TIDMIAT
LEGAL ENTITY IDENTIFIER: 549300YM9USHRKIET173
Invesco Asia Trust plc
Annual Financial Report Announcement for the Year Ended 30 April 2023
The following text is extracted from the Annual Financial Report of the Company
for the year ended 30 April 2023. All page numbers below refer to the Annual
Financial Report which will be made available on the Company's website.
This announcement contains regulated information.
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)
Total Return Statistics(1) with dividends reinvested
Change for the year (%) 2023 2022
Net asset value (NAV) total return(2) 1.3 -6.7
Share price total return(2) 1.2 -10.0
Benchmark index total return(3) -6.0 -12.9
Capital Statistics
At 30 April 2023 2022 change %
Net assets (£'000) 245,004 252,176 -2.8
NAV per share 366.48p 377.21p -2.8
Share price(1) 321.00p 332.50p -3.5
Benchmark index (capital) 938.42 1,023.11 -8.3
Discount(2) per ordinary share: (12.4)% (11.9)%
Average discount over the year(1)(2) (11.6)% (9.5)%
Gearing(2):
- gross 5.9% 2.2%
- net 5.3% 1.6%
Revenue Statistics
Year Ended 30 April 2023 2022 change %
Income (£'000) 7,601 6,228 +22.0
Net revenue available for ordinary shares (£'000) 5,596 4,469 +25.2
Revenue return per ordinary share 8.37p 6.68p +25.3
Dividends per share(4):
- first interim 7.20p 7.70p
- second interim 7.60p 7.60p
Total dividends 14.80p 15.30p -3.3
Ongoing charges ratio(2) 0.99% 0.97%
(1)Source: Refinitiv.
(2)Alternative Performance Measure (APM). See Glossary of Terms and Alternative
Performance Measures on pages 78 to 80 of the financial report for details of
the explanation and reconciliations of APMs.
(3) Index returns are shown on a total return basis, with dividends reinvested
net of withholding taxes.
(4) The Company's dividend policy 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
·Strong relative performance over 1, 3, 5 and 10 years.
·Investment Style: "Valuation not value".
·The next period is quite likely to prove to be avery attractive long-term
opportunity for shareholders. We have not been buying back shares recently
because we do not want to stand in their way.
I am pleased to report a strong second half to the Company's year both in
absolute and relative terms. NAV total return was +16.6% over the six months to
30April 2023, your share price total return was +19.7% whereas the MSCI AC Asia
ex-Japan Index total return was +11.0% (all figures in Sterling terms).
For the full year to 30 April 2023, this brings NAV total return back into
positive territory at +1.3% with the share price total return at +1.2%, both
outperforming the Index total return of -6.0%.
Attribution numbers show that the year's outperformance came once again mainly
from stock selection. Ian Hargreaves and Fiona Yang review performance in more
detail in their Portfolio Managers' Report.
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 compelling
investment case and a strong corporate proposition at the same time.
The Investment Case
The Investment Case rests on accessing the attractions of Asian equity markets
through the institutional expertise of IanHargreaves' team at Invesco. The Co
-Portfolio Managers, supported by a well-resourced Asian dedicated team, work
very closely on our portfolio and engage with our shareholders and potential
investors. Their investment process can be summarised as "valuation not value"
and has been very successful with institutional clients 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. The team have
delivered very strong performance relative to the benchmark for shareholders
over 1, 3, 5 and 10 years, as shown in the table below.
Like many professional consultants and shareholders, we, as fully independent
non-executive directors, look for talented stock pickers, a robust process and
consistent outperformance in our investment manager. We believe we have all
three in Ian, Fiona and the team at Invesco.
Annualised Total Return in Sterling Terms to 30 April 2023(1)(2)
1 3 5 10
year years years years
Net Asset Value % 1.3 13.9 6.0 10.0
Benchmark % -6.0 3.3 1.3 5.2
(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 MSCIAC Asia Pacific ex Japan Index (both indices
total return, net of withholding tax, in sterling terms). The benchmark
performance used throughout this report uses the former index for periods prior
to 1 May 2015.
The 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 shareholders as a whole. The intention is that the gains 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 is due in 2025.
2.Enhanced dividend policy: 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 2.0% 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. This means that the two interim dividends
will not be subject to a resolution at the Annual General Meeting (AGM) but that
the distribution policy as a whole will be put to shareholders at each AGM. For
the year ended 30 April 2023, the first interim dividend of 7.20p was paid to
shareholders on 24 November 2022 and a second interim dividend of 7.60p was paid
to shareholders on 25 April 2023. This gave a total distribution of
approximately 4.0% of NAV over the year and represents a 4.6% dividend yield on
the closing share price on 30 April 2023. Please note that the policy of paying
out approximately 4.0% of NAV means that dividend payments will not necessarily
increase every year.
3.Performance Conditional Tender: We introduced a performance conditional tender
offer in August 2020 through which the Board has undertaken to effect a tender
offer for up to 25.0% of the Company's issued share capital at a discount of
2.0% 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.
We are now three years through this five-year period over which the performance
of the Company will be assessed: On an annualised basis, the Company's NAV is up
by 13.9%per annum (p.a.) over the three years while the index is up by 3.3%p.a.
4.Environmental, Social and Governance Matters (ESG): The Board recognises the
importance of ESG considerations in delivering value to shareholders and the
Manager's approach is explained in detail later in this report. We continue to
monitor closely developments in this space and, noting the growing public
discourse on climate change, we have asked the Manager to highlight examples of
holdings in companies that are helping facilitate the journey towards Net Zero
Alignment (NZA). The Manager has the resources to assess the risks and
opportunities which may result from accelerating ESG-driven change. Invesco'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 signatory of the Financial Reporting Council's Stewardship Code and
is an active member of the UK Sustainable Investment and Finance Association
which guides the Portfolio Managers' investment approach for the portfolio. In
addition, the Manager scored four stars for its Investment & Stewardship Policy
under newscoring methodology produced by United Nations Principles for
Responsible Investment (PRI). This followed fiveconsecutive years of achieving
an A+ rating for responsible investment (Strategy & Governance) under the
previous methodology. The Manager is a supporter of the Task Force for Climate
Related Financial Disclosure (TCFD) since 2019 and published its third iteration
of its TCFD-aligned Climate Change Report in 2022.
As well as monitoring at each board meeting the Manager's assessment of ESG
considerations on individual stock decisions, the Board looks at various
indicators of overall ESG progress. We do not expect every indicator to travel
in the favoured direction in every period: the portfolio will change as will the
measurements. Some factors will have their priorities reassessed over time, for
example products with a military use may have been negatively assessed in the
past but when reconsidering the social factor of security in the light of the
Russian invasion of Ukraine, will now be assessed more favourably. Despite these
challenges, we should be able to see progress for many indicators over longer
time periods. For example, in the year just ended the Manager engaged with 54 of
the 56 portfolio holdings, voting against management resolutions for 38 of them.
The Manager met a total of 342companies over the year, engaging with ESG issues
on 255 of them. A year ago, the Company held 28companies that had not yet set a
net zero target. Now that number is down to 23 which is due in part to active
engagement with these companies by Invesco. Finally, the number of women on
investee company boards has been increasing.
5.Access to Invesco Expertise: Ian Hargreaves is Invesco's lead portfolio
manager of Asian accounts for institutional investors and manages over £4
billion of institutional assets (as at 30 June 2023). Fiona Yang is proving to
be a rising star in the Invesco Team contributing from her base in Singapore.
Invesco Asia Trust plc is the only vehicle available to UK retail investors who
wish to access their track record. They manage it with a high degree of
commonality to their institutional portfolios although they also add the best
smaller company opportunities.
6.Engaging more individual shareholders: We are encouraged that an increasing
proportion of our shareholders are individuals, with the proportion of investors
who hold shares of Invesco Asia Trust plc via execution-only platforms once
again increasing. 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 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 ofprofessional investors. Please visit our homepage
www.invesco.co.uk/invescoasia where you can also find presentations, read
updates or register to receive printed copies of the Half-Yearly and Annual
Financial Reports. Youcan also see third party research (by Kepler Partners) and
monthly factsheets on the Company's website. Shareholders can also contact us by
email at investmenttrusts@invesco.com.
7.Meeting the Directors and Portfolio Managers: One of the main attractions of
owning an investment trust over a unit trust or open-ended investment company
(OEIC) is that all shareholders have the opportunity of meeting the Directors
and the Portfolio Managers every year at the AGM. This year's meeting will be
held in person at Invesco's London office at 12pm on Thursday 21 September 2023.
As well as the Company's formal business, there will be a presentation from Ian
and Fiona, the opportunity to ask questions to the Portfolio Managers and
Directors and then to chat informally with all of us afterwards over lunch.
Shareholders may bring a guest to these meetings. For me this is one of the
highlights of being Chairman and I look forward to meeting as many of you as
possible. For those unable to make it in person, we will record a special
version of the presentation and post it onto our website after the AGM.
Shareholders wishing to lodge questions in advance of the AGM should do so by
email to the Company Secretary at investmenttrusts@invesco.com or, by letter, to
43-45Portman Square, London W1H 6LY.
8.Ongoing Charges and Fees: As a Board we are responsible for managing the level
of charges to shareholders. Our intention is to seek to reduce gradually the
level of ongoing charges over time. The main component of the 0.99%p.a. ongoing
charge is the investment management fee paid to Invesco. The investment
management fee is 0.75% on assets up to £250 million reducing to 0.65% on net
assets over this amount.
9.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
gearing of 5.3% having started the year at 1.6%.
10.Directors' Shareholdings: Institutional investors often follow and ask for
information on Directors' holdings of shares in the Company. These are shown in
the Directors' Remuneration Report in the Annual Financial Report and we are
required to notify any changes to the stock market by regulatory announcement.
Additionally, our Portfolio Managers, Ian and Fiona, are both shareholders in
the Company and we can confirm that their remuneration by the Manager is partly
determined by the performance of the Company.
11.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.
Update
As at the latest practicable date prior to the publication of this report, being
24 July 2023, the NAV total return was -0.2%, underperforming the index total
return of 0.8%. The share price total return was 4.1%, with the discount
narrowing to 8.7%.
Outlook
After a big fall in the first half of the Company's financial year and a big
rise in the second half, we are back to where we were a year ago. Some concerns
remain: relations between China and the US have been strained and are still
adjusting to a new normal. US interest rates have risen and are expected to rise
further. Yet some factors have improved: Asia and China in particular seem to
have escaped Covid-19 without the pain that was expected at the beginning of
last winter. Asian economies have proved robust in the absence of the inflation
problems that have plagued the West and the UK in particular. Corporate earnings
have rebounded which means that markets today are trading at valuations that are
much more attractive than a year ago. As Ian and Fiona argue, valuations such as
these have historically proven to be attractive entry points, even when
geopolitical or macroeconomic conditions might have suggested otherwise.
This is one of the main reasons why the Company has not undertaken any share
buybacks in the last year even though the average discount of the share price to
net asset value was higher than the Board's tolerance at 11.6%. 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 prove to be a very attractive long-term opportunity for shareholders. We
simply do not want to stand in their way.
Neil Rogan
Chairman
25 July 2023
Portfolio Managers' Report Q&A
Portfolio Manager
Ian Hargreaves is Co-Head of the Asian & Emerging Markets Equities team which
manages pan-Asian portfolios and covers the entire Asian region. He has led this
team as Co-Head since 2018. 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, up until the appointment of
Fiona Yang as Co-Portfolio Manager in January 2022.
Portfolio Manager
Fiona Yang was appointed Co-Portfolio Manager of Invesco Asia Trust plc in
January 2022 and is a member of the Henley-based Asian & Emerging Markets
Equities team. In February 2022, Fiona moved to Invesco's Singapore office and
remains an integral part of the Henley-based team. Fiona started her career with
Goldman Sachs in July 2012 and became a member of their Asian Equity sales team
as a China product specialist. She joined Invesco in August 2017. Fiona is also
the fund manager on the Invesco Asian Equity Income Fund (UK) and provides stock
and sector researchcovering the wider Asia ex-Japan region with a focus on China
H and A share markets.
QHow has the Company performed in the year under review?
AThe Company's net asset valuegrew by 1.3% (total return, in sterling terms)
over the twelve months to 30 April 2023, which compares to the benchmark MSCI AC
Asia ex Japan index return of -6.0%.
A small positive return for the portfolio over the year feels like a good
result. Markets have been volatile, and although they have rebounded strongly
from their October lows, buoyed by some admittedly short-lived optimism
surrounding China's reopening, the benchmark index against which we measure
performance has notrecovered its lost ground and evidences the changing market
conditions. Continued outperformance can be attributed to strong stock selection
across different countries and sectors. Having a balanced portfolio has also
helped, and we have remained active, seeking out new opportunities to invest in
companies that are worth more than the market believes.
Geopolitical uncertainty remains a significant overhang, with the ongoing Russia
-Ukraine conflict and resurfacing US-China tensions. Markets have also had to
contend with the collapse of Credit Suisse and the failure of some US regional
banks, who were caught off guard by the pace of Federal Reserve tightening. The
risk of developed markets entering recession lingers, but China's reopening is a
potential offset and domestic macro conditions in Asia remain largely stable.
QWhat have been the biggest contributors?
AIndia's economy is enjoying abroad-based recovery, andholdings in ICICI Bank
and Housing Development Finance Corporation (HDFC) made a significant
contribution, supported by a benign credit cycle and a pick-up in growth across
business lines. Engineering and construction conglomerate Larsen & Toubro and
Mahindra & Mahindra (auto manufacturer) also made strong gains.
Stock selection in financials elsewhere added value, with United Overseas Bank
in Singapore and PT Bank Negara Indonesia Persero outperforming, as did
insurers, particularly QBE Insurance which is enjoying a turnaround in
profitability.
China reopening acted as a positive catalyst for consumer-related stocks such as
Gree Electrical Appliances, Sands China, Beijing Capital International Airport
and Samsonite International. In Korea, steel manufacturer POSCO was buoyed by
the China reopening trade and the improved outlook for battery supply chain
companies (given its lithium business), which also benefitted LG Chemical.
QAnd detractors?
AJD.com was the biggest singledetractor amidst concerns overcompetitive
pressures in e-commerce as revenue growth slows. Alibaba has been similarly
impacted, with valuations for both having derated to such an extent that the
market does not appear to share our belief that earnings will start to show
signs of improvement.
Property-related companies in China underperformed, with China Overseas Land and
Investment and A-Living Smart CityServices lagging the broader marketrebound.
Dongfeng Motor also disappointed, although we have now sold this position, with
the car company's outlook challenged by the strength of competition in China's
electric vehicle (EV) market, an area of the market they are losing ground in
with joint venture partners Nissan and Honda.
Finally, Kasikornbank a leading Thai bank, has underperformed due to asset
quality concerns, but the bank has been cleaning-up its balance sheet and is
well positioned to benefit from a recovery in tourism, which should help improve
the outlook for growth and core bank profitability.
QHas your view on China changed at all?
AChina's reopening has resulted in a robust recovery in consumer demand, but
economic data has been mixed as expansion in the services sector is not yet
feeding through into other areas. Lingering concern over the strength of a
cyclical recovery appears to be feeding back into markets, which continue to
struggle with US/China tensions. Recent suggestions that regular direct
communication between the US and China might be resumed would be constructive
and help markets better price the equity risk premium for China. Policy settings
remain supportive and although this is not a typical cycle, we would expect
confidence to return to more cyclical areas of the economy in due course.
