Last checked at 
21 Mar 2019 07:00
ABERDEEN STANDARD ASIA FOCUS PLC
Legal Entity Identifier (LEI): 5493000FBZP1J92OQY70
ANNOUNCEMENT OF UNAUDITED HALF YEARLY RESULTS
for the six months ended 31 January 2019
INTERIM BOARD REPORT
Background
Stock markets worldwide had a bumpy ride in the period under review and Asia was no exception. There was considerable volatility in the face of an escalating threat of a trade war between China and the US, alongside worries about slowing global growth and further US Federal Reserve interest rate hikes. However, the New Year has so far marked a reversal of that bearish sentiment, with Asian stock markets including China rallying on a more emollient outlook on trade, as well as the Fed indicating that rate hikes might be deferred.
Against this challenging backdrop, I am pleased to report that your Company's underlying holdings performed better than the comparative indices - a consequence of our long-standing focus on investing in companies with strong management, resilient balance sheets and good prospects. In the six months to 31 January 2019 the Company's net asset value (NAV) fell by 4.5% against a drop in the MSCI Asia (ex-Japan) Smaller Companies Index of 8.6% on a total return basis. During the period, the share price remained flat, with the discount to NAV per share narrowing from 14.8% to 11.2%.
The narrowing of the discount is encouraging and, I believe, a sign that shareholders have welcomed last year's restructuring efforts. The appointment of Hugh Young as named manager and a sharpening of the focus of your portfolio to his highest conviction ideas should help perpetuate the Company's track record of delivering value to shareholders over the long term.
Over the past three years, the Company's NAV has risen by 43.6%, equivalent to an annualised return of 12.8%. The 5-year and 10-year annualised returns stand at 8.2% and 17.1% respectively. In testimony to Hugh's underlying long-term philosophy, according to a recent press release from the Association of Investment Companies, if an investor had invested each year's maximum ISA limit since 1999 in the Company's shares the Company would be placed second best out of the investment company universe over this 20 year period. This is clear evidence of a true investment approach.
Overview
In the six months to January 2019, markets faced several obstacles. At a global level, geopolitical concerns took centre stage as the ongoing US-China trade dispute deepened, while tightening liquidity and volatile commodity prices contributed to an overall sense of unease against arguably excessive equity market valuations. In Asia, concerns over slowing growth in China and the potential disruption to technology supply chains hampered equity markets in North Asia and Australia, including the large export markets of China, Korea and Taiwan, where the Trust has comparatively less exposure.
The markets of South-East Asia proved more resilient despite the headwind of a strengthening US dollar amid successive Fed rate increases. Indonesia rallied after the Central Bank hiked rates to support the rupiah, while Thailand - another large market for the company - held up thanks to its current account surplus, stable currency and rising domestic demand. The Indian stock market was the notable exception. Despite reaching new highs in August, the market succumbed to a liquidity crunch in the financial sector, triggered by the default of a non-banking-financial-company's debt obligations. However, the central bank's quick remedial actions mitigated some of the losses.
What we have done in the portfolio and how it has performed
The restructuring of the management last year and the change of Company name was based on the Board's belief that investing in smaller companies requires specialist knowledge which can best be achieved by a dedicated team with clear responsibilities for identifying and managing investments in smaller companies.
Considerable progress is being made on the actions we outlined. Hugh Young leads a small dedicated team whose primary function is to identify and research new opportunities, monitor existing holdings and arrange exits at the optimal moment. They have at their disposal the formidable resources of Aberdeen Standard with 14 offices across the region and a huge range of contacts.
The number of stocks in the portfolio is being reduced to improve focus, increase opportunity and enhance shareholder value. To this effect, 10 holdings were exited during the period where their businesses had become more mature and the growth outlook less exciting. These include Castrol India and Heineken Malaysia, both investments that have meaningfully contributed to the value of your Company over the years. The portfolio still has around 10% of its holdings that need tidying up, but it is important to emphasise that this is no fire sale. Over the years, great care has been taken to invest in well-financed companies, often in market leading positions. They continue to prosper but it is important to seek out new opportunities, particularly in a fast-changing environment, where disruptive new approaches are challenging traditional well-established incumbents. To this end, new holdings have been initiated in the largest online retailer in Taiwan, momo.com, and in Singapore's AEM Holdings, a test-handler manufacturer that has embedded itself in chipmaker Intel's global supply chain.
