Half Yearly Report

RNS Number : 9181V

abrdn Asian Income Fund Limited

15 August 2022

 

abrdn Asian Income Fund Limited

Legal Entity Identifier: 549300U76MLZF5F8MN87

UNAUDITED HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2022

Performance Highlights

Dividend yieldA			Earnings per Ordinary share - basic (revenue)
As at 30 June 2022			Six months ended 30 June 2022
4.6%			5.23p
As at 31 December 2021	4.1%		Six months ended 30 June 2021	4.32p
Net asset value total returnAB			Share price total returnAB
Six months ended 30 June 2022			Six months ended 30 June 2022
-6.9%			-7.1%
Year ended 31 December 2021	+11.0%		Year ended 31 December 2021	+5.2%
MSCI AC Asia Pacific ex Japan High Dividend Yield Index total return (currency adjusted)B			MSCI AC Asia Pacific ex Japan Index total return (currency adjusted)B
Six months ended 30 June 2022			Six months ended 30 June 2022
+1.8%			-5.8%
Year ended 31 December 2021	+8.1%		Year ended 31 December 2021	-1.8%
Discount to net asset value per Ordinary shareA			Ongoing chargesA
As at 30 June 2022			As at 30 June 2022
-12.5%			1.02%
As at 31 December 2021	12.1%		As at 31 December 2021	1.01%
Net gearingA
As at 30 June 2022
10.9%
As at 31 December 2021	9.6%
A Alternative Performance Measure (see definition below).
B Total return represents the capital return plus dividends reinvested.
C Percentage movements for the six months ended 30 June 2022 and year ended 31 December 2021.

Chairman's Statement

Background

The first half of 2022 was another unsettling period for stock markets, following an eventful Covid-dominated 2021. Investors confronted not only Europe's biggest conflict since World War II but also the prospect of a global recession as major central banks moved to fend off inflation amid a spike in commodity prices. Much of the action was centred in the West, but Asian markets were not spared the knock-on effects of these developments. Risks emanated from China too - pandemic outbreaks and resultant lockdowns in its major cities and business hubs weighed on domestic activity. There were also lingering concerns around the ailing Chinese property market, as well as regulatory risk in the new economy sectors. However, forceful government policy support propped up market sentiment towards the end
of June 2022.

In this environment, your Company's net asset value (NAV) total return declined 6.9% over the six months to 30 June 2022, behind both the MSCI All Countries Asia Pacific ex Japan Index's fall of 5.8% and the MSCI All Countries Asia Pacific ex Japan High Dividend Yield Index's return of 1.8%. This was largely due to a rebound in the Chinese market in June where the Manager has maintained an underweight position. The share price declined 7.1% ending the period at 210p, representing a discount of 12.5% to the NAV per share; and providing an attractive, ahead of benchmark, prospective yield of 4.6%. 

This short-term weakness is disappointing after last year's robust performance, but longer-term results remain encouraging. As indicated by the table below, your Company's NAV has outperformed relative to the comparative indices over the three- and five-year periods, reflecting your Manager's commitment to quality companies offering both capital and income growth.

	Six months	1 year	3 year	5 year
Performance (total return) to 30 June 2022	% return	% return	% return	% return
Share price (Ordinary)A	-7.1%	-4.8	+10.4	+23.6
Net asset valueA	-6.9%	-3.3	+13.9	+27.9
MSCI AC Asia Pacific ex Japan Index (currency adjusted)	-5.8%	-12.5	+12.5	+17.5
MSCI AC Asia Pacific ex Japan High Dividend Yield Index (currency adjusted)	+1.8%	+2.4	+7.7	+22.0
A Considered to be an Alternative Performance Measure (see definition below).

Overview

During the review period, as inflation surged globally, and Russia invaded Ukraine, governments started to reduce the amount of money being pushed into the economy. Even before the invasion, price pressures had been building globally, fuelled by pent-up demand and Covid-related supply-chain woes, compounded by China's zero-tolerance approach to Covid. The war amplified supply shocks and drove commodity prices sharply higher, causing major central banks to tighten further. This, in turn, stoked fears of recession. Most notably, the US Federal Reserve jolted markets when it delivered a series of larger than average interest rate increases to slow down inflation.

Little wonder, then, that almost all major stock markets ended in the red. Asian markets, however, were more resilient than other global emerging markets and the developed markets of the US and Europe. One reason is that Asia is much less exposed to the war in Ukraine. In addition, inflation is still moderate in most of Asia compared to the rest of the world which, combined with a softening global backdrop, could translate to relatively lower interest rate increases. The region's healthy current account positions and fiscal discipline should also help it better withstand a downturn. Perhaps most importantly, the post-Covid reopening (Asia is a relative latecomer) should prompt market growth in the short to medium term. Economies in South-East Asia are already humming again thanks to a tourism comeback. The uptick in domestic demand should also underpin earnings growth - and the outlook for dividends.