We believe the current mix of macro, regulatory and geopolitical concerns leave
valuations at overly discounted levels, providing attractive opportunities to
add exposure to quality growth names that appear cheap relative to their
history. As well as adding to existing holdings that we like, we have
introduced: dairy producer Yili, which has an improving branding and consumer
service capability that is likely to drive sales growth and support a recovery
in earnings over the medium term; and Will Semiconductor, a company which
principally engages in the research and development, design and sales of
semiconductor devices. The company was impacted by a downturn in the Chinese
smartphone cycle, but has a more positive growth outlook further out which is
supported by drivers such as auto contact image sensor (CIS) where it has 40%
market share.
QAre you more positive on tech?
AIn our half-year report, we noted that valuations appeared more reasonable,
particularly in the memory semiconductor market that is going through a sharp
downturn. Given that these downcycles tend to be relatively short in duration,
we feel that an inflexion point is inevitable at some stage in our investment
horizon, with capital expenditure (capex) cuts from weak players an encouraging
signal on that front.
Having already added to Samsung Electronics, we introduced SK Hynix, the second
biggest memory company globally. We also added slightly to other existing
semiconductor and tech hardware names on weakness, with the portfolio now having
a slight overweight position in the IT sector.
Sector performance has picked up year-to-date, benefitting from some excitement
around the launch of generative AI models such as ChatGPT, which are likely to
be revolutionary for the tech industry, allowing machines to understand natural
language and converse with us like humans. Strong demand for additional
computing power and AI servers makes us increasingly confident on the structural
outlook of several portfolio companies, particularly Taiwan Semiconductor
Manufacturing (TSMC) as the main fabricator of AI chips.
QHow are geopolitics and supply-chain changes affecting the sector?
AWhat some call `de-globalisation', and the Chinese call `dual circulation' is
already underway, and these trends are likely to continue as multinational
companies around the world seek greater supply chain resilience, with support
from governments looking to shield their economies from global volatility and
promote self-reliance. The US CHIPS and Science Act is likely to see greater
semiconductor capacity based out of the US and its associated ecosystem.
Meanwhile, US export controls seek to curtail China's access to advanced
semiconductor technology, slowing its development in quantum computing and
artificial intelligence. However, China continues to invest heavily in these
fields, in the hope that domestic innovation helps them remain competitive.
These trends have already caused disruption, but policy is unlikely to challenge
the systemic importance of key semiconductor technology providers like Samsung
Electronics and TSMC. While China's semiconductor industry faces increasing
technology constraints, a company like SK Hynix could benefit as competitive
pressures from China ease. It is important to stress that this remains a fluid
situation, which we continue to monitor closely. Further risks lie ahead, as do
opportunities, making stock picking imperative.
QIs increased exposure to Korea solely tech-related?
ASouth Korea continues to be the cheapest market in Asia, even after a strong
start to the year. We increasingly feel that the `Korea discount' overstates
corporate governance concerns, geopolitical risk and the cyclical nature of its
economy. We believe that this is an opportunity to own operationally solid
companies, with good balance sheets, and an ability and desire to improve
shareholder returns over time - a trend we already see evidence of (see chart in
the Annual Financial Report).
This biggest driver of position changes is conviction in the undervaluation of
the stocks we are adding to. As well as the memory chip companies mentioned
above, we have added to existing holdings such as: LG Chemical, the largest
maker of EV batteries outside China; and LG Household & Health Care, a consumer
goods company that manages cosmetics, household products and beverages brands.
The portfolio also has exposure to leading franchises across a variety of
sectors including an insurer, and manufacturers of autos and steel products.
QWhat opportunities have you found in Vietnam?
AHistorically, low levels of liquidity and relatively expensive valuations have
deterred us from investing in Vietnam. The market had a tough year in 2022 and
the near-term outlook is challenging. The property market has been hit by a
liquidity crunch, which has ramifications for the banks. Consumer spending has
been impacted by faltering exports growth, high mortgage rates and losses for
investors in domestics stocks and bonds. Finally, the near-term outlook for
earnings is lacklustre as the domestic economy appears to be in a period of
consolidation. However, with valuations having fallen to trough levels, we felt
the market was reflecting an overly pessimistic outlook and that there were
likely to be some attractive opportunities.
Vietnam's structural growth drivers remain intact. Foreign direct investment in
2022 was a record US$22.5 billion (5.5% of GDP), with multinationals such as
Apple and Boeing following Samsung Electronics, which already produces most of
its handsets in the country. As others follow, the improved infrastructure,
logistics and clustering of supply-chains should help to create a virtuous
cycle. Meanwhile, 37 million people are expected to join the middle class by
2030, which in turn is supporting rapid urbanisation.
We have introduced two new holdings. Vinamilk, the market-leading dairy company
generates strong free cash flow and offers a stable 5-6% dividend yield. While
near-term margins have been under pressure given milk powder price increases, we
expect to see a recovery in margins in 2023 as milk prices stabilise. Hoa Phat
is the largest steel producer in Vietnam, which has a significant cost and scale
advantage over smaller local competitors. Cyclical concerns are ultimately less
important than the potential for long-term steel demand growth, driven by both
property and infrastructure.
QHas your exposure to financials changed at all?
AThe portfolio continues to have significant exposure to financials, but we have
reduced position sizes in recent months, taking some profits from outperformers
such as PT Bank Negara Indonesia Persero, ICICI Bank, United Overseas Bank and
QBE Insurance. With portfolio performance having benefitted from a sensitivity
to rising interest rates, we have started to consider more closely areas of the
market that might benefit from an eventual easing of policy, such as real
estate.
The portfolio retains an underweight position in banks, with no holdings in
Chinese or Australian banks. We remain comfortable with exposure to banking
markets such as India and Indonesia, which have already undergone significant
credit downcycles in the last 5+ years. In our view this means greatly reduced
credit risk and importantly for the investment case the potential for good
credit growth ahead. This was demonstrated through Covid where bad debts were
low despite economic dislocations. The banks we own also feature high capital
ratios, low loan-to-deposit ratios and strong retail low-cost deposit bases.
Other significant themes within financials include long-term positive prospects
for the life insurance industry in China (AIA and Ping An Insurance), and a
turnaround in profitability for general insurers such as QBE Insurance and
Samsung Fire & Marine.
QFinal thoughts?
AChina's economy is reopening, with a robust recovery in consumer demand, but
its equity market continues to trade at a discount, even as fundamental
improvement in the outlook for corporate earnings mean there is scope for
positive surprises that would validate a re-rating. The rest of Asia should be a
relative beneficiary of China's reopening and as such may see less earnings
vulnerability from the global slowdown compared to many advanced economies, with
revisions beginning to improve.
Asian markets continue to trade at a significant discount to developed markets,
particularly the US. We believe there is scope for this to narrow, with US
dollar strength challenged by a potential recession in the US as the Fed seeks
to root out inflation. Inflationary pressures in Asia are less of a concern,
suggesting greater policy flexibility, which should also be supportive for
markets. Looking further ahead, US inflation might be stickier than expected,
but it is declining from a high base which could lead to an easing of financial
conditions at a time when Asia is enjoying a favourable growth differential.
Combined, we feel thismakes Asia an attractive place to be investing over the
medium-term, with divergence between countries and sectors providing good
opportunities for lucrative stock picking.
Ian Hargreaves & Fiona Yang
Portfolio Managers
25 July 2023
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. 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.
