Half-year Report

RNS Number : 9586N

Aberdeen Asian Income Fund Limited

14 August 2017

 

ABERDEEN ASIAN INCOME FUND LIMITED

Legal Entity Identifier: 549300U76MLZF5F8MN87

UNAUDITED HALF YEARLY REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2017

Interim Board Report - Chairman's Statement

Background

Your Company's net asset value ("NAV") returned 10.6% in sterling terms over the six months to 30 June 2017, underperforming the MSCI All Countries Asia Pacific ex Japan Index, which returned 14.1%. The Ordinary share price total return rose by 11.5% whilst the discount to NAV narrowed slightly to 7.6%. A notable development over the period was the stabilisation of growth in the Asian markets, following the volatility seen over the past few years. This has largely been driven by the technology sector, which tends to be characterised by high growth and low yields. The Company retains a balanced view on growth and income, focusing on those companies that boast strong balance sheets and cash flow generation to deliver a blend of sustainable income and capital appreciation.

Overview

Asian equities enjoyed a robust start to the year, shrugging off two US Federal Reserve rate hikes, uncertainty over Trump's stimulus plans, signs of impending monetary policy tightening in Europe and volatile oil prices. Despite Beijing's tightening, China outpaced the region after MSCI decided to add A-shares to its indexes and mainland internet stocks rallied even as the global technology rally faltered. Oil prices fell below US$44 a barrel, owing to record-high US output, though retreating commodity prices kept inflation at bay in Asia, with most central banks keeping interest rates unchanged. Asian investors focused instead on improvements in regional exports and global trade, signs of stabilisation in China and corporate earnings momentum.

Prior to this year, India maintained steady growth but the rest of Asia had faltered on concerns about a potential slowdown in the Chinese economy coupled with both softening consumer sentiment and corporate spending. However, the tides are beginning to turn in 2017, helped by improvements in the regional political environment and a domestic consumer base supported by favourable population demographics in the fast-growing Asian markets. Many of the stocks in your Company's underlying portfolio have been increasing their dividends on an absolute basis, despite this not being fully reflected in yields given the strength in share prices seen this year.

Performance Review

Your Company's NAV rose by 10.6% in sterling terms over the interim period, due to the focus on fundamentally solid businesses with robust balance sheets and good cash flow generation, both of which support your Company's dividend distribution. Against this, the MSCI AC Asia ex Japan index returned 14.1%, significantly skewed by the strength of internet stocks Tencent and Alibaba. These are high-growth companies trading at steep valuations that do not prioritise returning cash to investors, and are thus not held in this income orientated Company.

Whilst your Company does not invest in the Chinese internet stocks that do not pay good dividends, we have exposure to the technology sector via holdings in the hardware, semiconductors and electronics equipment space. Both Taiwan Semiconductor and Samsung Electronics have strong net cash balance sheets and run globally competitive semiconductor businesses which generate high margins and good free cash flows. The top stock contributor to your Company's relative performance this period has been Singapore-listed electronic equipment manufacturer and services provider Venture Corporation. Although a relatively small company with a market capitalisation of £2 billion, Venture has nurtured a global business based on its engineering capabilities, providing value-added products and services to a wide range of customers. Through innovation and cost controls, Venture maintains superior margins and good cash flow generation to support its dividend policy.

Stock selection in Singapore was particularly robust, as the three local lenders OCBC, UOB and DBS recovered after reporting better-than-expected results underpinned by higher fee income, better contributions from wealth management and insurance divisions, as well as growth in their regional operations. The improvements were reassuring in light of earlier concerns about deteriorating asset quality.

On the other hand, Australia was the weakest regional market, as low commodity prices and the risk of more bank levies hurt the largest segments of the economy. Both of your Company's diversified miners, Rio Tinto and South32, maintained their production guidance for the year and have relatively solid balance sheets to support their ongoing commitment to dividends. Meanwhile, property stocks were impacted as Australian bond yields tracked global yields higher. Viva Energy REIT suffered after it conducted an equity raising to fund the acquisition of eight new petrol station sites. However, it continues to have good long-term potential, boasting a high-quality tenant portfolio, long lease expiry profile, and a robust balance sheet with limited capital expenditure requirements. This allows it to maintain a healthy distribution policy. Similarly, shopping centre-focused Scentre Group is supported by quality assets, high levels of occupancy and long-term rental agreements.

