TIDMACIC
RNS Number : 4375R
abrdn China Investment Company Ltd.
06 July 2022
abrdn China Investment Company Limited
LEI: 213800RIA1NX8DP4P938
Seeking long-term capital growth by investing predominantly in
Chinese equities
Half-Yearly Report 30 April 2022
abrdn.com
Performance Highlights and Financial Calendar
Performance Highlights for the six months ended 30 April
2022
Net asset value ("NAV") per Ordinary NAV per Ordinary share 2
share total return 1,5
-21.5% 637.7p
Year ended 31 October 2021 +19.8% As at 31 October 2021 813.2p
Ordinary share price total return Ordinary share price - Closing price
1,5
536.0p
-22.9% As at 31 October 2021 695.0p - Closing
Year ended 31 October 2021 +18.7% price
MSCI China All Shares Index Net Assets
Net Total Return in sterling terms
-16.8% GBP296.5m
Year ended 31 October 2021 +10.7% As at 31 October 2021 GBP373.8 m
4
Net cash 3,5 Revenue return per Ordinary share
4.0% -0.47p
As at 31 October 2021 53.8% Year ended 31 October 2021 -0.61p
(1) Performance figures stated above include reinvestment of
dividends on the ex-date.
(2) See note 8 in the Selected Explanatory Notes to these
Financial Statements for basis of calculation.
(3) Based on the net of the drawn down loan value and cash, as a
percentage of NAV.
(4) The Company's previous benchmark was the MSCI Emerging
Markets Net Total Return Index in sterling terms.
(5) Definitions of these Alternative Performance Measures
('APMs') together with how these have been calculated can be found
below .
Financial Calendar
=========================================================
31 October 2022
Financial year end
================================== =====================
Expected announcement of results February 2023
for year ended 31 October 2022
================================== =====================
April 2023
Annual General Meeting
================================== =====================
Chairman's Statement
Overview
This is the first report of the Company as an investor in
Chinese equities since shareholders approved the change of mandate
in October 2021. It has been a testing period for most equity
markets, but China has been particularly challenging. While the
Board recognises that this is not the most auspicious start, it
remains confident in the long-term prospects for China and for an
investment trust investing therein remain strong. The net asset
value ("NAV") total return of the Company for the six month period
ended 30 April 2022 was -21.5%. This return is behind the return
from the reference index, the MSCI China All Shares Index (in
Sterling terms), of -16.8%.
It was a turbulent period for Chinese equities as they battled
against numerous challenges. Beijing's zero- tolerance approach to
Covid-19 outbreaks, regulatory upheaval, property and energy woes,
significant disruption to supply chains and the potential delisting
of US-listed Chinese companies over auditing requirements all
weighed on markets. This was compounded at a global level by
sharply rising inflation, further fueled by the war in Ukraine, and
the rising threat of a prolonged tighter monetary policy in the US
and Europe but loosening in China.
Fundamentals have taken a back seat since January, with the
direction of share prices being dictated by the current heightened
levels of macroeconomic and geopolitical risk. This has led to a
general rotation from growth to value stocks and the Company
struggled to keep pace against such a strong wave of negative
sentiment. Many of your Company's high-quality growth holdings, in
areas such as renewable energy, technology and healthcare,
experienced aggressive profit-taking. On the other hand, the energy
sector, to which the Company has no direct exposure, rallied
sharply as global energy prices soared on the back of concerns
around the impact of the war in Ukraine on supply. Similarly,
strong flows into the large state-owned banks, where the Company is
underweight, counted against performance. The performance for the
period under review is discussed in more detail in the Investment
Manager's Review.
Scheme of Reconstruction
As reported in the Company's Annual Report, I am pleased to
confirm the Company successfully completed the merger with Aberdeen
New Thai Investment Trust PLC ("New Thai") on 9 November 2021. As
part of the merger, a tender offer to shareholders was made and
6,894,773 Ordinary shares were tendered and bought back into
treasury. Simultaneously, 7,554,440 new Ordinary shares were issued
to the shareholders of New Thai who elected to roll their
shareholding into the Company.
Discount and Share Buy Backs
The discount at which the Company's shares trade relative to the
NAV narrowed significantly following the completion of the merger
with New Thai from 14.5% to less than 10% for much of the period.
Unfortunately, in the final days of April, the discount widened as
the news of renewed Covid-19 lockdowns in Shanghai weighed slightly
on Chinese equities and the discount at the end of the period was
15.9%. At 24 June 2022 the discount narrowed to 14.8%.
In December 2021, the Company undertook its first share buy back
for over two years. During the period ended April 2022, 134,749
Ordinary shares were bought back by the Company, representing 0.3%
of the issued share capital, at a weighted average discount of
10.3%. At the time of writing, a further 228,610 Ordinary shares
have been bought back. The Board monitors the discount on a
continual basis and expects to buy back shares when it considers
that it is in the best interests of shareholders to do so.
Loan Facility and Gearing
In April 2022, the Company announced that it had entered into a
GBP15 million unsecured multi-currency revolving loan facility with
Industrial and Commercial Bank of China, London Branch, for two
years. Under the terms of the facility, the Company has the option
to increase the level of the commitment from GBP15 million to GBP30
million at any time. The facility was undrawn at the end of the
period and has yet to be drawn.
The Board continues to believe that the use of gearing, which is
one of the advantages of a closed end structure, within
pre-determined ranges and at times when the Investment Manager sees
attractive investment opportunities, will be beneficial to the
longer term performance of the Company.
Compliance with US Executive Orders
Following the release of US Presidential Executive Orders
("Orders") which prohibit US Persons from purchasing publicly
traded securities of certain Chinese companies identified as
Communist Chinese Military Companies, the Company can confirm that
its policy is to adhere to the Orders and that it has no direct
investments in any of these companies.
Board Composition
William Collins retired from the Board at the Company's Annual
General Meeting in April 2022. Helen Green has taken on the role of
Senior Independent Director. On behalf of the Board, I would like
to thank Bill for his significant contribution to the Company over
the ten year period that he served as a Director.
For my part, I shall be stepping down from the Board shortly and
as such this is my last Chairman's Statement. I am delighted to
report that Helen Green shall be succeeding me upon my retirement
once her replacement as Chair of the Audit Committee has been
appointed. The process of identifying a suitable candidate is well
under way and we shall update you once the appointment is made.
Outlook
There are brighter signs on the horizon for Chinese companies.
The People's Bank of China has taken some initial measures to boost
liquidity in the financial system and the ruling party has made
several pledges to provide further economic stimulus. Although
there have been a limited number of concrete measures introduced
thus far, the rhetoric from Beijing suggests a strong commitment to
reviving the nation's flagging economy. In addition, after a sharp
sell-off, company valuations look more compelling than they have
for some time. Your Investment Managers will continue to monitor
the situation very closely for investment opportunities that arise
from Beijing's shift to a more pro-growth stance.
In the long run, China has many years of growth ahead of it as
it transitions from an industrial-based to a more consumer-led
economy and an increasing focus on technological innovation,
self-sufficiency and a cleaner environment. This has already
produced a range of structural growth trends to which the portfolio
has a significant exposure, such as renewable energy and
information technology.
The Board believes there are reasons to be optimistic about both
the short-term and longer-term prospects for Chinese equities,
especially given where company valuations currently sit after the
pull-back of the last few months. We have every confidence that,
under the management of Nicholas Yeo and Elizabeth Kwik, the
Company is very well equipped to deliver sustainable returns for
investors over the long term.
It has been a privilege to serve on the Board over the last
decade and latterly as your Chairman. I wish Helen every success as
your new Chair and I look forward to watching the fortunes of the
Company over the coming years as an ongoing shareholder
Mark Hadsley-Chaplin
Chairman
5 July 2022
Investment Manager's Review
This is our first report to shareholders since the change of
mandate in October 2021. The first few weeks of the period were
spent completing the liquidation of the remaining positions
inherited from the former mandate and investing the proceeds of the
liquidation of the Company's former portfolio and that of Aberdeen
New Thai Investment Trust.
Market Review
Chinese stock markets endured a volatile six months. The
Shanghai Composite and Shenzhen Component share indices both hit
21-month lows in mid-March before clawing back some ground
following supportive policy rhetoric from the government.
