LEGAL ENTITY IDENTIFIER:
549300YM9USHRKIET173
INVESCO
ASIA TRUST PLC
Half-Yearly
Financial Report for the Six Months to 31
October 2022
Investment
Objective
The Company’s objective is to provide long-term capital growth
and income by investing in a diversified portfolio of
Asian and Australasian companies. The Company aims to achieve
growth in its net asset value (NAV) total return in excess of
the Benchmark Index, the MSCI AC Asia ex Japan Index
(total return, net of withholding tax, in sterling terms).
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).
|
Six
Months to |
Year
ended |
|
|
31
October |
30
April |
|
| Total Return
Statistics(1) (dividends reinvested) |
2022 |
2022 |
|
| Net asset value
(NAV)((2) |
–13.1% |
-6.7% |
|
| Share
price(2) |
–15.5% |
-10.0% |
|
| Benchmark
index(3) |
–15.3% |
-12.9% |
|
Capital Statistics
|
At |
At |
|
|
31 October |
30 April |
|
|
2022 |
2022 |
change % |
| Net assets (£’000) |
219,021 |
252,176 |
–13.1 |
| NAV per share(2) |
327.62p |
377.21p |
–13.1 |
| Share price(1) |
281.00p |
332.50p |
–15.5 |
| Benchmark index (capital) |
851.09 |
1,023.11 |
–16.8 |
| Discount(2) per ordinary
share |
(14.2)% |
(11.9)% |
|
| Average discount over the six
months/year(1)(2) |
(12.4)% |
(9.5)% |
|
| Gearing(2): |
|
|
|
| – gross |
4.2% |
2.2% |
|
| – net |
3.6% |
1.6% |
|
| – net cash |
nil |
nil |
|
(1) Source: Refinitiv.
(2) Alternative Performance Measures (APM),
see below for the explanation and reconciliations of APMs. Further
details are provided in the Glossary of Terms and Alternative
Performance Measures in the Company’s 2022 Annual Financial
Report.
(3) Index returns are shown on a total return
basis, with dividends reinvested net of withholding taxes.
Chairman’s Statement
Highlights:
• NAV total return of –13.1% outperformed the benchmark
index total return of –15.3%;
• While the relative performance numbers for the last six
months are good, the absolute falls are clearly not; and
• The fact that Asian stock market valuations are so cheap
compared to their long-term averages is perhaps the most compelling
factor.
Performance over the six months to 31
October 2022 was again ahead of our benchmark: NAV per share
total return was –13.1% versus the MSCI AC Asia ex Japan Index
at –15.3%. The share price total return was –15.5% with the
discount widening from 11.9% to 14.2% over the period. Performance
numbers are shown as total return net of withholding tax in
sterling terms.
The three-yearly continuation vote was held at the Company’s
Annual General Meeting (AGM) on 8 September 2022 and passed
with votes in favour representing 99.45% of shareholders. It was
pleasing to see so many shareholders attending the AGM in person
once again. We enjoyed answering all of your questions.
A half-yearly dividend of 7.20p was paid on 24 November
2022 in accordance with our policy of paying two dividends per year
each amounting to approximately 2% of NAV. With the discount at
14.2% at 31 October 2022, this policy
puts the current annual dividend yield on the share price at 5.3%,
based on the share price of 281.00p at 31
October 2022.
In August 2020 the Board undertook
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 (net of
withholding tax, total return 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.
We are now halfway through this five-year period over which the
performance of the Company will be assessed: the Company’s NAV is
up by 26.7% over the 2.5 years while the index is down by 0.6%. On
an annualised basis, NAV is up by 9.9% p.a. while the index is down
by 0.2% p.a.
The Board has now settled back to its normal number of four
Directors. As planned, and reported in our previous report,
Myriam Madden has taken over as
Audit Chair and Vanessa Donegan as
both Senior Independent Director and Chair of the Remuneration
Committee. Sonya Rogerson joined us
on 26 July 2022 as a Non-Executive Director. Fleur Meijs retired on 1 August 2022 and
Owen Jonathan retired at the end of the AGM on 8 September 2022. Fleur and Owen leave with the
Company in good shape and we thank them again for their
contributions.
Our Co-Portfolio Managers undertake company meetings as a
regular part of their job, sometimes at the companies’
headquarters, sometimes elsewhere. Every two years or so, the
Board accompanies them on one of their fact finding trips. The last
trip was to South Korea and
Taiwan in November 2019. In January
2023, we visited companies in Indonesia and Singapore and were all struck by the sharp
contrast between the gloom and doom of the West and the positive
outlook held by nearly everyone we met.
Cumulative Total Return (dividends
reinvested) to 31 October
2022(1)
|
One |
Three |
Five |
Ten |
|
Year |
Years |
Years |
Years |
| Net asset value (NAV) |
–14.2% |
18.1% |
14.3% |
147.8% |
| Share price |
–20.0% |
16.3% |
14.6% |
145.9% |
| Benchmark index(2) |
–21.4% |
–3.0% |
–2.7% |
70.9% |
(1) Source: Refinitiv.
(2) The benchmark index of the Company was changed on
1 May 2015 to the MSCI AC Asia ex
Japan Index from the MSCI AC Asia Pacific ex Japan Index (both
indices total return, net of withholding tax, in sterling
terms).
Shareholders will know that we believe that the discount is
determined by a combination of demand for Asian equity investment
vehicles, the Investment Case for Invesco Asia Trust and the
Corporate Proposition that we offer. In order to stimulate more
demand for the Company’s shares, we aim to provide a strong
investment case and a strong corporate proposition at the same
time.
The Investment Case rests on accessing the attractions of Asian
equity markets through the institutional expertise of Ian Hargreaves and Fiona Yang’s team at Invesco.
The Co-Portfolio Managers’ investment process can be summarised as
‘valuation not value’ and has been very successful in attracting
institutional investors such as pension funds and sovereign wealth
investors. In times like these of great change, we would argue
that this forward-looking active approach (as opposed to a
backward-looking index or passive style) is exactly what is needed.
Invesco Asia Trust is the only way for individual investors to
access Ian and Fiona’s expertise.
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 these gains will combine to make the corporate proposition as
compelling as the investment case.
The multiple elements to our Corporate Proposition are detailed
in the 2022 Annual Financial Report’s Chairman’s Statement and
include a three-yearly continuation vote (the next one being due in
September 2025), an enhanced dividend
policy, a performance conditional tender, a strong integrated ESG
approach, engaging more individual shareholders, the ability for
shareholders to meet both the Co–Portfolio Managers and the
Directors, close management of ongoing charges and fees, the active
use of gearing, the ‘skin in the game’ of Directors’ and Managers’
shareholdings and the authority to buy back shares.