With inflation rising and markets in tumult, dividend-paying stocks proved resilient as investors shunned growth stocks in favour of stability and income. Your Manager's focus remains on high-yielding quality businesses with cash-rich balance sheets and sustainable cash-generative abilities rather than high risk growth companies. Such attributes will determine the ability to sustain dividends, particularly in a rising interest rate environment where companies with too much debt or leverage could be forced to cut or suspend payouts. Your Manager also prefers businesses with sound environmental, social and governance (ESG) credentials, which complement a company's quality and durability - and can lead to better investment outcomes.

Reassuringly, the underlying quality of the portfolio remains robust and the vast majority of holdings have proven defensive and delivered on dividends, supporting your Company's dividend yield of over 4.6% based on the 9.75p target dividend per share for 2022.

Performance Review

The portfolio's holdings, comprising a blend of companies with growth and income potential, faced stiff headwinds over the period. Even so, your Company was ahead of the MSCI All Countries Asia Pacific ex Japan Index by a commendable 3% for the first five months. Regrettably, gains were eroded in June, largely because of the rebound in China, where the portfolio is underweight. Performance lagged t he MSCI All Countries Asia Pacific ex Japan High Dividend Yield index over the period on account of that Index's heavier allocation to Chinese banks, a sector which held up relatively well on hopes of a recovery in credit growth. The Company does not hold benchmark heavyweights in the state-owned banks, which tend to be more heavily regulated, preferring instead to focus on a sector we are more positive on, wealth management, via our holding in privately-owned China Merchants Bank.

Despite lingering concerns over repeated Covid-19 lockdowns, Chinese stocks climbed towards the period-end thanks to early signs that the country's economic malaise may be ending. A potentially less severe regulatory stance on sectors such as e-commerce and internet provided further impetus to the rally. Against this background, not holding Alibaba, JD.com and Baidu held back our relative performance. As our longstanding shareholders would know, your income-oriented Company has not invested in these internet stocks as they do not pay dividends. Also hampering performance relative to the MSCI All Countries Asia Pacific ex Japan High Dividend Yield Index was the lack of exposure to China Construction Bank, Bank of China and Industrial and Commercial Bank of China given the higher weight to these banks in that Index. While the state banks offer high yields, your Manager is mindful that the sector is heavily regulated which may weigh on overall returns.

The adverse effect of the underweight to China overshadowed solid returns from the Chinese companies that the portfolio does hold. China Resources Land , one of your Company's largest investments, was the top stock contributor over the period. Unlike its low-quality peers, the property developer has a strong balance sheet and is modestly geared, as it funds new developments with rental income from its investment properties. Another standout was the real estate developer China Vanke. Both companies outperformed on the back of China's credit easing, which included cuts to loan prime rates. Their shares received a further fillip from improving industry-wide sales data. Following the sale of China Mobile and CNOOC , the portfolio no longer has exposure to Chinese military-industrial complex companies, in compliance with US sanctions relating to such securities.

Elsewhere, the rotation from interest rate-sensitive growth stocks to their value-oriented counterparts had a profound impact on markets. Korea and Taiwan - both technology-heavy markets - suffered steep losses in such an investment climate. A more subdued demand outlook for the global semiconductor industry added to the downbeat mood.

Accordingly, your Company's overweight to Taiwan detracted from performance. Silicon wafer maker GlobalWafers was caught in the indiscriminate selling of technology-related stocks. E-commerce platform Momo.com, an outstanding performer over the past three years, was also punished unfairly. There were some bright spots. Taiwan Mobile, backed by its attractive dividend yield and sound financial shape, delivered sizeable gains. Electronics manufacturer Hon Hai Precision Industry impressed with its payment of a record-high cash dividend per share following robust net profits. The company's payout ratio now exceeds 50%, which translates to a yield of over 5%. Your Manager's active engagement with Hon Hai has also been fruitful. The company made positive strides in sharing more about its ESG practices with the broader investment community and unveiled a new ESG roadmap towards the period end.

The modest position in Korea, where dividend yields tend to be low, added value. However, gains were pared by negative stock selection. Among the notable casualties was technology giant Samsung Electronics , whose robust fundamentals were overlooked as sentiment weakened across the sector. Nevertheless the company's financials remain healthy, and management has been increasingly focused on shareholder-friendly policies.

Investments in Singapore, the portfolio's biggest exposure, produced handsome returns. The trio of well-capitalised lenders Oversea-Chinese Banking Corp, United Overseas Bank and DBS Group were buoyed by rising interest rates and an improving economy, which are expected to boost net interest margins. The former has restored its dividend to pre-pandemic levels, while the latter two have scope for an increase later in the year.