Often, the small-cap sector is overlooked in favour of better-known large-cap stocks. This results in a greater likelihood for market mispricing, providing opportunities to buy quality holdings at attractive valuations. This is especially the case in such volatile times. Your Manager's approach to investing in quality stocks at reasonable valuations was evident from the few other additions to the portfolio. These were Indonesian fuel trader and distributor AKR Corporindo and Godrej Agrovet, a diversified agri-business in India. The former has a robust retail-fuel distribution business and integrated port and industrial estate in East Java. Godrej Agrovet is backed by the reputable conglomerate Godrej Group. It has a good track record in animal feed and crop protection, with distribution advantage, good farmer relationships and effective research and development capabilities. Both companies contributed to the overall performance of your Company in the review period.
Smaller companies also provide the potential for superior returns as they become targets for acquisition upon achieving scale and efficiency within their niche markets. In the portfolio, there are two or three potential take-over situations, one of which concerns Indonesian cement company Holcim Indonesia. The Trust intends to accept the acquirer's offer in March. News of the acquisition boosted the stock price, bolstering the relative performance of the Trust.
The long-term focus on quality companies has clearly helped the portfolio. Its largest exposure, Indonesia's Bank OCBC NISP, held for over two decades, continues to prosper as Indonesia develops and grows. Your Manager expects Indonesia to be the world's fifth largest economy in 20 years' time and Bank OCBC NISP is one of its highest quality banks. Similarly, Thailand's diversified financial company Aeon Thana, another core holding, rose on robust earnings and improved asset quality. Another long-term holding, Hana Microelectronics, an electronics manufacturing company, rose despite the poor short-term outlook for the technology sector from the ongoing US-China trade dispute. The company is well positioned, given its diversified products and plant locations, to weather the storm in the sector. Likewise, Philippines port operator Asian Terminals advanced on solid results, driven by higher volumes and margins.
Directorate
As I indicated in the last Annual Report, as part of the continuing process of succession planning the Board was delighted to welcome Charlotte Black and Deborah Guthrie as independent non-executive Directors of the Company on 16 January 2019. Charlotte has experience in various non-executive roles and as a board member within financial services, in both commercial and infrastructure companies and trade associations and is an experienced champion of major changes in the market's infrastructure. Debby is an equity research sales specialist with many years' experience of the Japanese equity market as well as a wider understanding of Asian markets having lived and worked in the region.
The appointment of two new Directors to the Board will allow us to refresh the Board in line with corporate governance guidelines. Chris Maude will retire from the Board on 31 March 2019 and I would like to reiterate our thanks to him for his considerable contribution over the last 11 years.
Share Capital Management and Gearing
During the period 652,000 Ordinary shares were purchased in the market at a discount to the prevailing ex income NAV and transferred to treasury. Subsequent to the period end a further 52,500 Ordinary shares have been purchased into treasury. Your Board continues to use share buy backs in periods of market uncertainty to both reduce the volatility of any discount as well as to modestly enhance the NAV for shareholders. Conversely, in times of market optimism, shares have been issued to the market at a premium to NAV.
The Company's net gearing at 31 January 2018 was 9.8%. The majority of the gearing is provided by the Convertible Unsecured Loan Stock redeemable in 2025, of which approximately £37m million remains outstanding. The Company also has a three-year multicurrency revolving loan facility and a term loan facility in an aggregate amount of $25 million with The Royal Bank of Scotland International Limited. Under the term loan facility $12.5 million has been drawn down and fixed until June 2020 at an all-in rate of 2.506%. The remaining $12.5 million has been drawn down under the $12.5m revolving credit facility. The Directors monitor the Company's gearing on a regular basis in accordance with the Company's investment policy and with advice from the Manager.
Outlook
Volatility is likely to remain the watchword as stock markets react to political and economic developments. It is also clear that Asia's economies and companies are seeing a lower rate of growth than that experienced in recent reporting periods. Moreover, 2019 is a crucial election year for Indonesia, India and Thailand, all countries in which the Trust has material exposure. That said, while uncertainty remains, these markets are expected to be supported by government spending and expansionary policies, in the run-up to the elections. The big picture for growth remains compelling, underpinned by a young population and an expanding middle class. Moreover, Asia remains the fastest growth region in the world and Asian smaller companies, in which we invest, are trading at the lower end of their historical valuation range. Given the underlying strength of our holdings' businesses and given their financials, we are confident of riding through the inevitable day-to-day gyrations of stock markets.
Principal Risks and Uncertainties
The principal risks and uncertainties affecting the Company are set out in detail on pages 10 and 11 of the Annual Report and Financial Statements for the year ended 31 July 2018 and have not changed. They can be summarised under the following headings:
- Investment Strategy and Objectives;
- Investment Portfolio and Investment Management Risks;
- Financial Obligations;
- Financial and Regulatory;
- Operational; and,
- Investment in Unlisted Securities.
In addition to these risks, the outcome and potential impact of the UK Government's Brexit discussions with the European Union are still unclear at the time of writing, and the potential for significant resultant currency volatility remains an economic risk for the Company in the meantime. In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the 2018 Annual Report.
