - Disclosures
Principal Risk Factors
The principal risks and uncertainties affecting the Company are set out below and in detail on pages 22 to 23 of the Annual Report for the year ended 31 December 2022 and are not expected to change materially for the remaining six months of the Company's financial year.
The risks outlined below are those risks that the Directors considered at the date of this Half Yearly Report to be material but are not the only risks relating to the Company or its shares. If any of the adverse events described below actually occur, the Company's financial condition, performance and prospects and the price of its shares could be materially adversely affected and shareholders may lose all or part of their investment. Additional risks which were not known to the Directors at the date of this Half Yearly Report, or that the Directors considered at the date of this Report to be immaterial, may also have an effect on the Company's financial condition, performance and prospects and the price of the shares.
If shareholders are in any doubt as to the consequences of their acquiring, holding or disposing of shares in the Company or whether an investment in the Company is suitable for them, they should consult their stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised
under the Financial Securities and Markets Act 2000 (as amended by the Financial Services Act 2012) or, in the case of prospective investors outside the United Kingdom, another appropriately authorised independent financial adviser.
The risks can be summarised under the following headings:
- Investment strategy and objectives;
- Investment portfolio, investment management;
- Financial obligations;
- Financial;
- Regulatory;
- Operational; and
- Income and dividend risk.
The Board considers that a number of contingent risks stemming from the Covid-19 pandemic may continue to linger, which may impact the operation of the Company. These include investment risks surrounding the companies in the portfolio such as employee absence, reduced demand, reduced turnover and supply chain breakdowns. In addition, the Russian military offensive against Ukraine has resulted in heightened security and cyber threats across the globe as well as market disruption and heightened geo-political uncertainty.
Whilst the Company has no holdings in Ukraine or Russia, these contingent and emerging risks from the conflict may have a global impact for some time and may affect the portfolio in the form of higher energy prices as well as increased volatility.
The Investment Manager will continue to review carefully the composition of the Company's portfolio and to be pro-active in taking investment decisions where necessary.
An explanation of other risks relating to the Company's investment activities, specifically market price, liquidity and credit risk, and a note of how these risks are managed, are contained in note 18 on pages 82 to 89 of the Annual Report for the year ended 31 December 2022.
Going Concern
The Directors have undertaken a robust review of the Company's ability to continue as a going concern. The Company's assets consist primarily of a diverse portfolio of listed equity shares which in most circumstances are realisable within a very short timescale.
The Directors have reviewed forecasts detailing revenue and liabilities, have set limits for borrowing and reviewed compliance with banking covenants, including the headroom available. They have also considered the ability of the Company to re-finance its loan facilities which are due to mature in March 2024. Having taken these factors into account, the Directors believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future and at least 12 months from the date of this Half Yearly Report. Accordingly, the Directors continue to adopt the going concern basis in preparing these 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 interim financial statements contained within the Half Yearly Financial Report which have been prepared in accordance with IAS 34 "Interim Financial Reporting", give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;
- the Half-Yearly Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure 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
- the Half-Yearly Board Report includes a fair review of the information required by 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 do so).
On behalf of the Board
Ian Cadby
Chairman17 August 2023
The Half Year Report will be posted to shareholders in August 2023 and copies will be available on the Company's website (asian-income.co.uk*).
*Neither the Company's website nor the content of any website accessible from hyperlinks on that website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement