Half-year Report

RNS Number : 8386V

Aberdeen Asian Income Fund Limited

12 August 2020

 

ABERDEEN ASIAN INCOME FUND LIMITED

Legal Entity Identifier: 549300U76MLZF5F8MN87

UNAUDITED HALF YEARLY REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2020

Interim Board Report - Chairman's Statement

Background

Over the six months ended 30 June 2020, the Company's net asset value (NAV) fell by 6.5% in sterling terms, compared to the MSCI All Countries Asia Pacific ex Japan High Dividend Yield Index's 7.0% decline over the same period and the MSCI All Countries Asia Pacific ex Japan Index, which increased by 0.8%. It is notable that the MSCI All Countries Asia Pacific ex Japan Index rise was largely driven by lower yielding growth stocks, and this is indicated in the relative resilience in your Company's NAV against the  high yield index. Your Company's share price at the period end was 184p which represented a discount of 12.3% to the NAV per share. During the period, two dividend payments totalling 4.5p per share were distributed to shareholders. This represented an annualised dividend yield of 5.0%.

The first six months of 2020 was one of the most challenging ever for markets worldwide, Asia included, as the onset of Covid-19 not only disrupted economic activity, but also life as we know it. Investor anxiety over lockdown measures and the impact of Covid-19 on economies saw financial markets plunge to a trough in March. As assets fell to attractive levels, risk appetite returned somewhat. Sentiment was also boosted by strong support from both governments and central banks to help businesses and individuals and alleviate the liquidity squeeze. Towards the period end, strict social distancing forced infection rates down, allowing governments to ease some of their lockdowns. The nascent recovery in economic activity revived investor sentiment. Although markets rebounded from their March lows, they remained below their January highs, reflecting understandable caution given the ongoing uncertainty.

Overview

The review period started on a positive note in January, as the US and China reached a phase-one trade deal. The optimism, however, was short-lived. A localised virus outbreak in China evolved rapidly into a global pandemic, causing widespread lockdowns as governments grappled with rising death tolls. Markets plummeted, while oil and other commodity prices collapsed on fears over the repercussions of the ensuing demand destruction.

In the latter part of the period, the rebound in stock markets was swift as investors piled back in to take advantage of low valuations, and on hopes of better days ahead as economies started to re-open. Emerging from the crisis first was China. Its leading indicator for manufacturing (PMI) rose above the key 50-point level indicating expansion, while most other Asian economies also saw similar PMI rebounds. Economic data elsewhere also appeared to improve, and US growth delivered consistent upside surprises since May. In addition, oil producers averted a much-feared supply glut, with inventories falling amid improving demand.

As the situation was still precarious, with some countries facing a resurgence in new infections after dismantling some of the more draconian measures, businesses were understandably cautious. Companies prioritised the conserving of cash. Some raised capital to shore up their balance sheets, while others cut spending and slashed overheads. Many also suspended dividend payments, some of their own accord, while others at the behest of their regulators. In the UK, for example, the financial regulator intervened to suspend dividend payments by banks, such as HSBC. In Asia, the Monetary Authority of Singapore gave banks more leeway with regulatory requirements to enable them to boost lending to help tide businesses over, whereas REITs received deadline extensions for distributing their income.

In my view, these mandated dividend suspensions or postponements are different from financially-driven decisions to cut payouts. These deferrals should allow banks and companies to strengthen their reserves during the difficult period. Moreover, your Manager had anticipated such regulatory recommendations, particularly in the banking sector, and therefore repositioned the portfolio accordingly over the period. 

Performance Review

As a result of the pandemic, your Company's performance was materially affected. In particular, it was impacted by its light exposure to China, as the mainland market was the first to re-open following months of lockdown. Performance was also reined in by the lack of exposure to Chinese internet stocks, such as Tencent and Alibaba that surged on the back of growing online demand for their services amid the lockdown. Your Company does not hold these names as they do not boast much of a yield. This was partially offset by the portfolio's holding in Yum China, which recovered due to better operational resilience than the market initially feared, buoyed in part by increased demand in its delivery business.

Your Manager also took the opportunity of the earlier sell-off in China to add selectively to positions - notably, China's largest insurance company, Ping An Insurance, where the firm's growth trajectory and income generation ability make its investment case attractive from both yield and capital appreciation standpoints. Additionally, your Manager's engagement with Ping An Insurance on environmental, social, and governance (ESG) issues has been encouraging. Since 2017, your Manager has continued to work with the insurer on a raft of issues, such as shareholding structure, risk management, cybersecurity, human capital management, work culture, as well as bribery and corruption defences. I am pleased to share that as a result of this work, Ping An Insurance has received two ESG rating upgrades in a year by external ratings provider, MSCI, and now commands an "A" rating.

