Abrdn Asiafocus Regulatory News (AAS)

ABRDN ASIA FOCUS PLC

Legal Entity Identifier (LEI):  5493000FBZP1J92OQY70

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JULY 2022

STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS

Performance Highlights

Financial Calendar, Dividends and Highlights

Dividends

Strategic Report

Chairman's Statement

Results

The past year has been difficult for financial markets as the world emerges unevenly from the pandemic, with global stock markets suffering from bouts of weakness as investors digest the implications of a European war while facing inflation and the rising prospects of a global recession. But amidst this, some of the stock markets of Asia, in particular those not under the direct influence of China, have been relatively resilient; India being an example where headline indices remain relatively unchanged.

In addition, inflation in most parts of Asia has been mild compared with elsewhere in the world with Asian Central Banks being more accommodating; commodity prices, with the exception of coal, have retreated from the highs of earlier in the year and wage inflationary pressures in Asia are not as great as those anticipated in Europe. However, Asia has not been immune to the fallout from Covid, with parts of the Chinese economy still suffering from lockdowns and there remain pressures in global supply-chains.

During the period, there was also a significant rotation from growth to value stocks in Asian markets, as tightening US monetary policy drove a de-rating in expensive growth stocks with longer-dated cash-flows. The market volatility was evident in both smaller companies and their larger counterparts, with, over the period, the MSCI Asia ex Japan Small Cap index broadly tracking the larger capitalisation MSCI Asia ex Japan index.

In this environment, your Company's net asset value (NAV) total return declined 2.0% over the 12 months to 31 July 2022. While this was a drop in absolute terms, it was ahead of the MSCI Asia ex Japan Small Cap Index which fell 5.1%. It is also important to point out that the performance has also benefitted from the weakness of sterling relative to many Asian currencies and particularly the US dollar. The share price ended the period at 254p, with the discount to NAV per share to 14.0%.

One of the advantages of serving as Chairman for over a quarter of a century, is to see how these periodical seismic events might affect the future prospects of this company- I believe this is the sixth during my tenure. In this regard, I think the following points are worth making:

- As we have identified in previous statements and the reports we published to celebrate our 20th and 25th anniversaries (available on the website), Asia is the great engine of growth over the next 25 years and these events will, over time, only be a blip in that cycle;

- From an Asian perspective, a war in Europe is a long way off and while it will affect global trade, its impact on domestic markets and in particularly small companies where we invest, will have a more limited impact; and

- In times like these, opportunities to rotate out of mature, well managed businesses into ones where opportunities exist to make investments with higher growth potential at more attractive valuations occur and again this time, it is no different. The greater flexibility we granted the Managers with the lifting of market cap limit last year has widened the opportunity.

Since Hugh Young, Martin Gilbert and myself started, in 1995, as the first Directors of the Company with abrdn as the Manager, it has been immensely rewarding and satisfying to see the Company capitalise on the growth and dynamism of the Far East's diverse small-cap companies and economies, growing assets under management (AUM) from £34.0 million at the time of launch in 1995 to £532.9 million (as at 31 July 2022). We have seen the dividends grow during that period from a low of 0.11p in 1998 to 8.0p, after the share split, in the year on which we are reporting. I believe this record on both investment performance and dividend growth is amongst the best for investment companies quoted on the London Stock Exchange.

This, in particular, is thanks to Hugh Young. As the inspired Manager of the Trust since its inception, he has been the key to shaping the abrdn Far Eastern investment team into one of Asia's leading on-the-ground investors with exceptional access to companies, business leaders and policymakers across the region. In the last few years, he has been ably assisted by Gabriel Sacks and since last year, with the addition of Flavia Cheong and Neil Sun, this has further bolstered an already-impressive team.

As I have said, more often than not, in the fifty-three Chairman's Statements made to shareholders, the key to our success has been to only invest in companies with strong balance sheets, good management and excellent prospects. To identify these companies needs dedication from the Managers to seek out these investment nuggets; and the performance of the Company bears out the hard work they have done and continue to do.

It is also easy to forget the multitude of administrative matters that need attending to on a daily basis to ensure the smooth running of the Company. Over the years, the staff at abrdn have provided a seamless and efficient service and I would like to thank Charles Mearns, who has acted as Company Secretary for over 20 years and William Hemmings, who as head of Investment Trusts for 18 years has been a source of valuable advice together with my thanks to all the support staff in London, Aberdeen and Singapore both past and present.

In my last Annual Report as Chairman before stepping down in November, I am pleased to see the Trust has in place the necessary measures to take it to even greater strengths in the next 25 years and beyond.

Overview

Volatility was already creeping into global markets even before the onset of Russia's war in Ukraine. In 2022, central banks have been preoccupied with the prospect of recession and fending off inflation caused by rising commodity prices. Asian markets have proved more resilient during this unsettling period compared with other emerging markets. Inflation has been more moderate and, with post-Covid restrictions lifting, returning tourists and increased consumer spending from pent-up demand have led to a notable recovery in Southeast Asia, for example.

China was an exception. The country's 'zero-Covid' policy meant lockdowns continued to be imposed as authorities tried to contain new virus outbreaks. This dampened domestic activity and put further pressure on an economy that was already slowing as a result of a weak property market and tight regulatory conditions. As a result, China was among the region's worst performing markets during the period. It will be interesting to see if the much heralded 20th Communist Party Congress at the end of this month, besides extending the term of office of President Xi, signals any significant changes in policy; there have been hints of Central Bank easing of policy which the team in Singapore will be monitoring closely.

The Company's relatively light exposure to China buoyed performance relative to the index, but we believe the country remains a great opportunity for diligent stock pickers. With an indiscriminate sell-off in the market, your Manager added two new holdings, capitalising on more attractive valuations and reflecting a desire to gradually increase the Company's exposure to China (you can read more about this in the Investment Manager's Review section of this report).

Two changes implemented to your Company this year will help in this regard. The first is the removal of the US$1.5 billion market cap limit (at the time of initiation), which was agreed at the General Meeting in January 2022. This limit was proving a little restrictive in larger markets - especially China - and the Board believes that the removal of the cap will give your Manager greater flexibility to invest in the most compelling smaller companies in the region.

Secondly, and as referred to above, we have strengthened the investment team. During the period, we welcomed Flavia Cheong, abrdn's Head of Equities - Asia Pacific, as joint Manager alongside Hugh Young and Gabriel Sacks, and Neil Sun, who joins as an investment manager. These additions add depth and experience to your Company and will be beneficial as the team considers a potential increase in allocation to North Asia, leveraging off abrdn's deeper insights on Chinese small caps built over the past few years.

Looking elsewhere across the portfolio, there was strong share-price performance from commodity-related businesses or markets, such as those in Indonesia, or those more positively impacted by rising inflation, such as the shipping industry. Nevertheless, more export-oriented markets fared poorly, especially those associated with the tech supply-chain, such as Taiwan. Despite the marked correction in a few of the Trust's holdings, your Manager remains convinced of the structural growth for these businesses and would argue that the sell-off has thrown up opportunities to buy high-quality companies in this space.

We have also benefitted from a low exposure to Chinese domestic companies. While these have suffered in the pull back of markets, there will be considerable opportunities in the growing Chinese markets and this current reduction in values will present opportunities which will bear fruit in future years.

For a more detailed report of the Company's performance and portfolio changes, please read the Investment Manager's Review.