Investors were buffeted on many fronts, both domestically and
globally. A flare-up of Covid-19 cases in December, albeit
amounting to a relatively low number of reported infections versus
outbreaks in Western societies, saw lockdowns imposed first in
Xi'an followed by the major cities of Shanghai and Shenzhen, as the
Chinese government stuck to its 'zero-Covid-19' policy. Lockdowns
since March have disrupted industrial production and pushed out
hopes of China's reopening further, which has added to investor
caution. Ongoing anxiety over regulation crackdowns added to
negative market sentiment, as did fears that the US may delist
Chinese companies listed in New York if they fail to provide audit
documents.
In January, we witnessed a general rotation from growth to value
stocks with more expensive and higher growth sectors such as
healthcare and information technology seeing the largest pullbacks,
while value-concentrated sectors such as real estate and financials
were relatively resilient. Amidst the economic slowdown, the
government set an increasingly easing tone on both monetary and
fiscal policies, cutting the reserve requirement ratio and loan
prime rate.
Towards the end of February, and with preliminary full year
results generally in-line or above expectations, growth stocks
recovered from earlier sell-offs at the expense of value names.
March was another volatile month, with a number of macroeconomic
factors and events adding to market fears and jitters. The 5.5% GDP
growth target that was announced at the National People's Congress
early in the month was met with scepticism by investors as the real
estate sector, the largest contributor to GDP growth, remained
under pressure. Omicron cases of Covid-19 started rising in a
number of provinces including Shanghai and Shenzhen, leading to
city-wide lockdowns, causing temporary disruptions to economic
activity and global supply chains.
The Russian invasion of Ukraine further increased turbulence in
global financial markets including commodities, with oil prices
hitting multi-year highs before receding slightly. Speculation over
China's relationship with Russia raised concerns relating to
possible secondary sanctions which also led to a sell-off in the
market.
Furthermore, US regulators commenced a de-listing process for
Chinese ADRs that fail to satisfy the regulator's audit
requirements by 2024. The news triggered a large sell-off in
Chinese ADRs which spread to the overall market. Our view is that
the extent of this sell off was surprising as this was not a new or
unexpected development, but was consistent with the way in which
the market has reacted to bad news since the start of 2022.
Chinese stock markets remained under significant pressure in
April as the effects of Covid-19 lockdowns continued to weigh on
investor sentiment and economic activity. The Shanghai and Shenzhen
markets edged steadily lower over the first three weeks before
selling off heavily. They then recovered some ground at the
month-end amid supportive announcements from the Chinese central
bank, which vowed to support liquidity levels, alongside promising
support for the development of technology platform companies, which
have been the target of a regulatory crackdown in recent
months.
While there was some easing of Covid -19-related restrictions in
Shanghai amid signs of falling case numbers towards the end of
April, an outbreak of cases in Beijing stoked fears of a
Shanghai-style lockdown in the capital. As a result, the Caixin
China Manufacturing PMI, an index of the prevailing direction of
economic trends in the manufacturing and service sectors, hit a
25-month low at the start of the month. This was below consensus
expectations and new orders fell by the most since the first wave
of the pandemic. In the services sector, the Caixin China Services
PMI fell from 50.2 in February to 42.0.
On a brighter note, Chinese exports recorded 14.7% year-on-year
growth, which eclipsed forecasts, but was obviously based on
depressed comparatives. Industrial production grew 5% year-on-year
to March, which also surpassed expectations. The Chinese economy
grew 4.8% year-on-year in the first quarter of 2022, beating
forecasts of a 4.4% expansion.
In contrast to Western economies, Chinese monetary policy is
expected to remain loose, given the country's currently slowing
economy. In addition, China is not facing as much inflationary
pressure as other economies.
Performance
The first six months of the new mandate have been eventful both
for the Company and Chinese equity markets. The net asset value
("NAV") total return of the Company was -21.5%, while the benchmark
MSCI China All Shares Index delivered a total return in Sterling
terms of -16.8%. The underperformance relative to the benchmark
over the period was driven mainly by stock selection as the market
focused more on sentiment rather than on fundamentals.
Some sectors in particular, renewable energy and healthcare,
proved prone to profit taking as investors turned increasingly
nervous about the near-term outlook and sought to book gains.
Sungrow Power Supplywas one such name and detracted from
performance during the period.
Other detractors included Estun Automation , medical and dental
equipment manufacturer Heifei Meyer Optoelectronic Technology ,
glass fibre, wind blade and separator manufacturer Sinoma Science
& Technology and power equipment manufacturer Qingdao TGOOD
Electric,whose earnings came under pressure due to the Covid-19
lockdowns and macro slowdown.
Electric vehicle battery maker Contemporary Amperex
Technologyfell as rising lithium prices clouded visibility on the
company's margin for the year.
Portfolio losses were cushioned somewhat by the performance of
holdings such as Kweichow Moutai , the Company's top performer over
the period, as the Baijiu spirit maker posted a solid set of
results, reporting a higher proportion of direct sales and product
mix upgrades. There have been positive earnings revisions for the
holding year to date, reflecting management's guidance for the
higher 15% growth rate .
The technology and internet sector was weighed down by continued
regulatory uncertainty. The Company's underweight position in
Alibaba Groupand not holding e-commerce platform
Pinduoduocontributed positively to performance.
Among the financial holdings, Bank of Ningbo posted solid FY21
results with earnings coming in above expectations. China Vanke was
also a positive contributor, with investors favourably regarding
its attributes as a market leader with a solid balance sheet.
Insurance company AIA delivered strong earnings growth and
increased its dividend per share by 8% year on year. It also
announced a share buyback of US$10 billion over the next three
years. The company grew more cautious over the growth outlook for
the first half of 2022, given that its business in China and Hong
Kong is expected to be affected by the Covid-19 lockdowns and the
weak macroeconomic backdrop. Separately, it is acquiring 100% of
Blue Cross (Asia-Pacific) Insurance and 80% of Blue Care JV (BVI)
from Bank of East Asia, for US$278 million. The deal will enable
AIA to leverage Blue Cross's medical network in Hong Kong and
accelerate its healthcare service integration with its core
insurance business.
Not holding state-owned banks China Construction Bankand
Industrial & Commercial Bank of Chinawere detractors to
performance amidst the market's rotation towards value stocks. Not
holding vehicle maker NIO, which sold off during the rotation
towards value names, was a positive.
Portfolio Activity
We reviewed the Company's exposure in our five core themes -
aspiration, digitalization, going green, health and wealth - and
adjusted positions to manage volatility at portfolio level. As a
result, we added exposure in defensive sectors where revenue is
typically mainly derived from the domestic market. This change also
helped to narrow the underweight gap in value stocks as the market
style rotated from growth to value stocks as the major Western
central banks started to raise interest rates.
We increased certain positions in the consumer staples sector
which have better earnings visibility, including cosmetics
manufacturer Proya Cosmetics and nuts and seeds manufacturer Cha
Cha Food. We also added slightly to our holdings in Bank of Ningbo,
Ping An Bank and China Merchants Bank. At the same time, we lowered
the active exposure to healthcare and renewable energy sectors.
Since the period ended, we have exited the position in Aberdeen
Standard SICAV I - China A Share Equity Fund. Approval for the
Company's Qualified Foreign Investor (QFI) application is expected
in the coming weeks. The QFI programme will enable the Company to
directly participate in mainland China's stock exchanges. There is
one remaining legacy holding in Komodo Fund,which now accounts for
just 0.4% of net assets. This fund is in the protracted process of
being liquidated. The management team of Komodo continues to work
on achieving an exit from the final remaining position in Berlina,
an Indonesian packaging company. Any exit will likely be via a
corporate restructuring involving the sale of the company to a
strategic buyer and, while there are several interested parties,
there is as yet no firm plan or timescale.
Outlook
While the economic outlook for the remainder of the year looks
challenging amidst Covid-19 outbreaks and a weak property market,
incrementally we have started to see more supportive comments from
central government. Vice Premier Liu He, President Xi Jinping's
closest economic adviser, stated that the Chinese government would
introduce policies that will be "favourable to the markets" and
will "boost the economy" and we have witnessed a gradual easing
since the end of 2021. To this end the People's Bank of China has
lowered banks' reserve requirement ratio and loan prime rates
several times over the period. Furthermore, despite market
volatility, the company volatility, the company results season in
March and April proved that the market is still focused on
fundamentals and it was reassuring that the high quality companies
in the portfolio, whose results exceeded expectations, saw
improvements in their share prices. We remain cautiously optimistic
on the outlook for 2022, as the stimulus starts to work through the
system. We also believe that Covid-19 measures are likely to be
gradually less stringent and the long-term policy support for our
five themes (aspiration, digitalization, going green, health and
wealth) remains compelling.