+--------------+------------------------------------+--------------------------+
|Category and |Mitigating Procedures and Controls |Risk trend during the year|
|Principal Risk| | |
|Description | | |
+--------------+------------------------------------+--------------------------+
|Strategic Risk |
+--------------+------------------------------------+--------------------------+
|Market Risk |The Company has a diversified |? Unchanged |
| |investment portfolio by country, | |
|The Company's |sector and stock. Due to its | |
|investments |investment trust structure, no | |
|are mainly |forced sales need to take place and | |
|traded on |investments can be held over a | |
|Asian and |longer term horizon. However, there | |
|Australasian |are few ways to mitigate absolute | |
|stock markets |market risk because it is engendered| |
|as well as the|by factors which are outside the | |
|UK. The |control of the Board and the | |
|principal risk|Manager. These factors include the | |
|for investors |general health of the world economy,| |
|in the Company|interest rates, inflation, | |
|is a |government policies, industry | |
|significant |conditions, and changing investor | |
|fall and/or a |demand and sentiment. Such factors | |
|prolonged |may give rise to high levels of | |
|period of |volatility in the prices of | |
|decline in |investments held by the Company. | |
|these markets.| | |
|This could be | | |
|triggered by | | |
|unfavourable | | |
|developments | | |
|within the | | |
|region or | | |
|events outside| | |
|it. | | |
+--------------+------------------------------------+--------------------------+
|Geopolitical |The Manager evaluates and assesses |? Increased |
|Risk |political risk as part of the stock | |
| |selection and asset allocation | |
|Political risk|policy which is monitored at every | |
|has always |Board meeting. This includes | |
|been a feature|political, military and diplomatic | |
|of investing |events and changes to legislation. | |
|in stock |Balancing political risk and reward | |
|markets and it|is an essential part of the active | |
|is |management process. | |
|particularly | | |
|so in Asia. | | |
|Wider | | |
|political | | |
|developments | | |
|in geographies| | |
|beyond Asia, | | |
|such as the US| | |
|and Ukraine, | | |
|can create | | |
|risks to the | | |
|value of the | | |
|Company's | | |
|assets. 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. | | |
+--------------+------------------------------------+--------------------------+
|Investment |The Board receives regular reports |?? Unchanged |
|Objectives and|reviewing the Company's investment | |
|Strategy |performance against its stated | |
| |objectives and peer group, and | |
|The Company's |reports from discussions with its | |
|investment |brokers and major shareholders. The | |
|objectives and|Board also has a separate annual | |
|strategy are |strategy meeting. | |
|no longer | | |
|meeting | | |
|investors' | | |
|demands. | | |
+--------------+------------------------------------+--------------------------+
|Widening |The Board receives regular reports |?? Increased |
|Discount |from both the Manager and the | |
| |Company's broker on the Company's | |
|A lack of |share price performance, level of | |
|liquidity |share price discount to NAV and | |
|and/or lack of|recent trading activity in the | |
|investor |Company's shares. The Board has | |
|interest in |introduced initiatives to help | |
|the Company's |address the Company's share rating | |
|shares leads |including a performance conditional | |
|to a depressed|tender in 2025 and the enhanced | |
|share price |dividend policy. It may seek to | |
|and a widening|reduce the volatility and absolute | |
|discount to |level of the share price discount to| |
|its NAV. |NAV for shareholders through buying | |
| |back shares within the stated limit.| |
|A persistently|The Board also receives regular | |
|high discount |reports on investor relation | |
|may lead to |meetings with shareholders and | |
|buybacks of |prospective investors and works to | |
|the Company's |ensure that the Company's investment| |
|shares and |proposition is actively marketed | |
|result in the |through relevant messaging across | |
|shrinkage of |many distribution channels. | |
|the Company. | | |
+--------------+------------------------------------+--------------------------+
|Performance |The Board regularly compares the |? Unchanged |
| |Company's NAV performance over both | |
|That the |the short and long term to that of | |
|Portfolio |the benchmark and peer group as well| |
|Managers |as reviewing the portfolio's | |
|consistently |performance against benchmark | |
|underperform |(attribution) and risk adjusted | |
|the benchmark |performance (volatility, beta, | |
|and/or peer |tracking error, Sharpe ratio) of the| |
|group over 3-5|Company and its peers. | |
|years. | | |
+--------------+------------------------------------+--------------------------+
|ESG including |ESG considerations are integrated as|? Increased |
|climate risk |part of the investment decision | |
| |-making in constructing the | |
|Risks |portfolio. Such investment decisions| |
|associated |include the transactions undertaken | |
|with climate |in the year, the review of active | |
|change and ESG|portfolio positions and | |
|considerations|consideration of the gearing | |
|could affect |position and, if applicable, | |
|the valuation |hedging. The Manager's process | |
|of the |around ESG is described in the ESG | |
|Company's |Monitoring and Engagement section on| |
|holdings. |pages 14 to 17. | |
+--------------+------------------------------------+--------------------------+
|Key Person |The appointment of Fiona Yang as Co |? Unchanged |
|Dependency |-Portfolio Manager has mitigated the| |
| |risk of key person dependency. Also,| |
|Either or both|the Portfolio Managers work within | |
|of the |and are supported by the wider | |
|Portfolio |Invesco Asian and Emerging Markets | |
|Managers (Ian |Equities team, with Ian Hargreaves | |
|Hargreaves and|and William Lam as Co-Heads of this | |
|Fiona Yang) |team. | |
|ceases to be | | |
|Portfolio | | |
|Manager or are| | |
|incapacitated | | |
|or otherwise | | |
|unavailable. | | |
+--------------+------------------------------------+--------------------------+
|Currency |With the exception of borrowings in |? Unchanged |
|Fluctuation |foreign currency, the Company does | |
|Risk |not normally hedge its currency | |
| |positions but may do so should the | |
|Exposure to |Portfolio Managers or the Board feel| |
|currency |this to be appropriate. Contracts | |
|fluctuation |are limited to currencies and | |
|risk |amounts commensurate with the asset | |
|negatively |exposure. The foreign currency | |
|impacts the |exposure of the Company is reviewed | |
|Company's NAV.|at Board meetings. | |
|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. | | |
+--------------+------------------------------------+--------------------------+
|Third Party |
|Service |
|Providers Risk |
+--------------+------------------------------------+--------------------------+
|Unsatisfactory|The Audit Committee closely monitors|? Unchanged |
|Performance of|the services provided by the Manager| |
|Third Party |and other TPPs. The details of how | |
|Service |effective internal control is | |
|Providers |assured are set out in the internal | |
| |control and risk management section | |
|Failure by any|on page 41. | |
|Third Party | | |
|Service | | |
|Provider (TPP)| | |
|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. | | |
+--------------+------------------------------------+--------------------------+
|Information |The Audit Committee receives regular|? Unchanged |
|Technology |updates on the Manager's information| |
|Resilience and|and cyber security. This includes | |
|Security |updates on the cyber security | |
| |framework, staff resource and | |
|The Company's |training, and the testing of its | |
|operational |security systems designed to protect| |
|structure |against a cyber security attack. | |
|means that all| | |
|cyber risk |As well as conducting a regular | |
|(information |review of TPPs audited service | |
|and physical |organisation control reports, the | |
|security) |Audit Committee monitors TPPs' | |
|arises at its |business continuity plans and | |
|TPP. This |testing including the TPPs' and | |
|cyber risk |Manager's regular `live' testing of | |
|includes |workplace recovery arrangements | |
|fraud, |should a cyber event occur. | |
|sabotage or | | |
|crime | | |
|perpetrated | | |
|against the | | |
|Company or any| | |
|of its TPPs. | | |
+--------------+------------------------------------+--------------------------+
|Operational |The Manager's business continuity |? Unchanged |
|Resilience |plans are reviewed on an ongoing | |
| |basis and the Directors are | |
|The Company's |satisfied that the Manager has in | |
|operational |place robust plans and | |
|capability |infrastructure to minimise the | |
|relies upon |impact on its operations so that the| |
|the ability of|Company can continue to trade, meet | |
|its TPPs to |regulatory obligations, report and | |
|continue |meet shareholder requirements. | |
|working | | |
|throughout the|The Manager has arrangements and | |
|disruption |prioritises between work deemed | |
|caused by a |necessary to be carried out on | |
|major event |business premises and work from home| |
|such as the |arrangements should it be necessary,| |
|Covid-19 |for instance due to further | |
|pandemic. |restrictions. Any meetings are held | |
| |in person, virtually or via | |
| |conference calls. Other similar | |
| |working arrangements are in place | |
| |for the Company's TPPs. The Audit | |
| |Committee receives regular update | |
| |reports from the Manager and TPPs on| |
| |business continuity processes. | |
+--------------+------------------------------------+--------------------------+
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
Managers in the running of the portfolio. The Company is required by its
Articles to have a vote on its future every threeyears, the next vote being at
the Annual General Meeting in 2025. The Directors remain confident in the
Company's Investment Case and Corporate Proposition, as detailed on pages7 to 9,
to deliver against the Company's investment objectives. On this basis and
notwithstanding the continuation vote in 2025, 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 pages23 to 25, 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, the ongoing conflict in Ukraine; the 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.