Portfolio Activity

Turning to portfolio activity, your Manager utilised the Stock Connect trading system to introduce Shanghai-listed SAIC Motor Corporation, which has good product positioning on the mainland and generates substantial cash from its joint ventures with Volkswagen and General Motors. The resulting cash pile on its balance sheet has been used to boost its dividend payout policy, which has kept its yield above 5% despite a 30% increase in share price in local currency. A small position was also initiated in City Developments' non-redeemable convertible preference shares, which offer a 3.9% coupon and trade at a significant discount to intrinsic value with the possibility of conversion into discounted ordinary shares in the future. Your Manager has long followed the parent company and City Development's hospitality trust is already an underlying holding in your Company.

Against this, your Manager reduced exposure to UOB and OCBC on relative strength and exited Thailand's BEC World, on concerns that the company's strategic shift to digital could impact earnings and dividends during the transition. Bonds issued by industrial gases company Yingde were sold close to par at the start of the year, following an unconditional takeover bid from private equity firm PAG. After extensive engagement, your Manager agreed with the Yingde board that valuations based on PAG's cash offer were fair, given the company's current financial status and the challenging environment faced by Yingde's customers, which are primarily in the steel industry.

Dividends

On 11 July 2017, your Board declared a second quarterly interim dividend of 2.25p per Ordinary share in respect of the year ending 31 December 2017, which will be paid on 18 August 2017 to shareholders on the register on 21 July 2017.  The first two quarterly dividends, covering the six months to 30 June 2017 therefore total 4.5p (2016 - 4.0p). As indicated at the time of the earlier announcements, the Board is seeking to rebalance the four interim dividends and, in the absence of unforeseen circumstances, it is the Board's intention to declare four interim dividends of 2.25p per Ordinary share totalling 9.0p (2016: 8.75p) in respect of the year to 31 December 2017.

Your Manager took advantage of the volatile environment to add to quality companies at attractive valuations, and trim those that appeared overvalued, whilst improving the yield of the portfolio. Despite the environment, your Company's holdings are expected to maintain steady dividend yields, given their robust operating cash flows.

Gearing and Share Repurchases

On 13 April 2017 the Company entered into a new unsecured three year £40 million multi currency revolving facility agreement with Scotiabank (Ireland) Designated Activity Company (the "New Facility") which replaced a £30 million unsecured facility that matured at that time. Under the terms of the New Facility the Company also has the option to increase the level of the commitment from £40 million to £60 million at any time, subject to the identification by the Manager of suitable investment opportunities and Lender credit approval.The Company's total gearing at the period end amounted to the equivalent of £36.5 million or net gearing of 6.8% with £10m, HKD 213m and USD 7.2m drawn under the Company's facilities with Scotiabank.  The Company has not at present used the optional extra commitment but will continue to monitor opportunities in conjunction with the Manager.

Over the first half of the year, the Ordinary shares have continued to trade at a discount to the NAV and the Company has been very active in the market when the discount (excluding income) has exceeded 5% with a view to minimising volatility due to a widening discount. During the period under review, your Company bought in 2,768,000 shares for treasury.  Subsequent to the period end a further 470,000 Ordinary shares have been acquired for treasury. 

Directorate

As part of the Board's on-going succession planning, Andrey Berzins retired from the Board at the Annual General Meeting ("AGM") held in May 2017 and I would like to reiterate the Board's sincere appreciation to him for his service and significant contribution to the Company since its launch in November 2005.  I am pleased to report that Mark Florance has been appointed as an independent non executive Director with effect from 10 May 2017.  Mark is a Singapore Permanent Resident and brings to the Board over 25 years' experience in corporate finance, including mergers and acquisitions, equity and debt capital markets and debt restructuring in Asia.

Going forward I intend to retire from the Board at the conclusion of the 2018 AGM and the Nomination Committee is currently overseeing the search for a further non executive Director.  With effect from the conclusion of the 2018 AGM Charles Clarke has agreed to become Chairman of the Company.

Aberdeen Merger Update

The Board notes the completion of the merger between Aberdeen and Standard Life. The Board observes that the merger process has not created any issues to date for the Company but we shall continue to ensure that the management team remain focussed upon looking after the interests of the Company and its shareholders during the integration of the two businesses.

Outlook

Asian stockmarkets have made a sharp comeback since their relative sluggishness in the preceding period, buoyed by optimism about a worldwide economic recovery. Chinese demand remains closely watched given the influence on regional trade but there are also concerns about rising financial leverage in China as shadow banking activity shows little sign of abating. Political risks in the region continue to be a wild card while inflation in Asia could pick up if commodities recover.