Going Concern
The Company's assets consist of a diverse portfolio of listed equities which in most circumstances are realisable within a short timescale. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
Directors' Responsibility Statement
The Directors are responsible for preparing this half-yearly financial report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements contained within the half-yearly financial report has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);
- the Interim Board Report (constituting the interim management report) includes a fair review of the information required by rule 4.2.7R of the UK Listing Authority Disclosure Guidance and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year) and 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could so do).
Nigel Cayzer
Chairman
20 March 2019
FINANCIAL HIGHLIGHTS
31 January 2019 | 31 July 2018 | % change | |
Total assets{A} (£'000) | 454,972 | 486,044 | -6.4 |
Net asset value per Ordinary share | 1,159.42p | 1,231.83p | -5.9 |
Share price per Ordinary share (mid) | 1,030.00p | 1,050.00p | -1.9 |
Discount to net asset value per Ordinary share{B} | 11.2% | 14.8% | |
Net gearing{B} | 9.8% | 9.5% | |
Ongoing charges ratio{B} | 1.17% | 1.22% | |
{A} Total assets as per the Statement of Financial Position less current liabilities (excluding prior charges such as bank loans). | |||
{B} Considered to be an Alternative Performance Measure as defined below. | |||
PERFORMANCE {A} | Six months ended31 January 2019 | Yearended31 July 2018 |
Share price{A} | -0.2% | +0.4% |
Net asset value per Ordinary share{A} | -4.5% | +4.6% |
MSCI AC Asia Pacific ex Japan Index (currency adjusted) | -4.8% | +6.1% |
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted) | -8.6% | +6.6% |
{A} Considered to be an Alternative Performance Measure as defined below. | ||
Condensed Statement of Comprehensive Income (unaudited)
Six months ended | Six months ended | ||||||
31 January 2019 | 31 January 2018 | ||||||
Revenue | Capital | Total | Revenue | Capital | Total | ||
Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Losses on investments | - | (21,136) | (21,136) | - | (3,425) | (3,425) | |
Income | 2 | 4,912 | - | 4,912 | 5,976 | - | 5,976 |
Exchange (losses)/gains | - | (91) | (91) | - | 1,008 | 1,008 | |
Investment management fees | (1,941) | - | (1,941) | (2,002) | - | (2,002) | |
Administrative expenses | (539) | - | (539) | (529) | - | (529) | |
______ | ______ | ______ | ______ | ______ | ______ | ||
Net return/(loss) before finance costs and taxation | 2,432 | (21,227) | (18,795) | 3,445 | (2,417) | 1,028 | |
Finance costs | (776) | - | (776) | (876) | - | (876) | |
______ | ______ | ______ | ______ | ______ | ______ | ||
Net return/(loss) before taxation | 1,656 | (21,227) | (19,571) | 2,569 | (2,417) | 152 | |
Taxation | 3 | (249) | (529) | (778) | (301) | (9) | (310) |
______ | ______ | ______ | ______ | ______ | ______ | ||
Return/(loss) attributable to equity shareholders | 1,407 | (21,756) | (20,349) | 2,268 | (2,426) | (158) | |
______ | ______ | ______ | ______ | ______ | ______ | ||
Return/(loss) per share (pence) | 4 | ||||||
Basic | 4.05 | (62.67) | (58.62) | 6.57 | (7.03) | (0.46) | |
______ | ______ | ______ | ______ | ______ | ______ | ||
Diluted | n/a | n/a | n/a | n/a | n/a | n/a | |
______ | ______ | ______ | ______ | ______ | ______ | ||
The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company. | |||||||
There is no other comprehensive income and therefore the return attributable to equity shareholders is also the total comprehensive income for the period. | |||||||
All revenue and capital items in the above statement derive from continuing operations. | |||||||
The accompanying notes are an integral part of the condensed financial statements. | |||||||
Condensed Statement of Financial Position (unaudited)
As at | As at | ||
31 January 2019 | 31 July 2018 | ||
Notes | £'000 | £'000 | |
Non-current assets | |||
Investments at fair value through profit or loss | 442,186 | 476,097 | |
Current assets | |||
Debtors and prepayments | 2,471 | 3,037 | |
Cash and short term deposits | 14,507 | 9,398 | |
_________ | _________ | ||
16,978 | 12,435 | ||
_________ | _________ | ||
Creditors: amounts falling due within one year | |||
Bank loans | 6 | (9,503) | (7,623) |
Other creditors | (4,192) | (2,488) | |
_________ | _________ | ||
(13,695) | (10,111) | ||
_________ | _________ | ||
Net current assets/(liabilities) | 3,283 | 2,324 | |
_________ | _________ | ||
Total assets less current liabilities | 445,469 | 478,421 | |
Non-current liabilities | |||
Bank loans | 6 | (9,485) | (9,506) |
2.25% Convertible Unsecured Loan Stock 2025 | 7 | (35,306) | (35,209) |
_________ | _________ | ||
(44,791) | (44,715) | ||
_________ | _________ | ||
Net assets | 400,678 | 433,706 | |