Investments in Order of Valuation
at 30 April 2023
Ordinary shares unless stated otherwise
?The sector group is based on MSCI and Standard & Poor's Global Industry
Classification Standard.
Market
Value % of
Company Sector? Country £'000 Portfolio
Taiwan Semiconductors and Taiwan 22,073 8.5
Semiconductor Semiconductor Equipment
Manufacturing
Samsung Electronics Technology Hardware and South Korea 16,551 6.4
Equipment
TencentR Media and Entertainment China 16,385 6.3
AlibabaR Consumer Discretionary China 10,344 4.0
Distribution and Retail
Housing Development Financial Services India 9,877 3.8
Finance Corporation
AIA Insurance Hong Kong 9,373 3.6
Gree Electrical Consumer Durables and China 7,045 2.7
AppliancesA Apparel
KasikornbankF Banks Thailand 6,680 2.6
Astra International Capital Goods Indonesia 6,606 2.6
Ping An InsuranceH Insurance China 6,353 2.5
Top Ten Holdings 111,287 43.0
LG Chemical Materials South Korea 6,313 2.5
SK Hynix Semiconductors and South Korea 6,123 2.4
Semiconductor Equipment
MINTH Automobiles and Hong Kong 5,357 2.1
Components
YiliA Food, Beverage and China 5,114 2.0
Tobacco
Aurobindo Pharma Pharmaceuticals, India 4,995 1.9
Biotechnology and Life
Sciences
JD.comR Consumer Discretionary China 4,575 1.8
Distribution and Retail
Shriram Transport Financial Services India 4,529 1.7
Finance
MingYang Smart Capital Goods China 4,521 1.7
EnergyA
Hyundai Motor - Automobiles and South Korea 4,346 1.7
preference shares Components
CK Asset Real Estate Management Hong Kong 4,283 1.7
and Development
Top Twenty Holdings 161,443 62.5
Beijing Capital Transportation China 4,258 1.6
International
AirportH
China Overseas Land Real Estate Management Hong Kong 4,085 1.6
and Investment and Development
Yue Yuen Industrial Consumer Durables and Hong Kong 3,886 1.5
Apparel
Samsung Fire & Insurance South Korea 3,883 1.5
Marine
Will SemiconductorA Semiconductors and China 3,773 1.5
Semiconductor Equipment
Newcrest Mining Materials Australia 3,702 1.4
ICICI Bank - ADR Banks India 3,622 1.4
NetEaseR Media and Entertainment China 3,608 1.4
LG Household & Household and Personal South Korea 3,503 1.4
Health Care Products
Largan Precision Technology Hardware and Taiwan 3,473 1.4
Equipment
Top Thirty Holdings 199,236 77.2
China MeiDong AutoR Consumer Discretionary China 3,422 1.3
Distribution and Retail
Suofeiya Home Consumer Durables and China 3,369 1.3
CollectionA Apparel
Vinamilk Food, Beverage and Vietnam 3,356 1.3
Tobacco
Uni-President Food, Beverage and Taiwan 3,273 1.3
Tobacco
Hansoh Pharmaceuticals, China 3,227 1.2
PharmaceuticalR Biotechnology and Life
Sciences
Larsen & Toubro Capital Goods India 3,212 1.2
ENN EnergyR Utilities China 3,123 1.2
Autohome - ADS Media and Entertainment China 3,080 1.2
Chroma ATE Technology Hardware and Taiwan 2,815 1.1
Equipment
Semen Indonesia Materials Indonesia 2,707 1.0
Top Forty Holdings 230,820 89.3
TingyiR Food, Beverage and China 2,559 1.0
Tobacco
Hoa Phat Materials Vietnam 2,399 0.9
QBE Insurance Insurance Australia 2,380 0.9
Worley Capital Goods Australia 2,345 0.9
POSCO Materials South Korea 2,274 0.9
China Capital Goods China 2,171 0.8
Communications
ServicesH
United Overseas Banks Singapore 2,167 0.8
Bank
JiumaojiuR Consumer Services China 2,040 0.8
MediaTek Semiconductors and Taiwan 2,012 0.8
Semiconductor Equipment
Mahindra & Mahindra Automobiles and India 1,656 0.6
Components
Top Fifty Holdings 252,823 97.7
China BlueChemicalH Materials China 1,593 0.6
PT Bank Negara Banks Indonesia 1,314 0.5
Indonesia Persero
Sands China Consumer Services Hong Kong 1,234 0.5
HKR International Real Estate Management Hong Kong 840 0.3
and Development
MeituanR Consumer Services China 633 0.2
A-Living Smart City Real Estate Management China 487 0.2
ServicesH and Development
Lime CoUQ Capital Goods South Korea 38 -
Total Holdings 57 258,962 100.0
(2022: 57)
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 USdollars.
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
2023 20221
Market Value % of Market Value % of
£'000 Portfolio £'000 Portfolio
Australia
Capital Goods 2,345 0.9 3,157 1.2
Insurance 2,380 0.9 5,702 2.2
Materials 3,702 1.4 2,082 0.8
8,427 3.2 10,941 4.2
China
Automobiles and - - 3,525 1.4
Components
Capital Goods 6,692 2.5 6,004 2.3
Consumer Discretionary 18,341 7.1 20,604 8.1
Distribution and Retail
Consumer Durables and 10,414 4.0 8,986 3.5
Apparel
Consumer Services 2,673 1.0 - -
Food, Beverage and 7,673 3.0 1,884 0.7
Tobacco
Insurance 6,353 2.5 5,374 2.1
Materials 1,593 0.6 2,531 1.0
Media and Entertainment 23,073 8.9 23,803 9.2
Pharmaceuticals, 3,227 1.2 1,801 0.7
Biotechnology and Life
Sciences
Real Estate Management 487 0.2 976 0.4
and Development
Semiconductors and 3,773 1.5 - -
Semiconductor Equipment
Transportation 4,258 1.6 1,726 0.7
Utilities 3,123 1.2 2,561 1.0
91,680 35.3 79,775 31.1
Hong Kong
Automobiles and 5,357 2.1 2,126 0.8
Components
Capital Goods - - 3,771 1.5
Consumer Durables and 3,886 1.5 5,262 2.0
Apparel
Consumer Services 1,234 0.5 2,371 0.9
Insurance 9,373 3.6 7,693 3.0
Real Estate Management 9,208 3.6 10,977 4.3
and Development
Transportation - - 1,409 0.5
29,058 11.3 33,609 13.0
India
Automobiles and 1,656 0.6 3,528 1.4
Components
Banks 3,622 1.4 8,622 3.4
Capital Goods 3,212 1.2 4,229 1.6
Financial Services 14,406 5.5 13,215 5.1
Pharmaceuticals, 4,995 1.9 4,830 1.9
Biotechnology and Life
Sciences
27,891 10.6 34,424 13.4
Indonesia
Banks 1,314 0.5 6,278 2.4
Capital Goods 6,606 2.6 10,848 4.3
Materials 2,707 1.0 - -
10,627 4.1 17,126 6.7
Ireland
Money Market Fund - - 846 0.3
- - 846 0.3
Singapore
Banks 2,167 0.8 5,661 2.2
Consumer Services - - 1,237 0.5
2,167 0.8 6,898 2.7
South Korea
Automobiles and 4,346 1.7 4,578 1.8
Components
Banks - - 1,710 0.7
Capital Goods 38 - 101 -
Energy - - 2,964 1.2
Household and Personal 3,503 1.4 - -
Products
Insurance 3,883 1.5 3,364 1.3
Materials 8,587 3.4 6,495 2.5
Semiconductors and 6,123 2.4 - -
Semiconductor Equipment
Technology Hardware and 16,551 6.4 15,242 6.0
Equipment
43,031 16.8 34,454 13.5
Taiwan
Food, Beverage and 3,273 1.3 4,416 1.7
Tobacco
Semiconductors and 24,085 9.3 19,499 7.7
Semiconductor Equipment
Technology Hardware and 6,288 2.5 9,707 3.8
Equipment
33,646 13.1 33,622 13.2
Thailand
Banks 6,680 2.6 4,991 1.9
6,680 2.6 4,991 1.9
Vietnam
Food, Beverage and 3,356 1.3 - -
Tobacco
Materials 2,399 0.9 - -
5,755 2.2 - -
Total 258,962 100.0 256,686 100.0
1 Restated to reflect 2023 MSCI Global Industry Classification Standard (GICS)
sector structure changes.