Update
From 31 October 2022 to
25 January 2023, the NAV total return
has been 26.4%, outperforming the index return of 20.4%. The share
price total return has been 33.5%, with the discount narrowing to
9.7%.
Outlook
While the relative performance numbers for the last six months
are good, the absolute falls are clearly not. Writing six months
ago, I noted surprise that Asia
had held up so well in the face of China tensions, the Russian invasion of
Ukraine and global economic
turmoil. With no respite from any of these and new concerns
arising, some stock market weakness was perhaps inevitable. Ian and
Fiona go into detail in their Managers’ Report.
Looking forward, I have to start by being honest that the short
term outlook remains highly uncertain. It will not be easy for
anyone to perform well over the next twelve months. However, if you
are free from worrying about monthly or quarterly performance and
are able to take a long term view, then the decision-making seems
to become a lot easier. The fact that Asian stock market valuations
are cheap compared to their long-term averages is perhaps the most
compelling factor. Yet by the end of 2023, many of the current
headwinds should have calmed or could even become tailwinds: global
inflation is likely to peak early in 2023. One way or the other,
Covid should become less of a problem for China. The economic strength (and lack of
inflation) in many Asian countries should allow them to grow their
economies faster than those in the West. Remember, stock markets
are usually lead indicators.
This is one of the main reasons why the Company has not
undertaken any share buybacks in the last six months even though
the discount of the Company’s share price to its NAV is above the
Board’s target of 10%. We believe that the Investment Case for the
Company is strong and so too is the combination of policies
enshrined in our Corporate Proposition. The next period is quite
likely to be a very attractive long-term opportunity for
shareholders. We simply do not want to stand in their way.
Neil
Rogan
Chairman
26 January 2023
Portfolio Managers’ Report
Q How has the Company performed in the period under
review?
A The Company’s net asset value (NAV) decreased by 13.1%
(total return, in sterling terms) over the six months to
31 October 2022, which compares to
the benchmark MSCI AC Asia ex Japan Index return of –15.3%.
It has been a weak and volatile period for global markets. The
Russia-Ukraine conflict and resurfacing US-China
tensions have added geopolitical uncertainty to the backdrop as
investors worry about the pace of US Federal Reserve tightening and
the prospect of inflation and recession – or stagflation. Asian
equity markets have generally weakened, as have currencies relative
the US dollar, prompting central banks (China being the notable exception) to tighten
policy in response. However, domestic macro conditions in
Asia remained largely stable,
notwithstanding a resurfacing of concerns related to China’s
property markets and Zero Covid Policy.
While it is chastening to report a double-digit percentage
decline in the Company’s NAV over the period, we have continued to
outperform the benchmark index, benefitting from strong stock
selection across different countries and sectors. Having a balanced
portfolio has helped in terms of relative performance, avoiding
expensive areas of the market such as profitless technology and
electric vehicle (EV) companies.
Asian markets have been more volatile than usual in 2022, but we
find grounds for cautious optimism.
Q What have been the biggest
contributors?
A India’s equity market has proved to be remarkably
resilient so far this year, with the portfolio’s holdings in
financials and other cyclicals making a strong contribution to
relative performance thanks to some positive earnings results and
the improved macro backdrop.
ICICI Bank was the biggest single contributor: its near-term
outlook remains strong with margins likely to inch up with rising
rates, a pick-up in growth across business lines and, a benign
credit cycle. Engineering and construction conglomerate Larsen
& Toubro also benefitted from solid earnings results, with a
healthy orderbook providing growth visibility and, although its
valuation is less attractive after recent share price strength,
there is scope for further positive earnings surprises given the
supportive macro backdrop in India.
ASEAN banks contributed positively, as did stock selection in
insurers as gains from QBE Insurance and Samsung Fire & Marine
more than offset the drag from holding Ping An Insurance. The
portfolio’s overweight position in Indonesia also continued to add value.
Elsewhere, Samsonite International enjoyed a rebound in sales
and raised its full year revenue guidance given a solid recovery in
travel demand in North America and
Europe. Chinese wind turbine
manufacturer MingYang Smart Energy benefitted from expectations of
a second half pick-up in installation projects, while easing
commodity prices were seen helping margins recover. Finally, the
portfolio’s underweight in the technology sector, particularly
semiconductor companies, benefitted relative performance, with a
positive impact from stock selection in technology hardware, with
holdings such as Chroma ATE, Largan Precision and Hon Hai Precision
Industry contributing positively.
Q And detractors?
A China has been the
portfolio’s biggest source of weakness, with investor and consumer
confidence badly dented by the authorities’ adherence to a Zero
Covid Policy. Specific concerns surrounding geopolitical and real
estate risks have compounded macroeconomic uncertainty.
Against this backdrop, the biggest detractors to relative
performance were Chinese internet companies JD.com, NetEase and
Tencent, followed by property-related
stocks Suofeiya Home Collection and China Overseas Land &
Investment. While it was disconcerting to see such significant
share price falls, we remained mindful that stock markets are prone
to overreaction in times of uncertainty.
Q How has the portfolio’s positioning
in China changed?
A Recent market volatility gave us an opportunity to
introduce three new holdings: restaurant operator Jiumaojiu
International, China Communications Services and China Meidong, an
auto dealership and maintenance group. We have also added to the
recently introduced Hansoh Pharma and aluminium auto parts
manufacturer Minth. In turn, we sold Pacific Basin Shipping and
have taken some profits from recent outperformers such as Samsonite
International, MingYang Smart Energy and Autohome.
The biggest change over the last two years has been the
reduction in the portfolio’s underweight position in China, where valuations had fallen to deeply
discounted levels (see chart in the 2022 Half-Yearly Financial
Report). At times during the recent reporting period that felt
increasingly uncomfortable, as concerns mounted to such an extent
that one sell-side analyst declared China ‘uninvestable’. However, we felt
comfortable leaning into weakness for several reasons.
Firstly, we felt that we had passed the peak in regulatory
tightening, be that on ‘new economy’ sectors or property
developers. Geopolitical risk is hard to analyse. Tensions in
China’s relationship with Taiwan
remain in focus, but there has been no change in our view that the
probability of military conflict is very low on a medium-term view.
The US government’s new rules barring China from accessing technology essential for
producing advanced chips are more tangible, making stock picking
ever important. The biggest source of uncertainty was China’s Zero
Covid Policy, which was being tightly adhered to. However, while we
could see China learning to live
with the virus on a medium-term view, there was no visibility on
how/when restrictions might be lifted in the near-term.