Dividend

In accordance with the enhanced dividend policy approved by shareholders, the Board has achieved the target dividend of 6.4p per Ordinary Share for the financial year ended 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) representing a 100% increase on the level of dividend paid in 2021. Dividends of 3.2p, 1.6p and 1.6p were paid in March, June and September 2022. Furthermore, I am very pleased to report that the strength of dividend generation from the portfolio has allowed the Company to declare a further special interim dividend in respect of the year ended 31 July 2022 of 1.6p per Ordinary share which will be paid on 20 December 2022 to shareholders on the register on the record date of 25 November 2022 (ex dividend 24 November 2022).

I believe that, in difficult times, this total dividend of 8.0p per share will be welcomed by shareholders especially as it is 25% higher than the annual target dividend.

The Board's policy is to maintain the progressive dividend policy of the last 25 years (including with the flexibility to pay dividends out of capital reserves where merited in the future) in order to provide shareholders with a regular level of income alongside capital growth prospects.

Share Capital and Gearing

A five for one Share split was approved by shareholders on 27 January 2022 and, with effect from 4 February 2022, each Ordinary share of 25p was sub-divided into five Ordinary shares of 5p each.

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 July 2022 was 12.1% 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 14 October 2022, the latest practicable date, the net gearing stood at 14.0%.

Directorate

One of the important duties of the Board is to see that the members have the necessary skills to ensure that it is able to both monitor the existing mandate, but also make any necessary changes to that mandate to reflect the demands of a constantly shifting investment world. It is therefore my great pleasure to recommend the finalisation of the following appointments to the Board. Mr Lindsay Cooper joined on 15 June 2022 and Mr Alex Finn joined on 13 July 2022.

Mr Cooper brings a significant amount of Asian investment and small cap expertise to the Board and, being based in Singapore, is perfectly placed to assist in overseeing the execution of the Company's expanded investment mandate that was approved by shareholders in January 2022. After working in corporate finance in Hong Kong in the early 1990s, Lindsay co-founded Arisaig Partners in 1996, an independent Investment Management business where he had investment responsibility for the Arisaig Asia Consumer Fund. Since stepping down from day to day investment responsibility at Arisaig, Lindsay founded Chic & Unique Pte Ltd, a boutique hotels and hospitality business with operations in Asia and Europe and, more recently, founded Chi Tree Health, a preventative healthcare enterprise in Singapore.

Mr Finn brings significant accounting expertise and international business experience to the Board. He has been appointed Chairman of the Audit Committee and was a partner for twenty seven years in PwC's global financial services practice, retiring on 30 June 2022. During his career at PwC Mr Finn was responsible for the services that PwC provided internationally to a number of its largest global clients, all of which had extensive operations in Asia. He was also responsible for supporting clients in large scale accounting and financial change programmes, was PwC's EMEA insurance leader, sat on its EMEA FS leadership team and led a number of PwC's largest global audit engagements. The Board has reviewed the independence of Mr Finn and is satisfied that, following his retirement from PwC where he had no involvement in any direct or indirect work for the Company or the Management Company, Mr Finn is fully independent.

The appointment process for both new Directors was conducted using the services and expertise of Fletcher Jones, an independent recruitment consultant.

I would also like to thank Debby Guthrie who resigned from the Board on 13 April 2022, for her contribution to not only the Board but also as Chairman of the Audit Committee.

As previously indicated, I will retire from the Board at the conclusion of the AGM on 30 November 2022. I am pleased to advise that Krishna Shanmuganathan has accepted an invitation from the other Directors to succeed me as independent Chairman from the conclusion of the AGM in November. Krishna's deep ties to Asia and his experience at the Foreign and Commonwealth Office, Fidelity International and then subsequently as Managing Partner of Hakluyt Asia, based in Singapore, will bring considerable knowledge and benefit to the Board deliberation and I wish him personally, and on your behalf, every success in his new role. 

The Board succession planning will continue in 2023.

Annual General Meeting

The Company's Annual General Meeting is scheduled for 12:30 p.m. on 30 November 2022 and the intention is for it to be held in person in London. The AGM will be preceded by a short presentation from the management team and following the formal business there will be a shareholder buffet lunch and the opportunity to meet the Directors. In addition to the usual ordinary business being proposed at the AGM, as special business the Board is seeking to renew the authority to issue new shares and sell treasury shares for cash at a premium without pre-emption rules applying and to renew the authority to buy back shares and either hold them in treasury for future resale (at a premium to the prevailing NAV per share) or cancel them. I would encourage all shareholders to support the Company and lodge proxy voting forms in advance of the meeting, regardless of whether they intend to attend in person.

In light of the significant take up from shareholders at the online presentation held in January 2022, in advance of the AGM, the Board has decided to hold another interactive Online Shareholder Presentation which will be held at 11:00 a.m. on 16 November 2022. At the presentation, shareholders will receive updates from the Chairman and Manager and there will be the opportunity for an interactive question and answer session. Following the online presentation, shareholders will still have time to submit their proxy votes prior to the AGM and I would encourage all shareholders to lodge their votes in advance in this manner. Full registration details can be found at: https://www.workcast.com/register?cpak=4646856687011531.

Outlook

As we look forward, investing in Asia has advantages over both the short and long term. The region is proving to be less vulnerable to the current environment than other emerging markets - inflation is less of an issue, while current account and fiscal discipline has been more resilient to the deep downturns. In the longer term, there are several strong trends that should support economic growth, notably rising affluence, increased urbanisation, growing infrastructure demand and commitment from policymakers to a greener and lower-carbon future. Geopolitics, on the other hand, remain a thorny issue, but diversification might be investors' best hedge against a polarising world.

Valuations currently appear attractive, with the MSCI AC Asia ex Japan trading at a forward price-to-earnings ratio of 12.4x (below its five-year average), with the portfolio trading at similar multiples. At these levels, your Manager believes many of the prevailing risks, such as slower growth and higher inflation, could be largely priced in.

Looking specifically at the Trust's niche, we believe that Asia's rapidly developing economies continue to provide fertile ground for quality smaller companies. Asia is home to a wealth of under-researched yet high-performing companies which are often family-run, conservative businesses with low debt levels. For the most part, these companies are leaders in their field, and have growth rates that can be divorced from global macro conditions. Over the years, your Manager's strength has been the ability to select quality companies at a reasonable price; with a focus on balance sheet resilience and sustainable earnings prospects. I believe this positions it well to continue delivering healthy returns for shareholders in these challenging times.

On a personal note, I would like to say what an honour and delight it has been to serve as your Chairman over so long a period. It has been a source of great inspiration to not only see the developments in Asia during this period but also to see the enormous achievements that this Company has enjoyed. £1,000 invested in 1995 is now worth £21,052 with dividends reinvested. I can only wish everyone associated with the Company many thanks for the huge support they have given me and great success in the future.

Nigel CayzerChairman14 October 2022

Overview of Strategy

Business Model

The business of the Company is that of an investment company which seeks to qualify as an investment trust for UK capital gains tax purposes.

Investment Objective

From 27 January 2022:

On 27 January 2022 shareholders approved an amended investment objective.The Company aims to maximise total return to shareholders over the long term from a portfolio made up predominantly of quoted smaller companies in the economies of Asia excluding Japan.

Up to 27 January 2022:

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.

Investment Policy

On 27 January 2022 shareholders approved an amended investment policy. The Company may invest in a diversified portfolio of securities (including equity shares, preference shares, convertible securities, warrants and other equity-related securities) predominantly issued by quoted smaller companies spread across a range of industries and economies in the Investment Region. The Investment Region includes Bangladesh, Cambodia, China, Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Myanmar, Pakistan, The Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam, together with such other economies in Asia as approved by the Board.