Statement of Directors' Responsibilities
IN RESPECT OF THE PREPARATION OF THE ANNUAL FINANCIAL REPORT AND THE FINANCIAL
STATEMENTS
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 have elected to prepare the financial
statements in accordance with UK accounting standards, and applicable law,
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 Act2006.
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.
We consider the Annual Financial Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess
the Company's position and performance, business model and strategy.
Signed on behalf of the Board of Directors
Neil Rogan
Chairman
25 July 2023
Income Statement
For the For the
Year Year
ended ended
30 30
April April
2023 2022
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Losses on 9 - (1,309) (1,309) - (20,854) (20,854)
investments held
at
fair value
Gains/(losses) - 625 625 - (178) (178)
on foreign
exchange
Income 2 7,601 51 7,652 6,228 62 6,290
Investment 3 (460) (1,381) (1,841) (484) (1,453) (1,937)
management fee
Other expenses 4 (681) (3) (684) (612) (5) (617)
Net return 6,460 (2,017) 4,443 5,132 (22,428) (17,296)
before finance
costs
and taxation
Finance costs 5 (108) (325) (433) (11) (33) (44)
Return on 6,352 (2,342) 4,010 5,121 (22,461) (17,340)
ordinary
activities
before taxation
Tax on ordinary 6 (756) (532) (1,288) (652) (855) (1,507)
activities
Return on 5,596 (2,874) 2,722 4,469 (23,316) (18,847)
ordinary
activities
after taxation
for the
financial
year
Return per 7 8.37p (4.30)p 4.07p 6.68p (34.87)p (28.19)p
ordinary share
Basic
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.
Statement of Changes in Equity
Capital
Share Redemption Special Capital Revenue
Capital Reserve Reserve Reserve(1) Reserve(1)
Total
Notes £'000 £'000 £'000 £'000 £'000
£'000
At Year ended 7,500 5,624 34,827 229,438 3,863
281,252
30 April 2021
Return on - - - (23,316) 4,469
(18,847)
ordinary
activities
Dividends paid 8 - - - (3,308) (6,921)
(10,229)
At Year ended 7,500 5,624 34,827 202,814 1,411
252,176
30 April 2022
Return on - - - (2,874) 5,596
2,722
ordinary
activities
Dividends paid 8 - - - (4,227) (5,667)
(9,894)
At Year ended 7,500 5,624 34,827 195,713 1,340
245,004
30 April 2023
(1) These reserves form the distributable reserves of the Company and may be
used to fund distributions by way of dividends.
Balance Sheet
At 30 April 2023 At 30 April 2022
Notes £'000 £'000
Fixed assets
Investments held at fair 9 258,962 256,686
value through profit or
loss
Current assets
Debtors 10 522 2,492
Cash and cash equivalents 1,337 738
1,859 3,230
Creditors: amounts falling
due within one year
Bank overdraft (740) -
Other Creditors 11 (14,261) (7,047)
(15,001) (7,047)
Net current liabilities (13,142) (3,817)
Total assets less current 245,820 252,869
liabilities
Provision for deferred tax 12 (816) (693)
liabilities
Net assets 245,004 252,176
Capital and reserves
Share capital 13 7,500 7,500
Other reserves:
Capital redemption reserve 14 5,624 5,624
Special reserve 14 34,827 34,827
Capital reserve 14 195,713 202,814
Revenue reserve 14 1,340 1,411
Total shareholders' funds 245,004 252,176
Net asset value per
ordinary share
Basic 15 366.48p 377.21p
The financial statements were approved and authorised for issue by the Board of
Directors on 25 July 2023.
Signed on behalf of the Board of Directors
Neil Rogan
Chairman
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, updated by the Association of Investment Companies in
July 2022 (`SORP'). The financial statements are prepared on a going concern
basis.
As an investment fund the Company has the option, which it has taken, not to
present a cash flow statement as the following conditions have been met:
·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
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 continuing uncertain economic outlook and other
geopolitical events 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,
including repayment of the bank facility;
·the net current liability position of the Company, after the deduction of drawn
-down borrowings, which will be met through the renewal of the existing credit
facility or the sale of investments in order to repay any 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 12 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
estimates 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.
Financial assets measured at amortised cost include cash, debtors and
prepayments.
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. There were no cash equivalents at the balance sheet
date.
(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. Special dividends representing a
return of capital are allocated to capital in the Income Statement and then
taken to capital reserves. Dividends will generally be recognised as revenue
however all special dividends will be reviewed, with consideration given to the
facts and circumstances of each case, including the reasons for the underlying
distribution, before a decision over whether allocation is to revenue or capital
is made. 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 taxable profit for the period.
Taxable profit differs from profit before tax as reported in the income
statement because it excludes items of income or expenses that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. 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 and the non-trade loan relationship deficit as the Company is unlikely
to have sufficient future taxable revenue to offset against these.
Gains and losses on sale of investments purchased and sold in India are liable
to capital gains tax in India.
At each year end date, a provision for Indian capital gains tax is calculated
based upon the Company's realised and unrealised gains and losses. There are two
rates of tax: short-term and long-term. The short-term rate of tax is applicable
to investments held for less than 12 months and the long-term rate of tax is
applicable to investments held for more than 12 months.
The provision for the Indian capital gains tax is recognised in the balance
sheet and the year-on-year movement in the deferred tax provision is recognised
in the income statement.
2.Income
This note shows the income generated from the portfolio (investment assets) of
the Company and income received from any other source.
2023 2022
£'000 £'000
Income from investments:
Overseas dividends 7,116 5,848
Overseas special dividends 470 380
Total dividend income 7,586 6,228
Other income:
Deposit interest 15 -
15 -
Total income 7,601 6,228
Special dividends of £51,000 were recognised in capital during the year (2022:
£62,000).
3.Investment Management Fee
This note shows the investment management fee due to the Manager which is
calculated and paid quarterly.
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 460 1,381 1,841 484 1,453 1,937
Details of the investment management and secretarial agreement are given on page
35 in the Directors' Report.
At 30 April 2023, £448,000 (2022: £461,000) 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.
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Directors' remuneration (i) 134 - 134 137 - 137
Auditor's fees (ii):
-for audit of the Company's 50 - 50 40 - 40
Annual Financial Statements
Other administration 497 3 500 435 5 440
expenses (iii)
681 3 684 612 5 617
(i) Directors' fees authorised by the Articles of Association are £200,000 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:
·£12,000 (2022: £13,000) of employer's National Insurance payable on Directors'
remuneration. As at 30 April 2023, the amounts outstanding on Directors'
remuneration was £10,000 (2022: £12,000); and the amount outstanding in respect
of employer's National Insurance was £1,000 (2022: £1,000).