Events in October 2022 tested our
conviction: Xi Jinping’s reappointment as leader of the Communist
Party, supported by the Politburo Standing Committee of his
appointed loyalists, was interpreted by the market as offering less
likelihood of any change in direction on government policy. To
foreign investors the prevailing picture has been that President Xi
was focused on political control and stability rather than economic
reform and development. However, we had not been expecting a big
change in the direction of economic policy, rather that the focus
was likely to remain on improving the quality, rather than
quantity, of growth and reducing financial risk in the system.
Q Can you update us on recent
developments?
A The news flow since the Party Congress concluded has
been remarkable, with markets caught off guard by the speed of
change in direction of policy. There have been three key
changes:
a. End of Zero Covid: initially a loosening or
‘optimisation’ of restrictions, to help local governments and
health authorities tackle the spread of Omicron. Quarantine
requirements have been reduced, with the resumption of
international flights. State media have also started to openly
discuss the milder symptoms associated with Omicron, with greater
encouragement for the elderly to get fully vaccinated.
b. Property sector support: a comprehensive 16-point plan
was announced in November 2022, with
measures including an easing of funding constraints for
cash-strapped private developers, a cut in mortgage rates and a
loosening of purchase restrictions to help stimulate demand.
c. Shift to ‘pro-growth’: the annual Central Economic
Work Conference, which convened in mid-December 2022 shortly after Covid
restrictions were abandoned, set the target of “promoting overall
economic improvement,” with an emphasis on boosting consumer
confidence and supporting the private sector. There was support for
China’s digital economy, with platform enterprises called on to
‘fully display their capabilities’, and a move to ‘normalise’ the
regulatory regime.
Q Is the risk-reward in China still attractive?
A The abrupt abandonment of Zero Covid has led to western
media headlines about a pending humanitarian crisis. The hard truth
is that China’s peak in hospitalisations and deaths, so far
avoided, is happening in a short and sharp spike, which could be
cleared by spring. With fatality rates for Omicron having collapsed
elsewhere, a manageable outcome can be hoped for.
The domestic economy can expect to see a post-pandemic recovery
like that seen in the rest of the world, buoyed by returning
consumer confidence. However, this is coinciding with a slowdown in
global growth as developed market demand rolls over, which will
negatively impact China’s manufacturing sector. Much also depends
on confidence returning to the residential property market, which
is not a bubble as some would have us believe. Reassuringly, the
household savings ratio in China
is estimated to be around 30% of disposable income, compared to the
typical 10-15%, its highest level in a decade.
However, once China’s economy reopens fully, it is likely to
revert to a slower growth glide path. While policy is currently
being eased, we expect it to remain orthodox, with the authorities
likely to tighten again to avoid any overheating in the economy.
Policy uncertainty risk also lingers longer-term with regulators
remaining active, if more supportive at present. That said, quality
companies that are trading cheaply relative to their own history
are still available in China. Our
focus remains on companies facing temporary challenges that we
believe have strong market positions, conservative balance sheets
and under-appreciated earnings growth potential. We are taking care
not to assume reversion to pre-pandemic levels of growth or rating,
but even after the recent rebound, the market continues to trade at
deeply discounted levels. Prospective returns still have the
potential to be very strong from here.
Q How has the rest of Asia been dealing with inflation and higher
interest rates?
A Inflation remains a developed market problem. Although
food and energy prices have picked up a bit in Asia, they remain at levels central banks are
comfortable with. Interest rates have been raised in most countries
(China the main exception) to try
to counter rising prices and to support currencies, although there
has been little success with the latter. While we continue to
monitor the situation, it is not a great concern. Asian countries
are generally much earlier in their economic cycles, with warning
signs such as high credit growth and deteriorating external
accounts still absent, in fact there is slack in most economies. As
inflation shows signs of peaking, expectations are that tightening
will be paused in most of Asia,
with room to ease next year should global growth slow more sharply
than expected.
The portfolio has also demonstrated a positive sensitivity to
rising interest rates, with banks such as United Overseas Bank and
KB Financial being beneficiaries. However, there comes a point when
rising interest rates begin to create concern about growth and thus
asset quality for banks, which is why we took the decision to sell
KB Financial. Korea has seen a relatively large expansion in credit
over the last two years, making it more vulnerable. In Singapore, however, the cycle indicators that
we track are still pointing to relatively low risk when it comes to
banks. Total credit from banks has barely increased as a percentage
of GDP in the last seven years and retail credit has declined.
Property prices have been declining relative to incomes, another
indicator that the Singapore
economy is not over-heating.
Q Where else are you seeing
opportunities in Asia?
A We believe there is a definite opportunity in
South Korea, one of the worst performing equity, bond and FX
markets in Asia in 2022. This is
not overly surprising given concerns about a global cyclical
slowdown, a weakening tech cycle, and elevated oil prices which hit
Korea’s external balance. However, while the near-term outlook
remains uncertain, we are very comfortable with the stocks we hold
on a three-to-five-year view.
Detractors are generally quick to point out that Korea has
always been cheap, with a ‘Korea discount’ due to factors such as
geopolitical risk, the cyclical nature of its economy, as well as
governance concerns given low dividend payouts and the dominance of
opaque conglomerates known as chaebols. We believe there are
reasons for the discount to narrow, while also noting that we can
still make attractive absolute returns in Korea without it doing so
as companies grow their earnings.
Over the period we introduced LG Household & Healthcare, a
major Korean consumer goods company that manufacture cosmetics,
household products and beverages. Whilst Covid lockdowns in
China and travel disruption have
had a negative impact on sales and earnings, these are temporary
issues which we believe have disproportionately affected the share
price. Indeed, around half of the company’s revenue is from the
more stable beverage and household goods segment, which has been
resilient in the current environment, while a recovery in travel
demand is likely to bolster demand for China onshore cosmetics.
We also added to existing holdings, including another LG
company. LG Chemical is the largest maker of EV batteries
outside China, leaving it well
positioned to benefit from geopolitical concerns as US car
companies look to source EV batteries from outside China. LG Chemical also has a very promising
business providing some of the chemicals and materials which go
into EV batteries – a separately listed subsidiary trading at
double the company’s market capitalisation.
Q Do you still favour Indonesia?
A Very much so. The market has performed well so far this
year, with the economy appearing to have scope for better growth
after a weak period, supported by the commodity cycle and current
account surplus. Near-term uncertainty is starting to lift and
valuations still appear attractive. We have sold Telkom Indonesia,
which had outperformed and was appearing fully valued, and trimmed
exposure to PT Bank Negara Indonesia Persero and Astra
International, taking advantage of share price strength.