Meanwhile, income-driven markets, such as Singapore and Hong Kong, also weighed on performance, particularly from the portfolio's holdings in the financial sector. Lenders, such as Singapore-based DBS Group and Hong Kong-based HSBC, were doubly hurt by concerns that lower interest rates would compress margins, as well as expectations of dividend suspensions to shore up capital.

On a more positive note, in anticipation of this weakness, your Manager took deliberate measures to protect the portfolio by lowering the weight of certain banks, while retaining active positions where the outlook was more resilient. A good example is the portfolio's position in Hong Kong retailer Convenience Retail Asia, as it kept generating cash flow by quickly adapting its in-store products to suit the changing spending patterns during a tumultuous half year. This allowed the company to pay out a much welcomed special cash dividend in May.

Your Manager also used this opportunity to invest in companies that stand to benefit when the tide turns. To this end, two new holdings were added to the portfolio from the property sector in Singapore - CapitaLand, which offers diversified exposure across various real estate segments globally, and its subsidiary, CapitaLand Mall Trust, a retail-focused REIT with a suite of local downtown and suburban malls. The REIT subsequently announced its merger with CapitaLand's office unit to form a combined entity of well-located properties across the island state. Both new additions share robust income profiles and stable yields. Your Manager has followed the group closely over the years and is confident in its management.

Your Company's exposure to technology and telecommunications companies in Korea and Taiwan contributed positively to performance. Both sectors emerged relatively unscathed from the worst of the pandemic, thanks to increased demand for electronic equipment and data stemming from the need to work-from-home, as well as other pandemic-induced trends. Notably, Taiwan's e-commerce retailer momo.com and Taiwan Mobile benefited as the lockdowns compelled a higher usage of data and online resources. In particular, momo.com re-rated significantly since January as online shopping boomed on the back of a larger proportion of the population sheltering. During this turbulent period, your Manager remained engaged with the portfolio's underlying companies, discussing their business continuity plans and readiness to overcome the current disruption. It was reassuring to see that most of your portfolio's holdings have undertaken strategic reviews and adopted processes to weather the storm. For instance, Samsung Electronics had to halt output at one of its Korean plants after a worker contracted Covid-19. Your Manager engaged with management to understand the implications of such a disruption and was reassured that the impact would be minimal and that no shipments would be delayed on account of this. Additionally, an expected change in its shareholder returns policy lifted the price of its preference shares that your Company holds. Your Manager continues to see value in the company, especially its chip business, and the continued playing out of this thesis has manifested well in the tech giant's strong contribution to performance this year.

Meanwhile, your Manager took advantage of the indiscriminate selling to invest in long-researched, quality stocks with good dividend yields that had been too expensive previously to introduce to the portfolio. Among these was Power Grid Corporation of India, the national power transmission utility with countrywide networks. It benefits from government investments in electric power infrastructure and alternative energy sources. The public-sector enterprise is prudently managed and has healthy operational cash flow, backed by a sturdy balance sheet. Your Manager also initiated APA Group, an Australian natural-gas infrastructure company with defensive cash flows and earnings, buttressed by long-term contracts and a diversified customer-base. Its unique proposition of an integrated network of gas pipelines allows it to provide flexibility to its customers, while generating ample cash flow to return capital to shareholders, as well as invest for future growth. 

While your Manager made the most of opportunities to add to the portfolio, a vigilant eye has also been kept on those whose income streams have become riskier and whose investment cases have waned. In addition to those already mentioned, your Manager exited Woodside Petroleum following the collapse in oil prices. While Woodside has a solid balance sheet and is among the best-managed in the region, a protracted low oil-price environment could weigh substantially on its expansion plans, something that management has already started to defer. Elsewhere, your Manager sold Swire Pacific in view of the difficult trading environment constraining its ability to distribute income. Another holding that was sold was Japan Tobacco, because your Manager believed that future dividends would be impaired by broader challenges faced by the entire industry.