The Company's holdings in Australia proved equally helpful. Diversified miners BHP Group and Rio Tinto staged strong advances amid the inflationary commodity-price environment. Both companies announced record dividend payouts on the back of solid results. It is worth noting that they are the lowest-cost producers in the sector and have been disciplined in strengthening their financial health by divesting non-core assets.

Turning to portfolio activity, your Manager is of the opinion that turbulence has created mispricing opportunities for long-term investors which are best exploited by refocusing on stock fundamentals and quality. Accordingly, your Manager took advantage of more palatable valuations to introduce some long-researched, quality companies that have clear growth trajectories and are well placed to ride on structural growth trends.

Of the four new purchases, two were in Taiwan. MediaTek , the country's leading fabless integrated-circuit design house, has attractive growth prospects. Management has also committed to returning capital to shareholders via special dividends over at least the next three years.  Taiwan Union Technology (TUC) is a major manufacturer of copper clad laminate, which is a key base material used to make printed circuit boards. The company has moved up the value chain and stayed ahead of competition thanks to its first mover advantage and product innovation. Management has a good track record of strategy execution and free-cash flow should improve as capex tapers off. TUC offers a decent dividend yield of 6%

Your Manager also initiated Hong Kong-based Dah Sing Financial, which provides banking, insurance and other financial-related services primarily in Hong Kong, Macau and mainland China. The group's outlook is brightening, driven by the economic recovery, the reopening of borders between Hong Kong and the mainland, and rising rates. Your Manager believes there is a good chance of the stock undergoing a re-rating if the macro environment recovers. 

Another new addition was Thailand-based Kasikornbank, a leader on the digitalisation, technology, and ESG fronts, and a key beneficiary of the country's re-opening. The lender's growth potential is supported by its sound balance sheet, strong branch network and measured approach in digital transformation, which could lead to dividends being reinstated. 

The purchases were funded with the sale of China Mobile and CNOOC mentioned earlier and the divestment of Waypoint REIT. Proceeds from the takeover of AusNet Services were also invested across holdings with high dividend yields. 

Dividends

As I reported at the time of the annual results in March 2022, the Board is very conscious of the continuing demand for yield in the current environment and the Company is targeting a total dividend of at least 9.75p per Ordinary share for the years ending 31 December 2022 and 2023.   The Company has announced two quarterly dividends of 2.3p each (2021: 2.25p each) covering the six months to 30 June 2022 totalling 4.6p (2021 - 4.5p). The remaining two dividends for 2022 will be considered at each quarter end, at which point an announcement will be made by the Company.  The Board remains mindful of the Company's objective of growing dividends over time and is keen to retain its 'AIC Next Generation 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 the fourth interim dividend in January 2023.

As we have cautioned in previous years, significant movements in the value of Sterling may also impact the level of earnings from the portfolio as the Company earns dividends in local Asian currencies and pays out its dividend to shareholders in Sterling. However, the Board is proud to have maintained a progressive policy despite the various economic, political and currency fluctuation risks seen both in Asia and in the UK since your Company's inception.

Gearing and Share Repurchases

£49.1m had been drawn down under the Company's £10 million term facility and its £40 million revolving credit facility with Bank of Nova Scotia, London Branch ("the Lender") at the period end representing net gearing of 10.9%.  Under the terms of the revolving credit 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 Investment Manager of suitable investment opportunities and the Lender's credit approval. At the time of writing the net gearing stood at 10.0%.

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 selectively buying back shares with a view to minimising volatility in the Company's share price due to a widening discount. During the period under review, your Company bought 1,288,978 shares for treasury and subsequent to the period end a further 73,695 Ordinary shares have been purchased for treasury.  At the time of writing the latest NAV per share is 246.0p and the share price is 216.0p representing a discount to NAV of 12.2%.  Buying back shares is accretive to existing shareholders and helps the performance of the Company.

Outlook

Volatility could remain the order of the day, as recession fears join inflation woes while central banks continue on their path of normalisation. China is still a source of some anxiety, particularly given Beijing's dynamic zero-Covid policy and increasing tensions with relation to the US. That said, your Manager is cautiously optimistic about China's outlook in the second half of 2022. Growth momentum could strengthen as supportive policies work their way through the economy. Benign inflation - in marked contrast to many advanced economies - also creates room for further monetary easing and stimulus. While caution is merited, there are elements of good news. The recovery in South-East Asia is gathering pace, which bodes well for earnings growth. By and large, Asia is seeing some return to normality. Your Manager is travelling again and meeting with companies, business leaders and policymakers. And it is heartening to report that though near-term macroeconomic uncertainties pose challenges, your Company's holdings - with their buffers of strong balance sheets, cash flow generation and pricing power - remain broadly resilient. They should have the wherewithal to ensure steady dividend payouts. Your Manager will closely monitor their operational performance over the next few quarters.