In turn, we have added Semen Indonesia, the country’s largest
cement company with about 50% market share. There is no new
capacity coming in Indonesia and
with no new disruptors entering the market we believe we can see an
improvement in the company’s utilisation rates, margins and
profitability. Free cash flow generation looks strong, the balance
sheet is relatively healthy with low debt levels and the valuation
multiples are low – price to book ratio is 0.9x. (See ESG section
in the 2022 Half-Yearly Financial Report for more perspective on
our evaluation of investment risk here).
Q Finally, you remain underweight
tech, is there an opportunity to add exposure?
A Weakness in the tech sector is bringing valuation
levels down to more reasonable levels. It is an area we are
monitoring closely but have yet to take any action, with the
exception of adding to Samsung Electronics, which is trading at
close to trough valuations in terms of price/book. The memory
semiconductor market is going through a sharp downturn at present,
as is normal for the industry, but these downcycles tend to be
relatively short in duration, and we know that an upcycle is
inevitable at some stage in our investment horizon. The first signs
of an end to the downcycle are capex cuts from weaker players in
the market, and the very recent news is encouraging on this front.
Expectations are for flat capex growth in 2022 after
25% growth in 2021, and 2023 will almost certainly be down on
2022.
Buying Samsung at or close to book value has always been a
strategy that has made attractive returns in the past. The company
is also well positioned to win more customers in the current
geopolitical climate where Western companies are wary of depending
too much on Chinese or Taiwanese suppliers.
Recent news-flow also suggests that Samsung plans to set up a
task force to enhance shareholder returns. The recent growth in
retail ownership has coincided with a falling share price, with
analysts estimating that 5.9 million of the new entrants on
its shareholder register are in loss making territory, which
is equivalent to 12% of the population of Korea. The company has
plenty of options with US$100 billion of cash on the balance
sheet, so a dividend hike seems a natural solution.
Q Final thoughts?
A Asian equity markets are not immune to global macro
headwinds, but conditions in Asia
should continue to remain largely stable in 2023. Many countries in
the region are at an earlier stage in their economic cycle, with
rising incomes and consumer penetration a tailwind to structural
demand.
The improved visibility on China’s reopening is a significant
positive and combined with the property market support and signs
that regulatory headwinds are abating, provides us grounds to
believe that the outlook for corporate earnings and broader
economic growth should be supportive after downgrades in 2022.
Although equity market valuations for Asia, as measured by traditional metrics such
as price to book ratios, have recovered in recent months from
deeply discounted to more reasonable levels, they continue to trade
at a significant discount to US and world equity market averages.
Asia’s underperformance has lasted more than a decade. Although
this was justifiably driven by lower earnings growth compared to US
equities when denominated in US-dollars, this may change. US-dollar
strength is being challenged by an imminent recession in the US to
root out inflation. While inflation in the US may be stickier than
expected it is declining, which may lead to an easing of financial
conditions at a time when Asia is
recovering. Inflation is less of an issue in Asia which provides some policy flexibility.
We believe there is great potential for a narrowing of Asia’s
valuation discount.
Ian
Hargreaves & Fiona
Yang
Portfolio Managers
26 January 2023
Principal 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. In carrying out this assessment, the Board together with
the Manager have considered emerging risks such as geopolitical
risks, evolving cyber threats and climate related risks. These
risks also form part of the principal risks identified and the
mitigating actions are detailed below. In the view of the Board,
these principal risks and uncertainties are as much applicable to
the remaining six months of the financial year as they were to the
six months under review.
| Category and Principal Risk
Description |
Mitigating Procedures and
Controls |
Risk trend |
|
|
during the |
|
|
period |
| Strategic Risk |
|
|
Market Risk
The Company’s investments are mainly traded on Asian and
Australasian stock markets as well as the UK. The principal risk
for investors in the Company is a significant fall and/or a
prolonged period of decline in these markets. This could be
triggered by unfavourable developments within the region or events
outside it. |
The Company has a
diversified investment portfolio by country, sector and stock. Its
investment trust structure means no forced sales need to take place
and investments can be held over a longer term horizon. However,
there are few ways to mitigate absolute market risk because it is
engendered by factors which are outside the control of the Board
and the Manager. These factors include the general health of the
world economy, interest rates, inflation, government policies,
industry conditions, and changing investor demand and sentiment.
Such factors may give rise to high levels of volatility in the
prices of investments held by the Company. |
Increased |
Geopolitical Risk
Political developments can create risks to the value of the
Company’s assets, such as political changes in the US and Asia
regions, and the war in Ukraine. Political risk has always been a
feature of investing in stock markets and it is particularly so in
Asia. Asia encompasses a variety of political systems. There are
many examples of diplomatic skirmishes and military tensions and
sometimes these resort to military engagement. Moreover, the
involvement in Asian politics of the US and European countries can
reduce or raise tensions. |
The Manager evaluates
and assesses political risk as part of the stock selection and
asset allocation policy which is monitored at every Board meeting.
This includes political, military and diplomatic events and changes
to legislation. Balancing political risk and reward is an essential
part of the active management process. |
Increased |
Investment Objectives and Strategy
The Company’s investment objectives and structure are no longer
meeting investors’ demands. |
The Board receives
regular reports reviewing the Company’s investment performance
against its stated objectives and peer group, and reports from
discussions with its brokers and major shareholders. The Board also
has a separate annual strategy meeting. |
Unchanged |
Wide
Discount
Lack of liquidity and lack of marketability of the Company’s shares
leading to stagnant share price and wide discount.