We continue to focus on quality companies with strong balance
sheets that are not reliant on debt financing and particularly to
those companies with robust franchises. We expect these companies
to be able to grasp opportunities not available to heavily
leveraged competitors and, in the case of those with competitive
advantage, to be in a better position to pass on inflationary cost
pressures, and continue to generate positive cash flows from their
operations.
Nicholas Yeo and Elizabeth Kwik
abrdn Hong Kong Limited
5 July 2022
Ten Largest Investments
Tencent (7.6% of net assets)
An innovative leader in China's internet sector with a strong
presence in fintech and cloud segments, backed by an entrenched
social media and payment ecosystem.
Kweichow Moutai (5.6% of net assets)
The largest maker of Chinese alcohol spirit Baijiu, positioned
in the ultra- premium space where there are few competitors. The
company is well placed to capture rising domestic consumption
trends in China.
China Merchants Bank (4.9% of net assets)
Best-in-class retail bank in China, offering diversified
financial services with a solid track record and sound risk
management practices in place.
JD.com (4.1% of net assets)
Online retailer with an edge in its strong logistics network.
The company has shown improving corporate governance and management
quality over the years.
Meituan (4.0% of net assets)
Diversified online services platform with over 400 million
users, offering services including food delivery, travel bookings
and wedding planning. It is optimally placed to capture rising
consumption in mainland China
Bank of Ningbo (3.4% of net assets)
City bank focused on lending to small and medium enterprises in
the affluent Ningbo-Zhejiang region. The bank has shown superior
returns and asset quality over the years.
China Tourism Group Duty Free (3.3% of net assets)
China's largest duty-free operator that is well placed to
benefit from supportive government policy and rising demand for
duty-free cosmetics on the mainland.
Alibaba Group (3.1% of net assets)
The Chinese internet group is a leading global e-commerce
company with leading platforms including Taobao and T-mall in the
mainland. The company also has interests in logistics and media as
well as cloud computing platforms and payments.
Aberdeen Standard SICAV I - China A Share Equity Fund (3.0% of
net assets)
China A share fund with a long-term quality investment approach
managed by the same team managing the Company (since the period
end, we have exited this position).
Contemporary Amperex Technology (2.6% of net assets)
Leading electric vehicle battery maker with a dominant market
share in China. The company has strong bargaining power along the
electric vehicle supply chain and provides exposure to the rapid
growth in electric vehicle adoption in China.
Investment Portfolio
As at 30 April 2022
Industry (Sub-Sector) Value Percentage
Company (GBP'000) of net assets
(%)
=================================== ================================== ============== ==================
Tencent Holdings Ltd Interactive Media & Services 22,507 7.6
=================================== ================================== ============== ==================
Kweichow Moutai Co Ltd Beverages 16,478 5.6
=================================== ================================== ============== ==================
China Merchants Bank Co Ltd Banks 14,491 4.9
=================================== ================================== ============== ==================
Internet & Direct Marketing
JD.com Inc Retail 12,018 4.1
=================================== ================================== ============== ==================
Internet & Direct Marketing
Meituan Retail 11,864 4.0
=================================== ================================== ============== ==================
Bank of Ningbo Co Ltd Banks 10,227 3.4
=================================== ================================== ============== ==================
China Tourism Group Duty
Free Corp Ltd Banks 9,745 3.3
=================================== ================================== ============== ==================
Internet & Direct Marketing
Alibaba Group Holding Ltd Retail 9,074 3.1
=================================== ================================== ============== ==================
Aberdeen Standard SICAV I
- China A Share Equity Fund Unit Trusts 8,907 3.0
=================================== ================================== ============== ==================
Contemporary Amperex Technology
Co Ltd Electrical Equipment 7,845 2.6
=================================== ================================== ============== ==================
Top ten investments 123,156 41.6
======================================================================= ============== ==================
Ping An Bank Co Ltd Banks 7,415 2.5
=================================== ================================== ============== ==================
AIA Group Ltd Insurance 7,191 2.4
=================================== ================================== ============== ==================
China Vanke Co Ltd Banks 6,310 2.1
=================================== ================================== ============== ==================
Textiles, Apparel & Luxury
Li Ning Co Ltd Goods 5,699 1.9
=================================== ================================== ============== ==================
Nari Technology Co Ltd Electrical Equipment 5,555 1.9
=================================== ================================== ============== ==================
Shenzhen Mindray Bio-Medical Textiles, Apparel & Luxury
Electronics Co Ltd Goods 5,531 1.9
=================================== ================================== ============== ==================
Fuyao Glass Industry Group
Co Ltd Auto Components 5,455 1.8
=================================== ================================== ============== ==================
Wanhua Chemical Group Co
Ltd Chemicals 5,390 1.8
=================================== ================================== ============== ==================
Proya Cosmetics Co Ltd Personal Products 5,212 1.8
=================================== ================================== ============== ==================
LONGi Green Energy Technology Semiconductors & Semiconductor
Co Ltd Equipment 5,143 1.7
=================================== ================================== ============== ==================
Top twenty investments 182,057 61.4
======================================================================= ============== ==================
Aier Eye Hospital Group Co
Ltd Health Care Providers & Services 5,040 1.7
=================================== ================================== ============== ==================
Sungrow Power Supply Co Ltd Electrical Equipment 5,030 1.7
=================================== ================================== ============== ==================
Foshan Haitian Flavouring
& Food Co Ltd Food Products 4,837 1.6
=================================== ================================== ============== ==================
Shenzhou International Group Textiles, Apparel & Luxury
Holdings Ltd Goods 4,768 1.6
=================================== ================================== ============== ==================
Hong Kong Exchanges & Clearing
Ltd Capital Markets 4,621 1.6
=================================== ================================== ============== ==================
Wuliangye Yibin Co Ltd Beverages 4,596 1.6
=================================== ================================== ============== ==================
Internet & Direct Marketing
Midea Group Co Ltd Retail 4,558 1.5
=================================== ================================== ============== ==================
Chacha Food Co Ltd Food Products 4,342 1.5
=================================== ================================== ============== ==================
Hangzhou Tigermed Consulting
Co Ltd Life Sciences Tools & Services 4,203 1.4
=================================== ================================== ============== ==================
CIFI Ever Sunshine Services Real Estate Management &
Group Ltd Development 3,969 1.3
=================================== ================================== ============== ==================
Top thirty investments 228,021 76.9
======================================================================= ============== ==================
Wuxi Biologics Cayman Inc Life Sciences Tools & Services 3,918 1.3
=================================== ================================== ============== ==================
By-health Co Ltd Personal Products 3,911 1.3
=================================== ================================== ============== ==================
Sinoma Science & Technology
Co Ltd Chemicals 3,854 1.3
=================================== ================================== ============== ==================
Hundsun Technologies Inc Software 3,753 1.3
=================================== ================================== ============== ==================
Shanghai M&G Stationery Inc Commercial Services & Supplies 3,572 1.2
=================================== ================================== ============== ==================
Estun Automation Co Ltd Machinery 3,388 1.1
=================================== ================================== ============== ==================
China Meidong Auto Holdings
Ltd Banks 3,133 1.1
=================================== ================================== ============== ==================
Luxshare Precision Industry Electronic Eqpt Instruments
Co Ltd & Components 3,120 1.1
=================================== ================================== ============== ==================
Venustech Group Inc Software 2,949 1.0
=================================== ================================== ============== ==================
Hefei Meiya Optoelectronic
Technology Inc Machinery 2,942 1.0
=================================== ================================== ============== ==================
Top forty investments 262,561 88.6
======================================================================= ============== ==================
GDS Holdings Ltd IT Services 2,829 1.0
=================================== ================================== ============== ==================
Yantai China Pet Foods Co
Ltd Food Products 2,604 0.9
=================================== ================================== ============== ==================
Amoy Diagnostics Co Ltd Biotechnology 2,474 0.8
=================================== ================================== ============== ==================
Maxscend Microelectronics Electronic Eqpt Instruments
Co Ltd & Components 2,319 0.8
=================================== ================================== ============== ==================
Jiangsu Hengrui Medicine
Co Ltd Pharmaceuticals 2,186 0.7
=================================== ================================== ============== ==================
Qingdao TGOOD Electric Co
Ltd Electrical Equipment 2,054 0.7
=================================== ================================== ============== ==================
Zai Lab Ltd Biotechnology 1,973 0.7
=================================== ================================== ============== ==================
Shanghai MicroPort MedBot
Group Co Ltd Commercial Services & Supplies 1,606 0.50
=================================== ================================== ============== ==================
Komodo Fund Unit Trusts 1,038 0.4
=================================== ================================== ============== ==================
China Conch Venture Holdings
Ltd Banks 1,029 0.3
=================================== ================================== ============== ==================
Top fifty investments 282,673 95.4
======================================================================= ============== ==================
China Conch Environment Protection
Holdings Banks 339 0.1
=================================== ================================== ============== ==================
Total investments 283,012 95.5
======================================================================= ============== ==================
Cash plus other net assets
and liabilities 13,446 4.5
======================================================================= ============== ==================
Net assets 296,458 100.0
======================================================================= ============== ==================
Sector Breakdown
As at 30 April 2022
Sector %
Consumer Discretionary 23.4
-----
Financials 15.5
-----
Consumer Staples 14.8
-----
Industrials 11.2
-----
Health Care Communication 9.5
-----
Services 8.0
-----
Information Technology 7.1
-----
Real Estate 3.6
-----
Unit Trusts 3.5
-----
Materials 3.3
-----
Source: Refinitiv Datastream
Investment Case Studies
Foshan Haitian Flavouring & Food Co Ltd
Foshan Haitian has over 300 years of history in soy sauce making
and is today China's largest condiment producer. It is a household
brand in China with strong consumer recognition. It has the largest
market share in soy sauce, oyster sauce and cooking wine and is
constantly developing new products which have been readily adopted
by consumers. It has been consistently investing in R&D to
drive product innovation and improve operational efficiency. This
has enabled the company to build a robust and diversified product
portfolio and industry-leading low-cost operation.