All told, Asia continues to provide rich pickings for investors, especially those who target income and capital growth. Not only does the region offer compelling dividend yields, Asia's long-term growth drivers, such as rising affluence, technology adoption and green energy, also remain persuasive. Your Manager has the advantage of having a long heritage in Asia and feet on the ground, filtering through the noise to find proven quality companies that are ideally placed to benefit from structural trends while generating healthy income for investors. Your Board remains confident that the portfolio's predisposition towards such companies will continue to reward shareholders over the long term.

Ian Cadby
Chairman
12 August 2022

Interim Board Report - Disclosures

Principal Risk Factors

The principal risks and uncertainties affecting the Company are set out in detail on pages 25 to 27 of the Annual Report and Financial Statements for the year ended 31 December 2021 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;

-  Regulatory;

-  Operational; and

-  Income and dividend risk.

The Board continues to monitor the impact on the Company of the Covid pandemic and the war in Ukraine. Both the pandemic and war in Ukraine are continuing to affect world markets by disrupting supply chains, impacting demand for products and services, increasing energy costs and potentially impacting cash flows. However, the Board notes the Investment 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. Throughout the pandemic the Board and Manager have closely monitored the Company's key third party service providers and the Company has proven resilient despite the severe market conditions that have been seen at times.  The Board, through the Manager, will continue to monitor all third-party service arrangements.

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 92 to 100 of the Annual Report for the year ended 31 December 2021.

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 Covid-19 pandemic and war in Ukraine 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;

-  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 abrdn Asian Income Fund Limited

Ian Cadby
Chairman
12 August 2022

  Condensed Statement of Comprehensive Income

	Six months ended			Six months ended			Year ended
	30 June 2022			30 June 2021			31 December 2021
	(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	10,849	-	10,849	9,682	-	9,682	19,869	-	19,869
Interest income on investments held at fair value through profit or loss	159	-	159	146	-	146	294	-	294
Stock lending income	-	-	-	-	-	-	2	-	2
Traded option premiums	47	-	47	21	-	21	33	-	33
Total revenue	11,055	-	11,055	9,849	-	9,849	20,198	-	20,198
(Losses)/gains on investments held at fair value through profit or loss	-	(36,224)	(36,224)	-	23,794	23,794	-	33,354	33,354
Net currency (losses)/gains	-	(2,313)	(2,313)	-	205	205	-	(266)	(266)
	11,055	(38,537)	(27,482)	9,849	23,999	33,848	20,198	33,088	53,286
Expenses
Investment management fee (note 10)	(668)	(1,003)	(1,671)	(691)	(1,037)	(1,728)	(1,411)	(2,116)	(3,527)
Other operating expenses (note 5)	(496)	-	(496)	(415)	-	(415)	(862)	-	(862)
Total operating expenses	(1,164)	(1,003)	(2,167)	(1,106)	(1,037)	(2,143)	(2,273)	(2,116)	(4,389)
Profit/(loss) before finance costs and tax	9,891	(39,540)	(29,649)	8,743	22,962	31,705	17,925	30,972	48,897
Finance costs	(169)	(254)	(423)	(125)	(188)	(313)	(238)	(357)	(595)
Profit/(loss) before tax	9,722	(39,794)	(30,072)	8,618	22,774	31,392	17,687	30,615	48,302
Tax expense (note 11)	(784)	319	(465)	(1,020)	(495)	(1,515)	(2,024)	(967)	(2,991)
Profit/(loss) for the period	8,938	(39,475)	(30,537)	7,598	22,279	29,877	15,663	29,648	45,311
Earnings per Ordinary share (pence) (note 3)	5.23	(23.10)	(17.87)	4.32	12.68	17.00	8.95	16.93	25.88
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 of the Company, 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 abrdn 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 2022	30 June 2021	31 December 2021
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss		455,329	482,334	497,370
Current assets
Cash and cash equivalents		4,434	5,634	3,268
Other receivables		2,194	2,363	1,438
		6,628	7,997	4,706
Creditors: amounts falling due within one year
Bank loans	8	(39,158)	(25,417)	(36,788)
Other payables		(2,821)	(1,081)	(2,917)
		(41,979)	(26,498)	(39,705)
Net current liabilities		(35,351)	(18,501)	(34,999)
Total assets less current liabilities		419,978	463,833	462,371
Creditors: amounts falling due after more than one year
Deferred tax liability on Indian capital gains		(1,297)	(1,144)	(1,616)
Bank loan	8	(9,973)	(10,044)	(9,965)
		(11,270)	(11,188)	(11,581)
Net assets		408,708	452,645	450,790
Stated capital and reserves
Stated capital	9	194,933	194,933	194,933
Capital redemption reserve		1,560	1,560	1,560
Capital reserve		200,343	244,760	242,727
Revenue reserve		11,872	11,392	11,570
Equity shareholders' funds		408,708	452,645	450,790
Net asset value per Ordinary share (pence)	4	240.04	257.62	262.76
The accompanying notes are an integral part of the financial statements.