Dividends

On 22 July 2020, your Board declared a second quarterly interim dividend of 2.25p per Ordinary share in respect of the year ending 31 December 2020, which will be paid on 21 August 2020 to shareholders on the register on 31 July 2020.  The first two quarterly dividends, covering the six months to 30 June 2020 therefore total 4.5p (2019 - 4.5p). As indicated at the time, i n light of the ongoing Covid-19 pandemic, the level of the remaining two dividends for 2020 will be considered at each quarter end, at which point an announcement will be made by the Company.  The Board is mindful of the Company's objective of growing dividends over time and is keen to retain its 'AIC Dividend Hero' status therefore, if appropriate, it will consider using the Company's healthy revenue reserves built up over the past decade where necessary. Any decision as to whether revenue reserves will be utilised (and by how much) will be taken at the time of each dividend declaration

Gearing and Share Repurchases

During the period, the Company renewed its £40,000,000 revolving credit facility (the "Facility") with Scotiabank Europe PLC ("Scotia") for 1 year. The Facility is in addition to the existing £10,000,000 fixed rate term loan facility with Scotia, which is due to mature in March 2021. HKD73.5 million, USD19.0m and GBP4.9mhas been drawn down under the Facility at all-in annualised rates of 1.6%, 1.5% and 1.4% respectively. Taking account of the existing £10,000,000 fixed rate loan, the Company's total gearing currently amounts to the equivalent of £38.0 million and net gearing of 8.8%.

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 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 632,285 shares for treasury and subsequent to the period end a further 400,157 Ordinary shares have been purchased for treasury.  At the time of writing the latest NAV per share is 211.0p and the share price is 186.25p representing a discount to NAV of 11.7%.

Outlook

While we have seen a rally in the second quarter of 2020, we have to be mindful of the disconnect between stock prices and corporate and economic fundamentals. We have yet to see a significant improvement in macro data and earnings that would justify valuations at these levels. I would not be surprised if markets reverse again. Governments are still walking the tight rope of having to re-open economies, while trying to avoid a resurgence in Covid-19 infections. Several countries have already changed direction, even though they know that a re-imposition of containment measures would stymie the fragile economic recovery. For example, at the time of writing, the state of Victoria in Australia has just re-instated strict lockdown measures in the wake of a significant rise in infections . However, we expect continued fiscal and monetary measures to help support economies and markets.

Broader geopolitical risks further complicate matters, with tensions between China and the US a recurring theme. The rift started with trade but has since broadened to other areas. This is most evident in the technology domain, where the US wants to restrict China's global ambitions by limiting access to US technology. Your Manager is mindful of the potential repercussions, which could disrupt smartphone supply chains and delay the rollout of 5G networks. We also have an eye on the US presidential elections in November, which is shaping up to be an open race and with the outcome having significant bearing on foreign policy.

In such a climate, it is no surprise that the outlook for corporate earnings has worsened. Many companies have lowered their profit forecasts, with dividend and capital spending being cut in certain cases. More recently, however, your Manager has been detecting marginally more positive updates among our holdings, even though the overall outlook is still muted and most still expect conditions to remain challenging through the rest of 2020.

Amid the uncertainty, it bears reminding that Asia continues to be well positioned as the powerhouse of global growth. For one, we have the spending power of consumers in two of the world's most populous nations - China and India.

The region is also at the forefront of many exciting and emerging technological advances, such as vehicle electrification, Internet of Things and cloud computing. The region has the potential to offer investors good returns for many more years to come.

Your Manager's focus remains on investing in good quality, market leading companies that are tapped into Asia's structural growth. Their defensive traits, such as balance sheet strength, visible revenue streams and healthy profit margins, should enable them to ride out the current crisis, while continuing to pay out a decent dividend. Moreover, your Manager continues to evaluate the new trends that have emerged during the pandemic, such as e-commerce and online activity, alongside longer-term tectonic shifts, such as rising demand in Asia for healthcare and infrastructure.

While your Manager is mindful that dividends will come under pressure in the short term, I remain confident that your Company is positioned well to continue delivering sustainable returns and generating healthy income in the long run.

Charles Clarke
Chairman
11 August 2020

Interim Board Report - Disclosures

Principal Risk Factors

The principal risks and uncertainties affecting the Company are set out in detail on pages 22 to 24 of the Annual Report and Financial Statements for the year ended 31 December 2019 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.

The Board has reviewed the risks related to the Covid-19 pandemic.  Covid-19 is continuing to affect the value of the Company's investments due to the disruption of supply chains and demand for products and services, increased costs and potential cash flow issues. The pandemic has significantly impacted world stock markets as well as creating uncertainty around future dividend payments. However, the Board notes the Manager's robust and disciplined investment process which continues to focus on long-term company fundamentals including balance sheet strength and deliverability of sustainable earnings growth. The pandemic has also impacted the Company's third party service providers, with business continuity and home working plans having been implemented.  The Board, through the Manager, has been closely monitoring all third party service arrangements and is pleased to report that it has not seen any reduction in the level of service provided to the Company to date.