A persistently high discount may lead to buybacks of the Company’s
shares and result in the shrinkage of the Company. |
The Board receives
regular reports from both the Manager and the Company’s broker on
the Company’s share price performance, level of share price
discount to NAV and recent trading activity in the Company’s
shares. The Board has introduced initiatives to help address the
Company’s share rating including a performance conditional tender
in 2025 and the enhanced dividend policy. It may seek to reduce the
volatility and absolute level of the share price discount to NAV
for shareholders through buying back shares within the stated
limit. The Board also receives regular reports on marketing
meetings with shareholders and prospective investors and works to
ensure that the Company’s investment proposition is actively
marketed through relevant messaging across many distribution
channels. |
Increased |
| Investment Management
Risk |
|
|
Performance
That the Portfolio Managers consistently underperform the benchmark
and/or peer group over 3-5 years. |
The Board regularly
compares the Company’s NAV performance over both the short and long
term to that of the benchmark and peer group as well as reviewing
the portfolio’s performance against benchmark (attribution) and
risk adjusted performance (volatility, beta, tracking error, Sharpe
ratio) of the Company and its peers. |
Unchanged |
ESG
including climate risk
Risks associated with climate change and ESG considerations could
affect the valuation of the Company’s holdings. |
ESG considerations
are integrated as part of the investment decision-making in
constructing the portfolio. Such investment decisions include the
transactions undertaken in the period, the review of active
portfolio positions and consideration of the gearing position and,
if applicable, hedging. The process around ESG is described in the
ESG Monitoring and Engagement section in the 2022 Half-Yearly
Financial Report. |
Unchanged |
Key
Person Dependency
Either or both of the Portfolio Managers (Ian Hargreaves and
Fiona Yang) ceases to be Portfolio Manager or are
incapacitated or otherwise unavailable. |
The appointment of
Fiona Yang as Co-Portfolio Manager has mitigated the risk of key
person dependency. Also, the Portfolio Managers work within and are
supported by the wider Invesco Asian and Emerging Markets Equities
team, with Ian Hargreaves and William Lam as Co-Heads of this
team. |
Unchanged |
Currency Fluctuation Risk
Exposure to currency fluctuation risk negatively impacts the
Company’s NAV. The movement of exchange rates may have an
unfavourable or favourable impact on returns as nearly all of the
Company’s assets are non-sterling denominated. |
With the exception of
borrowings in foreign currency, the Company does not normally hedge
its currency positions but may do so should the Portfolio Managers
or the Board feel this to be appropriate. Contracts are limited to
currencies and amounts commensurate with the asset exposure. The
foreign currency exposure of the Company is reviewed at Board
meetings. |
Unchanged |
| Third-Party Service Providers
Risk |
|
|
Unsatisfactory Performance of Third-Party Service
Providers
Failure by any third-party service provider to carry out its
obligations to the Company in accordance with the terms of its
appointment could have a materially detrimental impact on the
operations of the Company and could affect the ability of the
Company to successfully pursue its investment policy and expose the
Company to reputational risk. Disruption to the accounting, payment
systems or custody records could prevent the accurate reporting and
monitoring of the Company’s financial position. |
Details of how the
Board monitors the services provided by the Manager and other
third-party service providers, and the key elements designed to
provide effective internal control, are included in the internal
control and risk management section in the 2022 Annual Financial
Report on page 23. |
Unchanged |
Information Technology Resilience and Security
The Company’s operational structure means that all cyber risk
(information and physical security) arises at its Third Party
Service Providers (‘TPPs’). This cyber risk includes fraud,
sabotage or crime perpetrated against the Company or any of its
TPPs. |
The
Board receives regular updates on the Manager’s information and
cyber security. This includes updates on the cyber security
framework, staff resource and training, and the testing of its
security systems designed to protect against a cyber security
attack.
As well as conducting a regular review of TPPs audited service
organisation control reports by the Audit Committee, the Board
monitors TPPs’ business continuity plans and testing including the
TPPs’ and Manager’s regular ‘live’ testing of workplace recovery
arrangements should a cyber event occur. |
Unchanged |
Operational Resilience
The Company’s operational capability relies upon the ability of its
TPPs to continue working throughout the disruption caused by a
major event such as the Covid-19 pandemic. |
The
Manager’s business continuity plans are reviewed on an ongoing
basis and the Directors are satisfied that the Manager has in place
robust plans and infrastructure to minimise the impact on its
operations so that the Company can continue to trade, meet
regulatory obligations, report and meet shareholder
requirements.
The Manager has arrangements and prioritises between work deemed
necessary to be carried out on business premises and work from home
arrangements should it be necessary, for instance due to further
restrictions. Any meetings are held in person, virtually or via
conference calls. Similar working arrangements are in place for the
Company’s third-party service providers. The Board receives regular
update reports from the Manager and TPPs on business continuity
processes. |
Unchanged |
Twenty-five Largest Holdings
At 31 October
2022
Ordinary shares unless stated
otherwise
† The sector group is based on MSCI and Standard &
Poor’s Global Industry Classification Standard.
|
|
|
At Market |
|
|
|
|
Value |
% of |
| Company |
Sector† |
Country |
£’000 |
Portfolio |
| Samsung Electronics |
Technology Hardware and
Equipment |
South Korea |
15,469 |
6.8 |
| Taiwan Semiconductor
Manufacturing |
Semiconductors and Semiconductor
Equipment |
Taiwan |
13,332 |
5.9 |
| TencentR |
Media and Entertainment |
China |
10,334 |
4.5 |
| Housing Development Finance
Corporation |
Banks |
India |
9,912 |
4.4 |
| AlibabaR |
Retailing |
China |
7,947 |
3.5 |
| AIA |
Insurance |
Hong Kong |
7,178 |
3.2 |
| ICICI Bank – ADR |
Banks |
India |
6,718 |
2.9 |
| Astra International |
Automobiles and Components |
Indonesia |
6,703 |
2.9 |
| JD.comR |
Retailing |
China |
6,202 |
2.7 |
| MingYang Smart
EnergyA |
Capital Goods |
China |
5,634 |
2.5 |
| United Overseas Bank |
Banks |
Singapore |
5,597 |
2.4 |
| QBE Insurance |
Insurance |
Australia |
5,025 |
2.2 |
| PT Bank Negara Indonesia
Persero |
Banks |
Indonesia |
4,984 |
2.2 |
| POSCO |
Materials |
South Korea |
4,758 |
2.1 |
| Gree Electrical
AppliancesA |
Consumer Durables and Apparel |
China |
4,737 |
2.1 |
| Aurobindo Pharma |
Pharmaceuticals, Biotechnology and
Life Sciences |
India |
4,735 |
2.1 |
| Shriram Transport Finance |
Diversified Financials |
India |
4,515 |
2.0 |
| CK Asset |
Real Estate |
Hong Kong |
4,392 |
1.9 |
| KasikornbankF |
Banks |
Thailand |
4,381 |
1.9 |
| Larsen & Toubro |
Capital Goods |
India |
4,300 |
1.9 |
| NetEaseR |
Media and Entertainment |
China |
4,288 |
1.9 |
| Uni-President |
Food, Beverage and Tobacco |
Taiwan |
4,238 |
1.8 |
| Ping An InsuranceH |
Insurance |
China |
3,857 |
1.7 |
| LG Chemical |
Materials |
South Korea |
3,823 |
1.7 |
| Hyundai Motor – preference
shares |
Automobiles and Components |
South Korea |
3,687 |
1.6 |
|
|
|
156,746 |
68.8 |
| Other Investments (32) |
|
|
70,950 |
31.2 |
| Total Holdings (57) |
|
|
227,696 |
100.0 |
ADR: American Depositary Receipts – 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 are shares that
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.