Condensed Statement of Changes in Equity

Six months ended 30 June 2022 (unaudited)
		Capital
	Stated	redemption	Capital	Revenue
	capital	reserve	reserve	reserve	Total
	'000	'000	'000	'000	'000
Opening balance	194,933	1,560	242,727	11,570	450,790
Buyback of Ordinary shares for treasury	-	-	(2,909)	-	(2,909)
(Loss)/profit for the period	-	-	(39,475)	8,938	(30,537)
Dividends paid (note 6)	-	-	-	(8,636)	(8,636)
Balance at 30 June 2022	194,933	1,560	200,343	11,872	408,708
Six months ended 30 June 2021 (unaudited)
		Capital
	Stated	redemption	Capital	Revenue
	capital	reserve	reserve	reserve	Total
	'000	'000	'000	'000	'000
Opening balance	194,933	1,560	222,751	12,232	431,476
Buyback of Ordinary shares for treasury	-	-	(270)	-	(270)
Profit for the period	-	-	22,279	7,598	29,877
Dividends paid (note 6)	-	-	-	(8,438)	(8,438)
Balance at 30 June 2021	194,933	1,560	244,760	11,392	452,645
Year ended 31 December 2021 (audited)
		Capital
	Stated	redemption	Capital	Revenue
	capital	reserve	reserve	reserve	Total
	'000	'000	'000	'000	'000
Opening balance	194,933	1,560	222,751	12,232	431,476
Buyback of Ordinary shares for treasury	-	-	(9,672)	-	(9,672)
Profit for the year	-	-	29,648	15,663	45,311
Dividends paid (note 6)	-	-	-	(16,325)	(16,325)
Balance at 31 December 2021	194,933	1,560	242,727	11,570	450,790
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 2021 - £260,822,000; 31 December 2021 - £260,822,000). These amounts include proceeds arising from the issue of shares by the Company, but exclude the cost of shares purchased for cancellation or treasury by the Company.
The accompanying notes are an integral part of the financial statements.

Condensed Statement of Cash Flows

	Six months ended	Six months ended	Year ended
	30 June 2022	30 June 2021	31 December 2021
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Cash flows from operating activities
Dividend income received	9,919	7,507	18,432
Interest income received	153	153	298
Derivative income received	47	21	33
Investment management fee paid	(1,784)	(3,148)	(3,148)
Other cash expenses	(479)	(431)	(860)
Cash generated from operations	7,856	4,102	14,755
Interest paid	(435)	(347)	(557)
Overseas taxation paid	(804)	(1,011)	(2,009)
Net cash inflows from operating activities	6,617	2,744	12,189
Cash flows from investing activities
Purchases of investments	(47,167)	(48,423)	(98,164)
Sales of investments	53,206	53,913	98,324
Capital gains tax on sales	-	(45)	-
Net cash inflow from investing activities	6,039	5,445	160
Cash flows from financing activities
Purchase of own shares for treasury	(2,909)	(270)	(9,672)
Dividends paid	(8,636)	(8,438)	(16,325)
Loan arrangement expense paid	-	-	(49)
Drawdown of loans	-	-	25,800
Repayment of loans	-	-	(14,900)
Net cash outflow from financing activities	(11,545)	(8,708)	(15,146)
Net increase/(decrease) in cash and cash equivalents	1,111	(519)	(2,797)
Cash and cash equivalents at the start of the period	3,268	6,177	6,177
Foreign exchange	55	(24)	(112)
Cash and cash equivalents at the end of the period	4,434	5,634	3,268
The accompanying notes are an integral part of the financial statements.

Notes to the Financial Statements

For the year ended 30 June 2022

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 2021.
	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:
	IAS 41, IFRS 1, 9, and 16 Amendments	Annual Improvements 2018-2020		1 January 2022
	IFRS 3 Amendments	Conceptual Framework		1 January 2022
	IAS 1 Amendments	Classification of Liabilities as Current or Non-Current		1 January 2023
	IAS 1 Amendments	Disclosure of Accounting Policies		1 January 2023
	IAS 8 Amendments	Definition of Accounting Estimates		1 January 2023
	IAS 12 Amendments	Deferred Tax related to Assets and Liabilities arising from a Single Transaction		1 January 2023
	IFRS 4 Amendments	Deferral of effective date of IFRS 9		1 January 2023