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 18 on pages 81 to 89 of the Annual Report for the year ended 31 December 2019.

Going Concern

In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, the Directors have undertaken a rigorous review and consider that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate.  This review included the additional risks relating to the ongoing Covid-19 pandemic and where appropriate, action taken by the Manager and Company's service providers in relation to those risks. The Company's assets consist of a diverse portfolio of listed equities which in most circumstances are realisable within a very short timescale. The Directors believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future and at least 12 months from the date of this Half Yearly Report. Accordingly, the Directors continue to adopt the going concern basis in preparing these financial statements.

Directors' Responsibility Statement

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

· the condensed set of 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

Charles Clarke,
Chairman
11 August 2020

Condensed Statement of Comprehensive Income

	Six months ended			Six months ended						Year ended
	30 June 2020			30 June 2019						31 December 2019
	(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	8,792	-	8,792	10,187	-	10,187				20,516				-	20,516
Interest income on investments held at fair value through profit or loss	170	-	170	205	-	205				406				-	406
Traded option premiums	29	-	29	44	-	44				74				-	74
Total revenue	8,991	-	8,991	10,436	-	10,436				20,996				-	20,996
(Losses)/gains on investments held at fair value through profit or loss	-	(30,035)	(30,035)	-	43,152	43,152				-				24,759	24,759
Net currency (losses)/gains	-	(2,182)	(2,182)	-	(107)	(107)				-				934	934
	8,991	(32,217)	(23,226)	10,436	43,045	53,481				20,996				25,693	46,689
Expenses
Investment management fee (note 10)	(632)	(947)	(1,579)	(672)	(1,008)	(1,680)				(1,372)				(2,059)	(3,431)
Other operating expenses (note 5)	(428)	-	(428)	(489)	-	(489)				(951)				-	(951)
Total operating expenses	(1,060)	(947)	(2,007)	(1,161)	1,008	(2,169)				(2,323)				(2,059)	(4,382)
Profit/(loss) before finance costs and taxation	7,931	(33,164)	(25,233)	9,275	42,037	51,312				18,673				23,634	42,307
Finance costs	(191)	(287)	(478)	(203)	(305)	(508)				(429)				(643)	(1,072)
Profit/(loss) before tax	7,740	(33,451)	(25,711)	9,072	41,732	50,804				18,244				22,991	41,235
Tax expense	(713)	48	(665)	(630)	(47)	(677)				(1,470)				(68)	(1,538)
Profit/(loss) for the period	7,027	(33,403)	(26,376)	8,442	41,685	50,127				16,774				22,923	39,697
Earnings per Ordinary share (pence) (note 3)	3.97	(18.86)	(14.89)	4.73	23.37	28.10				9.42				12.87	22.29
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.
The accompanying notes are an integral part of the financial statements.

Condensed Balance Sheet

		As at	As at		As at
		30 June 2020	30 June 2019		31 December 2019
		(unaudited)	(unaudited)		(audited)
	Notes	£'000	£'000		£'000
Non-current assets
Investments held at fair value through profit or loss		398,961	451,205		435,984
Current assets
Cash and cash equivalents		5,727	7,702		3,458
Other receivables		1,706	2,252		1,568
		7,433	9,954		5,026
Creditors: amounts falling due within one year
Bank loans	8	(37,982)	(26,996)		(25,990)
Other payables		(1,073)	(1,562)		(1,618)
		(39,055)	(28,558)		(27,608)
Net current liabilities		(31,622)	(18,604)		(22,582)
Creditors: amounts falling due after more than one year
Deferred tax liability on Indian capital gains		(19)	-		-
Bank loan	8	-	(9,998)		(9,999)
		(19)	(9,998)		(9,999)
Net assets		367,320	422,603		403,403
Stated capital and reserves
Stated capital	9	194,933	194,933		194,933
Capital redemption reserve		1,560	1,560		1,560
Capital reserve		156,721	210,939		191,412
Revenue reserve		14,106	15,171		15,498
Equity shareholders' funds		367,320	422,603		403,403
Net asset value per Ordinary share (pence)	4	207.57	237.48		227.15
The accompanying notes are an integral part of the financial statements.