_________ | _________ | ||
Capital and reserves | |||
Called-up share capital | 8 | 10,429 | 10,429 |
Capital redemption reserve | 2,062 | 2,062 | |
Share premium account | 60,110 | 60,076 | |
Equity component of 2.25% Convertible Unsecured Loan Stock 2025 | 7 | 1,054 | 1,054 |
Capital reserve | 9 | 317,533 | 346,123 |
Revenue reserve | 9,490 | 13,962 | |
_________ | _________ | ||
Equity shareholders' funds | 400,678 | 433,706 | |
_________ | _________ | ||
Net asset value per share (pence) | 10 | 1,159.42 | 1,231.83 |
_________ | _________ |
Condensed Statement of Changes in Equity (unaudited)
Six months ended 31 January 2019 | |||||||
Capital | Share | Equity | |||||
Share | redemption | premium | component | Capital | Revenue | ||
capital | reserve | account | CULS 2025 | reserve | reserve | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 31 July 2018 | 10,429 | 2,062 | 60,076 | 1,054 | 346,123 | 13,962 | 433,706 |
Purchase of own shares to treasury | - | - | - | - | (6,817) | - | (6,817) |
Conversion of 2.25% Convertible Unsecured Loan Stock 2025 (note 7) | - | - | 34 | - | - | - | 34 |
Issue costs of 2.25% Convertible Unsecured Loan Stock 2025 | - | - | - | (17) | - | (17) | |
(Loss)/return after taxation | - | - | - | - | (21,756) | 1,407 | (20,349) |
Dividends paid (note 5) | - | - | - | - | - | (5,879) | (5,879) |
_____ | _____ | _____ | _____ | _____ | _____ | _____ | |
Balance at 31 January 2019 | 10,429 | 2,062 | 60,110 | 1,054 | 317,533 | 9,490 | 400,678 |
_____ | _____ | _____ | _____ | _____ | _____ | _____ | |
Six months ended 31 January 2018 | |||||||
Capital | Share | Equity | |||||
Share | redemption | premium | component | Capital | Revenue | ||
capital | reserve | account | CULS 2019 | reserve | reserve | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 31 July 2017 | 9,796 | 2,062 | 39,695 | 1,361 | 365,765 | 11,426 | 430,105 |
Purchase of own shares to treasury | - | - | - | - | (6,024) | - | (6,024) |
Conversion of 3.5% Convertible Unsecured Loan Stock 2019 (note 7) | 81 | - | 2,607 | - | - | - | 2,688 |
Return/(loss) after taxation | - | - | - | - | (2,426) | 2,268 | (158) |
Dividends paid (note 5) | - | - | - | - | - | (5,508) | (5,508) |
_____ | _____ | _____ | _____ | _____ | _____ | _____ | |
Balance at 31 January 2018 | 9,877 | 2,062 | 42,302 | 1,361 | 357,315 | 8,186 | 421,103 |
_____ | _____ | _____ | _____ | _____ | _____ | _____ | |
Condensed Statement of Cash Flows (unaudited)
Six months ended | Six months ended | |
31 January 2019 | 31 January 2018 | |
£'000 | £'000 | |
Operating activities | ||
Net (loss)/return before finance costs and taxation | (18,795) | 1,028 |
Adjustments for: | ||
Dividend income | (4,884) | (5,960) |
Interest income | (25) | (2) |
Other income | (3) | - |
Dividends received | 5,371 | 5,928 |
Interest received | 22 | 2 |
Other income received | 3 | - |
Interest paid | (673) | (757) |
Losses on investments | 21,136 | 3,425 |
Currency losses/(gains) | 91 | (1,008) |
Increase in prepayments | (15) | (14) |
Decrease in other debtors | 52 | 18 |
(Decrease)/increase in accruals | (124) | 365 |
Stock dividends included in investment income | (152) | (14) |
Withholding tax suffered | (288) | (301) |
__________ | __________ | |
Net cash flow from operating activities | 1,716 | 2,710 |
Investing activities | ||
Purchases of investments | (79,021) | (8,088) |
Sales of investments | 93,708 | 10,881 |
Capital Gains Tax on sales | (339) | (9) |
__________ | __________ | |
Net cash flow from investing activities | 14,348 | 2,784 |
Financing activities | ||
Purchase of own shares to treasury | (6,817) | (6,210) |
Issue costs of 2.25% Convertible Unsecured Loan Stock 2025 | (17) | - |
Drawdown of loan | 1,966 | 7,031 |
Equity dividends paid | (5,883) | (5,508) |
__________ | __________ | |
Net cash flow used in financing activities | (10,751) | (4,687) |
__________ | __________ | |
Increase in cash and cash equivalents | 5,313 | 807 |
__________ | __________ | |
Analysis of changes in cash and cash equivalents during the period | ||
Opening balance | 9,398 | 4,009 |
Increase in cash and cash equivalents as above | 5,313 | 807 |
Effect of exchange rate fluctuations on cash held | (204) | 315 |
__________ | __________ | |
Closing balance | 14,507 | 5,131 |
__________ | __________ | |
Notes to the Financial Statements
For the period ended 31 January 2019
1. | Accounting policies |
Basis of accounting | |
The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted. | |
The interim financial statements have been prepared using the same accounting policies as the preceding annual financial statements. |
Six months ended | Six months ended | ||
31 January 2019 | 31 January 2018 | ||
2. | Income | £'000 | £'000 |
Income from investments | |||
Overseas dividends | 4,407 | 5,808 | |
Overseas interest | 192 | 4 | |
REIT income | 49 | 64 | |