Nevertheless, there are compelling reasons to remain invested in Asia. Population demographics and a rising middle class offer good potential for long-term growth. Many companies that had delayed capital expenditure on the back of the softened macroeconomic backdrop redirected their cash towards paying down debt obligations and strengthening balance sheets. We are beginning to see a trough in earnings downgrades in Asia and our holdings are starting to see a recovery in earnings. We remain positive for the longer term as Asia's contribution to global nominal GDP far outstrips Asia's representation in the world index, and dividend yield remains higher relative to the Western markets. Your Manager remains committed to achieving a balance between generating income and tapping into growth, by building and maintaining a portfolio of diverse businesses with solid balance sheets, robust fundamentals and the ability to pay sustainable dividends.

I look forward to reporting to you again with the Annual Report for the year to 31 December 2017, which will be issued in April 2018. In the meantime, shareholders can find regular updates from your Investment Manager, and copies of all Stock Exchange announcements on your Company's website asian-income.co.uk. Also on the website there are NAV and share price feeds which are updated on a daily basis.

Peter Arthur

Chairman

14 August 2017

Interim Board Report - Disclosures

Principal Risk Factors

The principal risks and uncertainties affecting the Company are set out in detail on page 10 of the Annual Report and Financial Statements for the year ended 31 December 2016 and have not changed.

The risks outlined below are those risks that the Directors considered at the date of this Half Yearly Report to be material but are not the only risks relating to the Company or its shares. If any of the adverse events described below actually occur, the Company's financial condition, performance and prospects and the price of its shares could be materially adversely affected and shareholders may lose all or part of their investment. Additional risks which were not known to the Directors at the date of this Half Yearly Report, or that the Directors considered at the date of this Report to be immaterial, may also have an effect on the Company's financial condition, performance and prospects and the price of the shares.

If shareholders are in any doubt as to the consequences of their acquiring, holding or disposing of shares in the Company or whether an investment in the Company is suitable for them, they should consult their stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Securities and Markets Act 2000 (as amended by the Financial Services Act 2012) or, in the case of prospective investors outside the United Kingdom, another appropriately authorised independent financial adviser.

The risks can be summarised under the following headings:

   Investment strategy and objectives;

   Investment portfolio, investment management;

   Financial obligations;

   Financial and regulatory;

   Operational; and,

   Income and dividend risk.

An explanation of other risks relating to the Company's investment activities, specifically market price, liquidity and credit risk, and a note of how these risks are managed, are contained in note 16 on pages 60 to 67 of the Annual Report for the year ended 31 December 2016.

Going Concern

In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014, the Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. The Company's assets consist primarily of a diverse portfolio of listed securities which, in most circumstances, are realisable within a very short timescale. Therefore, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Half Yearly Report.

Directors' Responsibility Statement

The Directors are responsible for preparing this Half Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

-     the condensed set of interim financial statements contained within the Half Yearly Financial Report which have been prepared in accordance with IAS 34 "Interim Financial Reporting", give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

-     the Half-Yearly Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

-     the Half-Yearly Board Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

For and on behalf of the Board of Aberdeen Asian Income Fund Limited

Peter Arthur

Chairman

14 August 2017

Condensed Statement of Comprehensive Income

	Six months ended			Six months ended			Year ended
	30 June 2017			30 June 2016			31 December 2016
	(unaudited)			(unaudited)			(audited)
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Investment income
Dividend income	10,599	-	10,599	9,657	-	9,657	18,203	-	18,203
Interest income	873	-	873	1,499	-	1,499	2,744	-	2,744
Total revenue	11,472	-	11,472	11,156	-	11,156	20,947	-	20,947
Gains on investments held at fair value through profit or loss	-	31,371	31,371	-	47,313	47,313	-	83,483	83,483
Net currency gains/(losses)	-	1,397	1,397	-	(3,047)	(3,047)	-	(5,596)	(5,596)
	______	______	______	______	______	______	______	______	______
	11,472	32,768	44,240	11,156	44,266	55,422	20,947	77,887	98,834
	______	______	______	______	______	______	______	______	______
Expenses
Investment management fee (note 10)	(692)	(1,039)	(1,731)	(646)	(970)	(1,616)	(1,308)	(1,962)	(3,270)
Other operating expenses (note 5)	(541)	-	(541)	(523)	-	(523)	(1,049)	-	(1,049)
	______	______	______	______	______	______	______	______	______
Total operating expenses	(1,233)	(1,039)	(2,272)	(1,169)	(970)	(2,139)	(2,357)	(1,962)	(4,319)
	______	______	______	______	______	______	______	______	______
Profit before finance costs and taxation	10,239	31,729	41,968	9,987	43,296	53,283	18,590	75,925	94,515
Finance costs	(142)	(212)	(354)	(118)	(177)	(295)	(238)	(358)	(596)
	______	______	______	______	______	______	______	______	______
Profit before tax	10,097	31,517	41,614	9,869	43,119	52,988	18,352	75,567	93,919
Tax expense	(670)	-	(670)	(548)	-	(548)	(1,045)	-	(1,045)
	______	______	______	______	______	______	______	______	______
Profit for the period (note 3)	9,427	31,517	40,944	9,321	43,119	52,440	17,307	75,567	92,874
	______	______	______	______	______	______	______	______	______
Earnings per Ordinary share (pence) (note 3)	5.08	16.97	22.05	4.90	22.66	27.56	9.15	39.97	49.12
The Company does not have any income or expense that is not included in profit/(loss) for the period, and therefore the "Profit/(loss) for the period" is also the "Total comprehensive income for the period".
The total columns of this statement represent the Condensed Statement of Comprehensive Income, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.
All of the profit/(loss) and total comprehensive income is attributable to the equity holders of Aberdeen Asian Income Fund Limited.  There are no non-controlling interests.