Condensed Statement of Changes in Equity

Six months ended 30 June 2020 (unaudited)
		Capital
	Stated	redemption	Capital		Revenue
	capital	reserve	reserve		reserve		Total
	'000	'000	'000		'000		'000
Opening balance	194,933	1,560	191,412		15,498		403,403
Buyback of Ordinary shares for treasury	-	-	(1,288)		-		(1,288)
(Loss)/profit for the period	-	-	(33,403)		7,027		(26,376)
Dividends paid (note 6)	-	-	-		(8,419)		(8,419)
Balance at 30 June 2020	194,933	1,560	156,721		14,106		367,320
Six months ended 30 June 2019 (unaudited)
		Capital
	Stated	redemption	Capital		Revenue
	capital	reserve	reserve		reserve		Total
	'000	'000	'000		'000		'000
Opening balance	194,933	1,560	170,680		15,026		382,199
Buyback of Ordinary shares for treasury	-	-	(1,426)		-		(1,426)
Profit for the period	-	-	41,685		8,442		50,127
Dividends paid (note 6)	-	-	-		(8,297)		(8,297)
Balance at 30 June 2019	194,933	1,560	210,939		15,171		422,603
Year ended 31 December 2019 (audited)
		Capital
	Stated	redemption	Capital		Revenue
	capital	reserve	reserve		reserve		Total
	'000	'000	'000		'000		'000
Opening balance	194,933	1,560	170,680		15,026		382,199
Buyback of Ordinary shares for treasury	-	-	(2,191)		-		(2,191)
Profit for the year	-	-	22,923		16,774		39,697
Dividends paid (note 6)	-	-	-		(16,302)		(16,302)
Balance at 31 December 2019	194,933	1,560	191,412		15,498		403,403
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 2019 - £260,822,000; 31 December 2019 - £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.
The accompanying notes are an integral part of the financial statements.

Condensed Cash Flow Statement

	Six months ended	Six months ended	Year ended
	30 June 2020	30 June 2019	31 December 2019
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Cash flows from operating activities
Dividend income received	8,653	8,696	19,104
Interest income received	170	188	423
Derivative income received	29	44	74
Investment management fee paid	(1,982)	(1,703)	(3,409)
Other cash expenses	(425)	(485)	(890)
Cash generated from operations	6,445	6,740	15,302
Interest paid	(490)	(400)	(1,094)
Overseas taxation paid	(756)	(519)	(1,402)
Net cash inflows from operating activities	5,199	5,821	12,806
Cash flows from investing activities
Purchases of investments	(37,411)	(30,386)	(63,113)
Sales of investments	44,430	38,435	68,617
Net cash inflow from investing activities	7,019	8,049	5,504
Cash flows from financing activities
Purchase of own shares for treasury	(1,343)	(1,455)	(2,166)
Dividends paid	(8,419)	(8,297)	(16,302)
Net cash outflow from financing activities	(9,762)	(9,752)	(18,468)
Net increase/(decrease) in cash and cash equivalents	2,456	4,118	(158)
Cash and cash equivalents at the start of the period	3,458	3,622	3,622
Foreign exchange	(187)	(38)	(6)
Cash and cash equivalents at the end of the period	5,727	7,702	3,458
The accompanying notes are an integral part of the financial statements.

Notes to the Financial Statements

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' and should be read in conjunction with the Annual Report for the year ended 31 December 2019.
	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.
	The condensed interim financial statements have been prepared using the same accounting policies as the preceding annual financial statements.
	During the period the following standards, amendments to standards and new interpretations became effective. The adoption of these standards and amendments did not have a material impact on the financial statements:
	Standards
	IAS 1 and IAS 8 Amendments	Definition of Material	1 January 2020
	IAS 1, 8, 34, 37, 38 and IFRS 2, 3, 6, 14	Amendment to references to the conceptual framework	1 January 2020
	IAS 41 Amendment (AI 2018-20)	Taxation in fair value measurements	1 January 2020
	IFRS  3 Amendment	Definition of a Business	1 January 2020
	IFRS 3 Amendment	Reference to the Conceptual Framework	1 January 2020
	IFRS 9 Amendment (AI 2018-20)	Fees in the '10 per cent' test for derecognition of financial liabilities	1 January 2020
	IFRS 9, IAS 39 and IFRS 7 Amendments	Interest Rate Benchmark Reform	1 January 2020
	Interpretations
	IFRIC 12, 19, 20, 22 and SIC 32	Amendment to references to the conceptual framework	1 January 2020

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.