Stock dividends | 152 | 14 | |
UK dividend income | 84 | 84 | |
__________ | __________ | ||
4,884 | 5,974 | ||
__________ | __________ | ||
Other income | |||
Other income | 3 | - | |
Deposit interest | 25 | 2 | |
__________ | __________ | ||
Total income | 4,912 | 5,976 | |
__________ | __________ |
3. | Taxation |
The taxation charge for the period within revenue represents withholding tax suffered on overseas dividend income. The taxation charge for the period within capital represents capital gains tax on Indian equity sales. |
4. | Six months ended | Six months ended | |
31 January 2019 | 31 January 2018 | ||
Return/(loss) per Ordinary share | p | p | |
Basic | |||
Revenue return | 4.05 | 6.57 | |
Capital loss | (62.67) | (7.03) | |
__________ | __________ | ||
Total return | (58.62) | (0.46) | |
__________ | __________ | ||
The figures above are based on the following: | |||
Six months ended | Six months ended | ||
31 January 2019 | 31 January 2018 | ||
£'000 | £'000 | ||
Revenue return | 1,407 | 2,268 | |
Capital loss | (21,756) | (2,426) | |
__________ | __________ | ||
Total return | (20,349) | (158) | |
__________ | __________ | ||
Weighted average number of shares in issue{A} | 34,715,441 | 34,534,682 | |
__________ | __________ | ||
Six months ended | Six months ended | ||
31 January 2019 | 31 January 2018 | ||
Diluted{B} | p | p | |
Revenue return | n/a | n/a | |
Capital return | n/a | n/a | |
__________ | __________ | ||
Total return | n/a | n/a | |
__________ | __________ | ||
The figures above are based on the following: | |||
£'000 | £'000 | ||
Revenue return | 1,965 | 2,841 | |
Capital loss | (21,756) | (2,426) | |
__________ | __________ | ||
Total return | (19,791) | 415 | |
__________ | __________ | ||
Number of dilutive shares | 2,524,983 | 3,890,186 | |
__________ | __________ | ||
Diluted shares in issue{AB} | 37,240,424 | 38,424,868 | |
__________ | __________ | ||
{A} Calculated excluding shares held in treasury. | |||
{B} The calculation of the diluted total, revenue and capital returns per Ordinary share are carried out in accordance with IAS 33, "Earnings per Share". For the purpose of calculating total, revenue and capital returns per Ordinary share, the number of Ordinary shares used is the weighted average number used in the basic calculation plus the number of Ordinary shares deemed to be issued for no consideration on exercise of all 2.25% Convertible Unsecured Loan Stock 2025 (CULS). The calculations indicate that the exercise of CULS would result in an increase in the weighted average number of Ordinary shares of 2,524,983 (31 January 2018 - 3,890,186) to 37,240,424 (31 January 2018 - 38,424,868 ) Ordinary shares. | |||
As at 31 January 2019, the CULS conversion has a positive impact on the revenue and capital return per Ordinary share, therefore there is no dilution (31 January 2018 - no dilution to the revenue return per Ordinary share). Where dilution occurs, the net returns are adjusted for items relating to the CULS. Accrued CULS finance costs for the period and unamortised issue expenses are added back. Total earnings for the period are tested for dilution. Once dilution has been determined individual revenue and capital earnings are adjusted. | |||
Six months ended | Six months ended | ||
31 January 2019 | 31 January 2018 | ||
5. | Dividends | £'000 | £'000 |
Final dividend for 2018 - 13.00p (2017 - 12.00p) | 4,499 | 4,131 | |
Special dividend for 2018 - 4.00p (2017 - 4.00p) | 1,384 | 1,377 | |
Overpaid dividends | (4) | - | |
__________ | __________ | ||
5,879 | 5,508 | ||
__________ | __________ |
6. | Bank loans |
The Company currently has a $25,000,000 revolving facility agreement with The Royal Bank of Scotland International Limited. At the period end, $12,500,000 (31 July 2018 - $12,500,000) was drawn down from the term loan facility at a fixed interest rate of 2.506% until 8 June 2020. As at 22 January 2019 $12,500,000 (31 July 2018 - $10,000,000) was drawn down from the revolving facility at a rate of 3.560% and matured on 22 February 2019. The terms of the loan facilities contain covenants that the minimum net assets of the Company are £300,000,000, the percentage of borrowings against net assets is less than 20%, and the portfolio contains a minimum of forty-five eligible investments (investments made in accordance with the Company's investment policy). All covenants were met during the period. |
7. | Non-current liabilities - 2.25% Convertible Unsecured Loan Stock 2025 ("CULS") | |||
Liability | Equity | |||
Nominal | component | component | ||
£'000 | £'000 | £'000 | ||
Balance at beginning of period | 37,000 | 35,209 | 1,054 | |
Conversion of CULS into Ordinary shares | (34) | (34) | - | |
Notional interest on CULS | - | 77 | - | |
Amortisation of issue expenses | - | 54 | - | |