Condensed Balance Sheet

		As at	As at	As at
		30 June 2017	30 June 2016	31 December 2016
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss		449,432	398,415	428,908
		______	______	______
Current assets
Cash and cash equivalents		7,986	6,193	5,314
Other receivables		1,759	2,206	1,440
		______	______	______
		9,745	8,399	6,754
		______	______	______
Creditors: amounts falling due within one year
Bank loans	8	(36,467)	(29,154)	(27,974)
Other payables		(846)	(801)	(1,660)
		______	______	______
		(37,313)	(29,955)	(29,634)
		______	______	______
Net current liabilities		(27,568)	(21,556)	(22,880)
Creditors: amounts falling due after more than one year
Bank loan	8	-	(10,000)	(10,000)
		______	______	______
Net assets		421,864	366,859	396,028
		______	______	______
Stated capital and reserves
Stated capital	9	194,933	194,933	194,933
Capital redemption reserve		1,560	1,560	1,560
Capital reserve		210,765	156,339	185,050
Revenue reserve		14,606	14,027	14,485
		______	______	______
Equity shareholders' funds		421,864	366,859	396,028
		______	______	______
Net asset value per Ordinary share (pence)	4	229.02	194.19	211.82

Condensed Statement of Changes in Equity

Six months ended 30 June 2017 (unaudited)
		Capital
	Stated	redemption	Capital	Revenue	Retained
	capital	reserve	reserve	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance	194,933	1,560	185,050	14,485	-	396,028
Buyback of Ordinary shares for holding in treasury	-	-	(5,802)	-	-	(5,802)
Profit for the period	-	-	-	-	40,944	40,944
Transferred to retained earnings from capital reserve{A}	-	-	31,517	-	(31,517)	-
Transferred from retained earnings to revenue reserve	-	-	-	9,427	(9,427)	-
Dividends paid (note 6)	-	-	-	(9,306)	-	(9,306)
	______	______	______	______	______	______
Balance at 30 June 2017	194,933	1,560	210,765	14,606	-	421,864
	______	______	______	______	______	______
Six months ended 30 June 2016 (unaudited)
		Capital
	Stated	redemption	Capital	Revenue	Retained
	capital	reserve	reserve	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance	194,933	1,560	119,637	13,302	-	329,432
Buyback of Ordinary shares for holding in treasury	-	-	(6,417)	-	-	(6,417)
Profit for the period	-	-	-	-	52,440	52,440
Transferred to retained earnings from capital reserve{A}	-	-	43,119	-	(43,119)	-
Transferred from retained earnings to revenue reserve	-	-	-	9,321	(9,321)	-
Dividends paid (note 6)	-	-	-	(8,596)	-	(8,596)
	______	______	______	______	______	______
Balance at 30 June 2016	194,933	1,560	156,339	14,027	-	366,859
	______	______	______	______	______	______
Year ended 31 December 2016 (audited)
		Capital
	Stated	redemption	Capital	Revenue	Retained
	capital	reserve	reserve	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance	194,933	1,560	119,637	13,302	-	329,432
Buyback of Ordinary shares for holding in treasury	-	-	(10,154)	-	-	(10,154)
Profit for the year	-	-	-	-	92,874	92,874
Transferred from retained earnings to capital reserve{A}	-	-	75,567	-	(75,567)	-
Transferred from retained earnings to revenue reserve	-	-	-	17,307	(17,307)	-
Dividends paid (note 6)	-	-	-	(16,124)	-	(16,124)
	______	______	______	______	______	______
Balance at 31 December 2016	194,933	1,560	185,050	14,485	-	396,028
	______	______	______	______	______	______
{A} Represents the capital profit attributable to equity shareholders per the Condensed Statement of Comprehensive Income.
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.
The stated capital in accordance with Companies (Jersey) Law 1991 Article 39A is £260,822,000 (30 June 2016 - £260,822,000; 31 December 2016 - £260,822,000). These amounts include proceeds arising from the issue of shares by the Company but excludes the cost of shares purchased for cancellation or treasury by the Company.