3.	Earnings per Ordinary share
		Six months ended	Six months ended	Year ended
		30 June 2020	30 June 2019	31 December 2019
		(unaudited)	(unaudited)	(audited)
		p	p	p
	Revenue return	3.97	4.73	9.42
	Capital return	(18.86)	23.37	12.87
	Total return	(14.89)	28.10	22.29
	The figures above are based on the following:
		Six months ended	Six months ended	Year ended
		30 June 2020	30 June 2019	31 December 2019
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Revenue return	7,027	8,442	16,774
	Capital return	(33,403)	41,685	22,923
	Total return	(26,376)	50,127	39,697
	Weighted average number of Ordinary shares in issue	177,136,644	178,366,183	178,087,642

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 2020	30 June 2019	31 December 2019
		(unaudited)	(unaudited)	(audited)
	Attributable net assets (£'000)	367,320	422,603	403,403
	Number of Ordinary shares in issue (excluding shares in issue held in treasury)	176,959,690	177,953,298	177,591,975
	Net asset value per Ordinary share (p)	207.57	237.48	227.15

5.	Other operating expenses (revenue)
		Six months ended	Six months ended	Year ended
		30 June 2020	30 June 2019	31 December 2019
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Directors' fees	77	77	154
	Secretarial and administration fees	-	67	134
	Promotional activities	103	103	206
	Auditor's remuneration:
	- statutory audit	20	18	37
	Custodian charges	65	60	126
	Other	163	164	294
		428	489	951

6.	Dividends on equity shares
		Six months ended	Six months ended	Year ended
		30 June 2020	30 June 2019	31 December 2019
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Amounts recognised as distributions to equity holders in the period:
	Second interim dividend 2019 - 2.25p per Ordinary share	-	-	4,005
	Third interim dividend 2019 - 2.25p per Ordinary share	-	-	4,000
	Fourth interim dividend for 2019 - 2.50p  per Ordinary share (2018 - 2.40p)	4,436	4,286	4,286
	First interim dividend for 2020 - 2.25p per Ordinary share (2019 - 2.25p)	3,983	4,011	4,011
		8,419	8,297	16,302
	A second interim dividend of 2.25p for the year to 31 December 2020 will be paid on 21 August 2020 to shareholders on the register on 31 July 2020. The ex-dividend date was 30 July 2020.

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 2020	30 June 2019	31 December 2019
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Purchases	44	39	73
	Sales	53	39	71
		97	78	144

8.	Bank loans. In April 2020, the Company entered into a new unsecured £40 million multi-currency revolving loan facility agreement with Scotiabank Europe PLC which runs until 6 April 2021.  This facility agreement replaced the existing £40 million multi currency revolving loan facility agreement with Scotiabank (Ireland) Designated Activity Company. At the period end approximately USD 7.2 million and HKD 213 million, equivalent to £28.0 million was drawn down from the £40 million facility. The interest rates attributed to the USD and HKD loans at the period end were 1.525% and 2.184% respectively.
	In March 2018, the Company entered into a new fixed three year £10 million credit facility with Scotiabank Europe PLC at an all-in interest rate of 2.179% which will mature on 2 March 2021.
	The loan is shown on the balance sheet net of expenses which are being amortised over the life of the liability.
	At the period end, bank loans totalled £37,982,000 (30 June 2019 - £36,994,000; 31 December 2019 - £35,989,000).