Governance
Going Concern
The financial statements have been prepared on a going concern
basis.
During the period, the Directors took into consideration the
continuation vote for the Company; the uncertain economic outlook
following the ongoing consequences of the Covid-19 pandemic and the
conflict in Ukraine; and consider
the preparation of the financial statements on a going concern
basis to be the appropriate basis. The Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future, being taken as at
least 12 months after signing the financial statements for the same
reasons as set out in the Viability Statement in the Company’s 2022
Annual Financial Report. The Directors took into account the
diversified portfolio of readily realisable securities which can be
used to meet the net current liability position of the Company as
at the balance sheet date; and revenue forecasts for the
forthcoming year. An ordinary resolution was proposed and approved
at the 2022 AGM to release the Directors from their obligation to
convene a meeting in 2023 at which a special resolution for the
wind up of the Company would have been proposed.
Related Party Transactions
Under United Kingdom Generally Accepted Accounting Practice (UK
Accounting Standards and applicable law), the Company has
identified the Directors and their dependents as related parties.
No other related parties have been identified. No transactions with
related parties have taken place which have materially affected the
financial position or the performance of the Company.
Directors’ Responsibility
Statement
In respect of the preparation of the
half-yearly financial report
The Directors are responsible for preparing the half-yearly
financial report using accounting policies consistent with
applicable law and UK Accounting Standards.
The Directors confirm that to the best of their knowledge:
— the condensed set of financial statements
contained within the half-yearly financial report have been
prepared in accordance with the FRC’s FRS 104 Interim Financial
Reporting;
— the interim management report includes a fair
review of the information required by 4.2.7R and 4.2.8R of the
FCA’s Disclosure Guidance and Transparency Rules; and
— the interim management report includes a fair
review of the information required on related party
transactions.
The half-yearly financial report has not been audited nor
reviewed by the Company’s auditor.
Signed on behalf of the Board of Directors.
Neil
Rogan
Chairman
26 January 2023
Condensed Income Statement
For the Six Months ended 31
October
|
2022 |
2021 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
return |
return |
return |
return |
return |
return |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
| Losses on investments held at fair
value |
— |
(36,228) |
(36,228) |
— |
(17,938) |
(17,938) |
| Losses on foreign exchange |
— |
(316) |
(316) |
— |
(27) |
(27) |
| Income – note 2 |
5,285 |
51 |
5,336 |
3,981 |
62 |
4,043 |
| Investment management fee – note
3 |
(222) |
(666) |
(888) |
(247) |
(740) |
(987) |
| Other expenses |
(332) |
(2) |
(334) |
(326) |
(3) |
(329) |
| Net return before
finance costs and taxation |
4,731 |
(37,161) |
(32,430) |
3,408 |
(18,646) |
(15,238) |
| Finance costs – note 3 |
(24) |
(72) |
(96) |
(5) |
(15) |
(20) |
| Return on ordinary
activities before taxation |
4,707 |
(37,233) |
(32,526) |
3,403 |
(18,661) |
(15,258) |
| Tax on ordinary activities – note
4 |
(450) |
(179) |
(629) |
(345) |
— |
(345) |
| Return on ordinary
activities after taxation for the financial period |
4,257 |
(37,412) |
(33,155) |
3,058 |
(18,661) |
(15,603) |
| Return per ordinary
share |
|
|
|
|
|
|
| Basic |
6.37p |
(55.96)p |
(49.59)p |
4.57p |
(27.91)p |
(23.34)p |
| Weighted average
number of ordinary shares in issue during the period |
|
|
66,853,287 |
|
|
66,853,287 |
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 period.
Condensed Statement of Changes in
Equity
For the Six Months ended 31
October
|
|
Capital |
|
|
|
|
|
Share |
Redemption |
Special |
Capital |
Revenue |
|
|
Capital |
Reserve |
Reserve |
Reserve |
Reserve |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
| For the six months ended 31
October 2022 |
|
|
|
|
|
|
| At 30 April 2022 |
7,500 |
5,624 |
34,827 |
202,814 |
1,411 |
252,176 |
| Return on ordinary activities |
– |
– |
– |
(37,412) |
4,257 |
(33,155) |
| At 31 October 2022 |
7,500 |
5,624 |
34,827 |
165,402 |
5,668 |
219,021 |
| For the six months ended 31
October 2021 |
|
|
|
|
|
|
| At 30 April 2021 |
7,500 |
5,624 |
34,827 |
229,438 |
3,863 |
281,252 |
| Return on ordinary activities |
– |
– |
– |
(18,661) |
3,058 |
(15,603) |
| At 31 October 2021 |
7,500 |
5,624 |
34,827 |
210,777 |
6,921 |
265,649 |
Condensed Balance Sheet
Registered Number 3011768
|
At 31
October |
At 30
April |
|
2022 |
2022 |
|
£’000 |
£’000 |
| Fixed assets |
|
|
| Investments held at fair value
through profit or loss – note 7 |
227,696 |
256,686 |
| Current assets |
|
|
| Amounts due from brokers |
– |
1,746 |
| Overseas withholding tax
recoverable |
120 |
163 |
| VAT recoverable |
23 |
16 |
| Prepayments and accrued income |
163 |
567 |
| Cash and cash equivalents |
1,303 |
738 |
|
1,609 |
3,230 |
| Creditors: amounts falling due
within one year |
|
|
| Bank facility |
(8,400) |
(5,610) |
| Amounts due to brokers |
– |
(780) |
| Bank overdraft |
(694) |
– |
| Accruals |
(578) |
(657) |
|
(9,672) |
(7,047) |
| Net current liabilities |
(8,063) |
(3,817) |
| Total assets less current
liabilities |
219,633 |
252,869 |
| Creditors: amounts falling due
after more than one year |
|
|
| Provision for deferred Indian
capital gains tax |
(612) |
(693) |
| Net assets |
219,021 |
252,176 |
| Capital and reserves |
|
|
| Share capital |
7,500 |
7,500 |
| Other reserves: |
|
|
| Capital redemption
reserve |
5,624 |
5,624 |
| Special reserve |
34,827 |
34,827 |
| Capital reserve |
165,402 |
202,814 |
| Revenue reserve |
5,668 |
1,411 |
| Total shareholders’
funds |
219,021 |
252,176 |
| Net asset value per ordinary
share |
|
|
| Basic |
327.62p |
377.21p |
| Number of 10p ordinary shares in
issue at the period end – note 6 |
66,853,287 |
66,853,287 |
Notes to the Condensed Financial
Statements
1. Accounting
Policies
The condensed financial statements have been prepared in
accordance with applicable United Kingdom Accounting Standards and
applicable law (UK Generally Accepted Accounting Practice),
including FRS 102 The Financial Reporting Standard applicable in
the UK and Republic of Ireland,
FRS 104 Interim Financial Reporting and 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.