Condensed Cash Flow Statement

	Six months ended	Six months ended	Year ended
	30 June 2017	30 June 2016	31 December 2016
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Cash flows from operating activities
Dividend income received	9,081	8,207	16,996
Interest income received	958	1,634	2,881
Investment management fee paid	(2,544)	(1,343)	(2,433)
Other cash expenses	(631)	(506)	(954)
	______	______	______
Interest paid	(371)	(327)	(592)
Overseas taxation paid	(670)	(548)	(1,045)
	______	______	______
Net cash inflows from operating activities	5,823	7,117	14,853
Cash flows from investing activities
Purchases of investments	(25,426)	(21,817)	(56,400)
Sales of investments	37,500	29,362	70,158
	______	______	______
Net cash inflow/(outflow) from investing activities	12,074	7,545	13,758
Cash flows from financing activities
Purchase of own shares for treasury	(5,809)	(6,631)	(10,203)
Dividends paid	(9,306)	(8,596)	(16,124)
Loans repaid	-	(3,391)	(6,773)
	______	______	______
Net cash outflow from financing activities	(15,115)	(18,618)	(33,100)
	______	______	______
Net increase/(decrease) in cash and cash equivalents	2,782	(3,956)	(4,489)
Cash and cash equivalents at the start of the period	5,314	10,504	10,504
Foreign exchange	(110)	(355)	(701)
	______	______	______
Cash and cash equivalents at the end of the period	7,986	6,193	5,314
	______	______	______

Notes to the Financial Statements

For the period ended 30 June 2017

1.	Accounting policies - basis of preparation
	The Annual Report is prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC). The condensed Half Yearly Report has been prepared in accordance with International Accounting Standards (IAS) 34 - 'Interim Financial Reporting'. It has also been prepared using the same accounting policies applied in the annual report for the year ended 31 December 2016.
	The financial statements have been prepared on a going concern basis. In accordance with the Financial Reporting Council's guidance on 'Going Concern and Liquidity Risk' the Directors have undertaken a review of the Company's assets and liabilities. The Company's assets primarily consist of a diverse portfolio of listed equity shares which, in most circumstances, are realisable within a very short timescale.
	During the period the following amendments to standards became effective:
	-      IAS 7 - Disclosure Initiative (effective for annual periods beginning on or after 1 January 2017)
	-      IAS 12 - Recognition of Deferred Tax Assets for Unrealised Losses (effective for annual periods beginning on or after 1 January 2017)
	-      IFRS 12 (AI 2014-16) - Clarification of the scope of the Standard (effective for annual periods beginning on or after 1 January 2017)
	The adoption of the above amendments to standards did not have a significant impact on this condensed set of interim financial statements. The amendment to IAS 7 requires additional disclosures. Any changes in disclosure considered necessary will be made in the annual financial statements.
	The Board considers that there will be no material impact arising from a fundamental rewrite of accounting rules for financial instruments under IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018) which introduces a new classification model for financial assets that is more principles-based than the current requirements under IAS 39 Financial Instruments: Recognition and Measurement. More details relating to this assessment are contained within last year's annual report.

2.

Segmental information

For management purposes, the Company is organised into one main operating segment, which invests in equity securities and debt instruments. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment. The financial results from this segment are equivalent to the financial statements of the Company as a whole.

		Six months ended	Six months ended	Year ended
		30 June 2017	30 June 2016	31 December 2016
		(unaudited)	(unaudited)	(audited)
3.	Earnings per Ordinary share	p	p	p
	Revenue return	5.08	4.90	9.15
	Capital return	16.97	22.66	39.97
		______	______	______
	Total return	22.05	27.56	49.12
		______	______	______
	The figures above are based on the following:
		Six months ended	Six months ended	Year ended
		30 June 2017	30 June 2016	31 December 2016
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Revenue return	9,427	9,321	17,307
	Capital return	31,517	43,119	75,567
		______	______	______
	Total return	40,944	52,440	92,874
		______	______	______
	Weighted average number of Ordinary shares in issue	185,721,295	190,286,312	189,072,288
		__________	__________	__________