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

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

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

Risk Diversification

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

Gearing

The Board is responsible for determining the gearing strategy for the Company. Gearing is used selectively to leverage the Company's portfolio in order to enhance returns where and to the extent this is considered appropriate to do so. Gearing is subject to a maximum gearing level of 25% of NAV at the time of draw down.

Delivering the Investment Policy

The Directors are responsible for determining the investment policy and the investment objective of the Company. Day to day management of the Company's assets has been delegated, via the AIFM, to the Investment Manager, abrdn Asia. abrdn Asia invests in a diversified range of companies throughout the Investment Region in accordance with the investment policy. abrdn Asia follows a bottom-up investment process based on a disciplined evaluation of companies through direct visits by its fund managers. Stock selection is the major source of added value. No stock is bought without the fund managers having first met management. abrdn Asia estimates a company's worth in two stages, quality then price. Quality is defined by reference to management, business focus, the balance sheet and corporate governance. Price is calculated by reference to key financial ratios, the market, the peer group and business prospects. Top-down investment factors are secondary in the abrdn Asia's portfolio construction, with diversification rather than formal controls guiding stock and sector weights.

A detailed description of the investment process and risk controls employed by abrdn Asia is disclosed on pages 106 to 108 of the published Annual Report and financial statements for the year ended 31 July 2022. A comprehensive analysis of the Company's portfolio is disclosed on pages 30 to 37 of the published Annual Report and financial statements for the year ended 31 July 2022 including a description of the ten largest investments, the portfolio investments by value, sector/geographical analysis and currency/market performance. At the year end the Company's portfolio consisted of 62 holdings.

Investment Manager and Alternate Investment Fund Manager

The Company's Alternative Investment Fund Manager, appointed as required by EU Directive 2011/61/EU, is abrdn Fund Managers Limited ("aFML") (previously known as Aberdeen Standard Fund Managers Limited) 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"). aFML and abrdn Asia are wholly owned subsidiaries of abrdn plc.

Comparative Indices

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.

Promoting the Company's Success

In accordance with corporate governance best practice, the Board is now required to describe to the Company's shareholders how the Directors have discharged their duties and responsibilities over the course of the financial year following the guidelines set out under section 172 (1) of the Companies Act 2006 (the "s172 Statement"). This Statement, from 'Promoting the Success of the Company' to "Long Term Investment", provides an explanation of how the Directors have promoted the success of the Company for the benefit of its members as a whole, taking into account the likely long term consequences of decisions, the need to foster relationships with all stakeholders and the impact of the Company's operations on the environment.

The purpose of the Company is to act as a vehicle to provide, over time, financial returns to its shareholders. The Company's Investment Objective is disclosed on page 12 of the published Annual Report and financial statements for the year ended 31 July 2022. The activities of the Company are overseen by the Board of Directors of the Company.

The Board's philosophy is that the Company should operate in a transparent culture where all parties are treated with respect and provided with the opportunity to offer practical challenge and participate in positive debate which is focused on the aim of achieving the expectations of shareholders and other stakeholders alike. The Board reviews the culture and manner in which the Manager operates at its regular meetings and receives regular reporting and feedback from the other key service providers. 

Investment trusts, such as the Company, are long-term investment vehicles, with a recommended holding period of five or more years. Typically, investment trusts are externally managed, have no employees, and are overseen by an independent non-executive board of directors. Your Company's Board of Directors sets the investment mandate, monitors the performance of all service providers (including the Manager) and is responsible for reviewing strategy on a regular basis. All this is done with the aim of preserving and, indeed, enhancing shareholder value over the longer term.

Stakeholders

The Company's main stakeholders have been identified as its shareholders, the Manager (and Investment Manager), service providers, investee companies and debt providers. More broadly, the environment and community at large are also stakeholders in the Company. The Board is responsible for managing the competing interests of these stakeholders. Ensuring that the Manager delivers out performance for Ordinary shareholders over the longer term without adversely affecting the risk profile of the Company which is known and understood by the loan note holders and CULS holders. This is achieved by ensuring that the Manager stays within the agreed investment policy.

Shareholders

Shareholders are key stakeholders in the Company - they look to the Manager to achieve the investment objective over time. The following table describes some of the ways we engage with our shareholders:

The Manager

The key service provider for the Company is the Alternative Investment Fund Manager and the performance of the Manager is reviewed in detail at each Board meeting. The Manager's investment process is outlined on pages 106 to 108 and further information about the Manager is given on page 105 of the published Annual Report and financial statements for the year ended 31 July 2022. Shareholders are key stakeholders in the Company - they are looking to the Manager to achieve the investment objective over time and to deliver a regular growing income together with some capital growth. The Board is available to meet at least annually with shareholders at the Annual General Meeting and this includes informal meetings with them over lunch following the formal business of the AGM. This is seen as a very useful opportunity to understand the needs and views of the shareholders. In between AGMs, the Directors and Manager also conduct programmes of investor meetings with larger institutional, private wealth and other shareholders to ensure that the Company is meeting their needs. Such regular meetings may take the form of joint presentations with the Investment Manager or meetings directly with a Director where any matters of concern may be raised directly. 

Other Service Providers

The other key stakeholder group is that of the Company's third party service providers. The Board is responsible for selecting the most appropriate outsourced service providers and monitoring the relationships with these suppliers regularly in order to ensure a constructive working relationship. Our service providers look to the Company to provide them with a clear understanding of the Company's needs in order that those requirements can be delivered efficiently and fairly. The Board, via the Management Engagement Committee, ensures that the arrangements with service providers are reviewed at least annually in detail. The aim is to ensure that contractual arrangements remain in line with best practice, services being offered meet the requirements and needs of the Company and performance is in line with the expectations of the Board, Manager, Investment Manager and other relevant stakeholders. Reviews include those of the Company's depositary and custodian, share registrar, broker and auditors. 

Principal Decisions

Pursuant to the Board's aim of promoting the long term success of the Company, the following principal decisions have been taken during the year:

Portfolio The Investment Manager's Review details the key investment decisions taken during the year and subsequently. The Investment Manager has continued to monitor the investment portfolio throughout the year under the supervision of the Board. A list of the key portfolio changes can be found in the Investment Manager's Report. 

Board Investment Review During the year the Board concluded its comprehensive investment review which culminated in the following changes which were all approved by shareholders at the General Meeting held on 27 January 2022:

1. amend the Company's Investment Policy;

2. adopt the Company's enhanced New Dividend Policy;

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

4. enact a five for one Share split; and

5. introduce a new five year performance-linked tender.

Long Term Investment

The Investment Manager's investment process seeks to outperform over the longer term. The Board has in place the necessary procedures and processes to continue to promote the long term success of the Company. The Board will continue to monitor, evaluate and seek to improve these processes as the Company continues to grow over time, to ensure that the investment proposition is delivered to shareholders and other stakeholders in line with their expectations.

Key Performance Indicators (KPIs)

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and to determine the progress of the Company in pursuing its investment policy. The main KPIs identified by the Board in relation to the Company, which are considered at each Board meeting, are as follows:

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. Risks are identified and documented through a risk management framework and further details on the risk matrix are provided in the Directors' Report. The Board has undertaken a robust review of the principal risks and uncertainties facing the Company including those that would threaten its business model, future performance, solvency or liquidity. Those principal risks are disclosed in the table below together with a description of the mitigating actions taken by the Board. The principal risks associated with an investment in the Company's Shares are published monthly on the Company's factsheet or they can be found in the pre-investment disclosure document published by the Manager, both of which are available on the Company's website. 