9.	Stated capital
		30 June 2020			30 June 2019			31 December 2019
		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
	During the period 632,285 Ordinary shares were bought back by the Company for holding in treasury at a cost of £1,288,000 (30 June 2019 - 677,390 shares were bought back at a cost of £1,426,000; 31 December 2019 - 1,038,713 shares were bought back for holding in treasury at a cost of £2,191,000). As at 30 June 2020 17,973,699 (30 June 2019 - 16,980,091; 31 December 2019 - 17,341,414) 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. The Company has an agreement with Aberdeen Standard Capital International Limited ("ASCIL") for the provision of management services. This agreement has been sub-delegated to Aberdeen Standard Investments (Asia) Limited ("ASI Asia").
	On 1 January 2020 the Company agreed with the Manager that with effect from 1 January 2020, the calculation of the management fee be changed to 0.85% per annum on average net assets of the previous six months up to £350 million and 0.65% per annum thereafter. The fee continues to be payable quarterly in arrears. During the period, £1,579,000 (30 June 2019 - £1,680,000; 31 December 2019 - £3,532,000) of management fees were paid and payable, with a balance of £765,000 (30 June 2019 - £1,124,000; 31 December 2019 - £1,146,000) being payable to ASI Asia at the period end.
	The Company also agreed with the Manager that payment of the secretarial administration fee of £134,000 per annum would cease with effect from 1 January 2020. During the period £nil (30 June 2019 - £67,000; 31 December 2019 - £134,000) of fees were paid and payable, with a balance of £nil (30 June 2019 - £33,000; 31 December 2019 - £67,000) being payable to ASCIL at the period end.
	The promotional activities fee is based on a current annual amount of £206,000 payable quarterly in arrears. During the period £103,000 (30 June 2019 - £103,000; 31 December 2019 - £206,000) of fees were payable, with a balance of £103,000 (30 June 2019 - £52,000; 31 December 2019 - £52,000) being payable to ASCIL 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 2020 (unaudited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	394,801	-	-	394,801
	Quoted bonds	b)	-	4,160	-	4,160
	Total assets		394,801	4,160	-	398,961
			Level 1	Level 2	Level 3	Total
	At 30 June 2019 (unaudited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	440,703	-	-	440,703
	Quoted bonds	b)	457	10,045	-	10,502
	Total assets		441,160	10,045	-	451,205
			Level 1	Level 2	Level 3	Total
	At 31 December 2019 (audited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	432,105	-	-	432,105
	Quoted bonds	b)	-	3,879	-	3,879
	Total assets		432,105	3,879	-	435,984
	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 which are not considered to trade in active markets have been classified as Level 2.
	Fair value of financial assets. The Directors are of the opinion that the fair value of other financial assets is equal to the carrying amounts in the Condensed Balance Sheet.
	Fair values of financial liabilities. The fair value of borrowings as at 30 June 2020 is the same as the par value at £37,982,000 (carrying value per the Condensed Balance Sheet 30 June 2020 - £37,982,000; 30 June 2019 - £36,994,000; 31 December 2019 - £35,999,000). At 30 June 2019 the fair value was  £35,934,000 and at 31 December 2019 it was £35,999,000, calculated using a discounted cash flow valuation technique. 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 400,157 Ordinary shares have been bought back by the Company for holding in treasury, subsequent to the reporting period end, at a cost of £739,000. Following the share buybacks there were 176,559,533 Ordinary shares in issue excluding those held in treasury.

13.	Half Yearly Financial Report. The financial information for the six months ended 30 June 2020 and 30 June 2019 has not been audited.

14.	Approval. This Half Yearly Financial Report was approved by the Board on 11 August 2020.

The Half Year Report will be posted to shareholders in late August 2020 and copies will be available on the Company's website ( asian-income.co.uk* ).

*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 Standard Capital International Limited

Company Secretary

11 August 2020

Investment Portfolio

As at 30 June 2020
				Valuation	Total assets
Company		Country		£'000	%
Samsung Electronics (Pref)		South Korea		34,404	8.5
Taiwan Semiconductor Manufacturing Company		Taiwan		30,175	7.4
Venture Corporation		Singapore		15,312	3.8
Taiwan Mobile		Taiwan		12,943	3.2
Ping An Insurance (H Shares)		China		12,390	3.1
Oversea-Chinese Banking Corporation		Singapore		12,296	3.0
Tesco Lotus Retail Growth		Thailand		11,766	2.9
Waypoint REIT		Australia		10,564	2.6
Rio Tinto {A}		Australia		10,052	2.5
AusNet Services		Australia		9,857	2.4
Top ten investments				159,759	39.4
Momo.com Inc		Taiwan		9,761	2.4
DBS Group		Singapore		9,321	2.3
Singapore Telecommunications		Singapore		8,930	2.2
LG Chemical (Pref)		South Korea		8,285	2.0
Commonwealth Bank of Australia		Australia		8,167	2.0
China Mobile		China		8,111	2.0
Spark New Zealand		New Zealand		7,869	1.9
HSBC Holdings		Hong Kong		7,801	1.9
Shopping Centres Australasia		Australia		7,742	1.9
China Resources Land		China		7,533	1.9
Top twenty investments				243,279	59.9
Siam Cement {B}		Thailand		6,687	1.7
BHP Group {A}		Australia		6,584	1.6
Singapore Technologies Engineering		Singapore		6,494	1.6
Hana Microelectronics (Foreign)		Thailand		6,458	1.6
SAIC Motor 'A'		China		6,287	1.6
Hang Lung Properties		Hong Kong		5,962	1.5
ASX		Australia		5,654	1.4
Okinawa Cellular Telephone		Japan		5,457	1.3
Infosys		India		5,269	1.3
United Overseas Bank		Singapore		5,211	1.3
Top thirty investments				303,342	74.8
Amada Holdings		Japan		5,197	1.3
Auckland International Airport		New Zealand		4,942	1.2
Tata Consultancy Services		India		4,917	1.2
CNOOC		China		4,908	1.2
Ascendas India Trust		Singapore		4,761	1.2
Globalwafers		Taiwan		4,472	1.1
Yum China Holdings		China		4,334	1.1
Heineken Malaysia		Malaysia		4,309	1.1
ICICI Bank {D}		India		4,160	1.0
NZX		New Zealand		4,055	1.0
Top forty investments				349,397	86.2
Charter Hall long WALE		Australia		3,957	1.0
Power Grid Corp of India		India		3,930	1.0
Capitaland		Singapore		3,864	1.0
Aeon Credit Service M		Malaysia		3,568	0.9
Convenience Retail Asia		Hong Kong		3,558	0.9
Land & Houses Foreign		Thailand		3,489	0.9
Jardine Cycle & Carriage		Singapore		3,470	0.8
Tisco Financial Group Foreign		Thailand		3,440	0.8
Medibank Private		Australia		3,390	0.8
Bank Rakyat		Indonesia		3,306	0.8
Top fifty investments				385,369	95.1
ComfortDelGro		Singapore		2,393	0.6
APA Group		Australia		2,186	0.5
Capitaland Mall Trust		Singapore		1,876	0.5
Westpac Banking Corporation		Australia		1,775	0.4
Mapletree Commercial Trust		Singapore		1,671	0.4
Standard Chartered		United Kingdom		1,618	0.4
SP Setia {C}		Malaysia		1,065	0.2
Kingmaker Footwear		Hong Kong		717	0.2
City Developments (Pref)		Singapore		291	0.1
G3 Exploration {D}		China		-	-
Top sixty investments				398,961	98.4
Total value of investments				398,961	98.4
Net current assets {E}				6,360	1.6
Total assets				405,321	100.0
{A} Incorporated in and listing held in United Kingdom.
{B} Holding includes investment in common (£4,470,000) and non-voting depositary receipt (£2,217,000) lines.
{C} Holding includes investment in Preference Shares (£399,000) and Common Stock (£666,000).
{D} Corporate bonds.
{E} Excludes bank loans of £37,982,000.