The Investment Manager has invested in Foshan Haitian for over 5
years in a number of its other portfolios and considers that it
remains a cornerstone investment for the Company.
On the ESG front, the company has established strong internal
controls to ensure good corporate governance. Unusually for a
Chinese company, it has an internal audit team reporting directly
to the board to conduct regular audits in order to assess and
improve management and operational processes. Foshan Haitian has
set specific targets to reduce energy consumption and water use.
The company has also been making conscious efforts to improve ESG
disclosures and published its first ESG report in 2020.
Nari Technology Co Ltd
Nari Technology is a technology leader in grid secondary
equipment and software, which automates dispatch, transmission and
communication of power. The company contributes to China's carbon
neutral initiatives as renewables and rising power demand from the
rapidly rising uptake of electric vehicles requires a full-suite
upgrade of the power grid to avoid curtailment and safety
concerns.
Nari is an integrated player in four divisions: power
automation, telecommunication, transmission and generation, and the
Investment Manager believes that the company can remain dominant in
this industry with its high-barriers to entry. Nari has a strong
R&D capability, exclusive power dispatching data, and an
experienced, high quality workforce.
On the ESG front, the Investment Manager engaged with the
company to seek clarifications on related party transaction
policies, and encouraged the company to improve disclosures,
including more transparency on the clean technology opportunity and
business ethics to that of global standards. Nari's management has
promised to improve ESG management and established a new ESG team
working on disclosures. The company has recently issued its ESG
report according to Global Reporting Initiative ('GRI') standards,
which gave the Investment Manager a clearer understanding of the
company's clean technology opportunity and business ethics
policy.
The GRI is an international independent standards organisation
that helps businesses, governments and other organisations
understand and communicate their impacts on issues such as climate
change, human rights and corruption.
Interim Management Report
The Chairman's Statement and the Investment Manager's Review
provide details on the performance of the Company. Those reports
also include an indication of the important events that have
occurred during the first six months of the financial year ending
31 October 2022 and the impact of those events on the condensed
unaudited financial statements included in this Half-Yearly
Financial Report.
Details of investments held and the sector breakdown at the
period end is shown above.
Principal Risks, Emerging Risks and Uncertainties
The Board considers that the main risks and uncertainties faced
by the Company fall into the categories of:
(i) Risks relating to the Company.
(ii) Risks relating to the investment policy.
(iii) Risks relating to the Manager/Investment. Manager.
(iv) Risks relating to regulation, taxation and the Company's operating environment
(v) Internal Risks.
(vi) Emerging Risks and
(vii) Failure to manage premium and/or discount.
A detailed explanation of these risks and uncertainties can be
found in the Company's most recent Annual Report for the year ended
31 October 2021 (the "Annual Report").
The principal risks, emerging risks and uncertainties facing the
Company remain unchanged from those
disclosed in the Annual Report. The Chairman's Statement and the
Investment Manager's Review contain market outlook sections.
The Directors have also reviewed and assessed recent emerging
risks and increasing focus of ethical, social and governance
measures in assessing investment opportunities. The Investment
Manager has performed stress tests on the Company's portfolio of
investments under current conditions and the Directors remain
comfortable with the liquidity of the portfolio.
Related Party Transactions
Full details of the investment management arrangements were
provided in the Annual Report for the year ended 31 October 2021.
There have been no changes to the related party transactions
described in the Annual Report that could have a material effect on
the financial position or performance of the Company. Amounts
payable to the Manager in the six months ended 30 April 2022 are
detailed in note 10 of the Selected Explanatory Notes to the
Unaudited Financial Statements.
Going Concern
See note 2 for details on going concern. Signed on behalf of the
Board of Directors on 5 July 2022
Helen Green
Director
Statement of Directors' Responsibilities
In respect of the Half-Yearly Financial Report, the Directors
confirm that to the best of their knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting; and
-- the Interim Management Report which includes the Chairman's
Statement, Investment Manager's Review and Interim Management
Report includes a fair review of the information required by:
a. DTR 4.2.7R of the Disclosure Guidance 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
b. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or the performance of the Company
during that period; and any changes in the related party
transactions described in the last Annual Report that could do
so.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website, but not for the content of any information
included on the website that has been prepared or issued by third
parties, and for the preparation and dissemination of financial
statements. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Signed on behalf of the Board of Directors on 5 July 2022
Helen Green
Director
Independent Review Report
To abrdn China Investment Company Limited Conclusion
We have been engaged by abrdn China Investment Company Limited
(the "Company") to review the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
April 2022 of the Company which comprises the Condensed Unaudited
Statement of Financial Position as at 30 April 2022, the Condensed
Unaudited Statement of Comprehensive Income, the Condensed
Unaudited Statement of Changes in Equity, the Condensed Unaudited
Statement of Cash Flow for the six months then ended and the
related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
April 2022 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting and the Disclosure Guidance
and Transparency Rules (the "DTR") of the UK's Financial Conduct
Authority (the "UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with
International Financial Reporting Standards. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement letter to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Andrew Salisbury
For and on behalf of
KPMG Channel Islands Limited
Chartered Accountants, Guernsey
5 July 2022
Condensed Unaudited Statement of Comprehensive Income
Six month period Six month period
ended ended
30 April 2022 30 April 2021
===================== ============== ======================================== =====================================
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
===================== ============== ============ ============ ============ ============ =========== ==========
(Losses)/gains on
investments - (82,328) (82,328) - 68,879 68,879
===================== ============== ============ ============ ============ ============ =========== ==========
Losses on currency
movements - (508) (508) - (151) (151)
===================== ============== ============ ============ ============ ============ =========== ==========
Net investment
(losses)/gains - (82,836) (82,836) - 68,728 68,728
===================== ============== ============ ============ ============ ============ =========== ==========
Investment income 452 - 452 2,033 - 2,033
===================== ============== ============ ============ ============ ============ =========== ==========
452 (82,836) (82,384) 2,033 68,728 70,761
===================== ============== ============ ============ ============ ============ =========== ==========
Investment
management fees 10 (75) - (75) (1,346) - (1,346)
===================== ============== ============ ============ ============ ============ =========== ==========
Other expenses (455) - (455) (454) - (454)
===================== ============== ============ ============ ============ ============ =========== ==========
Operating
(loss)/profit
before finance
costs and
taxation (78) (82,836) (82,914) 233 68,728 68,961
===================== ============== ============ ============ ============ ============ =========== ==========
Finance costs 5 (107) - (107) (112) - (112)
===================== ============== ============ ============ ============ ============ =========== ==========
Operating
(loss)/profit
before taxation (185) (82,836) (83,021) 121 68,728 68,849
===================== ============== ============ ============ ============ ============ =========== ==========
Withholding tax
expense (36) - (36) (125) - (125)
===================== ============== ============ ============ ============ ============ =========== ==========
Total (loss)/profit
and
comprehensive
income for
the period (221) (82,836) (83,057) (4) 68,728 68,724
===================== ============== ============ ============ ============ ============ =========== ==========
(Losses)/earnings
per
Ordinary share 6 (0.47p) (177.94p) (178.41p) (0.01p) 149.52p 149.51p
===================== ============== ============ ============ ============ ============ =========== ==========
The Total column of this statement represents the Company's
Statement of Comprehensive Income, prepared under IAS 34 Interim
Financial Reporting. The Revenue and Capital columns, including the
revenue and capital (losses)/earnings per Ordinary share data, are
supplementary information prepared under guidance published by the
Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period.