The Board also has a process to review longer term risks and consider emerging risks and if any of these are deemed to be significant these risks are categorised, rated and added to the risk matrix.

The Board notes that there are a number of contingent risks stemming from the Covid-19 pandemic and the conflict in Ukraine that may impact the operation of the Company. These include investment risks surrounding the companies in the portfolio such as employee absence, reduced demand, reduced turnover and global supply chain breakdowns. The Investment Manager will continue to review carefully the composition of the Company's portfolio and to be pro-active in taking investment decisions where necessary. Operationally, third party services have continued to be supplied seamlessly to the Company throughout the Covid-19 pandemic and the Board will continue to monitor arrangements in the form of periodic updates from the Manager and Investment Manager.

In addition to the risks listed below, the Board is also very conscious of the risks emanating from increased environmental, social and governance challenges. The recent scrutiny by western governments of human rights violations in Xinjiang is an example of the need for continued vigilance regarding the supply chain exposure of investee companies and the fair and humane treatment of workers. Likewise, as climate change pressures mount, the Board continues to monitor, through its Manager, the potential risk that investee companies may fail to keep pace with the appropriate rates of change and adaption.

In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of this Annual Report and are not expected to change materially for the current financial year.

Promoting the Company

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares. The Board believes an effective way to achieve this is through subscription to and participation in the promotional programme run by the Manager on behalf of a number of investment trusts under its management. The Company's financial contribution to the programme is matched by the Manager. The Manager reports quarterly to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make-up of that register.

The purpose of the programme is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares. Communicating the long-term attractions of your Company is key and therefore the Company also supports the Manager's investor relations programme which involves regional roadshows, promotional and public relations campaigns. 

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow the Board to fulfil its obligations. The Board also recognises the benefits and is supportive of the principle of diversity in its recruitment of new Board members. The Board will not display any bias for age, gender, race, sexual orientation, religion, ethnic or national origins, or disability in considering the appointment of its Directors. Although the Board does not set diversity targets, it is mindful of best practice in this area, and the Board will continue to evolve in 2023, with the stated aim of improving its diversity. At 31 July 2022, there were five male Directors and one female Director on the Board.

Environmental, Social and Governance ("ESG") Engagement

Whilst the management of the Company's investments is not undertaken with any specific instructions to exclude certain asset types or classes, the Investment Manager embeds ESG into the research of each asset class as part of the investment process. ESG investment is about active engagement, with the goal of improving the performance of assets held around the world.

The Investment Manager aims to make the best possible investments for the Company, by understanding the whole picture of the investments - before, during and after an investment is made. That includes understanding the environmental, social and governance risks and opportunities they present - and how these could affect longer-term performance. Environmental, social and governance considerations underpin all investment activities. With 1,000+ investment professionals, the Investment Manager is able to take account of ESG factors in its company research, stock selection and portfolio construction - supported by more than 40 ESG specialists around the world. Please refer to pages 109 to 111 of the published Annual Report and financial statements for the year ended 31 July 2022 for further detail on the Investment Manager's ESG policies applicable to the Company.

The Company has no employees as the Board has delegated day to day management and administrative functions to abrdn Fund Managers Limited. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined above.

Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement. The Board considers the Company's supply chains, dealing predominantly with professional advisors and service providers in the financial services industry, to be low risk in relation to this matter.

The Company has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board formally considers risks and strategy at least annually. The Board considers the Company, with no fixed life, to be a long term investment vehicle, but for the purposes of this viability statement has decided that a period of three years is an appropriate period over which to report. The Board considers that this period reflects a balance between looking out over a long term horizon and the inherent uncertainties of looking out further than three years.

In assessing the viability of the Company over the review period the Directors have conducted a robust review of the principal risks, focusing upon the following factors:

- The principal risks detailed in the Strategic Report;

- The ongoing relevance of the Company's investment objective in the current environment;

- The demand for the Company's Shares evidenced by the historical level of premium and or discount;

- The level of income generated by the Company;

- The level of gearing and flexibility of the Company's Loan Stock and Loan Notes; and

- The liquidity of the Company's portfolio including the results of stress test analysis performed by the Manager under a wide number of market scenarios.

In making this assessment, the Board has examined scenario analysis showing the impact of historic large economic shocks on the value and level of liquidity of the portfolio. This included modelling a further global pandemic and the global financial crisis of 2008 and how these factors might affect the Company's prospects and viability in the future.

Accordingly, taking into account the Company's current position, the fact that the Company's investments are mostly liquid and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report. In making this assessment, the Board has considered that matters such as significant economic or stock market volatility, a substantial reduction in the liquidity of the portfolio or changes in investor sentiment could have an impact on its assessment of the Company's prospects and viability in the future.

Future

The Board's view on the general outlook for the Company can be found in the Chairman's Statement whilst the Investment Manager's views on the outlook for the portfolio are included in the Investment Manager's Review.

The Strategic Report has been approved by the Board and signed on its behalf by:

Nigel Cayzer,Chairman14 October 2022

Investment Manager's Review

Performance review

Asian equities fared well during the first half of the period as vaccine programmes led to an easing of lockdown restrictions and an economic recovery. However, there has been a pronounced risk-off trade in place since the turn of the year, with investors rattled by disruption to global supply chains, soaring inflation, rising interest rates and Russia's invasion of Ukraine. This has manifested itself in investors rotating away from more expensive areas of the market − such as high-growth companies − towards value. When market conditions are as volatile and the macroeconomic backdrop as uncertain as they are currently, sticking to our investment process becomes even more important. The rigour that is central to our process has stood us in good stead this year, enabling us to deliver solid outperformance for shareholders.

Your Company benefitted from being overweight Indonesia, as the market was among the strongest in the Asian region. The Indonesian economy rebounded as the country emerged from Covid-related restrictions and commodity prices surged. Further, stock selection was good, with AKR Corporindo among the standouts after announcing consecutive record quarters for earnings. This was thanks to lower expenses and sustained strength in margins in its transmission and distribution division. The company is a beneficiary of a commodity upcycle, as it provides a boost to fuel sales and chemical-price inflation improves profitability as the company has fixed-percentage distribution margins. Medikaloka Hermina's share price also fared well. The company is rapidly increasing its network of hospitals to meet growing demand for medical services across the country, and profits more than doubled in 2021. The stock was also supported in the latter part of the period by major Indonesian conglomerate Astra International raising its stake in the company.

Elsewhere in Southeast Asia, stock selection in Malaysia and our exposure to Vietnam further contributed to performance. In Vietnam, IT-services business FPT Corp benefitted from the continued need for corporates to transition to the cloud and adapt their systems to newer technologies. Property developer Nam Long benefitted from a period of relatively loose monetary policy as well as from a housing recovery - although inflation pressure in recent months has turned Vietnam's central bank more cautious. Turning to North Asia, the fund's underweight to China served us well, given the raft of headwinds facing companies there, including macro and regulatory challenges, Beijing's zero-Covid policy and accumulated stress in the property sector. Chinese equities sold-off further this year in response to China's temporary lockdown of major cities like Shanghai to curb the spread of Covid-19.

Hong Kong-listed dry-bulk shipper Pacific Basin, on the other hand, was among the top contributors to performance. The company continues to enjoy a period of higher profits and better earnings visibility, given tight industry supply, resulting in large dividend payouts that have significantly enhanced shareholder returns. Elsewhere, shares in M.P. Evans, which operates plantations in Indonesia, traded higher due to the sharp rise in palm-oil prices, while Indian digital-advertising business Affle rose as revenue growth continues to exceed expectations. In addition, the firm is well positioned to increase profitability in other emerging markets, as underlined by its recent acquisition in Latin America. 

