Invesco Asia Regulatory News (IAT)

Invesco Asia Trust Plc - Annual Financial Report

PR Newswire

London, July 15

Invesco Asia Trust plc

Annual Financial Report Announcement For the Financial Year Ended 30 April 2021

Financial Information and Performance Statistics

The benchmark index of the Company is the MSCI AC Asia ex Japan Index (total return, net of withholding tax, in sterling terms)

Capital Statistics

Revenue Statistics

(1) Source: Refinitiv.

(2) Alternative Performance Measure (APM). See Glossary of Terms and Alternative Performance Measures on pages 81 to 83 of the financial report for details of the explanation and reconciliations of APMs.

(3) Index returns are shown on a total return basis, with income reinvested net of withholding taxes. Previously Index returns, on a total return basis, were shown with income reinvested gross of withholding taxes. This change is also reflected, retrospectively, to any long term total returns shown in this report for comparison and consistency.

(4) A dividend enhancement policy was announced on 28 August 2020, which aims to pay a regular six-monthly dividend calculated at 2% of the Company’s NAV on the last business day of September and February. Dividends are paid from a combination of the Company’s revenue reserves and capital reserves, as required.

Chairman’s Statement

Highlights

• It has been an exceptionally good year for performance. Net Asset Value (NAV)* per share up 56.4% over 1 year, well ahead of the MSCI AC Asia ex Japan Index** up 34.8%, both on a total return basis.

• Share price total return up 58.5% as discount moved from 9.2% to 8.2% over the year.

• In line with our new policy to pay two dividends representing in total approximately 4% of NAV every year, our second interim dividend of 8.40p per share takes full year dividend to 15.10p, a yield of 3.9% on the 30 April 2021 closing share price.

• Investment case: The institutional strength, people and process of Invesco’s Asian Investment team.

• Corporate proposition: Since adding two further measures to our corporate proposition in August 2020, namely an enhanced dividend policy and a performance conditional tender offer, the discount has averaged 9.6%.

* Alternative Performance Measure (APM). See Glossary of terms and alternative performance measures on pages 81 to 83 of the financial report for details of the explanation and reconciliations of APMs.

** Benchmark index is the MSCI AC Asia ex Japan Index (total return, net of withholding tax, in sterling terms).

As previously reported, Ian Hargreaves, supported by Fiona Yang and the team, worked very hard in the early stages of the pandemic to reassess all our existing holdings and to research potential new ones. While there remained many Asian companies with good fundamentals at attractive valuations that were well positioned to prosper, some suffered severe financial stress as a result of the Covid-19 crisis while some exciting new candidates became available at unusually attractive prices. The portfolio was repositioned early for recovery and that proactive move proved to be the key factor in the subsequent success. Given it is exceptional to beat an index benchmark by so much in one year, the team is now reassessing every holding to decide whether the valuation case still offers upside. Some holdings will be multi-year winners, some will not. Ian discusses the outlook in more detail in his Investment Manager’s report and comments on how he has repositioned the portfolio to try to lock in some of the outperformance.

On a cum-income basis the discount to NAV at 30 April 2021 was 8.2%, compared to 9.2% at 30 April 2020. The average cum-income discount over the year was 10.7% and over our second half 8.7%. We believe that the discount level is a function of the investment case for the Company and the corporate proposition. Not all of the determining factors are within our control but we are mindful as a board to try to do everything we can to make our shares more attractive to existing and potential investors.

Investment Case

The investment case rests on people, process and performance: Our investment management is contracted to Invesco Fund Managers Limited (the Manager) with Ian Hargreaves as our Portfolio Manager, actively supported by his deputy, Fiona Yang. Ian is Co-Head of Asian and Emerging Markets Equities at Invesco, has been our lead manager since 1 January 2015, our named co-manager from 2011 and was part of the investment team before that. Fiona joined the team in 2017 from Goldman Sachs. The investment process, which the Manager has consistently applied over the long-term, can be summarised as “valuation not value” and has achieved considerable success in the institutional market.

The mandate is to invest predominantly in listed companies in Asia ex Japan. Long-term performance remains strong with the Company returning 194.9% over the ten years to 30 April 2021 on a NAV total return basis versus the 120.7% from our benchmark index**.

Your Board continues to consider the investment case for Invesco Asia Trust plc to be compelling and sustainable.

Corporate Proposition

The Company’s Corporate Proposition was first introduced in the Half-Yearly Financial Report to 31 October 2018. Since then the Board has continued to review and adopt measures intended to create additional demand for the Company’s shares, both from existing and new shareholders, and to reduce the discount. We have been careful to ensure that the measures chosen are in the best interests of all shareholders. The intention is that the benefits from each will combine to make the corporate proposition as compelling as the investment case.

There are multiple elements to our Corporate Proposition, including:

1. Continuation Vote: Every three years the future of the Company is subject to a continuation vote, the next one due in 2022.

2. Enhanced dividend policy*: As detailed in the Company’s Half-Yearly Financial Report, the Board introduced a new enhanced dividend policy in August 2020, which aims to pay, in the absence of unforeseen circumstances, a regular six-monthly dividend equivalent to 2% of the Company’s NAV, calculated on the last business day of September and February, giving a total distribution of approximately 4% of NAV over the year. The dividends will be paid to shareholders in November and April. Previously in respect of each financial year an interim dividend was paid in January and a final dividend was paid in September of the following financial year after approval at the AGM. Whilst this means that the two interim dividends will not be subject to a resolution at the AGM, the distribution policy as a whole will be put to shareholders at each AGM. The first interim dividend of 6.70p was paid to shareholders on 26 November 2020 and a second interim dividend of 8.40p was paid to shareholders on 27 April 2021. This represents a 3.9% dividend yield on the closing share price on 30th April 2021. An advisory Resolution inviting shareholders to approve the Company’s dividend payment policy will be put to shareholders at the forthcoming AGM.

3. Performance Conditional Tender: As also detailed in the Company’s Half-Yearly Financial Report, the Board introduced a performance conditional tender offer in August 2020. The Board has undertaken to effect a tender offer for up to 25% of the Company’s issued share capital at a discount of 2% to the prevailing NAV per share (after deduction of tender costs) in the event that the Company’s NAV cum-income total return performance over the five year period to 30 April 2025 fails to exceed the Company’s comparator index, the MSCI AC Asia ex Japan Index (total return, net of withholding tax in sterling terms) by 0.5% per annum over the five years on a cumulative basis. Shareholders already have the opportunity to vote on the continuation of the Company every three years, but the Board believes that also providing shareholders with the option to tender a proportion of their shares for a cash price close to NAV, if the Company underperforms, constitutes a pragmatic and attractive initiative, particularly if the shares were to be trading at a material discount at the time.

4. Environmental, Social and Corporate Governance Matters (ESG): Investors and investment managers are paying greater attention to environmental, social and governance matters for reasons including regulatory change and the growing public discourse on climate change. The Board recognises the importance of ESG considerations and on page 24 we explain our approach. We continue closely to monitor developments in this rapidly evolving arena. The Manager is well-placed with ample resource to assess the risks and opportunities which may result from accelerating ESG-driven change. The Manager’s Global ESG function, based in Henley, inputs into the research process and provides a formal ESG oversight process including meetings with the Portfolio Managers and analysts to review the portfolio from an ESG perspective. The Manager is a Tier 1 signatory of the Financial Reporting Council’s Stewardship Code and maintains an active seat on the Board of the UK Sustainable Investment and Finance Association. In addition, the Manager achieved a global ‘A+’ rating for the third consecutive year from United Nations sponsored Principles of Responsible Investment (PRI) for Strategy and Governance. In 2019 the MSCI upgraded the Manager’s ESG rating from BBB to A and under its membership of the Carbon Disclosure Project it reports annually on its carbon footprint. 

5. Access to Invesco Expertise: Ian Hargreaves is Invesco’s lead portfolio manager of Asian accounts for institutional investors and manages £3 billion of institutional assets. Invesco Asia Trust plc is the only vehicle available to UK retail investors who wish to access Ian’s track record. Ian manages it with a high degree of commonality to his institutional portfolios with the additional inclusion of some of the best smaller company opportunities.

6. Engaging more individual shareholders: We are encouraged to see that an increasing number of our shareholders are individuals, with the proportion of investors who hold shares of Invesco Asia Trust plc via execution only platforms rising again this year. The Board aims to engage more directly with individual investors. Working closely with the Manager, we continue to raise the profile of the Company through new direct investor information, commentary and events which will provide access to the thoughts and views of Ian and Fiona, their team and the Directors. These activities complement the ongoing engagement with a broad range of professional investors Please take a look at www.invesco.co.uk/invescoasia where you can watch video clips, read updates or register to receive printed copies of the Half-Yearly and Annual Financial Reports. You can see third party research (by Edison Investment Research and Kepler Partners) and register for monthly factsheet alerts. You can also contact us by email at investmenttrusts@invesco.com

7. Ongoing Charges and Fees: As a Board we are responsible for managing the level of charges to shareholders. Our intention is to reduce gradually the level of ongoing charges over time. The main component of the 1.00% p.a. ongoing charge is the investment management fee paid to Invesco. The new marginal rate of 0.65% on net assets over £250m has kicked in for the first time this year as net asset value rose to £281m.

8. Net Gearing: The Company intends to use gearing (or borrowings) actively to take advantage of its closed-end structure. At the year end the Company had net cash of 0.9% having started the year with net gearing at 4.3%. Net gearing ranged from 4.8% to a net cash position of 1.4% over the year.

9. Directors’ Shareholdings: Institutional investors often follow and ask for information on Directors’ holdings of shares in the Company. These are shown on page 46 and we are required to notify any changes to the stock market by regulatory announcement. Additionally, our Portfolio Manager, Ian Hargreaves and Fiona Yang are both shareholders in the Company and can confirm that their remuneration by the Manager is partly determined by the performance of Invesco Asia Trust plc.

10. Buyback Authority: The Board has a stated average discount target of less than 10% of NAV calculated on a cum-income basis (formerly ex-income) over the Company’s financial year, although the Directors are cognisant of the fact that the Company’s share rating at any particular time will reflect a combination of various factors, a number of which are beyond the Board’s control. Share buybacks will occur where and when we consider (in conjunction with our broker) that such buybacks will be effective, taking into account market factors and the discounts of comparable funds.

* Please be aware that the Board provides no guarantees of future dividends and that all future dividend payments will be at the Directors’ discretion.

Annual General Meeting 

Following the proposed Government’s lifting of all legal restrictions on social contact to be effective on 19 July 2021 (but subject to change), I am pleased to once again invite all our shareholders to the Company’s AGM to have the opportunity to meet and question the Directors and the Manager.

Our AGM will be held at 12 noon on 9 September 2021 at 43-45 Portman Square, London W1H 6LY. Ian Hargreaves will give a presentation highlighting the events of the past year and the prospects for the year to come. The Directors and Ian will answer shareholders’ questions both in the formal part of the meeting and over refreshments afterwards. I hope as many of you as possible will attend. In the eventuality that the AGM has to be held as a closed meeting, we will communicate any necessary changes to shareholders in the form of an RNS announcement and on the Company’s web page at www.invesco.co.uk/invescoasia. The Board encourages all shareholders to exercise their votes at the AGM by completing and submitting a form of proxy, either in paper form or online, with the Company's registrar ahead of the meeting.

One of the resolutions being proposed at this AGM is an amendment to the Company's articles of association (the “Articles”) to allow for ‘hybrid’ shareholder meetings to be held where some attendees are based in a single physical location and others attend, participate and vote by electronic means. Certain consequential changes to the Articles in order to facilitate this amendment will also be made. While the Board does not currently intend to hold meetings in this way, the resolution would allow the Board to hold hybrid meetings when in the best interests of shareholder safety, for example, in the event of a continuing lockdown. The amendments will not prevent the Company from holding physical meetings and the Board’s intention is always to hold a physical general meeting when safe and practical to do so.

In addition, it is proposed to amend the Articles to increase the aggregate fees of the Directors from £150,000 to £200,000 in order to allow for headroom for additional directors and to remain in line with market practice. Further information on the proposed fee increase is set out on page 45 and a summary of all of the changes being introduced can be found in the Appendix section on page 75 to 78.

The Board has considered all the resolutions proposed in the Notice of the AGM and believe they are in the best interests of shareholders and the Company as a whole. Accordingly, the Directors recommend that shareholders vote in favour of each resolution, as will the Directors in respect of their own shareholdings. To register your interest in attending, please contact us at investmenttrusts@invesco.com.

Shareholder Web Call

We also note that online meetings have been very popular during Covid-19 restrictions and so for those shareholders unable to travel to the AGM and also for potential investors, we will be holding an online presentation on 2 September 2021 at 11.30am. A presentation will be made by Ian Hargreaves followed by a question and answer session.

Shareholders can submit questions during the presentation or in advance by writing to the Company Secretary at the address given on page 80 or by email to investmenttrusts@invesco.com. Details on how to register for the event are available via the Company’s website www.invesco.co.uk/invescoasia

Outlook

After a much stronger year than was expected this time last year it is wise to expect some consolidation in Asian markets. You will read in the Manager’s Report how Ian is less bullish. Headwinds include valuations in aggregate being more expensive, continuing local and international political risk, rising US bond yields and the strong recent outperformance of popular technology stocks. Tailwinds include a recovering global economy, a clearer roadmap out of the Covid-19 pandemic, a hugely supportive liquidity backdrop, an increase in inflation (so long as it doesn’t go too far) and a more pragmatic approach to China from President Biden.

Despite the higher starting point, Asia presently displays strong economic and corporate fundamentals. The global pressure to improve ESG credentials will arguably make a bigger positive difference in Asia than in the rest of the world. Our Manager’s active approach focused on valuation, not value, should be exactly what is needed to outperform.

Update

From 30 April 2021 to 14 July 2021, the NAV has decreased by 4.0% and the benchmark index by 1.7%. The share price has decreased by 4.8%, meaning that the discount to NAV on a cum-income basis has moved from 8.2% to 9.0%.

Neil Rogan

Chairman

16 July 2021

Portfolio Manager’s Report

Portfolio Manager

Ian Hargreaves was promoted to Co-Head of the Asian & Emerging Markets Equities team in September 2018. Ian manages pan-Asian portfolios and covers the entire Asian region in his remit. He started his investment career with Invesco Asia Pacific in Hong Kong in 1994 as an investment analyst where he was responsible for coverage of Indonesia, South Korea and the Indian sub-continent, as well as managing several regional institutional client accounts. Ian returned to the UK to join Invesco’s Asian Equities team in 2005, working on the portfolio as part of the investment team. He was appointed as joint Portfolio Manager in 2011 and became the sole Portfolio Manager on 1 January 2015.

Q How has the company performed in the period under review?

A The Company’s net asset value increased by 56.4% (total return, in sterling terms) over the twelve

months to 30 April 2021, which compares to the benchmark, MSCI AC Asia ex Japan Index (total return, net of withholding tax, in sterling terms) return of 34.8%.

Markets have made a strong recovery from their March 2020 lows boosted by significant stimulus measures in developed markets and the reopening of economies across the world as Covid-19 lockdowns were lifted. More recently, there has been optimism surrounding the rollout of vaccination programmes and an ongoing economic recovery, although a new wave of Covid-19 cases in some Asian countries has seen markets pull back from record highs.

Against this backdrop the portfolio has significantly and consistently outperformed its benchmark index. This has been attributable to strong stock selection across a range of different sectors. Portfolio turnover has been higher than usual, which is as we would expect given market volatility and the opportunities that this has presented us with. Staying true to our investment process, means we have been actively taking profits from outperformers, as share prices move closer to our estimate of fair value. In turn, we have been taking advantage of the divergence in performance and valuation between different countries and sectors, with opportunities to add to selected cyclical businesses that have had scope for earnings to recover quickly as conditions normalise. We have been able to find what we consider to be deep discounts to fair value in these areas, with conviction levels supported by the strong balance sheets that some of these companies have.

Q Why have dividends doubled when income is down?

A The full year dividend of 15.10p, a 115.7% rise over the previous fiscal year, contrasts with the 21.3% decline in income generated by our Asian holdings this fiscal year. This reflects our commitment to the dividend enhancement policy announced in August last year, as well as our belief that the dividend cuts seen across Asian companies in a pandemic year are of a temporary nature. Although the dividend cuts were less severe in Asia compared to the UK and Europe, Asian banks were not immune to the forced curtailment on banking dividends by regulators. This was a global reaction to the pandemic and the uncertainty. Although many companies in Asia have solid balance sheets, some adopted a cautious approach by cutting dividends. With the recovery in economic activity and solid earnings across many sectors we would expect dividend payments to recover as well.

Q What have been the biggest contributors and detractors?

A The technology sector has continued to be a great source of positive performance, with semiconductor stocks enjoying a very strong year amidst a flurry of headlines about the global shortage of chips for manufacturers of everything from cars to mobile phones. Taiwanese memory chip designer MediaTek was the biggest single contributor to relative performance thanks to robust demand for its higher margin 5G chip and excitement over its new high-end, next generation microprocessor that helps process AI (artificial intelligence) tasks faster, using less power.

More recently, tech hardware companies such as ASUSTeK Computer and Delta Electronics have been key drivers. Delta Electronics has benefitted from its exposure to major industry trends (5G, automation, cloud and electric vehicles) that should support a recovery in margins and deliver more sustainable growth over the medium-term, while ASUSTeK Computer has seen strong demand for PCs and notebooks given the working/studying from home trend.

Chinese internet companies have contributed positively, particularly JD.com and NetEase as e-commerce and online gaming companies saw little disruption to their businesses and may have even benefitted from the stay-at-home trend. Both companies also enjoyed successful secondary listings in Hong Kong. Meanwhile, Chinese consumer-related companies have added value, as baijiu distiller Jiangsu Yanghe and fitted furniture manufacturer Suofeiya Home Collection (both A-shares) benefitted from a strong recovery in demand as lockdowns were lifted.

The market has also been willing to bid up stocks with exposure to the electric vehicle (EV) theme, supporting returns from the likes of Hyundai Motor, LG, Dongfeng Motor, Baidu, MINTH and Delta Electronics. These companies not only had improving fundamentals for their core businesses but were also reflecting little value for their EV exposure.

More economically sensitive holdings made an increasingly significant contribution in the second half of the period, with share prices of reopening and reflation plays lifted by the positive vaccine news in early-November. Indian and ASEAN financials made a strong recovery on evidence of an improvement in the macro outlook and an easing of asset quality concerns. Other cyclicals, such as steel maker POSCO, responded positively to improved profitability as the revival in demand ran ahead of the industry’s ability to supply. Recent moves by the Chinese government to target steel production as part of its carbon reduction policies have also increased the chance of a more durable recovery.

The portfolio also benefitted from the second bout of market rotation in 2021, triggered by President Biden’s US$1.9 trillion pandemic-relief bill, which strengthened expectations that a cyclical recovery in the US is underway. This saw a significant shift in inflation expectations and led to a sharp rise in US treasury yields, benefitting financials and other cyclical names such as Pacific Basin Shipping, which was well placed for the strong pickup in commodity demand.

Conversely, stock selection in the energy sector has detracted, with idiosyncratic reasons preventing CNOOC and Woodside Petroleum from recovering in line with the oil price. CNOOC, along with China Mobile, was impacted by the Trump administration’s attempt to block US investment in Chinese companies with military links. Meanwhile, Woodside has faced concerns that it may need to raise equity to fund its giant Scarborough liquefied natural gas (LNG) project, with an imminent change of CEO and the need to sell stakes in some of their other projects also clouding the outlook. CK Hutchison has also proved to be Covid-sensitive, with weaker earnings from its ports, retail and energy & infrastructure businesses. However, the business continues to be well managed, and as conditions normalise, we would expect the group to return to delivering good earnings growth and generating strong free cash flow.

Q How has gearing impacted performance and what is your strategy going forward?

A The advent of the pandemic caught us off guard with a geared portfolio and a cyclical bias. However, valuations quickly fell to low levels and this drove our decision to maintain the gearing of the trust. This proved to be the correct conclusion, amplifying the positive impact of other decisions made at the portfolio level. The use of gearing is a function of our valuation-led investment process. As can be seen in Chart 1 on the previous page, the valuation of the overall market has moved from a level meaningfully below its long-term historic average in terms of price-to-book (P/B), to one that it has struggled to maintain historically. Although the framework considers the current robust earnings growth momentum, valuations have reached levels that do not warrant gearing and we currently have a net cash position.

Q So you are more cautious?

A As we can see in Chart 1, despite the recent correction the valuation of the overall market is still high, and history tells us that future returns are likely to be lower as a result. However, it is important to recognise that there are several mitigating factors. Firstly, the composition of the market has gradually shifted over time towards more asset-light businesses. According to UBS, this explains 20% of the valuation re-rating since 2015. Secondly, there is currently an unusual divergence of valuation across the market (see Chart 2) with some sectors trading well above long term averages but others at or below long-run averages. The market broadly divides between those that have clearly benefitted from the pandemic and those that have seen a greater negative impact on profitability.

This divergence appears increasingly hard to justify and is a source of opportunity for the trust. We have seen extraordinary levels of fiscal and monetary policy support in developed markets, particularly the US. As rising vaccination rates allow more countries to “re-open”, it is reasonable to expect a period of better global economic growth, stronger than the anaemic growth that has characterised much of the post Global Financial Crisis period. This implies a broader earnings improvement across the market that we would expect to lead to a narrowing of the valuation discrepancies. There is some evidence in the last few months that this process has begun. 

Policymakers appear keen not to repeat the mistakes of the recent past by trying to withdraw support too early. However, once normality has returned, governments in developed markets will be forced to begin to chart a course back to policy orthodoxy, in our view. This is likely to be a riskier point for markets.

The issue of rising inflationary pressure has become increasingly paramount in market discourse. We have never seen an economic recovery from a pandemic like this. It remains unclear whether signs of inflationary pressure are due to temporary supply-side bottlenecks or more sustained mismatches between supply and demand. We feel that the best way to insure the portfolio against a more adverse inflation outcome is to avoid stocks whose current market valuations cannot be justified by their future cashflows even at current low interest rates. We believe that this is an environment that suits our investment process, with a laser focus on valuation, seeking to find out where the market has failed to price the recovery correctly.

Q How has portfolio positioning changed? 

A There have been a few distinct phases of activity worth highlighting. Firstly, we reduced exposure to financials, with the potential for asset quality deterioration and pressure on net interest margins. Financials have particularly leveraged business models, which made for a wide range of possible outcomes at a time when it was a hard to quantify the impact of Covid-19. However, we retained exposure to some companies with a decent level of core profitability and structural growth potential, such as Indian private banks and Chinese life insurers. Meanwhile, we reinvested into other cyclical businesses with strong balance sheets that were also trading at low valuations. These had less potential downside risk than financials but had the scope for earnings to recover quickly as conditions normalised. Examples of these include: Astra International, a conglomerate with a wide range of market leading auto-related businesses in Indonesia; and Yue Yuen Industrial, the world’s largest sports shoe manufacturer.

The next phase has been the gradual but marked reduction in the portfolio’s exposure to outperformers in the technology and internet sectors, as can be seen in charts 3 and 4 below. Stocks such as JD.com and MediaTek have been big beneficiaries of a new tech cycle with the launch of 5G networks, and changes in consumer behaviour, such as working from home and an increase in the trend towards online shopping. However, the strong gains seen in share prices over the period suggests their strong fundamentals and improved earnings prospects are being increasingly recognised. We continue to have significant exposure in this area, but in terms of active exposure this is more focused on tech hardware stocks such as Largan Precision, which we believe can maintain its market leading position in the smartphone cameras lens market as flagship phones continue to adopt higher spec cameras.

More recently, we have continued the process of taking profits from outperformers, selling some of our longest held stocks, Indian agrochemical manufacturer UPL (first purchased in May 2005) and Chinese internet search company Baidu (October 2011). We have also added to less economically sensitive stocks such as: Uni-President, a well-run Taiwanese food conglomerate trading at a low valuation despite a long history of delivering returns for minority shareholders; and MingYang Smart Energy, a Chinese manufacturer of generators for wind turbines, which should be well-positioned to take advantage of long-term wind installation targets in China. The recent underperformance of some Chinese internet stocks has also presented us with an interesting opportunity to add back exposure to the sector, which remains attractive given the strong fundamentals and structural growth potential of stocks like Tencent Music Entertainment, the leading Chinese music streaming service.