__________ | __________ | __________ | ||
Balance at end of period | 36,966 | 35,306 | 1,054 | |
__________ | __________ | __________ | ||
The 2.25% Convertible Unsecured Loan Stock 2025 ("CULS") can be converted at the election of holders into Ordinary shares during the months of May and November each year throughout their life until 31 May 2025 at a rate of one Ordinary share for every 1,465.0p nominal of CULS. Interest is paid on the CULS on 31 May and 30 November each year. 100% of the interest is charged to revenue in line with the Board's expected long-term split of returns from the investment portfolio of the Company. | ||||
In the event of a winding-up of the Company the rights and claims of the Trustee and CULS holders would be subordinate to the claims of all creditors in respect of the Company's secured and unsecured borrowings, under the terms of the Trust Deed. | ||||
During the period ended 31 January 2019 the holders of £34,482 of 2.25% CULS 2025 exercised their right to convert their holdings into Ordinary shares. Following the receipt of the exercise instructions, the Company converted £34,482 (31 July 2018- £2,687,937 of 3.5% CULS 2019) nominal amount of CULS into 2,348 (31 July 2018 - 323,835) Ordinary shares. | ||||
As at 31 January 2019, there was £36,965,518 (31 July 2018 - 37,000,000) nominal amount of CULS in issue. | ||||
8. | Called-up share capital |
During the six months ended 31 January 2019 652,000 (31 January 2018 - 570,500) Ordinary shares were bought back to be held in treasury at a total cost of £6,821,000 (31 January 2018 - £6,024,000). During the six months ended 31 January 2019 an additional 2,348 (31 July 2018 - 2,531,685) Ordinary shares were issued after £34,482 nominal amount of 2.25% Convertible Unsecured Loan Stock 2025 were converted at 1,465.0p each (31 July 2018 - £21,012,985 3.5% Convertible Unsecured Loan Stock 2019 were converted at 830.0p each). The total consideration received was £nil (31 July 2018 - £nil). At the end of the period there were 41,717,632 (31 July 2018 - 41,715,284) Ordinary shares in issue, of which 7,159,012 (31 July 2018 - 6,507,012) were held in treasury. | |
Subsequent to the period end, a further 52,500 Ordinary shares were bought back to be held in treasury at a total cost of £550,000. |
9. | Capital reserve |
The capital reserve reflected in the Condensed Statement of Financial Position at 31 January 2019 includes gains of £144,868,000 (31 July 2018 - gains £220,407,000), which relate to the revaluation of investments held at the reporting date. |
As at | As at | ||
10. | Net asset value per equity share | 31 January 2019 | 31 July 2018 |
Basic | |||
Net assets attributable | £400,678,000 | £433,706,000 | |
Number of Ordinary shares in issue{A} | 34,558,620 | 35,208,272 | |
Net asset value per Ordinary share | 1,159.42p | 1,231.83p | |
__________ | __________ | ||
Diluted{B} | |||
Net assets attributable | £435,984,000 | £468,915,000 | |
Number of Ordinary shares | 37,081,864 | 37,733,869 | |
Net asset value per Ordinary share | n/a | n/a | |
__________ | __________ | ||
{A} Excludes shares in issue held in treasury. | |||
{B} The diluted net asset value per Ordinary share has been calculated on the assumption that the £36,965,518 2.25% Convertible Unsecured Loan Stock 2025 ("CULS") are converted at 1,465.0p per share (31 July 2018 - £37,000,000 3.5% Convertible Unsecured Loan Stock 2019 are converted at 830.0p each), giving a total of 37,081,864 (31 July 2018 - 37,733,869) Ordinary shares. Where dilution occurs, the net assets are adjusted for items relating to the CULS. | |||
Net asset value per share - debt converted | |||
In accordance with the Company's understanding of the current methodology adopted by the AIC, convertible bond instruments are deemed to be 'in the money' if the cum income (debt at fair value) net asset value ("NAV") exceeds the conversion price of 1,465.0p per share. In such circumstances a net asset value is produced and disclosed assuming the convertible debt is fully converted. At 31 January 2019 the NAV was 1,159.42p and thus the CULS were not 'in the money' (31 July 2018 - 1231.83p, not 'in the money'). | |||
11. | Transaction costs | ||
During the period expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows: | |||
Six months ended | Six months ended | ||
31 January 2019 | 31 January 2018 | ||
£'000 | £'000 | ||
Purchases | 171 | 27 | |
Sales | 261 | 19 | |
__________ | __________ | ||
432 | 46 | ||
__________ | __________ | ||
12. | Fair value hierarchy | ||||
FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications: | |||||
Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date. | |||||
Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly. | |||||
Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability. | |||||
The financial assets and liabilities measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows: | |||||