The financial statements are issued on a going concern basis.
The accounting policies applied to these condensed financial
statements are consistent with those applied in the Company’s 2022
Annual Financial Report.
2. Income
|
|
Six months
to |
Six months
to |
|
|
31 October |
31
October |
|
|
2022 |
2021 |
|
|
£’000 |
£’000 |
|
Income from investments: |
|
|
|
Overseas dividends – ordinary |
4,956 |
3,689 |
|
Overseas dividends – special |
327 |
292 |
|
Deposit interest |
2 |
– |
|
Total income |
5,285 |
3,981 |
Special dividends of £51,000 were recognised in capital during
the period (31 October 2021:
£62,000).
3.
Management Fee, Performance Fees and Finance Costs
Investment management fee and finance costs on any borrowings
are charged 75% to capital and 25% to revenue. A management fee is
payable quarterly in arrears and is equal to 0.75% per annum of the
value of the Company’s total assets less current liabilities
(including any short term borrowings) under management at the end
of the relevant quarter and 0.65% per annum for any net assets over
£250 million.
4. Taxation and
Investment Trust Status
It is the intention of the Directors to conduct the affairs of
the Company so that it satisfies the conditions for approval as an
investment trust company. As such, the Company has not provided any
UK corporation tax on any realised or unrealised capital gains or
losses arising on investments. The Company’s tax charge represents
withholding tax suffered on overseas income and Indian capital
gains tax paid and provided for due to the holding of Indian equity
investments which are subject to Indian Capital Gains Tax
Regulations. Further details can be found in Note 6(d) of the
Company’s 2022 Annual Financial Report on page 62.
5. Dividends paid
on Ordinary Shares
As noted in the Chairman’s Statement, an interim dividend of
7.20p per share was paid on 24 November
2022 to shareholders on the register on 4 November 2022. Shares were marked ex-dividend
on 3 November 2022.
In accordance with accounting standards, dividends payable after
the period end have not been recognised as a liability.
6. Share Capital,
including Movements
Share capital represents the total number of shares in issue,
including treasury shares.
(a) Ordinary Shares of
10p each
|
|
Six months
to |
Year to |
|
|
31 October |
30
April |
|
|
2022 |
2022 |
|
Number of ordinary shares in
issue: |
|
|
|
Brought forward |
66,853,287 |
66,853,287 |
|
Shares bought back into
treasury |
– |
– |
|
Carried forward |
66,853,287 |
66,853,287 |
(b) Treasury Shares
|
|
Six months
to |
Year to |
|
|
31 October |
30
April |
|
|
2022 |
2022 |
|
Number of treasury shares
held: |
|
|
|
Brought forward |
8,146,594 |
8,146,594 |
|
Shares bought back into
treasury |
– |
– |
|
Carried forward |
8,146,594 |
8,146,594 |
|
Total ordinary shares |
74,999,881 |
74,999,881 |
During the period the Company has not bought back or re-issued
any shares into or from treasury (30 April
2022: nil).
Subsequent to the period end 31 October
2022 no ordinary shares were issued, bought back into
treasury or cancelled.
7. Classification
Under Fair Value Hierarchy
FRS 102 sets out three fair value levels. These are:
Level 1 – The unadjusted quoted price in an active market for
identical assets that the entity can access at the measurement
date.
Level 2 – Inputs other than quoted prices included within Level
1 that are observable (i.e. developed using market data) for the
asset or liability, either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
The fair value hierarchy analysis for investments and related
forward currency contracts held at fair value at the period end is
as follows:
|
|
31 October |
30
April |
|
|
2022 |
2022 |
|
|
£’000 |
£’000 |
|
Financial assets designated at
fair value through profit or loss: |
|
|
|
Level 1 |
223,218 |
250,748 |
|
Level 2 |
4,381 |
5,837 |
|
Level 3 |
97 |
101 |
|
Total for financial assets |
227,696 |
256,686 |
The Level 2 investment consists of one holding in Kasikornbank
(30 April 2022: Two holdings in the
Invesco Liquidity Funds – US Dollar money market fund and
Kasikornbank).
The Level 3 investment consists of one holding in Lime Co.
(30 April 2022: Lime Co.).
8. Status of
Half-Yearly Financial Report
The financial information contained in this half-yearly report
does not constitute statutory accounts as defined in section 434 of
the Companies Act 2006. The financial information for the half
years ended 31 October 2022 and
31 October 2021 has not been audited.
The figures and financial information for the year ended
30 April 2022 are extracted and
abridged from the latest audited accounts and do not constitute the
statutory accounts for that year. Those accounts have been
delivered to the Registrar of Companies and included the Report of
the Independent Auditor, which was unqualified and did not include
a statement under section 498 of the Companies Act 2006.
The Half-Yearly Financial Report for the Six Months to
31 October 2022 will be available to
shareholders, and copies may be obtained during normal business
hours from the Company’s Registered Office, from its correspondence
address, 43-45 Portman Square, London W1H 6LY, and via
www.invesco.co.uk/invescoasia.
A copy of the Half-Yearly Financial Report will be submitted
shortly to the National Storage Mechanism ("NSM") and will be
available for inspection at the NSM, which is situated at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
By order of the Board
Invesco Asset Management Limited
Company Secretary
26 January 2023
Glossary of Terms and Alternative
Performance Measures
Alternative Performance Measure
(APM)
An APM is a measure of performance or financial position that is
not defined in applicable accounting standards and cannot be
directly derived from the financial statements. The calculations
shown in the corresponding tables are for the six months ended
31 October 2022 and the year ended
30 April 2022. The APMs listed here
are widely used in reporting within the investment company sector
and consequently aid comparability.
(Discount)/Premium (APM)
Discount is a measure of the amount by which the mid-market
price of an investment company share is lower than the underlying
net asset value (NAV) of that share. Conversely, Premium is a
measure of the amount by which the mid-market price of an
investment company share is higher than the underlying net asset
value of that share. In this interim financial report the discount
is expressed as a percentage of the net asset value per share and
is calculated according to the formula set out below. If the shares
are trading at a premium the result of the below calculation will
be positive and if they are trading at a discount it will be
negative.
|
|
|
At 31
October |
At 30 April |
|
|
|
2022 |
2022 |
| Share price |
|
a |
281.00p |
332.50p |
| Net asset value per share |
|
b |
327.62p |
377.21p |
| Discount |
|
c = (a-b)/b |
(14.2)% |
(11.9)% |
The average discount for the period/year is the arithmetic
average, over a period/year, of the daily discount calculated on
the same basis as shown above.