Q You’ve also added to real estate?

A Yes, we’ve added holdings in CK Asset and China Overseas Land & Investment (COLI), although this is still only a small part of the portfolio. The property sector has been significantly impacted by the pandemic, particularly commercial real estate, but conditions should start to improve as economies re-open. Low valuations and growth prospects far outweigh the risk of interest rates rising, in our view.

CK Asset is trading at a 50% discount to Net Asset Value, has been diversifying away from Hong Kong property (

For COLI, we think they stand to benefit given that the relative strength of their balance sheet. The Chinese authorities are tightening leverage controls on certain property developers with weak balance sheets. This should give COLI room to gain market share by acquiring land banks/projects with less competition from other developers. The shares have recovered nicely from their trough earlier this year, but still trade at a 4.5x price earnings multiple with a 6.5% dividend yield.

Q Aren’t rising yields a risk?

A Whilst a rising yield environment has historically been tough for Asian and emerging markets’ performance, unlike 2013, this time round we remain sanguine about the prospect. Firstly, the pick-up in the yields is reflective of growing expectations that a strong cyclical recovery is underway in the US, supported by President Biden’s fiscal stimulus plans. Concerns that this may lead to inflationary pressures in emerging markets are premature in our view. Stimulus measures may see some further increase in demand for goods manufactured in Asia, but the next leg of the recovery is much more likely to unleash pent up demand in service sectors such as leisure and hospitality, which have been most affected by social distancing.

Secondly, compared to when Asia countries last faced the prospect of tightening conditions in the ‘taper tantrum’ of 2013, Asian countries are generally much earlier in their economic cycles. Warning signs such as high credit growth and deteriorating external accounts are absent.

For example, the situation in Indonesia today is looking very different to 2013 when it ran a wide current account deficit. A weak domestic economy has reduced the requirement for external funding, while inflation remains subdued. The difference in private sector credit growth is particularly stark, running at 0% year-on-year compared to 25% in 2013. We feel market valuations reflect a far more pessimistic outlook than we think likely and have been adding exposure here.

Q What about the outlook in China?

A We expect China to remain a valuable source of stock-picking opportunities over the long-term, but think it is important to tread carefully given cyclical, structural, and geopolitical challenges.

Chinese equity markets were amongst the strongest in the world last year as the authorities succeeded in containing the pandemic and reopening the economy. Policymakers now appear to be taking a more prudent approach, and have started to tighten policy at the margin, offering a less positive outlook from a macro recovery perspective. However, we take it as a positive that China remains committed to pursuing a more ‘balanced growth’ trajectory, effectively smoothing the natural decline in economic growth by taking counter-cyclical measures. For example, it has used more targeted stimulus measure to support the economy during the pandemic and it has sought to tackle signs of overheating in the property market.

This offers an interesting parallel with 2009 (as illustrated in Chart 5 below) when it was China’s stimulus measures that drove the initial stage of the global economic recovery, rather than those from the developed world. It has lived with the consequences of the resulting debt build-up ever since. This has been a drag on earnings and valuations. It also means that China looks less risky in the medium term, when compared to other major developed countries that have pursued more aggressive policy stimulus. We have become more constructive about the Renminbi on that basis.

Geopolitical tensions are symptomatic of China’s regional and global importance. Central to this is the rivalry between the US and China that stretches across economic, political, and technological spheres. It is difficult to price accurately, but it is appropriate to apply a risk premium to account for the uncertainty. We expect the Biden administration to be very alert to any Chinese action that could affect US interests, with particular sensitivity over Hong Kong and Taiwan.

Technology lies at the core of US-China rivalry while efforts to tackle climate change will require cooperation between the two countries. Both dynamics are likely to drive innovation and lead to new investment opportunities over time. With complex forces at play, we believe there are likely to be significant market mis-pricings over time, which is where we can add the most value to the portfolio.

Q ESG is resolutely at the front of people’s minds. Why does it matter to you?

A Outside of the obvious societal implications, ESG is important to us because it matters to our clients and to the value of their investments.

As active, fundamental managers it is in our DNA to consider every key aspect of a company’s true worth, including material ESG considerations because we believe that the most sustainable way to make money is to buy companies for less than they are worth. Establishing the ‘right’ fair value of a company is therefore essential and this entails incorporating ESG aspects into our investment methodology.

We take a holistic approach where a company’s ESG credentials are scrutinised alongside traditional financial and qualitative aspects to derive a fair value. The concepts of ESG materiality (the impact of ESG factors on fair value) and ESG momentum (the potential for ESG improvement over time) are of particular importance. Both can influence a stock’s potential returns and our conviction levels in an investment.

As shareholders we actively engage with companies to enhance the value of our investments. We encourage companies to create sustainable value and mitigate risks in relation to their corporate activities. This can include prompting them to make better asset allocation decisions, instilling sustainable practices and policies, and providing better disclosure. This reinforces our fundamental belief that responsible investing demands a long-term view and that a stakeholder-centric culture of ownership and stewardship is at the heart of ESG integration.

Q How important is ESG in Asia?

A Corporate governance has always been a key consideration in our stock selection in Asia and emerging markets. Superior top line growth does not necessarily translate into profit growth and better returns if management/family owners’ interests are misaligned with ours, as minority shareholders. Understanding this risk and assessing the degree to which the market is discounting it in the share price is key to making good risk-adjusted investment decisions.

The quality of corporate governance practices is perceived differently across countries. You only have to look at how the cross-holding structures in Korean Chaebols contrast with the best-in-class independence of boards and audit committees in Australia to help explain some of the valuation discrepancies between these markets. It is important not only to appreciate these differences but also worth scrutinising the stock level to distinguish reality from perception.

For example, some of the largest contributors to our performance have come from Korea. Although we appreciated the higher risk caused by the cyclical nature of its economy and sub-optimal corporate governance, valuation levels more than compensated for this. The market has under appreciated the strength of these businesses and the emerging pressure on them to improve shareholders’ return. Thus, the market’s general tendency to extrapolate current and indiscriminate perceptions far into the future can lead to mis-pricing.

In our view, the complexity and inconsistency of data surrounding other aspects of ESG today – the environmental and social aspects – is an opportunity for those investors willing to look beyond perceptions and consensus.

Q How do you integrate other aspects of ESG?

A Society’s increasing focus on climate change, human rights and inequality – embodied by the wider ESG movement – will undoubtedly shape the corporate landscape for decades to come.

Shifts in government regulation and policies aimed at skewing incentive structures towards meeting these sustainability goals are already impacting the fundamentals and valuations of many industries and companies.

Using an ESG lens, our approach to determining the impact of ESG on a company’s fair value can be summarised as:

Identify red flags

Assess materiality

Quantify the effect of ESG on fair value

actively enhance a company’s ESG credentials (ESG momentum) through regular engagement and voting.

Measuring the fundamental impact of these trends on our investments requires a deep understanding of the businesses we invest in, as well as the ability to correctly incorporate material ESG information into our analysis.

In this context, Invesco’s proprietary ESG scoring system, ESGintel, is a valuable two-way platform we use to source ESG data, ratings, and research from multiple vendors globally – providing context by which to assess a company’s ESG credentials. It also helps to drive our engagement agenda. For example, companies which contribute negatively to the portfolio’s overall ESG standing, and/or increases its carbon footprint, require greater scrutiny. These form part of our priority list for engagement. Although not a target in itself, the carbon intensity1 of the portfolio is much lower at 129.09 (CO2 emission equivalent per US$ million of revenue) vs 218.85 for our benchmark index (as of 30 April 2021).

As a result of our focus on boosting our ESG resource over the last few years we are better placed to capture mis-pricings caused by the expanding range of ESG concerns - and address them with greater conviction.

(1) the definition of ‘Carbon intensity’ is calculated using data from ISS Climate solutions which covers 91% of the Company's assets excluding cash. Carbon intensity is calculated as weighted average of (scope 1+scope 2 emissions(CO2 equivalents)/USD million of revenue).

Q Can you provide a recent example of a company engagement?

A POSCO is one of our top 10 holdings in the Trust and although we consider it to be significantly undervalued, we recently engaged with the company to test our ESG evaluation of the company in the following areas of potential concern

below:

• Environment: carbon emissions intensity (scope 1, 2, 3); energy and water management

• Social: employee and contractor fatalities

• Governance: gender diversity; bribery controversies

As one of largest steel makers in the world, the company’s carbon emissions are high. It has laid out a clear path of carbon reduction with the aim of being carbon neutral by 2050. Although this is ESG positive, aligning with wider sustainability goals, our fundamental analysis incorporates the additional investment required to meet the challenge and assess ‘carbon pricing’. Without higher prices for “green steel”, profitability and therefore valuation would likely fall. In this case, the pathway to achieving its carbon neutral ambition is largely through hydrogen-based steelmaking.

On energy usage the company has made significant progress compared to five years ago, but has still some way to go. Encouragingly the water recycling rate is on a rising trend. In their words: “Recognizing water shortage as a critical global issue, POSCO strives to increase water recycling and develop alternative water sources with the goal of reducing water consumption and increasing co-prosperity with local communities. Considering that steel production uses a large amount of water, we have invested considerable efforts into the reuse of water consumed in the process of steelmaking. In particular, we procure a portion of our water intake from reclaimed water by reusing urban sewage water and desalinating seawater, thus contributing to conserving water resources on a national level.”

We looked into past social controversies in its supply chain which could have affected the well-being of local communities (i.e. resettlements) but the company appears to have taken appropriate action and mitigated the risk. It exited a project in India which was controversial at the time. It has also reiterated its commitment to "no deforestation, no peatland and no exploitation” in the management of its palm oil plantations in Indonesia, an immaterial part of the business but informative when it comes to its practices. These positive developments provided some reassurance about its policies.

The company has never had a woman on the board of directors. While not uncommon in Korea and some other emerging markets, practices at the company are changing. The percentage of female executives doubled in 2019 and we continue to press for further progress in our engagement with management. The company’s governance structure appears strong – an internal audit discovered the bribery controversy back in 2015 which led to the resignation of the Chairman. This highlights that such behaviour is not tolerated, and no incidents have come to light since.

Despite these ESG considerations (which have been the focus of our ESG engagement), the company is top quartile regionally and globally in its sector from an overall ESG perspective. In absolute terms, however, the company's line of business and its current impact on the environment demands greater scrutiny. POSCO serves a purpose to society by producing high quality steel efficiently but its ability to transition towards sustainable steelmaking whilst progressively mitigating its environmental impact requires monitoring as this appears to be underappreciated.

We believe the company is well set up to improve its ESG performance over time, for example by positioning the business to be “part of the solution” with their lithium carbonate investment as well as lithium battery materials. Our valuation estimates are conservative to account for the costs and challenges of transitioning towards cleaner steelmaking. Also, despite the upside potential, our lower position size reflects the mentioned reservations after integrating material ESG factors.

Q Reflecting on your report, what is your overall view looking ahead?

A We are less bullish than we were twelve months ago given higher market valuations, but we feel there are grounds for cautious optimism, with opportunities to take advantage of valuation discrepancies that exist between markets and sectors, which we feel are unjustifiable.

These are challenging times, but Asia remains a region with solid economic and corporate fundamentals. We continue to be impressed by the greater capital discipline being displayed by companies across the region, with increasingly strong balance sheets and improving free cash flow generation. The challenge has been how to better allocate that capital. Asian managements are gradually yielding to pressure from minority shareholders to pay better dividends. This is an important fundamental development at a time when dividend returns will likely form a larger component of equity returns.

Ian Hargreaves

Portfolio Manager

16 July 2021

Business Review

Purpose, Business Model and Strategy

Invesco Asia Trust plc is an investment company and its investment objective is set out below. The strategy the Board follows to achieve that objective is to set investment policy and risk guidelines, together with investment limits, and to monitor how they are applied. These are also set out below and have been approved by shareholders.

The Company’s purpose is to provide shareholders with long-term capital growth by investing in a diversified portfolio of Asian and Australasian companies. The business model the Company has adopted to achieve its investment objective has been to contract out investment management and administration to appropriate external service providers, which are overseen by the Board. The principal service provider is Invesco Fund Managers Limited, which throughout this report is referred to as ‘the Manager’. Invesco Asset Management Limited, an associate company of the Manager, manages the Company’s investments and acts as Company Secretary under delegated authority from the Manager.