·custodian transaction charges of £3,000 (2022: £5,000). 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 £118,000 (2022: £102,000) 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).
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Commitment fees 5 17 22 10 31 41
due on bank
facility
Interest on bank 99 298 397 1 2 3
facility
Overdraft interest 4 10 14 - - -
108 325 433 11 33 44
6.Taxation
As an investment trust the Company pays no UK corporation tax on capital gains.
The Company suffers no UK corporation tax on income arising on UK and certain
overseas dividends. The Company's tax charge arises from irrecoverable tax on
overseas (generally non-EU) dividends and Indian capital gains tax paid and
provided for.
(a)Tax charge
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Overseas tax 756 - 756 652 - 652
Indian capital gains tax - 409 409 - 162 162
- paid - note 6(d)
Indian capital gains tax - 123 123 - 693 693
- provision - note 6(d)
Tax charge for the year 756 532 1,288 652 855 1,507
The overseas tax charge consists of irrecoverable withholding tax.
(b)Reconciliation of total tax charge
2023 2022
£'000 £'000
Return on ordinary activities before 4,010 (17,340)
taxation
Theoretical tax at the current UK 782 (3,295)
Corporation Tax rate of 19.5% (2022:
19%)
Effects of:
- Non-taxable overseas dividends (1,425) (1,109)
- Non-taxable overseas special (64) (84)
dividends
- Losses on investments not subject 255 3,962
to UK corporation tax
- Non-taxable (gains)/losses on (122) 34
foreign exchange
- Excess of allowable expenses over 573 491
taxable income
- Disallowable expenses 1 1
- Overseas taxation 756 652
- Indian capital gains tax - paid 409 162
- Indian capital gains tax - 123 693
provision - see (d) below
Tax charge for the year 1,288 1,507
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 £28,016,000 (2022:
£25,486,000) and a non-trade loan relationship deficit of £1,220,000 (2022:
£803,000) giving total unutilised losses of £29,236,000 (2022: £26,289,000) that
are available to offset future taxable revenue.
A deferred tax asset of £7,309,000 (2022: £6,572,000) at 25% (2022: 25%) has not
been recognised in respect of these expenses since the Directors believe that
there will be no taxable profits in the future against which the deferred tax
assets can be offset.
The UK corporation tax rate increased from 19% to 25% from 1 April 2023.
Deferred tax assets and liabilities on balance sheets prepared after the
enactment of the new tax rate must therefore be re-measured accordingly, so as a
result the deferred tax asset has been calculated at 25%.
(d)Indian capital gains tax
Capital gains arising from equity investments in Indian companies are subject to
Indian Capital Gains Tax Regulations. Consequently, the Company is subject to
both short and long term capital gains tax in India on the growth in value of
its Indian equities.
Although this capital gains tax only becomes payable at the point at which the
underlying investments are sold and profits crystallised, the Company has made a
provision for this tax liability for the year ended 30 April 2023 of £816,000
(2022:£693,000). See note12 for further details.
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.
2023 2022
Pence £'000 Pence £'000
Return per ordinary share
is based on the following:
Revenue return after 8.37 5,596 6.68 4,469
taxation
Capital return after (4.30) (2,874) (34.87) (23,316)
taxation
Total return after 4.07 2,722 (28.19) (18,847)
taxation
2023 2022
£'000 £'000
Weighted average number of 66,853,287 66,853,287
ordinary shares in issue during
the year
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.
2023 2022
Pence £'000 Pence £'000
Dividends paid and recognised in the year:
First interim dividend paid 7.20 4,813 7.70 5,148
Second interim dividend paid 7.60 5,081 7.60 5,081
14.80 9,894 15.30 10,229
Set out above 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 £5,596,000 (2022: £4,469,000).
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.
2023 2022
£'000 £'000
Opening valuation 256,686 279,058
Movements in the year:
Purchases at cost 90,297 85,110
Sales (86,712) (86,628)
Losses on investments in the year (1,309) (20,854)
Closing valuation 258,962 256,686
Closing book cost 234,875 211,699
Closing investment holding gains 24,087 44,987
Closing valuation 258,962 256,686
The Company received £86,712,000 (2022: £86,628,000) from investments sold in
the year. The book cost of these investments when they were purchased was
£67,122,000 (2022: £71,069,000) realising a profit of £19,590,000 (2022:
£15,559,000) which when offset against the movement in closing investment
holding gains results in net losses on investments in the year of £1,309,000
(2022: net losses of £20,854,000). 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 £79,000 (2022:
£65,000) on purchases and £134,000 (2022: £119,000) 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.
2023 2022
£'000 £'000
Amounts due from brokers - 1,746
Overseas withholding tax recoverable 145 163
VAT recoverable 19 16
Prepayments and accrued income 358 567
522 2,492
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 bank facility allows the Company to drawdown, repay and re-draw loans.
2023 2022
£'000 £'000
Bank facility 13,593 5,610
Amounts due to brokers - 780
Accruals 668 657
14,261 7,047
The committed unsecured 364 day multi-currency revolving credit facility (the
`bank facility') with The Bank of New York Mellon, has an interest payable based
on the Adjusted Reference Rate (principally SOFR and SONIA respectively in
respect of loans drawn in USD and GBP) plus a margin for amounts drawn. Any
undrawn amounts under the bank facility attract a commitment fee of 0.2% (2022:
0.2%). The bank facility covenants are based on the lower of 25% of net asset
value and £20 million, renewable on 28 July 2023, and require total assets to
not fall below £80 million. At the year end, the bank facility drawn down was in
US dollars with a sterling equivalent of £13,593,000 (2022: £5,610,000).
12.Provision for deferred tax liabilities
The Company makes a deferred tax provision when a potential obligation exists
that will probably have to settle in cash, but the amount is estimated and only
becomes payable at the point at which the underlying investments are sold and
profits crystallised.
2023 2022
£'000 £'000
Provision for deferred Indian capital gains tax 816 693
816 693
13.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 36 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
2023 2022
£'000 £'000
Share capital:
Ordinary shares of 10p each 6,685 6,685
Treasury shares of 10p each 815 815
7,500 7,500
(b)Share movements
2023 2022
Ordinary Treasury Ordinary Treasury
number number number number
Number at start of year 66,853,287 8,146,594 66,853,287 8,146,594
Number at the end of the year 66,853,287 8,146,594 66,853,287 8,146,594
During the year the Company has not bought back any shares into treasury (2022:
nil 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.
14.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.
15.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 as at the reporting date.
The net asset values attributable to each share in accordance with the Company's
Articles are set out below.
2023 2022
Ordinary shareholders' funds £245,004,000 £252,176,000
Number of ordinary shares in 66,853,287 66,853,287
issue, excluding treasury
shares
Net asset value per ordinary 366.48p 377.21p
share
There is no dilution in this or the prior year and therefore no diluted net
asset value per ordinary share has been disclosed.
16.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 page20. 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 and
emerging 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 asto 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 areduction 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.
16.1Market 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 (16.1.1), interest rate risk
(16.1.2) and other price risk (16.1.3).
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 page41. Borrowing is used to enhance returns; however,
this will also increase the Company's exposure to market risk and volatility.