The notes further below form an integral part of these financial
statements.
Condensed Unaudited Statement of Financial Position
As at As at
30 April 31 October
2022 2021*
Note GBP'000 GBP'000
=================================== ====== =============== =================
Non-current assets
===============================================================================
Investments at fair value through
profit or loss 283,012 112,905
=================================== ====== =============== =================
Current assets
===============================================================================
Cash and cash equivalents 13,433 201,795
=================================== ====== =============== =================
Sales for future settlement 1,555 59,838
=================================== ====== =============== =================
Other receivables 6 119
=================================== ====== =============== =================
14,994 261,752
=================================== ====== =============== =================
Total assets 298,006 374,657
=================================== ====== =============== =================
Current liabilities
===============================================================================
Purchases for future settlement (1,244) -
=================================== ====== =============== =================
Other payables (261) (835)
=================================== ====== =============== =================
Finance costs payable (43) (34)
=================================== ====== =============== =================
Total liabilities (1,548) (869)
=================================== ====== =============== =================
Net assets 296,458 373,788
=================================== ====== =============== =================
Equity
===============================================================================
Share capital 7 154,462 148,735
=================================== ====== =============== =================
Capital reserve 147,708 230,544
=================================== ====== =============== =================
Revenue reserve (5,712) (5,491)
=================================== ====== =============== =================
Total equity 296,458 373,788
=================================== ====== =============== =================
Net assets per Ordinary share 8 637.68p 813.20p
=================================== ====== =============== =================
*Audited
Approved by the Board of Directors and authorised for issue on 5
July 2022 and signed on its behalf by:
Helen Green Director
The notes further below form part of these financial statements.
Incorporated in Guernsey: Company registration number 50900
Condensed Unaudited Statement of Changes in Equity
For the six months to 30 April 2022
========================================================================================================
Share Capital Revenue
capital reserve reserve
GBP'000 GBP'000 GBP'000 Total
Note GBP'000
======================================= ====== ============= =========== ============ =============
Balance at start of 1 November
2021 148,735 230,544 (5,491) 373,788
======================================= ====== ============= =========== ============ =============
Loss for the period - (82,836) (221) (83,057)
======================================= ====== ============= =========== ============ =============
Scheme of reconstruction
========================================================================================================
Ordinary shares issued 62,037 - - 62,037
======================================= ====== ============= =========== ============ =============
Ordinary shares repurchased (55,291) - - (55,291)
======================================= ====== ============= =========== ============ =============
Tender offer and share issue costs 7 (177) - - (177)
======================================= ====== ============= =========== ============ =============
Share buybacks 7 (842) - - (842)
======================================= ====== ============= =========== ============ =============
Balance at 30 April 2022 154,462 147,708 (5,712) 296,458
======================================= ====== ============= =========== ============ =============
For the year ended 31 October 2021*
========================================================================================================
Share Capital Revenue
capital reserve reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000
======================================= ====== ============= =========== ============ =============
Balance at start of 1 November
2020 149,616 176,563 (5,209) 320,970
======================================= ====== ============= =========== ============ =============
Profit for the year - 64,438 (282) 64,156
======================================= ====== ============= =========== ============ =============
Dividends paid 9 - (10,457) - (10,457)
======================================= ====== ============= =========== ============ =============
Tender offer and share issue costs
(Scheme of Reconstruction) (881) - - (881)
======================================= ====== ============= =========== ============ =============
Balance at 31 October 2021 148,735 230,544 (5,491) 373,788
======================================= ====== ============= =========== ============ =============
*Audited
The capital reserve at 30 April 2022 is split between realised
gains of GBP218,088,000 and unrealised loss of GBP70,380,000 (31
October 2021: realised gains of GBP183,241,000 and unrealised gains
of GBP47,303,000).
The revenue reserve and the capital reserve is distributable
subject to the solvency requirements of the Guernsey Company Law
2008.
The notes further below form an integral part of these financial
statements.
Condensed Unaudited Statement of Cash Flow
Six months to 30 April Six months
2022 to 30 April
GBP'000 2021
GBP'000
============================================ ====================================================== ==============
Operating activities
====================================================================================================================
Cash inflow from investment income 540 1,958
============================================ ====================================================== ==============
Cash outflow from management expenses (868) (2,269)
============================================ ====================================================== ==============
Cash inflow from disposal of investments
1 244,052 71,991
============================================ ====================================================== ==============
Cash outflow from purchase of investments
1 (378,180) (60,628)
============================================ ====================================================== ==============
Cash outflow from withholding tax (36) (125)
============================================ ====================================================== ==============
Net cash flow from operating activities (134,492) 10,927
============================================ ====================================================== ==============
Financing activities
====================================================================================================================
Repayment of bank borrowings - (15,000)
============================================ ====================================================== ==============
Proceeds from bank borrowings - 12,500
============================================ ====================================================== ==============
Borrowing commitment fee and interest
charges (98) (112)
============================================ ====================================================== ==============
Dividends paid - (5,171)
============================================ ====================================================== ==============
Scheme of reconstruction
====================================================================================================================
Ordinary shares issued 2 3,257 -
============================================ ====================================================== ==============
Ordinary shares repurchased (55,291) -
============================================ ====================================================== ==============
Tender offer and share issue costs paid (388) -
============================================ ====================================================== ==============
Share buybacks (842) -
============================================ ====================================================== ==============
Net cash flow from/(used) in financing
activities (53,362) (7,783)
============================================ ====================================================== ==============
Net (decrease)/increase in cash and cash
equivalents (187,854) 3,144
============================================ ====================================================== ==============
Effect of foreign exchange (508) (151)
============================================ ====================================================== ==============
Cash and cash equivalents at start of
the period 201,795 8,315
============================================ ====================================================== ==============
Cash and cash equivalents at end of the
period 13,433 11,308
============================================ ====================================================== ==============
1 Cash flows from the disposal and purchase of investments have
been classified as components of cash flow from operating
activities because they form part of the Company's operating
activities.
2 Actual proceeds received as a result of the Scheme of
reconstruction on 9 November 2021 amounted to GBP3,257,000 with the
remainder being received in the form of a UK treasury bill
amounting to GBP57,980,000. The UK treasury bill was immediately
sold on 10 November 2021 and subsequently deployed into Chinese
equities.
The notes further below form an integral part of these financial
statements.
Selected Explanatory Notes to the Condensed Unaudited
Financial Statements
For the six month period ended 30 April 2022
1. Reporting entity
abrdn China Investment Company Limited (the "Company") is a
closed-ended investment company, registered in Guernsey on 16
September 2009. The Company's registered office is 11 New Street,
St Peter Port, Guernsey GY1 2PF. The Company's Ordinary shares have
a premium listing on the London Stock Exchange and commenced
trading on 10 November 2009. The condensed interim financial
statements of the Company are presented for the six months to 30
April 2022.
The Company's investment policy is to invest in companies
listed, incorporated or domiciled in the People's Republic of China
("China"), or companies that derive a significant proportion of
their revenues or profits from China operations or have a
significant proportion of their assets there.