The Manager provides company secretarial, marketing and general administration services including accounting and manages the portfolio in accordance with the Board’s strategy. Ian Hargreaves is the Portfolio Manager responsible for the day-to-day management of the portfolio.

The Company also has contractual arrangements with Link Asset Services to act as registrar and the Bank of New York Mellon (International) Limited (BNYMIL) as depositary and custodian.

Investment Objective

The Company’s objective is to provide long-term capital growth by investing in a diversified portfolio of Asian and Australasian companies. The Company aims to achieve growth in its net asset value (NAV) in excess of the Benchmark Index, the MSCI AC Asia ex Japan Index (total return, in sterling terms).

Investment Policy

Invesco Asia Trust plc invests primarily in the equity securities of companies listed on the stock markets of Asia (ex Japan) including Australasia. It may also invest in unquoted securities up to 10% of the value of the Company’s gross assets, and in warrants and options when it is considered the most economical means of achieving exposure to an asset.

The Company is actively managed and the Manager has broad discretion to invest the Company’s assets to achieve its investment objective. The Manager seeks to ensure that the portfolio is appropriately diversified having regard to individual stock weightings and the geographic and sector composition of the portfolio.

Investment Limits

The Board has prescribed limits on the investment policy, including:

– exposure to any one company may not exceed 10% of total assets;

– exposure to group-related companies may not exceed 15% of total assets;

– the Company may not invest more than 10% of total assets in collective investment funds;

– the Company may not invest more than 10% in aggregate in unquoted investments;

– the Company may invest in warrants and options up to a maximum of 10% of total assets. Apart from these and currency hedges, other derivative instruments are not permitted; and

– the Company may use borrowings up to 25% of net assets.

With the exception of borrowings in foreign currency, the Company does not normally hedge its currency positions but may do so if considered appropriate.

All the above limits are applied at the time of acquisition, except gearing which is monitored on a daily basis.

Borrowing and Debt

The Company’s borrowing policy is determined by the Board. The level of borrowing may be varied in accordance with the Portfolio Manager’s assessment of risk and reward, subject to the overall limit of 25% of net assets and the availability of suitable finance.

Performance and Key Performance Indicators

The Board reviews performance by reference to a number of Key Performance Indicators which include the following:

• the net asset value (NAV) and share price;

• peer group performance;

• discount;

• dividend; and

• ongoing charges ratio.

A chart showing the total return NAV and share price performance compared to the Company’s benchmark index can be found on page 5.

Peer group performance is monitored in relation to six investment trust companies in the Asia Pacific sector and five investment trusts in the Asia Pacific Equity Income sector that in the opinion of the Board form the 11 companies in the bespoke peer group of the Company. These are trusts that invest for growth and income in the Asia excluding Japan sector, as these most closely match the Company’s investment objective and capital structure. As at 30 April 2021, in total return NAV terms the Company was ranked 2nd over one year and 4th over three and 5th over five years (source: J.P. Morgan Cazenove).

The discount of the shares is monitored on a daily basis. During the year the shares traded at a discount to NAV in a range of 4.8% to 16.6% with an average discount of 10.7%. This is shown in the graph, on the next page, which plots the discount over the two years to 30 April 2021. At the year end the discount to the NAV stood at 8.2%.

The Board considers it desirable that the Company’s shares do not trade at a significant discount to NAV and believes that, in normal market conditions, the shares should trade at a price which on average represents a discount of less than 10% to NAV on a cum income basis. To enable the Board to take action to deal with any material overhang of shares in the market it seeks authority from shareholders annually to buy back shares. Shares may be repurchased when, in the opinion of the Board, the discount is wider than desired and shares are available in the market. The Board considers that the repurchase of shares at a discount will enhance net asset value for remaining shareholders and may also assist in addressing the imbalance between the supply of and demand for the Company’s shares and thereby reduce the scale and volatility of the discount at which the shares trade in relation to the underlying net asset value.

The ten year record for dividends can be found on page 5, and the ongoing charges ratio for the last two years on page 4. This year, the Board introduced the payment of two interim dividends, payable in November and April.

Results and Dividend

For the year ended 30 April 2021 the net asset value total return was +56.4% compared to the return on the benchmark index of +34.8%. The Portfolio Manager’s Report on pages 11 to 16 reviews the results.

As set out in the Company’s Half-Yearly Financial Report for the six months to 31 October 2020, the Board now aims to pay, in the absence of unforeseen circumstances, a regular six-monthly dividend equivalent to 2% of the Company’s NAV, calculated on the last business day of September and February. The dividends will be paid to shareholders in November and April. Dividends will be paid from a combination of the Company’s revenues, revenue reserves and capital reserves as required. So shareholders will be able to look forward to an annual dividend yield of approximately 4% of NAV. Shareholders should note that the new dividend policy of paying dividends calculated as a percentage of NAV means that dividends will fall if the NAV falls. The Company has paid two interim dividends in respect of the financial year; a first interim dividend of 6.70p per ordinary share was paid on 26 November 2020 to shareholders on the register on 6 November 2020. The second interim dividend of 8.40p per ordinary share was paid on 27 April 2021 to shareholders on the register on 6 April 2021. This gives a total distribution of approximately 4% of NAV over the year.

The Board’s dividend payment policy is for the Directors to declare two interim dividends in respect of each accounting year, with payments made in November and April. Whilst the two interim dividends are not subject to a resolution at the forthcoming AGM, a Resolution to approve the Company’s dividend payment policy will be put to shareholders at the AGM on 9 September 2021.

Financial Position and Borrowing

The Company’s balance sheet on page 58 shows the assets and liabilities at the year end. Details of the Company’s borrowing facility are shown in note 11 to the financial statements, with interest paid (finance costs) shown in note 5.

Outlook, including the Future of the Company

The main trends and factors likely to affect the future development, performance and position of the Company’s business can be found in the Portfolio Manager’s Report of this Strategic Report. Further details of the principal risks affecting the Company are set out in the section: ‘Principal Risks and Uncertainties’ on pages 22 and 23.

Investment Process

At the core of the Manager’s philosophy is a belief in active investment management. Fundamental principles drive an active investment approach, which aims to deliver attractive total returns over the long term. The investment process emphasises pragmatism and flexibility, active management, a focus on valuation and the combination of top-down and bottom-up fundamental analysis. Bottom-up analysis forms the basis of the investment process. It is the key driver of stock selection and is expected to be the main contributor to alpha generation within the portfolio. Portfolio construction at sector level is largely determined by this bottom-up process but is also influenced by top-down macro economic views.

Research provides a detailed understanding of a company’s key historical and future business drivers, such as demand for its products, pricing power, market share trends, cash flow and management strategy. This allows the Manager to form an opinion on a company’s competitive position, its strategic advantages/disadvantages and the quality of its management. Each member of the portfolio management team travels to the region between three and four times per year and therefore the team has contact with several hundred companies during each year. The Manager will also use valuation models selectively in order to understand the assumptions that brokers/analysts have incorporated into their valuation conclusions and as a structure into which the Manager can input its own scenarios.

Risk management is an integral part of the investment management process. Core to the process is that risks taken are not incidental but are understood and taken with conviction. The Manager controls stock-specific risk effectively by ensuring that the portfolio is appropriately diversified.

Also, in-depth and constant fundamental analysis of the portfolio’s holdings provides the Manager with a thorough understanding of the individual stock risk taken. The Manager’s internal Performance & Risk Team, an independent team, ensures that the Manager adheres to the portfolio’s investment objectives, guidelines and parameters. There is also a culture of challenge and debate within the portfolio management team regarding portfolio construction and risk.

Internal Control and Risk Management

The Directors have overall responsibility for the Company’s system of internal controls and are responsible for reviewing the effectiveness of these controls. This includes safeguarding of the Company’s assets. The following sets out how the Directors have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.

The Audit Committee (the ‘Committee’), on behalf of the Board, has established an ongoing process for identifying and undertaking a robust assessment of the risks and emerging risks to which the Company is exposed by reference to a risk control summary, which maps the risks, mitigating controls in place, and monitoring and reporting of relevant information to it.

As part of the process, the Committee has identified four risk categories: strategic; investment management; third party service providers; and regulation and corporate governance. An explanation of these categories follows.

Strategic Risk

The Board sets the strategy including objectives of the Company and how these should be achieved. The Board assesses the performance of the Company in the context of the market and macro issues, and gives direction, while monitoring the Manager and other third parties for the actions they take on behalf of the Company.

Investment Management Risk

Investment management covers management of the portfolio together with cash management, gearing and hedging i.e. the items which the Portfolio Manager has control of, and which generate the Company’s performance.

Third Party Service Providers Risk

The Company has no employees and its Directors are appointed on a non-executive basis. The Company is reliant on third party service providers (TPP) for its executive functions. The Company’s most significant TPP is the Manager – to which portfolio management, company secretarial and administrative services are delegated. Other significant TPPs are the broker, depositary, custodian, registrar and auditor.

Regulation and Corporate Governance Risk

The Company is required to comply with many regulations including the provisions of the Companies Act 2006, the UK Listing Rules, the Alternative Investment Fund Managers Directive, the Market Abuse Regulation, the FCA’s Disclosure Guidance and Transparency Rules, tax regulation as an investment trust, the UK Corporate Governance Code and Accounting Standards.

The resultant ratings of the mitigated risks, in the form of a risk control matrix, enable the Directors to concentrate on those risks that are most significant and also forms the basis of the list of principal risks and uncertainties.

The Company’s oversight and its control environment is based on the Company’s relationship with its third party service providers, all of which have clearly defined lines of responsibility, delegated authority, and control procedures and systems. The Company uses the three lines of defence model, which is also embedded into the Manager’s risk management systems.

The effectiveness of the Company’s internal control and risk management system is reviewed at least annually by the Committee. The Committee has received satisfactory reports on the operations and systems of internal control of the Manager, custodian and registrar from the Manager’s Compliance and Internal Audit representatives. Reports on the Manager encompassed all the areas the Manager is responsible for: investment management, company secretarial and general administration. The Committee also received a comprehensive, and satisfactory, report from the depositary at the year end Committee meeting.

Due diligence is undertaken before any contracts are entered into with any third party service provider. The Manager regularly reviews, against agreed service standards, the performance of all third party providers through formal and informal meetings, and by reference to third party independently audited service organisation control reports. The results of the Manager’s reviews are reported to and reviewed by the Committee. These various reports did not identify any significant failings or weaknesses during the year and up to the date of this annual financial report. If any had been identified, the required remedial action would have been taken. In particular the Board formally reviews the performance of the Manager annually and informally at every Board meeting. No significant failings or weaknesses occurred throughout the year ended 30 April 2021 and up to the date of this annual financial report.

Reporting to the Board at each board meeting comprises, but is not limited to: financial reports, including any hedging and gearing; performance against the benchmark and the Company’s peer group; the Portfolio Manager’s review, including of the market, the portfolio, transactions and prospects; revenue forecasts; and investment monitoring against investment guidelines. The Portfolio Manager is permitted discretion within these guidelines, which are set by the Board. Compliance with the guidelines is monitored daily. Any proposed variation to these guidelines is referred to the Board.

Principal and Emerging Risks and Uncertainties

The Board has carried out a robust assessment of the principal and emerging risks facing the Company. These include those that would threaten its business model, future performance, solvency and liquidity. The principal and emerging risks that follow are those identified by the Board after consideration of mitigating factors.

The Board, with the assistance of the Manager, has carried out a robust assessment of the emerging risks facing the Company. In carrying out this assessment, we have considered geopolitical risks, as well as evolving cyber threats and the global pandemic as those that would threaten its business model, future performance, solvency and liquidity. These risks also form part of the principal risks identified and the mitigating action is detailed above.

Viability Statement

The Company is a collective investment vehicle rather than a commercial business venture and is designed and managed for long term investment. The Company’s investment objective clearly sets out the long-term nature of the returns from the portfolio and this is the view taken by both the Directors and the Portfolio Manager in the running of the portfolio. The Company is required by its Articles to have a vote on its future every three years, the next vote being at the Annual General Meeting in 2022. The Directors remain confident in the Company’s Investment Case and Corporate Proposition, as detailed on pages 7 and 8, to deliver against the Company’s investment objectives. On this basis and notwithstanding the continuation vote in 2022, the Directors consider that ‘long term’ for the purpose of this viability statement is three years, albeit that the life of the Company is not intended to be limited to this period.