4.	Net asset value per share
	Ordinary shares
	The basic net asset value per Ordinary share and the net asset values attributable to Ordinary shareholders at the period end calculated in accordance with the Articles of Association were as follows:
		As at	As at	As at
		30 June 2017	30 June 2016	31 December 2016
	Basic	(unaudited)	(unaudited)	(audited)
	Attributable net assets (£'000)	421,864	366,859	396,028
	Number of Ordinary shares in issue (excluding shares in issue held in treasury)	184,200,389	188,913,389	186,968,389
	Net asset value per Ordinary share (p)	229.02	194.19	211.82

		Six months ended	Six months ended	Year ended
		30 June 2017	30 June 2016	31 December 2016
		(unaudited)	(unaudited)	(audited)
5.	Other operating expenses (revenue)	£'000	£'000	£'000
	Directors' fees	85	80	165
	Secretarial and administration fees	67	67	134
	Promotional activities	125	125	250
	Auditor's remuneration:
	- statutory audit	17	29	39
	- interim accounts review	6	6	6
	- tax services	3	-	11
	Custodian charges	89	70	155
	Other	149	146	289
		______	______	______
		541	523	1,049
		______	______	______

		Six months ended	Six months ended	Year ended
		30 June 2017	30 June 2016	31 December 2016
		(unaudited)	(unaudited)	(audited)
6.	Dividends on equity shares	£'000	£'000	£'000
	Amounts recognised as distributions to equity holders in the period:
	Second interim dividend for 2016 - 2.00p	-	-	3,771
	Third interim dividend for 2016 - 2.00p	-	-	3,757
	Fourth interim dividend for 2016 - 2.75p (2015 - 2.50p)	5,136	4,812	4,812
	First interim dividend for 2017 - 2.25p (2016 - 2.00p)	4,170	3,784	3,784
		______	______	______
		9,306	8,596	16,124
		______	______	______
	A second interim dividend of 2.25p for the year to 31 December 2017 will be paid on 18 August 2017 to shareholders on the register on 21 July 2017. The ex-dividend date was 20 July 2017.
	The following data has been used in calculating the total returns on net asset value and share price:
	Ex-div date	Rate (p)	NAV (p)	Share price (p)
	19 January 2017	2.75	216.85	204.00
	27 April 2017	2.25	222.29	208.25
		______	______	______
	Ex-div date	Rate (p)	NAV (p)	Share price (p)
	21 January 2016	2.50	157.18	140.50
		______	______	______
	21 April 2016	2.00	186.39	171.88
		______	______	______
	21 July 2016	2.00	205.60	187.00
	20 October 2016	2.00	218.61	206.00

7.	Transaction costs
	During the period expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains/(losses) on financial assets at fair value through profit or loss in the Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended	Year ended
		30 June 2017	30 June 2016	31 December 2016
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Purchases	35	23	49
	Sales	37	33	64
		______	______	______
		72	56	113
		______	______	______

8.	Bank loans
	In April 2017, the Company entered into a new unsecured three year £40 million multi-currency facility agreement with Scotiabank (Ireland) Limited which replaced a £30 million secured facility. At the period end approximately USD 7.2 million and HKD 213 million, equivalent to £26.4 million was drawn down from the £40 million facility. The interest rates attributed to the USD and HKD loans at the period end were 2.077% and 1.319% respectively.
	In March 2015, the Company entered into a new fixed three year £10 million credit facility with Scotiabank Europe PLC at an all-in interest rate of 2.2175% which will mature on 2 March 2018.
	At the period end, bank loans totalled £36,467,000 (30 June 2016 - £39,154,000; 31 December 2016 - £37,974,000).

		30 June 2017		30 June 2016		31 December 2016
9.	Stated capital	Number	£'000	Number	£'000	Number	£'000
	Ordinary shares of no par value
	Authorised	Unlimited	Unlimited	Unlimited	Unlimited	Unlimited	Unlimited
	Issued and fully paid	194,933,389	194,933	194,933,389	194,933	194,933,389	194,933
	No Ordinary shares were issued or bought back for cancellation during the period (six months ended 30 June 2016 and year ended 31 December 2016 - same).
	During the period 2,768,000 Ordinary shares were bought back by the Company for holding in treasury at a cost of £5,802,000 (30 June 2016 - 4,213,000 shares were bought back at a cost of £6,417,000; 31 December 2016 - 6,158,000 shares were bought back for holding in treasury at a cost of £10,154,000). As at 30 June 2017 10,733,000 (30 June 2016 - 6,020,000; 31 December 2016 - 7,965,000) Ordinary shares were held in treasury.
	The Ordinary shares give shareholders the entitlement to all of the capital growth in the Company's assets and to all the income from the Company that is resolved to be distributed.