In furtherance of the investment policy, the portfolio will
normally consist principally of quoted equity securities and
depositary receipts although unlisted companies, fixed interest
holdings or other non-equity investments may be held. Investments
in unquoted companies will be made where the Manager has a
reasonable expectation that the company will seek a listing in the
near future. The portfolio is actively managed and may be invested
in companies of any size and in any sector.
Prior to the approval of the new investment objective and
investment policy at the exraordinary general meeting ("EGM") on 26
October 2021, the Company was managed in accordance with its
previous investment objective, which was to achieve consistent
returns for shareholders in excess of the MSCI Emerging Markets Net
Total Return Index in sterling terms.
Manager
The Company's Manager during the six months ended 30 April 2022
was Aberdeen Standard Fund Managers Limited ('ASFML').
Non-mainstream pooled investments ("NMPIs")
The Company currently conducts its affairs so that the Ordinary
shares issued by the Company can be recommended by Independent
Financial Advisers to ordinary retail investors in accordance with
the Financial Conduct Authority's rules in relation to NMPIs and
intends to c ontinue to do so for the foreseeable future.
2. Basis of preparation Statement of compliance
The condensed interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting and the
Disclosure Guidance and Transparency Rules ("DTRs") of the UK's
Financial Conduct Authority. They do not include all of the
information required for full annual financial statements and
should be read in conjunction with the financial statements of the
Company as at and for the year ended 31 October 2021. The financial
statements of the Company as at and for the year ended 31 October
2021 were prepared in accordance with International Financial
Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board ("IASB"). The accounting policies used
by the Company are the same as those applied by the Company in its
financial statements as at and for the year ended 31 October
2021.
Where presentational guidance set out in the Statement of
Recommended Practice ("SORP") for Investment Companies issued by
the Association of Investment Companies ("AIC") in April 2021 is
consistent with the requirements of IFRS, the Directors have
prepared the financial statements on a basis compliant with the
recommendations of the SORP.
The "Total" column of the Condensed Unaudited Statement of
Comprehensive Income is the profit and loss account of the Company.
The "Revenue" and "Capital" columns provide supplementary
information.
This report will be sent to shareholders and copies will be made
available to the public at the Company's registered office. It will
also be made available on the Company's website:
www.abrdnchina.co.uk.
Going concern
The Directors have adopted the going concern basis in preparing
the financial statements. The Board formally considered the
Company's going concern status at the time of the publication of
these financial statements and a summary of the assessment is
provided below.
Since the adoption of new investment p olicy, as approved by
Shareholders at the EGM held on 26 October 2021, the Board
considered it appropriate to reset the interval between
Continuation Resolutions so that the next Continuation Resolution
will be put to Shareholders at the annual general meeting of the
Company to be held in 2027.
The Directors believe that the Company has adequate resources to
continue in operational existence for at least 12 months from the
date of approval of this document. In reaching this conclusion, the
Directors have considered the liquidity of the Company's portfolio
of investments as well as its cash position, income and expense
flows.
As at 30 April 2022, the Company held GBP13.4 million in cash
and GBP283.0 million in investments. It is estimated that
approximately 99% of the investments held at the period end could
be realised in one month. The total operating expenses for the
period ended 30 April 2022 were GBP0.5 million, which on an
annualised basis represented approximately 0.56% of average net
assets during the period. The Company also incurred 0.04% of
finance costs. At the date of approval of this report, based on the
aggregate of investments and cash held, the Company has substantial
operating expenses cover. The Company's net assets at 24 June 2022
were GBP329.0 million.
In April 2022, the Company entered into a GBP15 million
unsecured multicurrency revolving loan facility with Industrial and
Commercial Bank of China, London Branch ("the Len der") for a two
year period. The facility will be utilised for general working
capital purposes and for the acquisition of investments in
accordance with the Company's investment policy. Under the terms of
the facility, the Company also has the option to increase the level
of the commitment from GBP15 million to GBP30 million at any time,
subject to the Lender's credit approval.
The facility has yet to be drawn.
In light of the current market environment, the Directors have
fully considered and assessed the Company's portfolio of
investments. A prolonged and deep market decline could lead to
falling values of the investments or interruptions to cashflow.
However, the Company currently has more than sufficient liquidity
available to meet any future obligations.
The Directors are satisfied that it is appropriate to adopt the
going concern basis in preparing the financial statements and,
after due consideration, that the Company is able to continue in
operation for a period of at least 12 months from the date of
approval of these financial statements.
Global issues and other market concerns
Covid-19 - The rapid spread of C ovid-19 led governments across
the globe to implement policies to restrict the gathering,
interaction and/or movement of people. These policies have
inevitably impacted and changed the nature of the operations of
some aspects of the Company, its key service providers and
companies in its investment portfolio. Share prices respond to
assessments of future economic activity as well as their own
forecast performance. The C ovid-19 pandemic has had a materially
negative impact on the Chinese economy and may continue do so for
an unknown period of time as further lockdowns continue to weigh on
investor sentiment and economic activity.
Russia-Ukraine war - Russia's invasion into Ukraine continues to
cause disruption in supply chains and global markets. Speculation
over China's relationship with Russia raised concerns relating to
possible secondary sanctions leading to further volatility.
The Board and Investment Manager have regular discussions to
assess the impact of emerging risks, including Covid-19 and
geopolitical events, on both the investment portfolio and on the
Company's ability to maximise returns for shareholders.
Equity and reserves Share capital
Share capital represents the 1p nominal value of the issued
share capital plus any share premium arising from the net proceeds
of issuing shares less the aggregate cost of shares repurchased (to
be held in treasury or for cancellation).
Capital reserve
Profits achieved by selling investments and changes in fair
value arising upon the revaluation of investments that remain in
the portfolio are all credited or charged to profit or loss in the
capital column of the Statement of Comprehensive Income and
allocated to the capital reserve. The capital reserve is
distributable subject to the solvency requirements of the Guernsey
Company Law 2008.
Revenue reserve
The balance of all items allocated to the revenue column of the
Statement of Comprehensive Income in each year is transferred to
the Company's revenue reserve. The revenue reserve is distributable
subject to the solvency requirements of the Guernsey Company Law
2008.
Use of estimates, assumptions and judgements
The preparation of the condensed interim financial statements in
conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates.
Use of estimates and assumptions
Estimates and underlying assumptions are reviewed on an on-going
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
Classification and valuation of investments
Investments are designated as fair value through profit or loss
on initial recognition and are subsequently measured at fair value.
The valuation of such investments requires estimates and
assumptions made by the management of the Company depending on the
nature of the investments as described below and fair value may not
represent actual realisable value for those investments.
Use of judgements
In respect of note 11, the determination of what constitutes
'observable' requires significant judgement by the Company. The
Company considers observable data to be that market data that is
readily available, regularly distributed or updated, reliable and
verifiable, not proprietary and provided by independent sources
that are actively involved in the relevant market.
Adoption of new and revised standards
At the date of approval of these financial statements, there
were no new or revised standards or interpretations relevant to the
Company which came into effect.
3. Investments
As the Company's business is investing in financial assets with
a view to profiting from their total return in the form of
increases in fair value, financial assets are held at fair value
through profit or loss on initial recognition. These investments
are recognised on the trade date of their acquisition at which the
Company becomes a party to the contractual provisions of the
instrument. At this time, the best evidence of the fair value of
the financial assets is the transaction price. Transaction costs
that are directly attributable to the acquisition or issue of the
financial assets are charged to the profit or loss of the condensed
unaudited Statement of Comprehensive Income as a capital item.
Subsequent to initial recognition, investments designated as fair
value through profit or loss are measured at fair value with
changes in their fair value recognised in the profit or loss of the
condensed unaudited Statement of Comprehensive Income and
determined by reference to:
(i) investments quoted or dealt on recognised stock exchanges in
an active market are valued by reference to their market bid
prices;
(ii) investments other than those in i) above which are dealt on
a trading facility in an active market are valued by reference to
broker bid price quotations, if available, for those
investments;
(iii) investments in underlying funds, which are not quoted or
dealt on a recognised stock exchange or other trading facility or
in an active market, are valued at the net asset values provided by
such entities or their administrators. These values may be
unaudited or may themselves be estimates and may not be produced in
a timely manner. If such information is not provided, or is
insufficiently timely, the Investment Manager uses appropriate
valuation techniques to estimate the value of investments. In
determining fair value of such investments, the Investment Manager
takes into c onsideration relevant issues, which may include the
impact of suspension, redemptions, liquidation proceedings and
other significant factors. Any such valuations are assessed and
approved by the Directors. The estimates may differ from actual
realisable values;
(iv) investments which are in liquidation are valued at the
estimate of their remaining realisable value; and
(v) any other investments are valued at Directors' best estimate of fair value.