In their assessment of the Company’s viability, the Directors have performed a robust assessment of the emerging and principal risks. The Directors considered the risks to which it is exposed, as set out on pages 22 and 23, together with mitigating factors. Their assessment considered these risks, as well as the Company’s investment objective, investment policy and strategy, the investment capabilities of the Manager and the business model of the Company, which has withstood several major market downcycles since the Company’s inception in 1995. Their assessment also covered the current outlook for the Asian economies and equity markets, especially so during the Covid-19 disruption since March 2020; demand for and buybacks of the Company’s shares; the Company’s borrowing structure and level of gearing; the liquidity of the portfolio; and the Company’s future income and annual operating costs, including stressed scenario testing for both income and loan covenants. Although the current outlook for Asian markets is challenging, the Directors and the Manager are cautiously optimistic that Asia remains a region with sound economic and corporate fundamentals. Lastly, whilst past performance may not be indicative of performance in the future, the sustainability of the Company can be demonstrated to date by there having been no material change in the Company’s investment objective since its launch in 1995.

The Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for the three year period from the signing of the balance sheet.

Duty to Promote the Success of the Company (s.172)

In accordance with the Companies (Miscellaneous Reporting) Regulations 2018, the below details how the Directors have discharged their duties under section 172 of the Companies Act 2006 during the year under review. The Directors have a statutory duty to promote the success of the Company, whilst also having regard to certain broader matters, including the need to engage with employees, suppliers, customers and others, and to have regard to their interests. However, the Company has no employees and no customers in the traditional sense. In accordance with the Company’s nature as an investment trust the Board’s principal concern has been, and continues to be, the interests of the Company’s shareholders taken as a whole. In doing so, it has due regard to the impact of its actions on shareholders and the wider community. The Board has a responsible governance culture and has due regard for broader matters so far as they apply. A formal schedule of matters reserved for decision by the Board details the responsibilities of the Board. The main responsibilities include: setting the Company’s objectives, policies and standards; ensuring that the Company’s obligations to shareholders and others are understood and complied with; approving accounting policies and dividend policy; managing the capital structure; setting long-term objectives and strategy; assessing risk; reviewing investment performance; approving loans and borrowing; and controlling risks. The Schedule of Matters Reserved for the Board and the Terms of Reference for its Committees are reviewed at least annually and are published on the Company’s web page. 

The Board engages with the Manager at every Board meeting and receives updates from the Portfolio Managers on a regular basis outside of these meetings. The Management Engagement Committee reviews its relationships with the Manager and other third party service providers at least annually. The Manager holds regular service review meetings with the Company’s Registrar, Depositary, Broker, Fund Accountant and Custodian; and reviews their performance against various service level agreements. Summaries of these reviews are presented to the Board on a regular basis and the Manager acts on feedback as appropriate.

At every Board meeting the Directors receive an investor relations update from the Manager, which details any significant changes in the Company’s shareholder register, shareholder feedback, as well as notifications of any publications or press articles.

Some of the key discussions and decisions the Board made during the year were:

• To introduce a new enhanced dividend policy targeting a yield of approximately 4% of NAV;

• To introduce a performance conditional tender offer for up to 25% of the Company's issued share capital at a discount of 2% to the prevailing NAV per share in the event that the Company’s comparator index, the MSCI AC Asia ex Japan Index by 0.5% per annum over the five years on a cumulative basis.

• To manage the discount as far as possible in the best interests of all shareholders.

The Company communicates with shareholders at least twice a year providing information about shareholder meetings, dividend payments and financial results. The Company’s page on the Manager’s website provides all shareholder information and regularly hosts video presentations (vlogs) and articles by the Portfolio Manager and the wider Asian Equities team. The Company holds its Annual General Meeting in London; this provides shareholders with the opportunity to listen to a presentation by the Portfolio Manager and meet with Directors and representatives of the Manager. Furthermore, the Manager provides a schedule of regional meetings with institutional investors and analysts to gather the views and thoughts of institutional investors. This year’s AGM is on 9 September 2021 and shareholders are encouraged to attend the AGM.

Modern Slavery

As an investment vehicle the Company does not provide goods or services in the normal course of business, and does not have customers or employees. Accordingly, the Directors consider that the Company is not within the scope of the UK Modern Slavery Act 2015.

Board Diversity

The Board takes into account many factors, including the balance of skills, knowledge, diversity (including gender) and experience, amongst other factors when reviewing its composition and appointing new directors. The Board has considered the recommendations of the Davies and Hampton-Alexander review as well as the Parker review. Diversity will be considered with new appointments. The Board comprises four non-executive directors, two of whom are female, thereby constituting 50% female representation. There are no set targets in respect of diversity, including gender. However, diversity forms part of both the Nominations Committee and main Board’s deliberations when considering new appointments. The Company’s success depends on suitably qualified candidates who are willing, and have the time, to be a director of the Company. Summary biographical details of the Directors are set out on page 33. The Company has no employees.

Environment, Social and Governance (ESG) Matters

As an investment company with no employees, property or activities outside investment, environmental policy has limited direct application. In relation to the portfolio, the Company has delegated the management of the Company’s investments to the Manager, who has an ESG Guiding Framework which sets out a number of principles that are intended to be considered in the context of its responsibility to manage investments in the financial interests of shareholders.

The Manager is committed to being a responsible investor and applies, and is a signatory to, the United Nations Principles for Responsible Investment (‘PRI’), which demonstrates its extensive efforts in terms of ESG integration, active ownership, investor collaboration and transparency. The Manager also achieved a global ‘A+’ rating for its overall approach to responsible investment for the fourth consecutive year since 2018 as well as achieving an ‘A’ or ‘A+’ across all categories in the 2020 assessment period from PRI for Strategy and Governance. In addition, the Manager is an active member of the UK Sustainable Investment and Finance Association as well as a supporter of the Task Force for Climate Related Financial Disclosure (TCFD) since 2019. The Manager has published its inaugural Climate Change report in line with the TCFD in July 2020. Although TCFD does not apply directly for the Company at present, the Board confirms that it will comply with all reporting regulations as they are implemented. The Manager has also voluntarily complied with the Sustainable Finance Disclosure Regulation (SFDR) which came into effect within the European Union on 10 March 2021 and introduces a number of sustainability-related disclosure requirements for financial market participants.

Regarding stewardship, the Board considers that the Company has a responsibility as a shareholder towards ensuring that high standards of corporate governance are maintained in the companies in which it invests. To achieve this, the Board does not seek to intervene in daily management decisions, but aims to support high standards of governance and, where necessary, will take the initiative to ensure those standards are met. The principal means of putting shareholder responsibility into practice is through the exercise of voting rights. The Company’s voting rights are exercised on an informed and independent basis. The Company’s stewardship functions have been delegated to the Manager, which has adopted a clear and considered policy towards its responsibility as a shareholder on behalf of the Company. As part of this policy, the Manager takes steps to satisfy itself about the extent to which the companies in which it invests look after shareholders’ value and comply with local recommendations and practices, such as the UK Corporate Governance Code. Further details are shown in the Manager’ Statement on pages 11 to 16.

Insight into Invesco’s ESG Framework

The Henley based Invesco Asia & Emerging Markets equities team, of which the Portfolio Manager is a part, incorporates ESG considerations in its investment process as part of the evaluation of new primary and secondary market opportunities, with identified ESG concerns feeding into the final investment decision and assessment of fair value. The Manager’s proprietary approach to integrating ESG can be described by (1) illustrating the relationship between share prices and what they consider to be the company’s ‘right’ fair value and (2) by providing examples of how ESG is quantified before making investment decisions. Finally, active ownership means engaging with companies to enhance client outcomes (3).

(1) Establishing the ‘right’ fair value

The chart below illustrates the relationship between share prices and fair value – with the gap between the two representing the potential mis-pricing.

The team typically make investments when a company’s shares are trading at a significant discount to their estimate of fair value (near the green dots in the chart). Typically, they would expect the share price to revert towards fair value within a 3-5-year period (near the red dots), at which point, they would sell or have sold the shares for better opportunities elsewhere.

In other words, the team buy when the shares are expected to return in excess of 10% p.a. (slope from green dots to red dots (i.e. fair value)) and sell when a stock offers at best only mid-single digit returns p.a. (represented by the slope of the fair value band), similar to what the wider market has historically achieved. Whilst schematised, it’s conceptually useful.

The team point to four cases in this chart (represented by the numbered squares) which highlight the merits of integrating material ESG information to establish the ‘right’ fair value estimate. The team expect to make better investment decisions and with greater conviction if they:

1 Establish that ESG issues are truly overly discounted - to avoid missing out on opportunities (for example, steel manufacturer POSCO – further described in the Manager’s Q&A section on page 15 appeared significantly undervalued but toxic emissions are a material ESG issue for this sector, as are labour issues. The company’s labour policies and pathway to carbon neutrality using hydrogen, reaffirmed during the team’s engagement with the company, provided confidence that management were addressing the ESG concerns and mitigating the risks)

2 Account for ESG credentials which lead to better business prospects – to avoid selling too early (for example, the market appeared to have been slow to appreciate Hyundai Motor’s significant advancements and growth prospects in electric vehicles compared to pure electric vehicle plays; and the market appeared to be overlooking the potential for companies like Ming Yang Smart Energy, a Chinese wind turbine company, due to a regulatory overhang on subsidies. The team see better business growth prospects with the sector playing a part in China’s carbon neutrality pledge)

3 Appreciate the true materiality of a company’s ESG issues or credentials – to avoid overpaying (for example, China Resources Power’s apparent undervaluation no longer transpired according to the team’s analysis after accounting for its ESG issues around coal and corporate governance – see details in next section)

4 Actively exploit our ability to engage with companies on ESG issues – to improve their ESG credentials (i.e. ESG momentum) (for example, the team’s engagement with UPL, an Indian agrochemical company, led to greater ESG disclosure which helped dispel incorrect perceptions about the business, which was then rewarded by the market; and the team’s active engagement in promoting better asset allocation at another Indian company called Mahindra & Mahindra was beneficial – see details in next section)

Through these cases and examples, the Manager is demonstrating the benefits of actively integrating ESG aspects to better assess the true financial opportunity alongside the sustainability outcome. Client outcomes are greatly improved if negative exclusions (e.g. coal-related company), positive inclusions (e.g. EV-related company), and impact investments (defined as investments intended to generate a positive social or environmental impact – e.g. wind turbines company) are active decisions supported by a valuation framework.

The team’s primary goal is to outperform the market by investing in companies where the fundamentals are under appreciated by the market. This integrated investment approach allows them to reduce risk by correctly discounting the value of companies with negative ESG characteristics while appreciating the benefits of positive ESG momentum in their estimates. Promoting positive change through engagement is increasingly driving positive sustainability outcomes.

(2) How it works in practice: ESG is quantified prior to making investment decisions

Firstly, the team evaluate companies based on the total returns they can generate over their 3-5-year investment horizon (preferably >10% p.a.) and use their own fundamental analysis to estimate the three components of total returns, namely:

• Future business growth (expressed as EPS growth below)

• The fair valuation multiple (leading to a projected re-rating or de-rating)

• Future dividends expressed as a yield

To some degree, all businesses have ESG issues to contend with but not all will be material enough to affect the team’s bottom-up estimates. In some cases, areas of concern or opportunity can be singled out and a discount or premium to estimates can be applied to account for the materiality. ESG issues are rarely static or binary and often involve trade-offs that constantly shift, so adopting a flexible, dynamic framework that’s based on judgement rather than solely on external ratings is considered hugely beneficial.

For example, a steel producer aligned to sustainability goals may warrant a higher valuation multiple relative to its sector peers, but one’s fundamental analysis should also account for the potentially higher costs involved (i.e. water recycling, etc) and investment required (i.e. hydrogen-based capex) to meet that challenge.

The team amalgamate all their fundamental work into a proprietary company shortlist as shown below. It ranks the hundred or so candidate companies by total returns, highlighting the three components of returns mentioned previously. The dynamic framework means that a stock’s attractiveness is continuously reassessed and ranked as share prices and fundamentals change. The team will look to drop stocks that no longer meet their total return threshold. In some cases, this may be caused by changing views about a company’s ESG credentials – considerable time and effort is spent generating potential new ideas to replace these. The impact of ESG is explicitly illustrated in this version.