10.	Related party disclosures and transactions with the Manager
	Transactions with the Manager
	Mr H Young is a director of Aberdeen Asset Management PLC ("AAM") and its subsidiary Aberdeen Asset Management Asia Limited ("AAM Asia"). Aberdeen Private Wealth Management Limited ('APWM') is also a subsidiary of AAM and it has an agreement to provide management services to the Company, which it has sub-delegated to AAM Asia. APWM has an agreement to provide company secretarial and administration and promotional activity services to the Company.
	The management fee is payable quarterly in arrears, based on an annual amount of 0.85% of the net asset value of the Company valued monthly and on the average of the previous five monthly valuation points. During the period £1,731,000 (30 June 2016 - £1,616,000; 31 December 2016 - £3,270,000) of management fees were paid and payable, with a balance of £295,000 (one month's fee) (30 June 2016 - £544,000 (two months' fees); 31 December 2016 - £1,108,000 (four months' fees)) being payable to AAM Asia at the period end.
	The company secretarial and administration fee is £134,000 (30 June 2016 - £134,000; 31 December 2016 - £134,000), payable quarterly in arrears. During the period £67,000 (30 June 2016 - £67,000; 31 December 2016 - £134,000) of fees were paid and payable, with a balance of £33,000 (30 June 2016 - £33,000; 31 December 2016 - £101,000) being payable to APWM at the period end.
	The promotional activities fee is based on a current annual amount of £250,000 (30 June 2016 - £250,000; 31 December 2016 - £250,000), payable quarterly in arrears. During the period £125,000 (30 June 2016 - £125,000; 31 December 2016 - £250,000) of fees were payable, with a balance of £63,000 (30 June 2016 - £63,000; 31 December 2016 - £63,000) being payable to APWML at the period end.

11.	Fair value hierarchy
	IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making measurements. The fair value hierarchy has the following levels:
	Level 1:      quoted prices (unadjusted) in active markets for identical assets or liabilities;
	Level 2:      inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
	Level 3:      inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	The financial assets and liabilities measured at fair value in the Condensed Balance Sheet are grouped into the fair value hierarchy as follows:
			Level 1	Level 2	Level 3	Total
	At 30 June 2017 (unaudited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	436,146	-	-	436,146
	Quoted bonds	b)	-	13,286	-	13,286
			______	______	______	______
	Total assets		436,146	13,286	-	449,432
			______	______	______	______
			Level 1	Level 2	Level 3	Total
	At 30 June 2016 (unaudited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	375,972	-	-	375,972
	Quoted bonds	b)	-	22,443	-	22,443
			______	______	______	______
	Total assets		375,972	22,443	-	398,415
			______	______	______	______
			Level 1	Level 2	Level 3	Total
	At 31 December 2016 (audited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	405,449	-	-	405,449
	Quoted bonds	b)	-	23,459	-	23,459
			______	______	______	______
	Total assets		405,449	23,459	-	428,908
			______	______	______	______
	a) Quoted equities
	The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.
	b) Quoted bonds
	The fair value of the Company's investments in quoted bonds has been determined by reference to their quoted bid prices at the reporting date. Investments in quoted bonds are not considered to trade in active markets and accordingly the Company's holding in quoted bonds as at 30 June 2016 has been reclassified from Level 1 to Level 2.
	Fair values of financial liabilities
	The fair value of the loan is determined by aggregating the expected future cash flows for the loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency.
	The fair value of borrowings as at 30 June 2017 has been estimated at £36,467,000. At 30 June 2016 and 31 December 2016 the fair value was £39,216,000 and £38,033,000 respectively which was the same as the carrying values due to the short-term nature of the loans. Under the fair value hierarchy in accordance with IFRS 13, these borrowings are classified as Level 2.

12.	Events after the reporting period
	A further 470,000 Ordinary shares have been bought back by the Company for holding in treasury, subsequent to the reporting period end, at a cost of £1,004,000. Following the share buybacks there were 183,730,389 Ordinary shares in issue.

13.	Half Yearly Financial Report
	The financial information for the six months ended 30 June 2017 and 30 June 2016 has not been audited.

14.	Approval
	This Half Yearly Financial Report was approved by the Board on 14 August 2017.

The Half Year Report will be posted to shareholders in late August 2017 and copies will be available on the Company's website (asian-income.co.uk*) or in hard copy format from the Company's registered office, Sir Walter Raleigh House, 48 - 50 Esplanade, St Helier, Jersey JE2 3QB.