Investments are derecognised on the trade date of their
disposal, which is the point where the Company transfers
substantially all the risks and rewards of the ownership of the
financial asset. Gains or losses are recognised within profit or
loss in the 'Capital' column of the c ondensed unaudited Statement
of Comprehensive Income. The Company uses the weighted average cost
method to determine realised gains and losses on disposal of
investments.
4. Operating segments
IFRS 8, 'Operating segments' requires a 'management approach',
under which segment information is presented on the same basis as
that used for internal reporting purposes. The Board, as a whole,
has been determined as constituting the chief operating decision
maker of the Company. The Board has considered the requirements of
the standard and is of the view that the Company is engaged in a
single segment of business, which is investing in a portfolio of
funds and products which give exposure to developing and emerging
market economies. The key measure of performance used by the Board
is the Net Asset Value of the Company (which is calculated under
IFRS). Therefore, no reconciliation is required between the measure
of profit or loss used by the Board and that contained in the
financial statements.
The Board of Directors is responsible for ensuring that the Co
mpany's objective and investment strategy is followed. The
day-to-day implementation of the investment strategy has been
delegated to the Investment Manager, but the Board retains
responsibility for the overall direction of the Company. The Board
reviews the investment decisions of the Investment Manager at
regular Board meetings to ensure compliance with the investment
strategy and to assess the achievement of the Company's objective.
The Investment Manager has been given full authority to make
investment decisions on behalf of the Company in accordance with
the investment strategy and analyses markets within a framework of
quality, value, growth and change. The investment policy employed
by the Investment Manager ensures that diversification within
investments are taken into account when deciding on the size of
each investment so the Company's exposure to any one company should
never be excessive. The Company's positions are monitored as a
whole by the Board in monthly portfolio valuations and at Board
meetings. Any significant change to the Company's investment
strategy requires shareholder approval.
The Company has a diversified portfolio of investments and no
single investment accounted for more than 8% of the Company's net
assets at the Company's period end. The Investment Manager aims to
identify investments which it considers are likely to deliver
consistent c apital growth over the longer term.
5. Bank loan and finance costs
In April 2022, the Company entered into a GBP15 million
unsecured multicurrency revolving loan facility with Industrial and
Commercial Bank of China, London Branch ("the Len der") for a two
year period. The facility will be utilised for general working
capital purposes and for the acquisition of investments in
accordance with the Company's investment policy. Under the terms of
the facility, the Company also has the option to increase the level
of the commitment from GBP15 million to GBP30 million at any time,
subject to the Lender's credit approval. The facility has yet to be
drawn.
Six month period Six month period
ended 30 April 2022 ended 30 April
GBP'000 2021
GBP'000
============================== ============================= =================
Interest payable 66 93
============================== ============================= =================
Facility arrangement fees and
other charges 41 19
============================== ============================= =================
Total finance costs 107 112
============================== ============================= =================
At 30 April 2022, interest payable of GBP43,000 (30 April 2021:
GBP34,000) was accrued in the Condensed Unaudited Statement of
Financial Position.
Restrictions imposed by the Lender in connection with the credit
facility include the following financial covenants:
a) Total borrowings do not exceed 20% of the total assets at any time:
b) Its net asset value shall at all times be a minimum of GBP200,000,000; and
c) The aggregate value of the unlisted investments does not
exceed 10% of the aggregate value of the investments at any
time
The Company does not have any externally imposed capital
requirements other than disclosed above.
6. (Losses)/earnings per Ordinary share
(Losses)/earnings per Ordinary share is based on the total
comprehensive loss for the period ended 30 April 2022, being a loss
of GBP83,057,000 (30 April 2021: profit of GBP68,724,000)
attributable to the weighted average of 46,552,649 (2021:
45,965,159) Ordinary shares in issue (excluding shares held in
treasury) during the period ended 30 April 2022.
Supplementary information is provided as follows: revenue per
share is based on the net revenue loss of
GBP221,000 (30 April 2021: revenue profit of GBP4,000) and
capital earnings per share is based on the net capital loss of
GBP82,836,000 (30 April 2021: capital gain of GBP68,728,000)
attributable to the above Ordinary shares.
7. Share capital
Ordinary
shares with
Ordinary shares Allotted, voting rights
For the six month of 1p nominal issued (excluding Treasury
period ended 30 April Authorised value and fully treasury shares
2022 GBP'000 paid shares)
============================== =============== ================= ============= =================== =============
Opening number of
shares Unlimited 546 54,618,507 45,965,159 8,653,348
============================== =============== ================= ============= =================== =============
Scheme of reconstruction:
=====================================================================================================================
Ordinary shares issued - 76 7,554,440 7,554,440 -
============================== =============== ================= ============= =================== =============
Ordinary shares repurchased - - - (6,894,773) 6,894,773
============================== =============== ================= ============= =================== =============
Purchase of own shares - - - (134,749) 134,749
============================== =============== ================= ============= =================== =============
Closing number of
shares Unlimited 622 62,172,947 46,490,077 15,682,870
============================== =============== ================= ============= =================== =============
Ordinary
shares with
Ordinary shares Allotted, voting rights
For the year ended of 1p nominal issued (excluding Treasury
31 October 2021 * Authorised value and fully treasury shares
GBP'000 paid shares)
======================= ================== ================= ============ =================== =============
Opening number of
shares Unlimited 546 54,618,507 45,965,159 8,653,348
======================= ================== ================= ============ =================== =============
Purchase of own shares - - - - -
======================= ================== ================= ============ =================== =============
Closing number of
shares Unlimited 546 54,618,507 45,965,159 8,653,348
======================= ================== ================= ============ =================== =============
* Audited
Purchase of own shares
Excluding the effect of the tender offer (see below) 134,749
Ordinary shares were purchased during the six months ended 30 April
2022 at an aggregate cost to the Company of GBP842,000 (year to 31
October 2021: GBPnil).
Scheme of Reconstruction
As announced on 9 November 2021, the Company completed its
Scheme of Reconstruction (the "Scheme"). As a result of the Scheme,
the change in Ordinary share capital of the Company was as
follows:
Share issue - The Company received approximately GBP62 million
of net assets from New Thai in consideration for the issue of
7,554,440 new Ordinary shares in the Company.
Tender Offer - A total of 6,894,773 Ordinary shares were
repurchased by the Company on 10 November 2021 under the Tender
Offer and held in treasury at an aggregate cost to the Company of
GBP55 million.
The costs incurred in implementing the Scheme amounted to
GBP1,057,493. During the financial year ended 31 October 2021
GBP880,164 was accrued as a cost to the Company of which GBP668,164
was paid. During the six month period ended 30 April 2022,
GBP389,329 was paid and the balance of GBP177,329 was accrued as a
cost in the accounts.
Share capital account
The aggregate balance (including share premium) standing to the
credit of the share capital account at 30 April 2022 was
GBP154,462,000 (31 October 2021: GBP148,735 ,000).
8. Net asset value per Ordinary share
Net asset value per Ordinary share is based on net assets of
GBP296,458,000 (31 October 2021: GBP373,788,000) divided by
46,490,077 (31 October 2021: GBP45,965,159) Ordinary shares in
issue (excluding treasury shares) at the period end.
The table below is a reconciliation between the NAV per Ordinary
share announced on the London Stock Exchange and the NAV per
Ordinary share disclosed in these financial statements.