The relatively poor ESG credentials of stock A (China Resources Power) compared to that of stock B (Mahindra & Mahindra) has affected their relative attractiveness after adjustment.

The ESG analysis on Stock A led to a reduction in the fair PE to account for the company‘s “stranded” assets risk (i.e. power company with exposure to coal) and corporate governance risk relating to dividend policy uncertainty. The company’s investments in renewables and its desire to transition was an offsetting positive which drove a mid-single digit annual growth outlook according to their analysis. However, the stock no longer met their total return hurdle after adjusting for these ESG credentials (3-year CAGR dropped to 9% from 15%).

In contrast, Stock B was expected to deliver a 3-year CAGR of 15%. This reflected the potential for better capital allocation decisions with the team actively engaging with the company. Their analysis suggested that the company could deliver better business growth as well as attract a higher valuation than previously estimated to reflect a more positive perception of the business and management quality. Incorporating ESG in this way has helped the team make better investment decisions.

One of the major advantages of this framework is that it allows the team to compare stocks in different sectors, geographies, themes, and with different ESG credentials as well as allowing team members to challenge the assumptions made. 

Investment decisions are ultimately based on judgement. Once the fair value estimate has been established incorporating ESG considerations, the team’s conviction levels in those estimates and other considerations such as liquidity, downside protection and portfolio construction, combine to form a holistic view of an investment opportunity.

(3) Monitoring and engagement

Along with the day-to-day integration of ESG as part of the team’s fundamental analysis, ESG information is formally raised during semi-annual reviews with the ESG team. Stocks with poor overall ratings are flagged and undergo rigorous analysis to understand the underlying issues. Although the poor rating of certain stocks such as cement companies or steel producers does not come as a surprise to the investment team, an important part of the risk management process is to apply greater scrutiny to stocks which negatively affect the overall ESG rating of the portfolio. Issues raised by external rating providers need to be appropriately assessed. Incorporating their own views about flagged ESG issues is a key part of establishing a company’s fair value and helps to build conviction in ideas that go against consensus views.

The Strategic Report was approved by the Board of Directors on 16 July 2021.

Invesco Asset Management Limited

Corporate Company Secretary

Investments in Order of Valuation

AT 30 APRIL 2021

Ordinary shares unless stated otherwise

† The industry group is based on MSCI and Standard & Poor’s Global Industry Classification Standard.

UQ Unquoted investment.

ADR/ADS: American Depositary Receipts/Shares – are certificates that represent shares in the relevant stock and are issued by a US bank. They are denominated and pay dividends in US dollars.

H: H-Shares – shares issued by companies incorporated in the People’s Republic of China (PRC) and listed on the Hong Kong Stock Exchange.

R: Red Chip Holdings – holdings in companies incorporated outside the PRC, listed on the Hong Kong Stock Exchange, and controlled by PRC entities by way of direct or indirect shareholding and/or representation on the board.

A: A-shares – shares that are denominated in Renminbi and traded on the Shanghai and Shenzhen stock exchanges.

F: F-Shares – shares issued by companies incorporated in Thailand that are available to foreign investors only. Thai laws have imposed restrictions on foreign ownership of Thai companies so there is a pre-determined limit of these shares. Voting rights are retained with these shares.

Classification of Investments by Country/Sector

AT 30 APRIL

Statement of Directors’ Responsibilities

IN RESPECT OF THE PREPARATION OF THE ANNUAL FINANCIAL REPORT

The Directors are responsible for preparing the annual financial report and financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period.

In preparing these financial statements, the Directors are required to:

– select suitable accounting policies and then apply them consistently;

– make judgements and estimates that are reasonable and prudent;

– state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

– assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

– use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website, which is maintained by the Company’s Manager. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility Statement of the Directors in Respect of the Annual Financial Report

We confirm that to the best of our knowledge:

– the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

– the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.

Signed on behalf of the Board of Directors

Neil Rogan

Chairman

16 July 2021

Income Statement

FOR THE YEAR ENDED 30 APRIL

The total column of this statement represents the Company’s profit and loss account, prepared in accordance with UK Accounting Standards. The return on ordinary activities after taxation is the total comprehensive income and therefore no additional statement of other comprehensive income is presented. The supplementary revenue and capital columns are presented for information purposes in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies. All items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year.

The accompanying accounting policies and notes are an integral part of these financial statements.

Statement of Changes in Equity

FOR THE YEAR ENDED 30 APRIL

(1) These reserves form the distributable reserves of the Company and may be used to fund distributions by way of dividends.

The accompanying accounting policies and notes are an integral part of these financial statements.

Balance Sheet

AT 30 APRIL

The financial statements were approved and authorised for issue by the Board of Directors on 16 July 2021.

Signed on behalf of the Board of Directors

Neil Rogan

Chairman

The accompanying accounting policies and notes are an integral part of these financial statements.

Notes to the Financial Statements

1. Accounting Policies

Accounting policies describe the Company’s approach to recognising and measuring transactions during the year and the position of the Company at the year end.

A summary of the principal accounting policies, all of which have been consistently applied throughout this and the preceding year is set out below:

(a) Basis of Preparation

(i) Accounting Standards applied

The financial statements have been prepared in accordance with applicable United Kingdom Accounting Standards and applicable law (UK Generally Accepted Accounting Practice (‘UK GAAP’)), including FRS 102, and with the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts, issued by the Association of Investment Companies in April 2021 (‘SORP’). The financial statements are issued on a going concern basis.

The revised SORP issued in April 2021 is applicable for accounting periods beginning on or after 1 January 2021 and early adoption is encouraged. The Company has chosen to early adopt the revised SORP. The SORP has no substantive changes but has been updated to reflect changes to IFRS standards and regulatory requirements. No accounting policies or disclosures have changed as a result of the revised SORP.

As an investment fund the Company has the option, which it has taken, not to present a cash flow statement. A cash flow statement is not required when an investment fund meets the following conditions:

• substantially all investments are highly liquid;

• substantially all investments are carried at market value, and

• a statement of changes in equity is provided.

(ii) Going concern

The financial statements have been prepared on a going concern basis. The Company’s Articles of Association require that every three years the Directors propose an ordinary resolution to release them from the obligation to wind up the Company, or they must put forward proposals to wind up the Company. Shareholders voted to release the Directors from the obligation to wind up the Company at the 2019 AGM, and therefore the next resolution in respect of this will be at the AGM in 2022.

The Directors performed an assessment of the Company’s ability to meet its liabilities as they fall due. In performing this assessment, the Directors took into consideration the uncertain economic outlook in the wake of the Covid-19 pandemic including:

• the level of borrowings, cash balances and the diversified portfolio of readily realisable securities which can be used to meet short-term funding commitments;

• the net current asset position of the Company, after the deduction of drawn-down borrowings;

• the ability of the Company to meet all of its liabilities and ongoing expenses from its assets;

• revenue and operating cost forecasts for the forthcoming year;

• the ability of third-party service providers to continue to provide services; and

• potential downside scenarios including a fall in the valuation of the investment portfolio or levels of investment income.

Based on this assessment, the Directors are satisfied that the Company has adequate resources to continue in operational existence for at least twelve months after signing the balance sheet and the financial statements have therefore been prepared on a going concern basis.

(iii) Significant Accounting Estimates and Judgements

The preparation of the financial statements may require the Directors to make estimations where uncertainty exists. It also requires the Directors to make judgements, estimates and assumptions, in the process of applying the accounting policies. Except for the functional and presentation currency as noted below, there have been no other significant judgements, estimates or assumptions for the current or preceding year.

(b) Foreign Currency

(i) Functional and presentation currency

The Company’s investments are made in several currencies, however, the financial statements are presented in sterling, which is the Company’s functional and presentational currency. In arriving at this conclusion, the Directors considered that the Company’s shares are listed and traded on the London Stock Exchange, the shareholder base is predominantly in the United Kingdom and the Company pays dividends and expenses in sterling.

(ii) Transactions and balances

Transactions in foreign currency, whether of a revenue or capital nature, are translated to sterling at the rates of exchange ruling on the dates of such transactions. Foreign currency assets and liabilities are translated to sterling at the rates of exchange ruling at the balance sheet date. Any gains or losses, whether realised or unrealised, are taken to the capital reserve or to the revenue account, depending on whether the gain or loss is of a capital or revenue nature. All gains and losses are recognised in the income statement.

(c) Financial Instruments

The Company has chosen to apply the provisions of Sections 11 and 12 of FRS 102 in full in respect of the financial instruments, which is explained below.

(i) Recognition of financial assets and financial liabilities

The Company recognises financial assets and financial liabilities when the Company becomes a party to the contractual provisions of the instrument. The Company offsets financial assets and financial liabilities in the financial statements if the Company has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis.

(ii) Derecognition of financial assets

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire or it transfers the right to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in the transferred financial asset that is created or retained by the Company is recognised as an asset.

(iii) Derecognition of financial liabilities

The Company derecognises financial liabilities when its obligations are discharged, cancelled or expired.

(iv) Trade date accounting

Purchases and sales of financial assets are recognised on trade date, being the date on which the Company commits to purchase or sell the assets.

(v) Classification and measurement of financial assets and financial liabilities

Financial assets

The Company’s investments are held at fair value through profit or loss as the investments are managed and their performance evaluated on a fair value basis in accordance with documented investment strategy and this is also the basis on which information about the investments is provided internally to the Board. Financial assets held at fair value through profit or loss are initially recognised at fair value, which is taken to be their cost, with transaction costs expensed in the income statement, and are subsequently valued at fair value.

Fair value for investments that are actively traded in organised financial markets, is determined by reference to stock exchange quoted bid prices at the balance sheet date. For investments that are not actively traded and where active stock exchange quoted bid prices are not available, fair value is determined by reference to a variety of valuation techniques including last traded price, broker quotes and price modelling.

Financial liabilities

Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method.

(d) Cash and Cash Equivalents

Cash and cash equivalents may comprise short term deposits which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. Investments are regarded as cash equivalents if they meet all of the following criteria: highly liquid investments held in the Company’s base currency that are readily convertible to a known amount of cash, are subject to an insignificant risk of change in value and have a maturity of no more than three months.

(e) Income

All dividends are taken into account on the date investments are marked ex-dividend, and UK dividends are shown net of any associated tax credit. Where the Company elects to receive dividends in the form of additional shares rather than cash, the equivalent of the cash dividend is recognised as income in the revenue account and any excess in value of the shares received over the amount of the cash dividend is recognised in capital. Interest income and expenses are accounted for on an accruals basis. Other income from investments is accounted for on an accruals basis. Deposit interest receivable is accounted for on an accruals basis.

(f) Expenses and Finance Costs

Expenses are recognised on an accruals basis and finance costs are recognised using the effective interest method in the income statement.

The investment management fee and finance costs are allocated 75% to capital and 25% to revenue. This is in accordance with the Board’s expected long-term split of returns, in the form of capital gains and income respectively, from the portfolio.

Investment transaction costs are recognised in capital in the income statement. All other expenses are allocated to revenue in the income statement.

(g) Dividends

Dividends are not recognised in the accounts unless there is an obligation to pay at the balance sheet date. Proposed final dividends are recognised in the period in which they are either approved by or paid to shareholders.

(h) Taxation

The liability to corporation tax is based on net revenue for the period. The tax charge is allocated between the revenue and capital accounts on the marginal basis whereby revenue expenses are matched first against taxable income in the revenue account.

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax or a right to pay less tax in the future have occurred. Timing differences are differences between the Company’s taxable profits and its results as stated in the financial statements. Deferred taxation assets are recognised where, in the opinion of the Directors, it is more likely than not that these amounts will be realised in future periods.

A deferred tax asset has not been recognised in respect of surplus management expenses as the Company is unlikely to have sufficient future taxable revenue to offset against these.

2. Income

This note shows the income generated from the portfolio (investment assets) of the Company and income received from any other source.

Special dividends of £67,000 were recognised in capital during the year (2020: £86,000).

3. Investment Management Fee

This note shows the investment management fee due to the Manager which is calculated and paid quarterly.

Details of the investment management and secretarial agreement are given on page 34 in the Directors’ Report.

At 30 April 2021, £507,000 (2020: £352,000) was accrued in respect of the investment management fee.