Your Company's exposure elsewhere in India dragged on performance. Elevated energy and commodity prices earlier this year contributed to inflation pressure that prompted the Reserve Bank of India to embark on raising interest rates. Higher prices combined with wavering outlook for global growth weighed on shares. Towards the end of the review period, Indian equities rebounded sharply, but the fund's underweight position relative to the comparative index proved costly. The Trust's holding in Vijaya Diagnostic Centre sold off amid growing concerns over competition in the diagnostics sector. In our view, the market has overestimated the importance of price and underappreciated more important business drivers such as branding, trust and service quality. Godrej Agrovet also lagged and we decided to divest the position to pursue other investments with greater earnings visibility

Further, the rotation away from technology stocks impacted the Trust's performance, with holdings in the tech-heavy markets of Taiwan and South Korea not immune from the broader sell-off in the sector globally. This included the likes of Taiwan Union Technology, Park Systems, Koh Young Technology and Douzone Bizon. Also in Taiwan, momo.com underperformed after a strong period of outperformance, as investors gravitated away from high-growth companies, despite the company reporting strong quarterly results. 

Your Company's exposure to Sri Lanka, through its holding in conglomerate John Keells, hurt performance given the country's turbulent economic and political backdrop. This manifested itself primarily via a devaluation of the currency, as the company's operations continue to recover from Covid-induced challenges and the share price in local currency terms has been relatively stable. Despite the undoubted challenges Sri Lanka faces, we believe there is value in John Keell's shares and feel the company is in a comfortable enough position to continue investing in its businesses, which is likely to strengthen its competitive moat over the long-term.

Portfolio activity

We think market volatility has created a price disconnect that is best exploited through a focus on company fundamentals. In line with this view, we took the opportunity to introduce some quality businesses that are well placed to ride on structurally growing themes, such as health care and technology. This should also help us mitigate the downside risks to growth from inflation. In a similar vein, we sold-out of some companies where we were less convinced of their long-term prospects, either due to disappointing execution or as a result of a rapidly changing macroeconomic environment.

As referenced in the Chairman's statement, we decided to increase the Trust's exposure to China following a sharp pullback in valuations This included introducing Sinoma Science and Technology, one of the largest wind-turbine blade producers in China and the third largest battery separator maker. Sinoma operates with the entrepreneurial culture of a private enterprise but, as a state-owned enterprise, has better access to resources, capital and research and development capabilities. We view the stock as a proxy for rising demand for renewable energy, including both wind and lithium batteries. Therefore, as well as being a high-quality operator, it has strong ESG credentials. We also added Joinn Laboratories, which offers drug safety assessment services on the mainland. Being an early mover in innovative drugs, Joinn has a solid track record, while its services cover the discovery, pre-clinical and clinical trial stages, underpinned by research excellence and experienced management.

We also purchased shares in South Korea's Leeno Industrial, which designs and manufactures equipment that is vital in the testing process of most electronic products. It is the global market leader in an industry where barriers to entry are high due to the considerable upfront investment required. Leeno supplies the largest semiconductor manufacturers globally and has a well-diversified customer base, spanning over a thousand clients. We are also positive about its longer-term prospects thanks to strong growth in end markets driven by 5G, artificial intelligence, medical devices and autonomous driving and electric vehicles. This is all backed by excellent financials. Its healthy free cash flow and net-cash balance sheet enables it to fund its capex and working capital internally and it consistently generates a return on equity in the high teens. Other additions to the Trust during the period include Andes Technology, MapmyIndia, IPH and Vijaya Diagnostic Centre.

Meanwhile, we divested the position in Singapore's Raffles Medical Group. Despite the firm announcing a good full-year result in February, we were concerned about the sustainability of Covid-related revenue and expect the business to see earnings recede for a period of time. Other exits include Aeon Credit Service Asia, Aeon Thana Sinsap, Goodyear, Orix Leasing, Ujjivan Financial Services, Yantai China Pet Foods and YNH Property.

Outlook

We expect Asian markets to remain volatile as the prevailing stress points of rising inflation - aggravated by the Ukraine conflict − and monetary policy normalisation continue to raise the probability of a global economic recession. China's economy also remains weak and although Beijing has adopted a more pro-growth stance of late, continued monetary and fiscal support will be required to revive economic activity and much will depend on the extent to which the government decides to loosen its 'zero-Covid' measures. Elsewhere across the region, the recovery in Southeast Asia is gathering pace amid further progress in the reopening of economies.

Despite serious macroeconomic and geopolitical pressures, we have yet to see significant deterioration in company fundamentals across the region, and the operating performance of the Trust's holdings has proven to be resilient. Corporate Asia will continue to battle the twin challenges of higher input costs and rising interest rates, but we remain encouraged about your companies' pricing power and debt-free balance sheets.

Despite the more uncertain near-term outlook, our confidence in the long-term growth prospects for the Asian region remains undimmed. The opportunities for growth are plentiful, especially within the smaller companies' space, and we remain positioned around structural growth themes like domestic consumption, technology and green energy. Indeed, the turbulence in markets has resulted in more palatable valuations, creating enticing opportunities for investors like us who are here for the long run.

Flavia Cheong, Gabriel Sacks, Neil Sun & Hugh Youngabrdn Asia Limited14 October 2022

Results

Performance (total return)

Ten Year Financial Record

Ten Largest Investments

As at 31 July 2022

Portfolio

Directors' Report

The Directors present their Report and the audited financial statements for the year ended 31 July 2022.

Change of Name

On 4 April 2022 the Company changed its name from Aberdeen Standard Asia Focus PLC to abrdn Asia Focus plc.

Results and Dividends

Details of the Company's results and proposed dividends are shown above.

Investment Trust Status

The Company (registered in England & Wales No. 03106339) has been accepted by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 August 2012. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 July 2022 so as to enable it to comply with the ongoing requirements for investment trust status.

Individual Savings Accounts

The Company has conducted its affairs so as to satisfy the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner.

Capital Structure, Buybacks and Issuance

The Company's capital structure is summarised in note 14 to the financial statements. On 4 February 2022 the Company completed a five for one share split and shareholders received five New Ordinary Shares of 5p each in exchange for each existing Ordinary Share of 25p held as at the close of business on 3 February 2022. The new Ordinary shares of 5p each retained the Stock Exchange ticker (AAS) but were assigned a new ISIN and SEDOL as follows:

New ISIN: GB00BMF19B58

New SEDOL: BMF19B5

At 31 July 2022, there were 156,953,631 fully paid Ordinary shares of 5p each (2021 - 31,189,684 Ordinary shares of 25p each) in issue with a further 51,744,590 Ordinary shares of 5p held in treasury (2021 - 10,348,918 Ordinary shares of 25p each held in treasury). During the year no Ordinary shares were purchased in the market for treasury (2021 - 1,055,000 Ordinary shares of 25p each purchased for treasury). During the period and up to the date of this report no new Ordinary shares were issued for cash and no shares were sold from or purchased into treasury.

On 14 December 2021, 13,764 units of Convertible Unsecured Loan Stock 2025 were converted into 935 new Ordinary shares of 25p each. On 14 June 2022 1,579 units of Convertible Unsecured Loan Stock 2025 were converted into 536 new Ordinary shares of 5p each. In accordance with the terms of the CULS Issue, (subsequently adjusted to reflect the share split in February 2022), the conversion price of the CULS for the December conversion was determined at 1465.0p nominal of CULS for one Ordinary share of 25p and the conversion price for the June conversion was determined at 293.0p nominal of CULS for one Ordinary share of 5p.