16.1.1 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 Managers 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 2023
Foreign Investments
Debtors Creditors currency at fair
(due from (due to exposure value
Total
net
brokers Cash and Overdrafts brokers on net through
foreign
and cash and bank and monetary profit
currency
dividends) equivalents facility accruals) items or loss
exposure
Currency £'000 £'000 £'000 £'000 £'000 £'000
£'000
Australian - - - - - 8,427
8,427
dollar
Chinese - - - - - 23,822
23,822
yuan
Hong Kong - - - - - 93,836
93,836
dollar
Indian - - - - - 24,269
24,269
rupee
Indonesian - - - - - 10,627
10,627
rupiah
Singapore 58 - - - 58 2,167
2,225
dollar
South 124 - - - 124 43,031
43,155
Korean won
Taiwan 145 345 - - 490 33,646
34,136
dollar
Thai baht 151 - - - 151 6,680
6,831
US dollar - 845 (14,333) - (13,488) 6,702
(6,786)
Vietnamese - - - - - 5,755
5,755
Dong
478 1,190 (14,333) - (12,665) 258,962
246,297
Year ended 30 April 2022
Foreign
Investments
Debtors Creditors currency at
fair
(due from (due to exposure value
Total net
brokers Cash and Overdrafts brokers on net
through foreign
and cash and bank and monetary
profit currency
dividends) equivalents facility accruals) items or
loss exposure
Currency £'000 £'000 £'000 £'000 £'000 £'000
£'000
Australian dollar - - - - -
10,941 10,941
Chinese yuan - - - - -
14,990 14,990
Hong Kong dollar 239 - - (7) 232
93,178 93,410
Indian rupee - - - - -
25,802 25,802
Indonesian rupiah 697 - - - 697
17,126 17,823
Singapore dollar 423 - - - 423 6,898
7,321
South Korean won 859 - - (773) 86
34,453 34,539
Taiwan dollar 163 227 - - 390
33,622 34,012
Thai baht 81 - - - 81 4,991
5,072
US dollar - 488 (5,610) - (5,122)
14,685 9,563
2,462 715 (5,610) (780) (3,213)
256,686 253,473
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:
2023 2022
Total Total
Revenue Capital loss Revenue Capital loss
return return after tax return return after tax
£'000 £'000 £'000 £'000 £'000 £'000
Australian dollar (9) (219) (228) (4) (263) (267)
Chinese yuan (25) (572) (597) (22) (435) (457)
Hong Kong dollar (62) (3,097) (3,159) (32) (2,143) (2,175)
Indian rupee 19 (849) (830) 7 (387) (380)
Indonesian rupiah (11) (340) (351) (6) (446) (452)
Singapore dollar (5) (52) (57) (6) (137) (143)
South Korean won (24) (990) (1,014) (14) (447) (461)
Taiwan dollar (24) (748) (772) (22) (643) (665)
Thai baht (4) (147) (151) (2) (95) (97)
US dollar 434 (225) 209 (3) (239) (242)
Vietnamese Dong - (161) (161) - - -
289 (7,400) (7,111) (104) (5,235) (5,339)
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:
2023 2022
% %
£/Australian dollar +/-2.6 +/-2.4
£/Chinese yuan +/-2.4 +/-2.9
£/Hong Kong dollar +/-3.3 +/-2.3
£/Indian rupee +/-3.5 +/-1.5
£/Indonesian rupiah +/-3.2 +/-2.5
£/Singapore dollar +/-2.4 +/-1.9
£/South Korean won +/-2.3 +/-1.3
£/Taiwan dollar +/-2.2 +/-1.9
£/Thai baht +/-2.2 +/-1.9
£/US dollar +/-3.3 +/-2.5
£/Vietnamese Dong +/-2.8 -
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.
16.1.2 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 revolving credit facility (the `bank 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, US dollars with a sterling equivalent of
£13,593,000 of the bank facility was drawn down (2022: £5,610,000).
The Company also has available an uncommitted bank overdraft arrangement with
the custodian for settlement purposes. At the year end, there was a US dollar
overdraft with a sterling equivalent of £740,000 (2022: £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.
16.1.3 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 £25.9 million (2022:
£25.7 million) respectively.
16.2Liquidity 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.
16.3Credit 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 £1,337,000 (2022: £738,000) 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 (2022: £846,000).
17.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 atransaction 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 areasonable 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 pages29 and 30.
Except for one Level 2 and 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
totalling £252,244,000 (2022: £250,748,000).
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 year end there was one Level 2 investment held with a total fair
value of £6,680,000 (2022:£5,837,000), comprising of Kasikornbank, valued at
£6,680,000 (2022: £4,991,000) and in the prior year, Invesco Liquidity Funds -
US Dollar money market fund, valued at £nil (2022: £846,000).
There have been no other transfers or movements between fair value categories
during the year.
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 £38,000 using a price which was
in line with trades in the OTC market (2022: one investment: Lime Co. valued at
£101,000 based on prices of trades in the OTC market).
18.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 2023 was £258,597,000 (2022:
£257,786,000) comprising borrowings of £13,593,000 (2022: £5,610,000) and equity
share capital and other reserves of £245,004,000 (2022: £252,176,000).
The Company's total capital employed is managed to achieve the Company's
investment objective and investment policy as set out on page20. 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 and Emerging Risks and Uncertainties' section on pages23 to
25. 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.
19.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 2023 (2021: nil).
20.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 page46 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 page35, note3 and note 4(iii) to the financial statements.
21.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.
22.2023 Financial Information
The figures and financial information for the year ended 30 April 2023 are
extracted from the Company's annual financial statements for that year and do
not constitute statutory accounts. The Company's annual financial statements for
the year to 30 April 2023 have been audited but have not yet been delivered to
the Registrar of Companies. The Auditor's report on the 2023 annual financial
statements 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.
23.2022 Financial Information
The figures and financial information for the year ended 30 April 2022 are
compiled from an extract of the published accounts for that year and do not
constitute statutory accounts. Those accounts have been delivered to the
Registrar of Companies. The Auditor's report on the 2022 annual financial
statements 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.
24.Annual Financial Report
The Annual Report for the year-ended 30 April 2023 will be posted to
shareholders in August 2023 and will be available thereafter at
www.invesco.co.uk/invescoasia or from the Corporate Secretary at the Company's
correspondence address, 43-45 Portman Square, London W1H 6LY. A copy of the
Annual 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.
Notice of Annual General Meeting
THIS NOTICE OF ANNUAL GENERAL MEETING IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION. If you are in any doubt as to what action to take, you should consult
your stockbroker, solicitor, accountant or other appropriate independent
professional adviser authorised under the Financial Services and Markets Act
2000. If you have sold or otherwise transferred all your shares in Invesco Asia
Trust plc, please forward this document and the accompanying Form of Proxy to
the person through whom the sale or transfer was effected, for transmission to
the purchaser or transferee.
Notice is given that the Annual General Meeting of Invesco Asia Trust plc will
be held at 43-45 Portman Square, London W1H6LY, on 21September 2023 at 12pm 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 2023.
2.To approve the Company's Dividend Payment Policy. This is an advisory vote.
3.To approve the Directors' Remuneration Policy.
4.To approve the Annual Statement and Report on Remuneration for the year ended
30 April 2023.
5.To re-elect Neil Rogan as a Director of the Company.
6.To re-elect Vanessa Donegan as a Director of the Company.
7.To re-elect Myriam Madden as a Director of the Company.
8.To re-elect Sonya Rogerson as a Director of the Company.
9.To re-appoint KPMG LLP as auditor of the Company.
10.To authorise the Audit Committee to determine the remuneration of the
auditor.
Special Business
To consider and, if thought fit, pass the following resolutions of which
resolution 11 will be proposed as an ordinary resolution and resolutions 12 to
14 as special resolutions:
Authority to Allot Shares
11.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 25 July
2023, such authority to expire at the conclusion of the next Annual General
Meeting of the Company or the date 15months 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.
Disapplication of Pre-emption Rights
12.That:
subject to the passing of resolution number 11 set out in the notice of this
meeting (the `Section 551 Resolution') and in substitution for any existing
authority under sections 570 and573 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 25 July 2023 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 25 July 2023;
(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 14days.
Dated this 25 July 2023
By order of the Board
Invesco Asset Management Limited
Corporate Company Secretary
This information was brought to you by Cision http://news.cision.com
END
(END) Dow Jones Newswires
July 26, 2023 02:00 ET (06:00 GMT)
Grafico Azioni Invesco Asia (LSE:IAT)
Storico
Da Apr 2024 a Mag 2024
Grafico Azioni Invesco Asia (LSE:IAT)
Storico
Da Mag 2023 a Mag 2024