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 2022	30 June 2021	31 December 2021
		(unaudited)	(unaudited)	(audited)
		p	p	p
	Revenue return	5.23	4.32	8.95
	Capital return	(23.10)	12.68	16.93
	Total return	(17.88)	17.00	25.88
	The figures above are based on the following:
		Six months ended	Six months ended	Year ended
		30 June 2022	30 June 2021	31 December 2021
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Revenue return	8,938	7,598	15,663
	Capital return	(39,475)	22,279	29,648
	Total return	(30,537)	29,877	45,311
	Weighted average number of Ordinary shares in issue	170,797,870	177,136,644	175,057,061

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 2022	30 June 2021	31 December 2021
		(unaudited)	(unaudited)	(audited)
	Attributable net assets (£'000)	408,708	452,645	450,790
	Number of Ordinary shares in issue (excluding shares in issue held in treasury)	170,269,918	175,704,329	171,558,896
	Net asset value per Ordinary share (p)	240.04	257.62	262.76

5.	Other operating expenses (revenue)
		Six months ended	Six months ended	Year ended
		30 June 2022	30 June 2021	31 December 2021
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Directors' fees	82	79	166
	Promotional activities	103	103	206
	Auditor's remuneration:
	- statutory audit	19	20	40
	Custodian charges	82	88	178
	Other	210	125	272
		496	415	862

6.	Dividends on equity shares
		Six months ended	Six months ended	Year ended
		30 June 2022	30 June 2021	31 December 2021
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Amounts recognised as distributions to equity holders in the period:
	Second interim dividend 2021 - 2.25p per Ordinary share	-	-	3,951
	Third interim dividend 2021 - 2.25p per Ordinary share	-	-	3,936
	Fourth interim dividend for 2021 - 2.75p  per Ordinary share (2020 - 2.55p)	4,712	4,484	4,484
	First interim dividend for 2022 - 2.30p per Ordinary share (2021 - 2.25p)	3,924	3,954	3,954
		8,636	8,438	16,325
	A second interim dividend of 2.30p for the year to 31 December 2022 will be paid on 22 August 2022 to shareholders on the register on 29 July 2022. The ex-dividend date was 28 July 2022.

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 2022	30 June 2021	31 December 2021
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Purchases	43	65	108
	Sales	51	108	181
		94	173	289

8.	Bank loans
	On 2 March 2021, the Company entered into a new unsecured £40 million multi-currency revolving loan facility agreement with Bank of Nova Scotia, London Branch, which runs until 2 March 2024. Under the terms of the facility agreement, the Company also has the option to increase the level of the commitment from £40 million to £60 million at any time. This facility agreement replaced the existing £40 million multi currency revolving loan facility agreement with Scotiabank Europe PLC. At the period end approximately GBP 15.8 million, USD 19 million and HKD 73.5 million, equivalent to £39.2 million was drawn down from the £40 million facility. The interest rates attributed to the GBP, USD and HKD loans at the period end were 2.422%, 2.764% and 1.906% respectively.
	On 2 March 2021, the Company also entered into a new unsecured fixed three year £10 million credit facility with Bank of Nova Scotia, London Branch at an all-in interest rate of 1.53%. 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 £49,131,000 (30 June 2021 - £35,461,000; 31 December 2021 - £46,753,000).

9.	Stated capital
		30 June 2022		30 June 2021		31 December 2021
		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 1,288,978 Ordinary shares were bought back by the Company for holding in treasury at a cost of £2,909,000 (30 June 2021 - 120,154 shares were bought back at a cost of £270,000; 31 December 2021 - 4,265,587 shares were bought back for holding in treasury at a cost of £9,672,000). As at 30 June 2022 24,663,471 (30 June 2021 - 19,229,060; 31 December 2021 - 23,374,493) 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 abrdn Capital International Limited ("ACIL") for the provision of management services. With the exception of stocklending activities, this agreement has been sub-delegated to abrdn Asia Limited ("abrdn Asia").  Any stocklending activity has been sub-delegated to Aberdeen Asset Managers Limited.  Mr Young, who is a Director of the Company, is employed by abrdn Asia as Chairman of its Asian operations. ACIL and abrdn Asia are both wholly owned subsidiaries of abrdn plc.
	The investment management fee is payable quarterly in arrears and is based on an annual fee of 0.8% on the average net assets of the previous six months up to £350 million and 0.6% per annum thereafter. During the period, £1,671,000 (30 June 2021 - £1,728,000; 31 December 2021 - £3,527,000) of management fees were paid and payable, with a balance of £2,572,000 (30 June 2021 - £886,000; 31 December 2021 - £2,685,000) being payable to abrdn Asia at the period end. The investment management fee is charged 40% to revenue and 60% to capital in line with the Board's expected long term returns.
	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 2021 - £103,000; 31 December 2021 - £206,000) of fees were payable, with a balance of £52,000 (30 June 2021 - £52,000; 31 December 2021 - £52,000) being payable to ACIL at the period end.