Voting Rights

Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares carry a right to receive dividends. On a winding up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.

CULS holders have the right to attend but not vote at general meetings of the Company. A separate resolution of CULS holders would be required to be passed before any modification or compromise of the rights attaching to the CULS can be made.

Gearing

On 1 December 2020 the Company issued a £30 million 15 year Senior Unsecured Loan Note (the "Loan Note") at an annualised interest rate of 3.05%. The Loan Note is unsecured, unlisted and denominated in sterling. The Loan Note ranks pari passu with the Company's other unsecured and unsubordinated financial indebtedness. The Company used the proceeds of the Loan Note issue to repay, and cancel in full, the Company's loan facility with RBS and the remainder was invested in the portfolio by the Investment Manager. 

Management Agreement

The Company has appointed abrdn Fund Managers Limited ("aFML"), a wholly owned subsidiary of abrdn plc, as its alternative investment fund manager. aFML has been appointed to provide investment management, risk management, administration and company secretarial services and promotional activities to the Company. The Company's portfolio is managed by abrdn Asia Limited ("abrdn Asia") by way of a group delegation agreement in place between aFML and abrdn Asia. In addition, aFML has sub-delegated administrative and secretarial services to Aberdeen Asset Management PLC and promotional activities to Aberdeen Asset Managers Limited ("AAML"). 

Management Fee

With effect from 1 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%. Investment management fees are charged 25% to revenue and 75% to capital.

The management agreement may be terminated by either the Company or the Manager on the expiry of three months' written notice (reduced from 12 months). On termination, the Manager would be entitled to receive fees which would otherwise have been due to that date. 

The Management Engagement Committee reviews the terms of the management agreement on a regular basis and have confirmed that, due to the long-term relative performance, investment skills, experience and commitment of the investment management team, in their opinion the continuing appointment of aFML and abrdn Asia is in the interests of shareholders as a whole.

Political and Charitable Donations

The Company does not make political donations (2021 - nil) and has not made any charitable donations during the year (2021 - nil).

Risk Management

Details of the financial risk management policies and objectives relative to the use of financial instruments by the Company are set out in note 19 to the financial statements.

The Board

The current Directors, N K Cayzer, Randal Dunluce (The Earl of Antrim), C Black, K Shanmuganathan, L Cooper (appointed 15 June 2022) and A Finn (appointed 13 July 2022), together with D Guthrie who resigned on 13 April 2022, were the only Directors who served during the year. During the period Viscount Dunluce succeeded to the title Earl of Antrim following the death of his father. Pursuant to Principle 23 of the AIC's Code of Corporate Governance which recommends that all directors should be subject to annual re-election by shareholders, all the members of the Board will retire at the AGM scheduled for 30 November 2022 and will offer themselves for re-election. Details of each Director's contribution to the long term success of the Company are provided on page 50 of the published Annual Report and financial statements for the year ended 31 July 2022.

The Board considers that there is a balance of skills and experience within the Board relevant to the leadership and direction of the Company and that all the Directors contribute effectively.

In common with most investment trusts, the Company has no employees. Directors' & Officers' liability insurance cover has been maintained throughout the year at the expense of the Company.

The Role of the Chairman

The Chairman is responsible for providing effective leadership to the Board, by setting the tone of the Company, demonstrating objective judgement and promoting a culture of openness and debate. The Chairman facilitates the effective contribution, and encourages active engagement, by each Director. In conjunction with the Company Secretary, the Chairman ensures that Directors receive accurate, timely and clear information to assist them with effective decision-making. The Chairman leads the evaluation of the Board and individual Directors, and acts upon the results of the evaluation process by recognising strengths and addressing any weaknesses. The Chairman also engages with major shareholders and ensures that all Directors understand shareholder views.

The Company has not appointed a senior independent director. Accordingly the Audit Committee Chairman in combination with the other independent Directors fulfils the duties of the senior independent director, acting as a sounding board for the Chairman and acting as an intermediary for other directors as applicable. The Audit Committee Chairman is also available to shareholders to discuss any concerns they may have.

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and this statement describes how the Company has applied the principles identified in the UK Corporate Governance Code as published in July 2018 (the "UK Code"), which is available on the Financial Reporting Council's (the "FRC") website: frc.org.uk.

The Board has also considered the principles and provisions of the AIC Code of Corporate Governance as published in February 2019 (the "AIC Code"). The AIC Code addresses the principles and provisions set out in the UK Code, as well as setting out additional provisions on issues that are of specific relevance to the Company. The AIC Code is available on the AIC's website: theaic.co.uk.

The Board considers that reporting against the principles and provisions of the AIC Code, which has been endorsed by the FRC provides more relevant information to shareholders.

The Board confirms that, during the year, the Company complied with the principles and provisions of the AIC Code and the relevant provisions of the UK Code, except as set out below.

1. Interaction with the workforce (provisions 2, 5 and 6);

2. the role and responsibility of the chief executive (provisions 9 and 14);

3. previous experience of the chairman of a remuneration committee (provision 32);

4. executive directors' remuneration (provisions 33 and 36 to 40);

5. senior independent director (provision 12); and

6. tenure of the Chairman (provision 19).

For the reasons set out in the AIC Code, and as explained in the UK Corporate Governance Code, the Board considers that provisions 1 to 4 above are not relevant to the position of the Company, being an externally-managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of provisions 1 to 4 above. The tenure of the Chairman is discussed further under 'Policy on Tenure', below. The full text of the Company's Corporate Governance Statement can be found on the Company's website: asia-focus.co.uk.

During the year ended 31 July 2022, the Board had six scheduled meetings. In addition, the Audit Committee met twice and the Management Engagement Committee met once and there has been a number of ad hoc Board meetings to discuss investment strategy. Between meetings the Board maintains regular contact with the Manager. Directors have attended the following scheduled Board meetings and Committee meetings during the year ended 31 July 2022 (with their eligibility to attend the relevant meeting in brackets):

Policy on Tenure - Chairman

The Company's policy, which is kept under very regular review, is in line with the Listing Rules, the Chairman must remain independent of the Manager and the Company. The independent Directors believe that the independence of the Chairman should be judged by the degree to which the interests of the shareholders and stakeholders as a whole are being served. The Directors note that Mr Cayzer will be retiring from the Board at the conclusion of the Annual General Meeting on 30 November 2022 and Mr Shanmuganathan has accepted the Board's invitation to become Chairman from that date.

Policy on Tenure - Directors

The Board's policy on tenure is that Directors need not serve on the Board for a limited period of time only. The Board does not consider that the length of service of a Director is as important as the contribution he or she has to make, and therefore the length of service will be determined on a case-by-case basis. In accordance with corporate governance best practice, all Directors, including those who have served for more than nine years or who are non-independent, voluntarily offer themselves for re-election on an annual basis. 

Board Committees

Audit Committee

The Audit Committee Report is on pages 61 to 63 of of the published Annual Report and financial statements for the year ended 31 July 2022.

Nomination Committee

All appointments to the Board of Directors are considered by the Nomination Committee which comprises all of the Directors. The Board's overriding priority in appointing new Directors to the Board is to identify the candidate with the best range of skills and experience to complement existing Directors. The Board also recognises the benefits of diversity and its policy on diversity is referred to in the Strategic Report.