4. Other Expenses

The other expenses, including those paid to Directors and the auditor, of the Company are presented below; those paid to the Directors and the auditor are separately identified.

(i) Directors’ fees authorised by the Articles of Association are £150,000 per annum. The Director's Remuneration Report provides further information on Directors’ fees.

(ii) Auditor’s fees include out of pocket expenses but excludes VAT. The VAT is included in other administration expenses.

(iii) Other administration expenses include:

£11,000 (2020: £12,000) of employer’s National Insurance payable, by the Company, on Directors’ remuneration. As at 30 April 2021 the amount outstanding in respect Directors’ remuneration was £9,000 (2020: £12,000) and the amount outstanding in respect of employer's National Insurance was £1,000 (2020: £1,000).

custodian transaction charges of £6,000 (2020: £2,000). These are charged to capital.

a separate fee paid to the Manager for secretarial and administrative services which is subject to annual adjustment in line with the UK Retail Price Index. During the year the Company paid £98,000 (2020: £97,000) for these services.

5. Finance Costs

Finance costs arise on any borrowing the Company has utilised in the year. The Company has a committed £20 million revolving credit facility (the ‘bank facility’) (see note 11 for further details).

6. Tax on Ordinary Activities

As an investment trust the Company pays no tax on capital gains. The Company suffers no tax on income arising on UK and certain overseas dividends. The Company’s tax charge arises solely from irrecoverable tax on overseas (generally non-EU) dividends. This note also clarifies the basis for the Company having no deferred tax liability.

(a) Current tax charge

The overseas tax charge consists of irrecoverable withholding tax.

(b) Reconciliation of current tax charge

Given the Company’s status as an investment trust, and the intention to continue meeting the conditions required to obtain the necessary approval in the foreseeable future, the Company has not provided any UK corporation tax on any realised or unrealised capital gains or losses arising on investments.

(c) Factors that may affect future tax changes

The Company has cumulative excess management expenses of £23,706,000 (2020: £21,169,000) that are available to offset future taxable revenue.

A deferred tax asset of £4,504,000 (2020: £4,022,000) at 19% (2020: 19%) has not been recognised in respect of these expenses since tax is recoverable only to the extent that the Company has sufficient future taxable revenue.

The UK Government announced on 3 March 2021 its intention to increase the UK rate of corporation tax to 25% from 19% from 1 April 2023. As this rate was not substantively enacted at the year end, deferred tax has been calculated based on the prevailing rate of 19%. Existing temporary differences on which deferred tax has been provided may unwind in periods subject to the 25% rate. The impact of the post balance sheet date change in tax rate, on the unrecognised deferred tax asset, is not expected to be material.

7. Return per Ordinary Share

Return per share is the amount of gain or loss generated for the financial year divided by the weighted average number of ordinary shares in issue.

8. Dividends on Ordinary Shares

Dividends represent a return of income to shareholders for investing in the Company’s shares. These are determined by the Directors and paid twice a year.

Set out below are the total dividends paid in respect of the financial year, which is the basis on which the requirements of Section 1158–1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £3,863,000 (2020 – £5,354,000).

9. Investments at Fair Value

The portfolio comprises investments which are predominantly listed and traded on regulated stock exchanges. The investments of the Company are registered in the name of the Company or in the name of nominees and held to the order of the Company.

Gains and losses are either:

• realised, usually arising when investments are sold; or

• unrealised, being the difference from cost on those investments still held at the year end.

The Company received £164,766,000 (2020: £74,810,000) from investments sold in the year. The book cost of these investments when they were purchased was £131,425,000 (2020: £66,182,000) realising a profit of £33,341,000 (2020: £8,628,000). These investments have been revalued over time and until they were sold any unrealised profits/losses were included in the fair value of the investments.

The transaction costs included in gains on investments amount to £111,000 (2020: £62,000) on purchases and £227,000 (2020: £130,000) for sales.

10. Debtors

Debtors are amounts which are due to the Company, such as monies due from brokers for investments sold, income which has been earned (accrued) but not yet received and any taxes that are recoverable.

11. Creditors: amounts falling due within one year

Creditors are amounts which must be paid by the Company and they are all due within 12 months of the balance sheet date.

The bank facility provides a specific amount of capital, up to £20 million, over a specified period of time (364 days). Unlike a term loan, the revolving nature of the facility allows the Company to drawdown, repay and re-draw loans.

The committed unsecured 364 day multi-currency revolving credit facility (the ‘bank facility’) with The Bank of New York Mellon, has an interest rate based on LIBOR plus a margin. Any undrawn amounts under the facility attract a commitment fee of 0.2% (2020: 0.2%). The facility covenants are based on the lower of 25% of net asset value and £20 million, renewable on 31 July 2021, and require total assets to not fall below £80 million. At the year end, the bank facility drawn down was £2,096,000 (2020: £10,354,000).

12. Share Capital

Share capital represents the total number of shares in issue. Any dividends declared will be paid on the shares in issue on the record date.

The Directors’ Report on page 35 sets out the share capital structure, restrictions and voting rights.

Share capital represents the total number of shares in issue, including treasury shares.

(a) Allotted, called-up and fully paid

(b) Share movements

During the year the Company has not bought back any shares into treasury (2020: 3,616,188 shares bought back into treasury).

Since the year end and to the date of this annual financial report, no shares have been bought back or re-issued.

(c) Winding-up provisions

The Directors are obliged to convene a General Meeting (‘GM’) to consider a special resolution to wind up the Company every third year from the date of the AGM at which the Directors were released from such obligation. At the AGM in 2019 the Directors were released from their obligation to convene an GM and a resolution to release the Directors from their obligation to convene an GM will be put to shareholders at the AGM in 2022.

13. Reserves

This note explains the different reserves attributable to shareholders. The aggregate of the reserves and share capital (see previous note) make up total shareholders’ funds.

The capital redemption reserve maintains the equity share capital arising from the buy-back and cancellation of shares and is non-distributable. The special reserve arose from the cancellation of the share premium account and is available as a distributable reserve to fund any future tender offers and share buybacks.

The capital reserve includes investment gains and losses, expenses allocated to capital and special dividends received that are classified as capital in nature. The revenue reserve reflects the income and expenses as shown in the revenue column of the Income Statement. The capital and revenue reserves are distributable by way of dividend. Dividends are first funded from available revenue reserves and then funded from capital reserves at the date of the dividend payment.

14. Net Asset Value

The Company’s total net assets (total assets less total liabilities) are often termed shareholders’ funds and are converted into net asset value per ordinary share by dividing by the number of shares in issue.

The net asset values attributable to each share in accordance with the Company's Articles are set out below.

There is no dilution in this or the prior year and therefore no diluted net asset value per ordinary share has been disclosed.

15. Financial Instruments

Financial instruments comprise the Company’s investment portfolio, derivative financial instruments (if the Company had any), as well as any cash, borrowings, debtors and creditors. This note sets out the risks arising from the Company’s financial instruments in terms of the Company’s exposure and sensitivity, and any mitigation that the Manager or Board can take.

Risk Management Policies and Procedures

The Company’s portfolio is managed in accordance with its investment objective, which is set out in the Strategic Report on page 19. The Strategic Report then proceeds to set out the Manager’s investment process and the Company’s internal control and risk management systems as well as the Company’s principal risks and uncertainties. Risk management is an integral part of the investment management process and this note expands on certain of those risks in relation to the Company’s financial instruments, including market risk.

The accounting policies in note 1 include criteria for the recognition and the basis of measurement applied for financial instruments. Note 1 also includes the basis on which income and expenses arising from financial assets and liabilities are recognised and measured. The Directors have delegated to the Manager the responsibility for the day-to-day investment activities of the Company as more fully described in the Strategic Report.

As an investment trust the Company invests in equities and other investments for the long-term so as to meet its investment objective and policies. In pursuing its investment objective, the Company is exposed to a variety of risks that could result in either a reduction in the Company’s net assets or a reduction of the profits available for dividends. The risks applicable to the Company and the policies the Company used to manage these are summarised below and have remained substantially unchanged for the two years under review.

15.1 Market Risk

Market risk arises from changes in the fair value or future cash flows of a financial instrument because of movements in market prices. Market risk comprises three types of risk: currency risk (15.1.1), interest rate risk (15.1.2) and other price risk (15.1.3).

The Company’s Manager assesses the Company’s exposure when making each investment decision, and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis. The Board meets at least quarterly to assess risk and review investment performance, as disclosed in the Board Responsibilities on page 41. Borrowing is used to enhance returns, however, this will also increase the Company’s exposure to market risk and volatility.

15.1.1 Currency Risk

As nearly all of the Company’s assets, liabilities and income are denominated in currencies other than sterling, movements in exchange rates will affect the sterling value of those items.

Management of the Currency Risk

The Manager monitors the Company’s exposure to foreign currencies on a daily basis and reports to the Board on a regular basis. With the exception of borrowings in foreign currency, the Company does not normally hedge its currency positions but may do so should the Portfolio Manager or the Board feel this was appropriate. Contracts are limited to currencies and amounts commensurate with the asset exposure.

Income denominated in foreign currencies is converted to sterling on receipt. The Company does not use financial instruments to mitigate the currency exposure in the period between the time that income is accrued and received.

Foreign Currency Exposure

The fair values of the Company’s monetary items that have currency exposure at 30 April are shown below. Where the Company’s investments (which are not monetary items) are priced in a foreign currency they have been included separately in the analysis so as to show the overall level of exposure.

Year ended 30 April 2021

The amounts shown are not representative of the exposure to risk during the year, because the levels of foreign currency exposure change significantly throughout the year.

Foreign Currency Sensitivity

The following table illustrates the sensitivity of the returns after taxation for the year with respect to the Company’s financial assets and liabilities.

If sterling had strengthened by the amounts shown in the second table below, the effect on the assets and liabilities held in non-sterling currency would have been as follows:

If sterling had weakened by the same amounts, the effect would have been the converse.

The following movements in the assumed exchange rates are used in the above sensitivity analysis:

These percentages have been determined based on the market volatility in exchange rates during the year. The sensitivity analysis is based on the Company’s foreign currency financial instruments held at each balance sheet date and takes account of forward foreign exchange contracts that offset the effects of changes in currency exchange rates. The effect of the strengthening or weakening of sterling against foreign currencies is calculated by reference to the volatility of exchange rates during the year using one standard deviation of currency fluctuations from the average exchange rate.

In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole since the level of foreign currency exposure varies.

15.1.2 Interest Rate Risk

The Company is exposed to interest rate risk through income receivable on cash deposits and interest payable on variable rate borrowings. When the Company has cash balances, they are held in variable rate bank accounts yielding rates of interest dependent on the base rate of the custodian, Bank of New York Mellon (International) Limited.

The Company has a credit facility (the ‘facility’) for which details and year end drawn down amounts are shown in note 11. The Company uses the facility when required at levels approved and monitored by the Board. At the maximum possible gearing of £20 million, the effect of a 1% increase/decrease in the interest rate would result in a decrease/increase to the Company’s total income of £200,000. At the year end, £2,096,000 of the bank facility was drawn down (2020: £10,354,000).

The Company also has available an uncommitted bank overdraft arrangement with the custodian for settlement purposes. At the year end there was no overdrawn amount (2020: £nil). Interest on the bank overdraft is payable at the custodian’s variable rate.

The Company’s portfolio is not directly exposed to interest rate risk.

15.1.3 Other Price Risk

Other price risks (i.e. changes in market prices other than those arising from interest rate risk or currency risk) may affect the value of the equity investments, but it is the business of the Manager to manage the portfolio to achieve the best possible return.

The Directors manage the market price risks inherent in the investment portfolio by meeting regularly to monitor on a formal basis the Manager’s compliance with the Company’s stated objectives and policies and to review investment performance.

The Company’s portfolio is the result of the Manager’s investment process and as a result is not wholly correlated with the Company’s benchmark or the markets in which the Company invests. The value of the portfolio will not move in line with the markets but will move as a result of the performance of the shares within the portfolio.

If the value of the portfolio rose or fell by 10% at the balance sheet date, the profit after tax for the year would increase or decrease by £27.9 million (2020: £19.6 million) respectively.

15.2 Liquidity Risk

This is the risk that the Company may encounter difficulty in meeting its obligations associated with financial liabilities i.e. when realising assets or raising finance to meet financial commitments.