Level 1 | Level 2 | Level 3 | Total | ||
As at 31 January 2019 | £'000 | £'000 | £'000 | £'000 | |
Financial assets/(liabilities) at fair value through profit or loss | |||||
Quoted equities | 437,557 | - | - | 437,557 | |
Quoted bonds | - | 4,629 | - | 4,629 | |
______ | _______ | ______ | _______ | ||
Net fair value | 437,557 | 4,629 | - | 442,186 | |
_______ | _______ | _______ | _______ | ||
Level 1 | Level 2 | Level 3 | Total | ||
As at 31 July 2018 | £'000 | £'000 | £'000 | £'000 | |
Financial assets/(liabilities) at fair value through profit or loss | |||||
Quoted equities | 476,097 | - | - | 476,097 | |
______ | _______ | ______ | _______ | ||
Net fair value | 476,097 | - | - | 476,097 | |
______ | _______ | ______ | _______ | ||
Quoted equities
| |||||
The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges. | |||||
Quoted bonds | |||||
The fair value of the Company's investments in quoted preference shares and bonds has been determined by reference to their quoted bid prices at the reporting date. Investments categorised as Level 2 are not considered to trade in active markets. | |||||
13. | Related party disclosures |
Mr Gilbert is a director of Standard Life Aberdeen plc. Both Mr Gilbert and his alternate, Mr Young are directors of its subsidiary ASI Asia which has been delegated, under an agreement with ASFML, to provide management services to the Company. Neither Mr Gilbert nor Mr Young are directors of ASFML. | |
Mr Yea is chairman of Equiniti Group plc which acts as Registrar and Receiving Agent to the Company. Mr Yea is excluded from participation in all discussions relating to the appointment of Equiniti. | |
Transactions with the Manager | |
From 1 August 2018 until 31 October 2018 the investment management fee was payable monthly in arrears based on an annual amount of 1.0% calculated on the average net asset value of the Company over a 24 month period, valued monthly. The fee was calculated by reference to the value of the Company's net assets (gross assets less liabilities excluding the amount of any loan facilities or overdraft facilities drawn down). With effect from 01 November 2018 the investment management fee has been payable monthly in arrears at 0.08% based on the market capitalisation of the Company multiplied by the number of shares in issue (less those held in Treasury) at the month end. During the period £1,941,000 (31 January 2018 - £2,002,000) of investment management fees were charged, with a balance of £565,000 (31 January 2018 - £684,000) being payable to ASFML at the period end. Investment management fees are charged 100% to revenue. | |
The Company also has a management agreement with ASFML for, inter alia, the provision of both administration and promotional activities services which are, in turn, delegated to AAM and Aberdeen Asset Managers Limited ('AAML') respectively. | |
The administration fee is payable quarterly in advance and is adjusted annually to reflect the movement in the Retail Price Index. It is based on a current annual amount of £95,000 (31 January 2018 - £93,000). During the period £47,000 (31 January 2018 - £45,000) of fees were charged, with a balance of £24,000 (31 January 2018 - £23,000) payable to AAM at the period end. | |
The promotional activities costs are based on a current annual amount of £219,000 (31 January 2018 - £250,000), payable quarterly in arrears. During the period £110,000 (31 January 2018 - £125,000) of fees were charged, with a balance of £73,000 (31 January 2018 - £21,000) being payable to AAML at the period end. |
14. | Segmental information |
The Company is engaged in a single segment of business, which is to invest in equity securities and debt instruments. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment. |
Half-Yearly Report | |
The financial information in this Report does not comprise statutory accounts within the meaning of Section 434 - 436 of the Companies Act 2006. The financial information for the year ended 31 July 2018 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified and contained no statement under Section 498 (2), (3) or (4) of the Companies Act 2006. The interim accounts have been prepared using the same accounting policies as the preceding annual accounts. | |
Ernst & Young LLP has reviewed the financial information for the six months ended 31 January 2019 pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. |
16. | This Half-Yearly Report was approved by the Board and authorised for issue on 20 March 2019. |
Copies of the Company's Half Yearly Report for the six months ended 31 January 2019 will be posted to shareholders in April 2019 and will be available thereafter on the Company's website:asia-focus.co.uk* and from the registered office, Bow Bells House, 1 Bread Street, London EC4M 9HH.
Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.
* Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.
Aberdeen Asset Management PLC
Secretaries
20 March 2019
Alternative Performance Measures | | | |
Alternative Performance Measures ("APMs") are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies. | |||
| | | |
Total return | | | |
Total return is considered to be an alternative performance measure. NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. NAV total return involves investing the same net dividend in the NAV of the Company with debt at fair value on the date on which that dividend was earned. Share price total return involves reinvesting the net dividend in the month that the share price goes ex-dividend. | |||
| | | |
The tables below provide information relating to the NAVs and share prices of the Company on the dividend reinvestment dates during the six months ended 31 January 2019 and 31 January 2018 and total return for the period. | |||
| | | |
| Dividend | | Share |
2019 | rate | NAV | price |
31 July 2018 | N/A | 1,231.83p | 1,050.00p |
20 December 2018 | 17.00p | 1,159.30p | 1,000.00p |
31 January 2019 | N/A | 1,159.42p | 1,030.00p |
----- | ----- | ----- | |
Total return | | -4.5% | -0.2% |
----- | ----- | ----- | |
| | | |
| Dividend | | Share |
2018 | rate | NAV | price |
31 July 2017 | N/A | 1,192.49p | 1,062.00p |
2 November 2017 | 16.00p | 1,273.76p | 1,065.00p |
31 January 2018 | N/A | 1,180.08p | 1,030.00p |
----- | ----- | ----- | |
Total return | | +0.2% | -1.6% |
----- | ----- | ----- | |
| | | |
Discount to net asset value per Ordinary share | | | |
The difference between the share price of 1,030.00p (31 July 2018 - 1,050.00p) and the net asset value per Ordinary share of 1,159.42p (31 July 2018 - 1,231.83p) expressed as a percentage of the net asset value per Ordinary share. | |||
| | | |
Net gearing | | | |
Net gearing measures the total borrowings of £54,294,000 (31 July 2018 - £52,338,000) less cash and cash equivalents of £14,891,000 (31 July 2018 - £11,250,000) divided by shareholders' funds of £400,678,000 (31 July 2018 - £433,706,000), expressed as a percentage. | |||
| | | |
Ongoing charges | | | |
Ongoing charges is considered to be an alternative performance measure. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values with debt at fair value throughout the year. The ratio for 31 January 2019 is based on forecast ongoing charges for the year ending 31 July 2019. | |||
| | | |
| | 31 January | 31 July |
| | 2019 | 2018 |
Investment management fees (£'000) | | 3,649 | 4,155 |
Administrative expenses (£'000) | | 1,099 | 1,092 |
Less: non-recurring charges (£'000) | | (3) | - |
----- | ----- | ||
Ongoing charges (£'000) | | 4,745 | 5,247 |
----- | ----- | ||
Average net assets (£'000) | | 404,247 | 429,584 |
----- | ----- | ||
Ongoing charges ratio | | 1.17% | 1.22% |
----- | ----- | ||
| | | |
The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations. | |||
Independent Review Report to Aberdeen Standard Asia Focus PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2019 which comprises a Condensed Statement of Comprehensive Income, Condensed Statement of Financial Position, Condensed Statement of Changes in Equity, Condensed Statement of Cash Flows and the related Notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the company are prepared in accordance with United Kingdom Generally Accepted Accounting Practice. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting).
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2019 is not prepared, in all material respects, in accordance with the Financial Reporting Standard 104 (Interim Financial Reporting) and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Conduct Authority.
Ernst & Young LLP
London
20 March 2019