ALTERNATIVE PERFORMANCE MEASURES
	Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes IFRS and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.   ​ ​ ​
	Total return. NAV and share price total returns show how the NAV and share price have performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend. ​ ​ ​
	The tables below provide information relating to the NAVs and share prices of the Company on the dividend reinvestment dates during the six months ended 30 June 2020 and the year ended 31 December 2019. ​ ​ ​
		Dividend				Share
	Six months ended 30 June 2020	rate		NAV		price
	31 December 2019	N/A		227.15p		214.00p
	23 January 2020	2.50p		229.76p		211.00p
	23 April 2020	2.25p		187.79p		166.00p
	30 June 2020	N/A		207.57p		182.00p
	Total return			-6.5%		-12.8%
		Dividend				Share
	Year ended 31 December 2019	rate		NAV		price
	31 December 2018	N/A		213.96p		195.75p
	17 January 2019	2.40p		216.13p		196.50p
	25 April 2019	2.25p		231.16p		214.00p
	18 July 2019	2.25p		237.99p		218.00p
	24 October 2019	2.25p		226.02p		207.00p
	31 December 2019	N/A		227.15p		214.00p
	Total return			+10.5%		+14.2%
	Discount to net asset value per Ordinary share. The difference between the share price of 182.00p (31 December 2019 - 214.00p) and the net asset value per Ordinary share of 207.57p (31 December 2019 - 227.15p) expressed as a percentage of the net asset value per Ordinary share. ​ ​ ​
	Dividend yield. The annual dividend of 9.25p per Ordinary share (31 December 2019 - 9.25p) divided by the share price of 182.00p (31 December 2019 - 214.00p), expressed as a percentage. ​ ​ ​
	Net gearing. Net gearing measures the total borrowings of £37,982,000 (31 December 2019 - £35,989,000) less cash and cash equivalents of £5,734,000 (31 December 2019 - £3,453,000) divided by shareholders' funds of £367,320,000 (31 December 2019 - £403,403,000), expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes net amounts due from brokers at the period end of £7,000 (31 December 2019 - £5,000) as well as cash held at banks of £5,727,000 (31 December 2019 - £3,458,000). ​ ​ ​
	Ongoing charges. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values with debt at fair value throughout the year. The ratio for 30 June 2020 is based on forecast ongoing charges for the year ending 31 December 2020. ​ ​ ​
			30 June 2020		31 December 2019
	Investment management fees (£'000)		3,099		3,431
	Administrative expenses (£'000)		834		951
	Ongoing charges (£'000)		3,933		4,382
	Average net assets (£'000)		365,940		406,372
	Ongoing charges ratio		1.07%		1.08%
	The ongoing charges percentage provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations which among other things, includes the cost of borrowings and transaction costs. ​ ​ ​

 

END

 

 

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