11.	Tax expense
	With effect from 1 January 2022 the Company migrated its tax residency to the UK from Jersey and elected for the Company to join the UK's investment trust regime.

12.	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 2022 (unaudited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	451,557	-	-	451,557
	Quoted bonds	b)	-	3,772	-	3,772
	Total assets		451,557	3,772	-	455,329
			Level 1	Level 2	Level 3	Total
	At 30 June 2021 (unaudited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	478,589	-	-	478,589
	Quoted bonds	b)	-	3,745	-	3,745
	Total assets		478,589	3,745	-	482,334
			Level 1	Level 2	Level 3	Total
	At 31 December 2021 (audited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	493,609	-	-	493,609
	Quoted bonds	b)	-	3,761	-	3,761
	Total assets		493,609	3,761	-	497,370
	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 2022 has been estimated at £49,087,000 (carrying value per Condensed Balance Sheet - £49,131,000) which was calculated using a discounted cash flow valuation technique. At 30 June 2021 and 31 December 2021 the fair value was estimated at £35,567,000 and £46,878,000 (carrying value per Condensed Balance Sheet - £35,461,000 and £46,753,000) respectively. Under the fair value hierarchy in accordance with IFRS 13, these borrowings are classified as Level 2.

13.	Events after the reporting period
	A further 73,695 Ordinary shares have been bought back by the Company for holding in treasury, subsequent to the reporting period end, at a cost of £158,000. Following the share buybacks there were 170,196,233 Ordinary shares in issue excluding those held in treasury.

14.	Half Yearly Financial Report
	The financial information for the six months ended 30 June 2022 and 30 June 2021 has not been audited.

15.	Approval
	This Half Yearly Financial Report was approved by the Board on 12 August 2022.

Investment Portfolio As at 30 June 2022
		Valuation	Total assets
Company	Country	£'000	%
Taiwan Semiconductor Manufacturing Company	Taiwan	29,457	6.4
Samsung Electronics (Pref)	South Korea	25,365	5.5
BHP Group A	Australia	17,745	4.0
DBS Group	Singapore	16,642	3.6
Oversea-Chinese Banking Corporation	Singapore	15,197	3.3
Venture Corporation	Singapore	14,782	3.2
China Resources Land	China	11,906	2.6
Taiwan Mobile	Taiwan	11,836	2.6
United Overseas Bank	Singapore	10,938	2.4
Power Grid Corp of India	India	10,877	2.4
Top ten investments		164,745	36.0
Infosys	India	10,196	2.2
Rio Tinto A	Australia	9,735	2.1
LG Chem (Pref)	South Korea	9,575	2.1
Hon Hai Precision Industry	Taiwan	9,430	2.1
AIA Group	Hong Kong	9,153	2.0
Keppel Infrastructure	Singapore	8,523	1.9
Spark New Zealand	New Zealand	8,417	1.8
National Australia Bank	Australia	8,314	1.8
Charter Hall Long Wale REIT	Australia	7,779	1.7
Shopping Centres Australasia	Australia	7,689	1.7
Top twenty investments		253,556	55.4
Commonwealth Bank of Australia	Australia	7,393	1.6
Momo.com Inc	Taiwan	7,380	1.6
Hong Kong Exchanges & Clearing	Hong Kong	7,291	1.6
China Merchants Bank 'A'	China	7,213	1.6
ASX	Australia	7,171	1.6
SAIC Motor 'A'	China	7,073	1.5
China Vanke (H Shares)	China	7,035	1.5
Tisco Financial Group Foreign	Thailand	6,977	1.5
Tata Consultancy Services	India	6,971	1.5
Singapore Technologies Engineering	Singapore	6,869	1.5
Top thirty investments		324,929	70.9