During the year the Nomination Committee conducted a search for two new non executive Directors using the services of Fletcher Jones Limited, an independent recruitment consultant. As part of the search a specification of desired attributes and qualities was prepared and the recruitment process culminated in the appointment of Mr Lindsay Cooper on 15 June 2022 and the appointment of Mr Alex Finn on 13 July 2022.

The Board undertakes an annual evaluation of the Board, Directors, the Chairman and the Audit Committee which is conducted by questionnaires. The 2022 evaluation highlighted certain areas of further focus such as continuing professional development which will be addressed with input where necessary from the Company's advisors. Overall, the Committee has concluded that the Board has an excellent balance of experience, knowledge of investment markets, legal regulation and financial accounting and continues to work in a collegiate and effective manner. 

The Nomination Committee has reviewed the contributions of each Director ahead of their proposed election and re-elections at the AGM on 30 November 2022. Notwithstanding that Mr Cayzer intends to retire from the Board at the AGM on 30 November 2022, the Committee wishes to reiterate its belief that Mr Cayzer remains independent of the Manager. Ms Black has brought significant financial promotion and marketing expertise to the Board and has been closely involved in the redevelopment of the Company's website during the year; the Earl of Antrim has continued to bring detailed wealth management investment experience and insight to the Board; and Mr Shanmuganathan has continued to bring his deep experience of Asia as well as significant strategic and financial vision to the Board. Although Mr Cooper and Mr Finn were appointed to the Board immediately prior to the Company's year end they have already settled into their roles seamlessly and, respectively, are bringing excellent regional/investment experience and expert relevant and recent accounting and financial experience to the Board. For the foregoing reasons, the independent members of the Nomination Committee have no hesitation in recommending the election/re-election of each Director who will be submitting themselves for re-election at the AGM on 30 November 2022.

Management Engagement Committee

The Management Engagement Committee comprises all of the Directors and was chaired by Ms Guthrie up to her resignation in April 2022 and subsequently by the Chairman. The Committee is now chaired by Mr Finn following his appointment to the Board on 13 July 2022. The Committee is responsible for reviewing the performance of the Investment Manager and its compliance with the terms of the management and secretarial agreement. The terms and conditions of the Investment Manager's appointment, including an evaluation of fees, are reviewed by the Committee on an annual basis. The Committee believes that the continuing appointment of the Manager on the terms agreed is in the interests of shareholders as a whole.

Remuneration Committee

Under the UK Listing Authority rules, where an investment trust has only non-executive directors, the Code principles relating to directors' remuneration do not apply. Accordingly, matters relating to remuneration are dealt with by the full Board, which acts as the Remuneration Committee, and is chaired by the Chairman.

The Company's remuneration policy is to set remuneration at a level to attract individuals of a calibre appropriate to the Company's future development. Further information on remuneration is disclosed in the Directors' Remuneration Report on pages 56 to 59 of the published Annual Report and financial statements for the year ended 31 July 2022.

Terms of Reference

The terms of reference of all the Board Committees may be found on the Company's website asia-focus.co.uk and copies are available from the Company Secretary upon request. The terms of reference are reviewed and re-assessed by the Board for their adequacy on an annual basis.

Internal Control

In accordance with the Disclosure and Transparency Rules (DTR 7.2.5), the Board is ultimately responsible for the Company's system of internal control and for reviewing its effectiveness and confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the year under review and up to the date of approval of this Annual Report and Financial Statements. It is regularly reviewed by the Board and accords with the FRC Guidance.

The Board has reviewed the effectiveness of the system of internal control. In particular, it has reviewed and updated the process for identifying and evaluating the significant risks affecting the Company and policies by which these risks are managed.

The Directors have delegated the investment management of the Company's assets to the abrdn Group within overall guidelines, and this embraces implementation of the system of internal control, including financial, operational and compliance controls and risk management. Internal control systems are monitored and supported by the abrdn Group's internal audit function which undertakes periodic examination of business processes, including compliance with the terms of the management agreement, and ensures that recommendations to improve controls are implemented.

Risks are identified and documented through a risk management framework by each function within the abrdn Group's activities. Risk includes financial, regulatory, market, operational and reputational risk. This helps the internal audit risk assessment model identify those functions for review. Any weaknesses identified are reported to the Board, and timetables are agreed for implementing improvements to systems. The implementation of any remedial action required is monitored and feedback provided to the Board.

The significant risks faced by the Company have been identified as being financial; operational; and compliance-related.

The key components of the process designed by the Directors to provide effective internal control are outlined below:

- the Manager prepares forecasts and management accounts which allow the Board to assess the Company's activities and review its performance;

- the Board and Manager have agreed clearly defined investment criteria, specified levels of authority and exposure limits. Reports on these issues, including performance statistics and investment valuations, are regularly submitted to the Board and there are meetings with the Manager and Investment Manager as appropriate;

- as a matter of course the Manager's compliance department continually reviews abrdn's operations and reports to the Board on a six monthly basis;

- written agreements are in place which specifically define the roles and responsibilities of the Manager and other third party service providers and, where relevant, ISAE3402 Reports, a global assurance standard for reporting on internal controls for service organisations, or their equivalents are reviewed;

- the Board has considered the need for an internal audit function but, because of the compliance and internal control systems in place within abrdn, has decided to place reliance on the Manager's systems and internal audit procedures; and

- at its September 2022 meeting, the Audit Committee carried out an annual assessment of internal controls for the year ended 31 July 2022 by considering documentation from the Manager, Investment Manager and the Depositary, including the internal audit and compliance functions and taking account of events since 31 July 2022. The results of the assessment, that internal controls are satisfactory, were then reported to the Board at the next Board meeting.

Internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against mis-statement and loss.

Going Concern

In accordance with the Financial Reporting Council's guidance the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern. The Company's assets consist of equity shares in companies listed on recognised stock exchanges and are considered by the Board to be realisable within a relatively short timescale under normal market conditions. The Board has set overall limits for borrowing and reviews regularly the Company's level of gearing, cash flow projections and compliance with banking covenants. The Board has also reviewed stress testing and liquidity analysis covering the impact of significant historical market events such as the 1997 Asian Crisis and 2008 Global Financial Crisis on the liquidity of the portfolio to ensure that even in significant negative markets the Company would still be able to raise sufficient capital to repay its liabilities.

The Directors are mindful of the Principal Risks and Uncertainties disclosed in the Strategic Report and they believe that the Company has adequate financial resources to continue its operational existence for a period of not less than 12 months from the date of approval of this Annual Report. They have arrived at this conclusion having confirmed that the Company's diversified portfolio of realisable securities is sufficiently liquid and could be used to meet short-term funding requirements were they to arise, including in current market conditions caused by the Covid-19 pandemic and the conflict in Ukraine. The Directors have also reviewed the revenue and ongoing expenses forecasts for the coming year. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

Management of Conflicts of Interest

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his or her wider duties is affected. Each Director is required to notify the Company Secretary of any potential, or actual, conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.

No Director has a service contract with the Company although Directors are issued with letters of appointment upon appointment. The Directors' interests in contractual arrangements with the Company are as shown in note 18 to the financial statements. No other Directors had any interest in contracts with the Company during the period or subsequently.

The Board has adopted appropriate procedures designed to prevent bribery. The Company receives periodic reports from its service providers on the anti-bribery policies of these third parties. It also receives regular compliance reports from the Manager.

The Criminal Finances Act 2017 introduced a new corporate criminal offence of "failing to take reasonable steps to prevent the facilitation of tax evasion". The Board has confirmed that it is the Company's policy to conduct all of its business in an honest and ethical manner. The Board takes a zero-tolerance approach to facilitation of tax evasion, whether under UK law or under the law of any foreign country.