A lack of liquidity in the portfolio may make it difficult for the Company to realise assets at or near their purported value in the event of a forced sale. This is minimised as the majority of the Company’s investments comprise a diversified portfolio of readily realisable securities which can be sold to meet funding commitments as necessary, cash held and the bank facility provides for additional funding flexibility. The financial liabilities of the Company at the balance sheet date are shown in note 11.

15.3 Credit Risk

Credit risk comprises the potential failure by counterparties to deliver securities which the Company has paid for, or to pay for securities which the Company has delivered; it includes, but is not limited to: lost principal and interest, disruption to cash flows or the failure to pay interest.

Credit risk is minimised by using:

(a) only approved counterparties, covering both brokers and deposit takers;

(b) a custodian that operates under BASEL III guidelines. The Board reviews the custodian’s annual, externally audited, service organisation controls report and the Manager’s management of the relationship with the custodian. Following the appointment of a depositary, assets held at the custodian are covered by the depositary’s restitution obligation, accordingly the risk of loss is remote; and

(c) the Invesco Liquidity Funds plc – US Dollar, a money market fund, which is rated AAAm by Standard & Poor’s and AAAmmf by Fitch.

Cash balances are limited to a maximum of 5% of net assets with the custodian, 2.5% of net assets with any other deposit taker and a maximum of 6% of net assets in the Invesco Liquidity Funds plc. These limits are at the discretion of the Board and are reviewed on a regular basis. As at the year end, the sterling equivalent of £4,584,000 (2020: £1,623,000) was held at the custodian, in addition a balance had been held in Invesco Liquidity Funds plc during the year and the balance was £nil at the year end (2020: £738,000).

16. Fair Value of Financial Assets and Financial Liabilities

‘Fair value’ in accounting terms is the amount at which an asset can be bought or sold in a transaction between willing parties, i.e. a market-based, independent measure of value. Under accounting standards there are three levels of fair value based on whether there is an active market (Level 1) or, if not, Levels 2 and 3 where other methods have been employed to establish a fair value. This note sets out the aggregate amount of the portfolio in each level, and why.

Financial assets and financial liabilities are either carried at their fair value (investments), or at a reasonable approximation of their fair value. The valuation techniques used by the Company are explained in the accounting policy note. FRS 102 sets out three fair value levels for the fair value for the hierarchy disclosures. Categorisation into a level is determined on the basis of the lowest level input that is significant to the fair value measurement of each relevant asset/liability.

The investments held by the Company at the year end are shown on pages 28 and 29. Except for one Level 3 investments described below, all of the Company’s investments at the year end were deemed to be Level 1 with fair values for all based on unadjusted quoted prices in active markets for identical assets.

Level 2 investments are investments for which inputs are other than quoted prices included within Level 1 that are observable (i.e. developed using market data). At the last year end there was one Level 2 investment in an Invesco Liquidity Funds – US Dollar money market fund, valued at £738,000. There have been investments in this fund during the year but had been redeemed prior to the financial year end.

Level 3 investments are investments for which inputs are unobservable (i.e. for which market data is unavailable). Lime Co. was the only Level 3 investment in the portfolio at the year end and was valued at £103,000 (2020: one investment: Lime Co. valued at £123,000).

17. Capital Management

This note is designed to set out the Company’s objectives, policies and processes for managing its capital. This capital being funded by monies invested in the Company by shareholders (both initial investment and retained amount) and any borrowings by the Company.

The Company’s total capital employed at 30 April 2021 was £283,348,000 (2020: £197,302,000) comprising borrowings of £2,096,000 (2020: £10,354,000) and equity share capital and other reserves of £281,252,000 (2020: £186,948,000).

The Company’s total capital employed is managed to achieve the Company’s investment objective and investment policy as set out on page 19. Borrowings may be used to provide gearing up to the lower of £20 million or 25% of net asset value. The Company’s policies and processes for managing capital were unchanged throughout the year and the preceding year.

The main risks to the Company’s investments are shown in the Directors’ Report under the ‘Principal Risks and Uncertainties’ section on pages 22 and 23. These also explain that the Company is able to gear and that gearing will amplify the effect on equity of changes in the value of the portfolio.

The Board can also manage the capital structure directly since it has taken the powers, which it is seeking to renew, to issue and buy-back shares and it also determines dividend payments.

The Company is subject to externally imposed capital requirements with respect to the obligation and ability to pay dividends by section 1158 Corporation Tax Act 2010 and by the Companies Act 2006, respectively, and with respect to the availability of the bank facility, by the terms imposed by the lender, details of which are given in note 11. The Board regularly monitors, and the Company has complied with, these externally imposed capital requirements.

18. Contingencies, Guarantees and Financial Commitments

Any liabilities the Company is committed to honour, and which are dependent on future circumstances or events occurring, would be disclosed in this note if any existed.

There were no contingencies, guarantees or other financial commitments of the Company as at 30 April 2021 (2020: nil).

19. Related Party Transactions and Transactions with the Manager

A related party is a company or individual who has direct or indirect control or who has significant influence over the Company. Under accounting standards, the Manager is not a related party.

Under UK GAAP, the Company has identified the Directors and their dependents as related parties. The Directors’ remuneration and interests have been disclosed on page 46 with additional disclosure in note 4. No other related parties have been identified.

Details of the Manager’s services and fees are disclosed in the Director’s Report on page 34, note 3 and note 4(iii) to the financial statements.

20. Post Balance Sheet Events

Any significant events that occurred after the balance sheet date but before the signing of the balance sheet will be shown here.

There are no significant events after the end of the reporting period requiring disclosure.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 April 2021 or 2020. The financial information for 2020 is derived from the statutory accounts for 2020 which have been delivered to the registrar of companies. The auditor has reported on the 2020 accounts; their report was (i) unqualified (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2021 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the registrar of companies in due course.

The Audited Annual Financial Report will be posted to shareholders shortly. Copies may be obtained during normal business hours from the offices of Invesco, 43-45 Portman Square, London W1H 6LY. A copy of the Annual Financial Report will be available from Invesco on the following website: www.invesco.co.uk/invescoasia in due course.

The Annual General Meeting of the Company will be held at 12.00 noon on 9 September 2021 at 43-45 Portman Square, London, W1H 6LY.

By order of the Board

Invesco Asset Management Limited

Company Secretary

16 July 2021

Notice of Annual General Meeting

Notice is given that the Annual General Meeting of Invesco Asia Trust plc will be held at 43-45 Portman Square, London W1H 6LY, on 9 September 2021 at 12 noon for the following purposes:

Ordinary Business

To consider and, if thought fit, to pass the following resolutions all of which will be proposed as ordinary resolutions:

1. To receive and consider the Annual Financial Report for the year ended 30 April 2021.

2. To approve the Company’s Dividend Payment Policy. This is an advisory vote.

3. To approve the Annual Statement and Report on Remuneration for the year ended 30 April 2021.

4. To re-elect Owen Jonathan as a Director of the Company.

5. To re-elect Fleur Meijs as a Director of the Company.

6. To re-elect Neil Rogan as a Director of the Company.

7. To re-elect Vanessa Donegan as a Director of the Company.

8. To re-appoint KPMG LLP as auditor of the Company.

9. To authorise the Audit Committee to determine the remuneration of the auditor.

Special Business

To consider and, if thought fit, pass the following resolutions which will be proposed as an ordinary resolution:

Authority to Allot Shares

10. That:

in substitution for any existing authority under section 551 of the Companies Act 2006 (the ‘Act’) but without prejudice to the exercise of any such authority prior to the date of this resolution the Directors of the Company be generally and unconditionally authorised in accordance with section 551 of the Act as amended from time to time prior to the date of the passing of this resolution, to exercise all powers of the Company to allot shares and grant rights to subscribe for, or convert any securities into, shares up to an aggregate nominal amount (within the meaning of sections 551(3) and (6) of the Act) of £668,532, this being 10% of the Company’s issued ordinary share capital as at 15 July 2021, such authority to expire at the conclusion of the next Annual General Meeting of the Company or the date fifteen months after the passing of this resolution, whichever is the earlier unless the authority is renewed or revoked at any other general meeting prior to such time, but so that this authority shall allow the Company to make offers or agreements before the expiry of this authority which would or might require shares to be allotted, or rights to be granted, after such expiry as if the authority conferred by this resolution had not expired.

To consider and, if thought fit, pass the following resolutions which will be proposed as special resolutions:

11. That :

The Articles of Association as produced to the meeting and initialled by the Chairman for the purpose of identification (the ‘Articles’) be adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the existing Articles of Association.

Disapplication of Pre-emption Rights

12. That:

subject to the passing of resolution number 10 set out in the notice of this meeting (the ‘Section 551 Resolution’) and in substitution for any existing authority under sections 570 and 573 of the Companies Act 2006 (the ‘Act’) but without prejudice to the exercise of any such authority prior to the date of this resolution, the Directors be and are hereby empowered, in accordance with sections 570 and 573 of the Act as amended from time to time prior to the date of the passing of this resolution to allot equity securities (within the meaning of section 560(1), (2) and (3) of the Act) for cash, either pursuant to the authority given by the Section 551 Resolution or (if such allotment constitutes the sale of relevant shares which, immediately before the sale, were held by the Company as treasury shares) otherwise, as if section 561 of the Act did not apply to any such allotment, provided that this power shall be limited:

(a) to the allotment of equity securities in connection with a rights issue in favour of all holders of a class of equity securities where the equity securities attributable respectively to the interests of all holders of securities of such class are either proportionate (as nearly as may be) to the respective numbers of relevant equity securities held by them or are otherwise allotted in accordance with the rights attaching to such equity securities (subject in either case to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or legal, regulatory or practical problems under the laws of, or the requirements of, any regulatory body or any stock exchange in any territory or otherwise); and

(b) to the allotment (otherwise than pursuant to a rights issue) of equity securities up to an aggregate nominal amount of £334,266, this being 5% of the Company’s issued share capital as at 15 July 2021 and this power shall expire at the conclusion of the next Annual General Meeting of the Company or the date 15 months after the passing of this resolution, whichever is the earlier unless the authority is renewed or revoked at any other general meeting prior to such time, but so that this power shall allow the Company to make offers or agreements before the expiry of this power which would or might require equity securities to be allotted after such expiry as if the power conferred by this Resolution had not expired; and so that words and expressions defined in or for the purposes of Part 17 of the Act shall bear the same meanings in this resolution.

Authority to Make Market Purchases of Shares

13. That:

the Company be generally and subject as hereinafter appears unconditionally authorised in accordance with Section 701 of the Companies Act 2006 as amended from time to time prior to the date of the passing of this resolution (the ‘Act’) to make market purchases (within the meaning of Section 693(4) of the Act) of its issued ordinary shares of 10p each in the capital of the Company (‘Shares’).

PROVIDED ALWAYS THAT:

(i) the maximum number of Shares hereby authorised to be purchased shall be 10,021,307 or 14.99% of shares in issue as at 15 July 2021;

(ii) the minimum price which may be paid for a Share shall be 10p;

(iii) the maximum price which may be paid for a Share must not be more than the higher of: (i) 5% above the average of the mid-market values of the Shares for the five business days before the purchase is made; and (ii) the higher of the price of the last independent trade in the Shares and the highest then current independent bid for the Shares on the London Stock Exchange;

(iv) any purchase of Shares will be made in the market for cash at prices below the prevailing net asset value per Share (as determined by the Directors);

(v) the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company, or the date 15 months after the passing of this resolution, whichever is the earlier, unless the authority is renewed or revoked at any other general meeting prior to such time;

(vi) the Company may make a contract to purchase Shares under the authority hereby conferred prior to the expiry of such authority which will be executed wholly or partly after the expiration of such authority and may make a purchase of Shares pursuant to any such contract; and

(vii) any shares so purchased shall be cancelled or, if the Directors so determine and subject to the provisions of Sections 724 to 731 of the Act and any applicable regulations of the United Kingdom Listing Authority, be held (or otherwise dealt with in accordance with Section 727 or 729 of the Act) as treasury shares.

Period of Notice Required for General Meetings

14. That: the period of notice required for general meetings of the Company (other than AGMs) shall be not less than 14 days.

Dated this 16 July 2021

By order of the Board

Invesco Asset Management Limited

Corporate Company Secretary