Auckland International Airport	New Zealand	6,771	1.5
Singapore Telecommunications	Singapore	6,550	1.4
Hang Lung Properties	Hong Kong	6,422	1.4
Centuria Industries REIT	Australia	6,082	1.3
Siam Cement B	Thailand	6,044	1.3
Capitaland Investment	Singapore	5,968	1.3
Bank Rakyat	Indonesia	5,434	1.2
Accton Technology	Taiwan	5,385	1.2
Midea Group 'A'	China	4,989	1.1
Ascendas India Trust	Singapore	4,947	1.1
Top forty investments		383,521	83.7
Okinawa Cellular Telephone	Japan	4,719	1.0
NZX	New Zealand	4,647	1.0
Dah Sing Financial Holdings	Hong Kong	4,573	1.0
Hana Microelectronics (Foreign)	Thailand	4,435	1.0
GlobalWafers	Taiwan	4,366	1.0
Lotus Retail Growth Freehold And Leasehold Property Fund	Thailand	4,338	0.9
KMC Kui Meng	Taiwan	4,240	0.9
Kasikornbank	Thailand	4,185	0.9
Sunonwealth Electric Machine	Taiwan	3,966	0.9
Medibank Private	Australia	3,782	0.8
Top fifty investments		426,772	93.1
ICICI Bank D	India	3,772	0.8
Convenience Retail Asia	Hong Kong	3,712	0.8
Digital Core REIT	Singapore	3,591	0.8
Land & Houses Foreign	Thailand	3,409	0.7
Macquarie Group	Australia	3,242	0.7
Amada Co	Japan	3,105	0.7
Media Tek	Taiwan	2,975	0.6
China Resources Gas	China	2,432	0.5
Taiwan Union Technology	Taiwan	1,811	0.4
SP Setia (Pref)	Malaysia	508	0.1
Top sixty investments		455,329	99.2
G3 Exploration D	China	-	-
Total value of investments		455,329	99.2
Net current assets D		2,510	0.5
Total assets		457,839	99.7
A Incorporated in and listing held in United Kingdom.
B Holding includes investment in common (£4,041,000) and non-voting depositary receipt (£2,003,000) lines.
C Corporate bonds.
D Excludes bank loans of £49,131,000.

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.
Discount to net asset value per Ordinary share
The discount is the amount by which the share price is lower than the net asset value per share, expressed as a percentage of the net asset value.
		30 June 2022	31 December 2021
NAV per Ordinary share (p)	a	240.03p	262.76p
Share price (p)	b	210.00p	231.00p
Discount	(b-a)/a	-12.5%	-12.1%
Dividend yield
The yield for 30 June 2022 is calculated based on the prospective annual dividend for 2022 per Ordinary share in accordance with the Board's stated target divided by the share price, expressed as a percentage. The yield for 31 December 2021 is calculated based on the annual dividend for 2021 per Ordinary share divided by the share price, expressed as a percentage.
		30 June 2022	31 December 2021
Annual dividend per Ordinary share (p)	a	9.75p	9.50p
Share price (p)	b	210.00p	231.00p
Dividend yield	(b-a)/a	4.6%	4.1%
Net gearing
Net gearing measures the total borrowings less cash and cash equivalents dividend by shareholders' funds, expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due to and from brokers at the period end as well as cash and cash equivalents.
		30 June 2022	31 December 2021
Borrowings (£'000)	a	49,131	46,753
Cash (£'000)	b	4,434	3,268
Amounts due to brokers (£'000)	c	-	-
Amounts due from brokers (£'000)	d	-	-
Shareholders' funds (£'000)	e	408,708	450,790
Net gearing	(a-b+c-d)/e	10.9%	9.6%
Ongoing charges ratio
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 published daily net asset values with debt at fair value throughout the year. The ratio for 30 June 2022 is based on forecast ongoing charges for the year ending 31 December 2022.
		30 June 2022	31 December 2021
Investment management fees (£'000)		3,233	3,527
Administrative expenses (£'000)		924	862
Less: non-recurring chargesA (£'000)		(42)	(76)
Ongoing charges (£'000)		4,152	4,313
Average net assets (£'000)		421,141	446,994
Ongoing charges ratio (excluding look-through costs)		0.99%	0.96%
Look-through costsA		0.03%	0.05%
Ongoing charges ratio (including look-through costs)		1.02%	1.01%
A Professional services comprising advisory and legal fees considered unlikely to recur.
B Calculated in accordance with AIC guidance issued in October 2020 to include the Company's share of costs of holdings in investment companies on a look-through basis.
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.
Total return
NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. Share price and NAV total returns are monitored against open-ended and closed-ended competitors, and the Reference Index, respectively.
			Share
Six months ended 30 June 2022		NAV	Price
Opening at 1 January 2022	a	262.76p	231.00p
Closing at 30 June 2022	b	240.03p	210.00p
Price movements	c=(b/a)-1	-8.7%	-9.1%
Dividend reinvestmentA	d	1.8%	2.0%
Total return	c+d	-6.9%	-7.1%
			Share
Year ended 31 December 2021		NAV	Price
Opening at 1 January 2021	a	245.40p	228.50p
Closing at 31 December 2021	b	262.76p	231.00p
Price movements	c=(b/a)-1	7.1%	1.1%
Dividend reinvestmentA	d	3.9%	4.1%
Total return	c+d	+11.0%	+5.2%
A 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 Half Year Report will be posted to shareholders in late August 2022 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

For abrdn Capital International Limited

Company Secretary

12 August 2022

 

END

 

 

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