Accountability and Audit

The respective responsibilities of the Directors and the auditors in connection with the financial statements are set out on pages 60 and 71 of the published Annual Report and financial statements for the year ended 31 July 2022, respectively.

Each Director confirms that:

- so far as he or she is aware, there is no relevant audit information of which the Company's auditors are unaware; and,

- each Director has taken all the steps that they could reasonably be expected to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Additionally there have been no important events since the year end that impact this Annual Report.

The Directors have reviewed the independent auditors' procedures in connection with the provision of non-audit services. No non audit services were provided by the independent auditors during the year and the Directors remain satisfied that the auditors' objectivity and independence has been safeguarded.

Independent Auditors

At the January 2022 AGM shareholders approved the re-appointment of PricewaterhouseCoopers LLP ("PwC") as independent auditors to the Company. PwC has expressed its willingness to continue to be the Company's auditors and a Resolution to re-appoint PwC as the Company's auditors and to authorise the Directors to fix the auditors' remuneration will be put to the forthcoming Annual General Meeting.

Substantial Interests

The Board has been advised that the following shareholders owned 3% or more of the issued Ordinary share capital of the Company at 31 July 2022:

On 16 September 2022 the Company received notice that City of London Investment Management Company had increased its interest to 36,113,225 Ordinary shares, representing 23.0% of the issued capital. There have been no other significant changes notified in respect of the above holdings between 31 July 2022 and 14 October 2022.

The UK Stewardship Code and Proxy Voting

Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the AIFM which has sub-delegated that authority to the Manager.

The Manager is a tier 1 signatory of the UK Stewardship Code which aims to enhance the quality of engagement by investors with investee companies in order to improve their socially responsible performance.

Relations with Shareholders

The Directors place a great deal of importance on communication with shareholders. The Annual Report is widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up to date information on the Company through the Manager's freephone information service and the Company's website asia-focus.co.uk. The Company responds to letters from shareholders on a wide rangeof issues.

The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of the abrdn Group (either the Company Secretary or the Manager) in situations where direct communication is required and usually a representative from the Board meets with major shareholders on an annual basis in order to gauge their views.

The Notice of the Annual General Meeting, included within the Annual Report and financial statements, is sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board or the Manager, either formally at the Company's Annual General Meeting or, where possible, at the subsequent buffet luncheon for shareholders. The Company Secretary is available to answer general shareholder queries at any time throughout the year.

Special Business at the AnnualGeneral Meeting

Directors' Authority to Allot Relevant Securities

Approval is sought in Resolution 10, an ordinary resolution, to renew the Directors' existing general power to allot securities but will also, provide a further authority (subject to certain limits), to allot shares under a fully pre-emptive rights issue. The effect of Resolution 10 is to authorise the Directors to allot up to a maximum of 104,635,754 shares in total (representing approximately 2/3 of the existing issued capital of the Company), of which a maximum of 52,317,877 shares (approximately 1/3 of the existing issued share capital) may only be applied to fully pre-emptive rights issues. This authority is renewable annually and will expire at the conclusion of the next Annual General Meeting. The Board has no present intention to utilise this authority.

Disapplication of Pre-emption Rights

Resolution 11 is a special resolution that seeks to renew the Directors' existing authority until the conclusion of the next Annual General Meeting to make limited allotments of shares for cash of up to 10% of the issued share capital other than according to the statutory pre-emption rights which require all shares issued for cash to be offered first to all existing shareholders. This authority includes the ability to sell shares that have been held in treasury (if any), having previously been bought back by the Company. The Board has established guidelines for treasury shares and will only consider buying in shares for treasury at a discount to their prevailing NAV and selling them from treasury at or above the then prevailing NAV.

New shares issued in accordance with Resolution 11 and subject to the authority to be conferred by Resolution 10 will always be issued at a premium to the NAV per Ordinary share at the time of issue. The Board will issue new Ordinary shares or sell Ordinary shares from treasury for cash when it is appropriate to do so, in accordance with its current policy. It is therefore possible that the issued share capital of the Company may change between the date of this document and the Annual General Meeting and therefore the authority sought will be in respect of 10% of the issued share capital as at the date of the Annual General Meeting rather than the date of this document.

Purchase of the Company's Shares

Resolution 12 is a special resolution proposing to renew the Directors' authority to make market purchases of the Company's shares in accordance with the provisions contained in the Companies Act 2006 and the Listing Rules of the Financial Conduct Authority. The minimum price to be paid per Ordinary share by the Company will not be less than 5p per share (being the nominal value) and the maximum price should not be more than the higher of (i) 5% above the average of the middle market quotations for the shares for the preceding five business days; and (ii) the higher of the last independent trade and the current highest independent bid on the trading venue where the purchase is carried out.

The Directors do not intend to use this authority to purchase the Company's Ordinary shares unless to do so would result in an increase in NAV per share and would be in the interests of shareholders generally. The authority sought will be in respect of 14.99% of the issued share capital as at the date of the Annual General Meeting rather than the date of this document. 

The authority being sought in Resolution 12 will expire at the conclusion of the next Annual General Meeting unless it is renewed before that date. Any Ordinary shares purchased in this way will either be cancelled and the number of Ordinary shares will be reduced accordingly or under the authority granted in Resolution 11 above, may be held in treasury. During the year the Company has not bought back any Ordinary shares for Treasury.

If Resolutions 10 to 12 are passed then an announcement will be made on the date of the Annual General Meeting which will detail the exact number of Ordinary shares to which each of these authorities relate.

These powers will give the Directors additional flexibility going forward and the Board considers that it will be in the interests of the Company that such powers be available. Such powers will only be implemented when, in the view of the Directors, to do so will be to the benefit of shareholders as a whole.

Notice of Meetings

Resolution 13 is a special resolution seeking to authorise the Directors to call general meetings of the Company (other than Annual General Meetings) on 14 days' notice. This approval will be effective until the Company's next Annual General Meeting in 2023. In order to utilise this shorter notice period, the Company is required to ensure that shareholders are able to vote electronically at the general meeting called on such short notice. The Directors confirm that, in the event that a general meeting is called, they will give as much notice as practicable and will only utilise the authority granted by Resolution 13 in limited and time sensitive circumstances.

Dividend Policy

As a result of the timing of the payment of the Company's quarterly dividends, the Company's Shareholders are unable to approve a final dividend each year. In line with good corporate governance, the Board therefore proposes to put the Company's dividend policy to Shareholders for approval at the Annual General Meeting and on an annual basis thereafter.

The Company's dividend policy shall be that dividends on the Ordinary Shares are payable quarterly in relation to periods ending October, January, April and July. It is intended that the Company will pay quarterly dividends consistent with the expected annual underlying portfolio yield. The Company has the flexibility in accordance with its Articles to make distributions from capital. Resolution 3, an ordinary resolution, will seek shareholder approval for the dividend policy.

Recommendation

Your Board considers Resolutions 10 to 13 to be in the best interests of the Company and its members as a whole and most likely to promote the success of the Company for the benefit of its members as a whole. Accordingly, your Board unanimously recommends that shareholders should vote in favour of Resolutions 10 to 13 to be proposed at the AGM, as they intend to do in respect of their own beneficial shareholdings amounting to 14,060 Ordinary shares. 

By order of the BoardAberdeen Asset Management PLC -SecretariesBow Bells House, 1 Bread StreetLondon EC4M 9HH14 October 2022

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

For the year ended 31 July 2022