*Neither the Company's website nor the content of any website accessible from hyperlinks on that website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement

Aberdeen Private Wealth Management Limited

Company Secretary

14 August 2017

Independent Review Report to Aberdeen Asian Income Fund Limited

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the Half Yearly Financial Report for the six months ended 30 June 2017 which comprises the Condensed Statement of Comprehensive Income, the Condensed Balance Sheet, the Condensed Statement of Changes in Equity, the Condensed Cash Flow Statement and the related explanatory notes 1 to 14. We have read the other information contained in the Half Yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The Half Yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards (IFRS). The condensed set of financial statements included in this Half Yearly Financial Report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Half Yearly Financial Report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half Yearly Financial Report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

Jersey

Channel Islands

14 August 2017

The maintenance and integrity of the Aberdeen Asian Income Fund Limited website is the responsibility of the Directors; the work carried out by the Auditor does not include consideration of these matters and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the financial information since it was initially presented on the website.

Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Investment Portfolio

As at 30 June 2017

		Valuation	Total assets
Company	Country of activity	£'000	%
HSBC Holdings	Hong Kong	16,843	3.7%
Taiwan Semiconductor Manufacturing	Taiwan	16,253	3.6%
Venture Corporation	Singapore	15,631	3.4%
Singapore Telecommunciations	Singapore	14,790	3.2%
Oversea-Chinese Banking Corporation	Singapore	14,505	3.2%
Jardine Cycle & Carriage	Singapore	13,804	3.0%
Taiwan Mobile	Taiwan	12,548	2.7%
Hana Microelectronics	Thailand	12,453	2.7%
Spark New Zealand	New Zealand	11,952	2.6%
Singapore Technologies Engineering	Singapore	11,728	2.6%
Top ten investments		140,507	30.7%
Ausnet Services	Australia	11,536	2.5%
Commonwealth Bank of Australia	Australia	11,507	2.5%
Heineken Malaysia	Malaysia	11,476	2.5%
Tesco Lotus Retail Growth	Thailand	11,248	2.5%
China Mobile	China	11,194	2.4%
DBS Group	Singapore	10,576	2.3%
Samsung Electronics	South Korea	10,273	2.2%
Australia & New Zealand Bank Group	Australia	9,291	2.0%
Swire Pacific (Class A and Class B shares)	Hong Kong	8,985	2.0%
Hang Lung Properties	Hong Kong	8,385	1.9%
Top twenty investments		244,978	53.5%
Scentre Group	Australia	8,260	1.8%
Yum China Holdings	China	8,196	1.8%
Electricity Generating	Thailand	8,158	1.8%
Amada Holdings	Japan	8,119	1.8%
Advanced Information Services	Thailand	8,001	1.7%
Telstra	Australia	7,770	1.7%
Viva Energy REIT	Australia	7,641	1.6%
Westpac Banking Corporation	Australia	7,474	1.6%
United Overseas Bank	Singapore	7,394	1.6%
SAIC Motor Corp	China	7,163	1.6%
Top thirty investments		323,154	70.5%
CDL Hospitality Trust	Singapore	7,081	1.6%
Far East Hospitality Trust	Singapore	6,988	1.5%
Shopping Centres Australasia	Australia	6,955	1.5%
Siam Cement{B}	Thailand	6,927	1.5%
Giordano International	Hong Kong	6,881	1.5%
Japan Tobacco	Japan	6,877	1.5%
Rio Tinto{C}	Australia	6,808	1.5%
Keppel REIT	Singapore	6,581	1.4%
Standard Chartered	United Kingdom	6,161	1.4%
British American Tobacco Malaysia	Malaysia	5,602	1.2%
Top forty investments		390,015	85.1%
Indo Tambangraya Megah	Indonesia	5,546	1.2%
Okinawa Cellular Telephone	Japan	5,319	1.2%
South32{C}	Australia	4,851	1.1%
Green Dragon Gas{A}	China	4,777	1.0%
Star Media	Malaysia	4,642	1.0%
ASX	Australia	4,569	1.0%
ICICI Bank{A}	India	4,565	1.0%
Hong Leong Finance	Singapore	4,514	1.0%
Texwinca Holdings	Hong Kong	4,365	0.9%
Kingmaker Footwear	Hong Kong	4,235	0.9%
Top fifty investments		437,398	95.4%
Westfield Corporation	Australia	4,007	0.9%
DFCC Bank{A}	Sri Lanka	3,944	0.9%
Lafarge Malaysia	Malaysia	3,656	0.8%
City Developments	Singapore	300	0.1%
AEON Credit Service	Malaysia	127	-
Total investments		449,432	98.1%
Other net assets{D}		8,899	1.9%
Total assets		458,331	100.0%
{A}           Corporate bonds.
{B}           Holding includes investment in common and non-voting depositary receipt lines.
{C}          Incorporated in and listing held in United Kingdom.
{D}          Excludes bank loans of £36,467,000.

 

END

 

 

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