Gearing
The gearing percentage reflects the amount of borrowings that a
company has invested. This figure indicates the extra amount by
which net assets, or shareholders’ funds, may move if the value of
a company’s investments were to rise or fall. A positive percentage
indicates the extent to which net assets are geared; a nil gearing
percentage, or ‘nil’, shows a company is ungeared. A negative
percentage indicates that a company is not fully invested and is
holding net cash as described below.
There are several methods of calculating gearing and the
following has been used in this report:
Gross Gearing (APM)
This reflects the amount of gross borrowings in use by a company
and takes no account of any cash balances. It is based on gross
borrowings as a percentage of net assets. As at 31 October 2022 the Company had £9,094,000 gross
borrowings (30 April 2022:
£5,610,000).
|
|
|
|
At 31
October |
At 30 April |
|
|
|
|
2022 |
2022 |
|
|
|
|
£’000 |
£’000 |
|
Bank facility |
|
|
8,400 |
5,610 |
|
Overdraft |
|
|
694 |
– |
|
Gross borrowings |
|
a |
9,094 |
5,610 |
|
Net assets |
|
b |
219,021 |
252,176 |
|
Gross gearing |
|
c = a/b |
4.2% |
2.2% |
Net Gearing or Net Cash (APM)
Net gearing reflects the amount of net borrowings invested, i.e.
borrowings less cash and cash equivalents (incl. investments in
money market funds). It is based on net borrowings as a percentage
of net assets. Net cash reflects the net exposure to cash and cash
equivalents, as a percentage of net assets, after any offset
against total borrowings.
|
|
|
|
At 31
October |
At 30 April |
|
|
|
|
2022 |
2022 |
|
|
|
|
£’000 |
£’000 |
|
Bank facility |
|
|
8,400 |
5,610 |
|
Overdraft |
|
|
694 |
– |
|
Less: cash and cash
equivalents including margin |
|
|
(1,303) |
(738) |
|
Less: Invesco Liquidity
Fund – US Dollar (money market fund) |
|
|
– |
(846) |
|
Net borrowings |
|
a |
7,791 |
4,026 |
|
Net assets |
|
b |
219,021 |
252,176 |
|
Net gearing |
|
c = a/b |
3.6% |
1.6% |
Leverage
Leverage, for the purposes of the Alternative Investment Fund
Managers Directive (‘AIFMD’), is not synonymous with gearing as
defined above. In addition to borrowings, it encompasses anything
that increases the Company’s exposure, including foreign currency
and exposure gained through derivatives. Leverage expresses the
Company’s exposure as a ratio of the Company’s net asset value.
Accordingly, if a Company’s exposure was equal to its net assets it
would have leverage of 100%. Two methods of calculating such
exposure are set out in the AIFMD, gross and commitment. Under the
gross method, exposure represents the aggregate of all the
Company’s exposures other than cash balances held in base currency
and without any offsetting. The commitment method takes into
account hedging and other netting arrangements designed to limit
risk, offsetting them against the underlying exposure.
Net Asset Value (NAV)
Also described as shareholders’ funds, the NAV is the value of
total assets less liabilities. The NAV per share is calculated by
dividing the net asset value by the number of ordinary shares in
issue. The number of ordinary shares for this purpose excludes
those ordinary shares held in treasury.
Portfolio Beta
The portfolio beta is a measure of the portfolio’s sensitivity
to market movements. The beta of the market is 1.00 by definition.
A beta of 1.10 shows that the portfolio is predicted to perform 10%
better than its benchmark index in rising markets and 10% worse in
falling markets, assuming all other factors remain constant.
Conversely, a beta of 0.90 indicates that the portfolio is expected
to perform 10% worse than the benchmark index during rising markets
and 10% better during falling markets. The beta of the Company’s
portfolio was 1.11 as at 31 October
2022.
Return
The return generated in a period from the investments including
the increase and decrease in the value of investments over time and
the income received.
Capital Return
Reflects the return on NAV, from the increase and decrease in
the value of investments, but excluding any dividends
reinvested.
Total Return
Total return is the theoretical return to shareholders that
measures the combined effect of any dividends paid, together with
the rise or fall in the share price or net asset value per share.
In this half-yearly financial report these return figures have been
sourced from Refinitiv who calculate returns on an industry
comparative basis.
Net Asset Value Total Return (APM)
Total return on net asset value per share, assuming dividends
paid by the Company were reinvested into the shares of the Company
at the NAV per share at the time the shares were quoted
ex-dividend.
Share Price Total Return (APM)
Total return to shareholders, on a mid-market price basis,
assuming all dividends received were reinvested, without
transaction costs, into the shares of the Company at the time the
shares were quoted ex-dividend.
|
|
|
|
Net Asset |
Share |
|
Six Months Ended 31
October 2022 |
|
|
Value |
Price |
|
As at 31 October
2022 |
|
|
327.62p |
281.00p |
|
As at 30 April
2022 |
|
|
377.21p |
332.50p |
|
Change in period |
|
a |
–13.1% |
–15.5% |
|
Impact of dividend
reinvestments(1) |
|
b |
0.0% |
0.0% |
|
Total return for the
period |
|
c = a+b |
–13.1% |
–15.5% |
|
|
|
|
Net Asset |
Share |
|
Year Ended at 30
April 2022 |
|
|
Value |
Price |
|
As at 30 April
2022 |
|
|
377.21p |
332.50p |
|
As at 30 April
2021 |
|
|
420.70p |
386.00p |
|
Change in year |
|
a |
–10.3% |
–13.9% |
|
Impact of dividend
reinvestments(1) |
|
b |
3.6% |
3.9% |
|
Total return for the
year |
|
c = a+b |
–6.7% |
–10.0% |
(1) No dividends have been paid during six
months to 31 October 2022 (year to
30 April 2022: 15.30p). NAV or share
price movements subsequent to the reinvestment date further impact
the returns, rising if the NAV or share price rises and falling if
the NAV or share price falls.
Benchmark
The benchmark of the Company is the MSCI AC Asia ex Japan Index
(total return, net of withholding tax, in sterling terms). Total
return on the benchmark is on a mid-market value basis, assuming
all dividends received were reinvested, without transaction costs,
into the shares of the underlying companies at the time the shares
were quoted ex-dividend.