As at 30 April 2022 As at 30 April
2021
==================================== ====================================================== =======================
NAV per NAV per
==================================== ============================ =========== =================== ============
Net assets Ordinary Net assets Ordinary
==================================== ============================ =========== =================== ============
(GBP'millions) share (p) (GBP'millions) share (p)
==================================== ============================ =========== =================== ============
NAV as published on 3 May 2022
and
==================================== ============================ =========== =================== ============
1 November 2021 respectively 296.6 638.01 373.7 813.09
==================================== ============================ =========== =================== ============
Revaluation adjustments - delayed
prices (0.1) (0.33) 0.1 0.11
==================================== ============================ =========== =================== ============
NAV as disclosed in these financial
statements 296.5 637.68 373.8 813.20
==================================== ============================ =========== =================== ============
9. Dividends paid
There were no dividends paid or declared in respect of the six
months ended 30 April 2022:
10. Related party disclosures Manager
Management fees payable are shown in profit or loss in the
Condensed Unaudited Statement of Comprehensive Income.
At 30 April 2022, management fees of GBP75,000 (30 April 2021:
GBP462,000) were accrued in the Condensed Unaudited Statement of
Financial Position. Total management fees for the period were
GBP75,000 (30 April 2021:
GBP1,346,000) .
Following completion of the Scheme of reconstruction, on 9
November 2021, the Company entered into a new management agreement
(the "Management Agreement") with Aberdeen Standard Fund Managers
Limited ("ASFML"), pursuant to which the management fee payable by
the Company to ASFML will be calculated by reference to the market
capitalisation of the Company, rather than its net assets (as was
the case previously). The new management fee will be structured on
a tiered basis, with the first GBP150 million of market
capitalisation being charged at 0.80%, the next GBP150 million
being charged at 0.75%. and amounts thereafter being charged at
0.65%.
Furthermore, ASFML agreed to make a contribution to the costs of
implementing the Scheme of reconstruction by means of a waiver of
the management fee for the first six months following the
completion of the Scheme.
The Management Agreement is terminable by either party on not
less than six months' written notice at any time.
Investments held by the Company which are managed by the abrdn
Group
As at 30 April 2022, the Company held the following investments
managed by the abrdn Group;
As at As at
30 April 2022 31 October
GBP'000 2021
GBP'000
========================================== =========================== ===============
Aberdeen Standard SICAV I - China A Share
Equity Fund 8,907 21,874
========================================== =========================== ===============
abrdn Asian Income Fund Limited - 6,215
========================================== =========================== ===============
Aberdeen New India Investment Trust PLC - 10,826
========================================== =========================== ===============
Total 8,907 38,915
========================================== =========================== ===============
Directors
Total fees for the Directors in the period ended 30 April 2022
were GBP88,800 (30 April 2021: GBP76,700). There were no
outstanding fees due to the Directors at the period end ( 30 April
2021: GBPnil).
As at 30 April 2022 and at the date of this report, the
Directors held the following Ordinary shares in the Company.
Ordinary shares At 30 April
2022 and at the date of this Ordinary shares
report At 31 October
2021
================== =========================================================== =====================
M Hadsley-Chaplin 35,000 30,000
================== =========================================================== =====================
H Green 1,800 1,800
================== =========================================================== =====================
E de Rochechouart 142 -
================== =========================================================== =====================
A Gilding 1,667 -
================== =========================================================== =====================
S MacAulay 2,779 -
================== =========================================================== =====================
W Collins N/A 15,000
================== =========================================================== =====================
11. Financial instruments
IFRS 13 requires the Company to classify its investments in a
fair value hierarchy that reflects the significance of the inputs
used in making the measurements. IFRS 13 establishes a fair value
hierarchy that prioritises the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The three levels of
fair value hierarchy under IFRS 13 are
as follows:
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 asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices);
Level 3 - inputs for the asset or liability that are not based
on observable market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant assumptions based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary and provided by independent sources that are actively
involved in the relevant market.
The classification of the Company's investments held at fair
value as at 30 April 2022 is detailed in the table below:
30 April 2022 31 October
GBP'000 2021
GBP'000
========= =============================== ===============
Instruments held at fair value through profit and loss
===========================================================
Level 1 281,974 69,419
========= =============================== ===============
Level 2 - 42,128
========= =============================== ===============
Level 3 1,038 1,358
========= =============================== ===============
Total 283,012 112,905
========= =============================== ===============
The Company recognises transfers between levels of fair value
hierarchy as at the date of the period end in which the change
occurred.
There were no investments transferred between levels during the
period ( 31 October 2021: GBPnil).
Level 1 classification basis
Investments, whose values are based on quoted market prices in
active markets, and therefore classified within Level 1, include
listed equities in active markets. The Company does not adjust the
quoted price for these instruments.
Level 2 classification basis
Investments that trade in markets that are not considered to be
active but are valued based on quoted market prices, dealer
quotations or alternative pricing sources supported by observable
inputs are classified within Level 2. These include monthly priced
investment funds. The underlying net asset values of the open ended
funds included under Level 2 are prepared using industry accepted
standards and the funds have a history of accepting and redeeming
funds on a regular basis at net asset value. The net asset values
of regularly traded open ended funds are considered to be
reasonable estimates of the fair values of those investments and
such investments are therefore classified within Level 2 if they do
not meet the c riteria for inclusion in Level 1.
Level 3 classification basis
Investments classified within Level 3 have significant
unobservable inputs, as they trade infrequently. The level 3 figure
consists of an investment in Komodo Fund. Komodo Fund is valued at
the unadjusted net asset values provided by the administrator of
that fund.
The movement on the level 3 classified investments is shown
below:
Six months to 30 April Year to
2022 31 October
GBP'000 2021
GBP'000
======================== ============================================================= ==============
Opening balance 1,358 2,129
======================== ============================================================= ==============
Valuation adjustments * (320) (771)
======================== ============================================================= ==============
Closing balance 1,038 1,358
======================== ============================================================= ==============
* Total gains and losses for the period included in profit or
loss relating to assets held at the end of the period
12. Financial instruments - risk profile
The principal risks relating to financial instruments held by
the Company remain the same as at the Company's last financial year
end.
13. Post balance sheet events
Since the period ended 30 April 2022, 228,610 Ordinary shares
have been bought back and held in treasury.
14. Financial information
The Half-Yearly Financial Report will be submitted to the
National Storage Mechanism and will shortly be available for
inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
Alternative Performance Measures ("APMs")
The following APMs are presented to convey a view of the
entity's performance which is closer to the manager's view than
what would result from the use solely of accounting measures.
Discount
The amount, expressed as a percentage, by which the share price
is less than the NAV per Ordinary share.
As at As at
30 April 2022 30 April
2021
============================================ =============================== ============== ==================
NAV per Ordinary share (pence) a 637.68 836.55
============================================ =============================== ============== ==================
Ordinary share price (pence) b 536.00 714.00
============================================ =============================== ============== ==================
Discount (b÷a)-1 15.9% 14.6%
============================================ =============================== ============== ==================
Net cash / (gearing)
A way to magnify income and capital returns, but which can also
magnify losses. The revolving loan facility with ICBC is a common
method of gearing.
As at As at
30 April 2022 30 April
2021
===================================================== ====================== ============== ==================
Total assets less cash/cash equivalents
(GBP'000) a 284,573 385,771
===================================================== ====================== ============== ==================
Net assets (GBP'000) b 296,458 384,523
===================================================== ====================== ============== ==================
Net cash / (gearing) 1-(a÷b) 4.0% (0.3%)
===================================================== ====================== ============== ==================
Ongoing charges
A measure of the regular annual costs of running an investment
company expressed as a percentage of the average daily published
NAV.
As at As at
30 April 2022 30 April
2021
============================================ ============================== ============== ==================
Average NAV (GBP'000) a 340,371 368,076
============================================ ============================== ============== ==================
Annualised expenses* (GBP'000) b 1,907 3,640
============================================ ============================== ============== ==================
Ongoing charges b÷a 0.56% 0.99%
============================================ ============================== ============== ==================
* The Company's ongoing charges figure does not reflect any
costs of the underlying funds as the underlying information is not
readily available.
Total return
A measure of performance that includes both income and capital
returns. This takes into account capital gains and reinvestment of
dividends paid out by the Company into its Ordinary shares on the
ex-dividend date.
Six months ended 30 April Ordinary Share NAV
2022 price
============================ =============== =========== ================== ==============
Opening at 1 November 2021
(pence) a 695.00 813.20
============================ ============================ ================== ==============
Closing at 30 April 2022
(pence) b 536.00 637.68
============================ ============================ ================== ==============
Share price/NAV movement
(b ÷ a) - 1 c n/a -22.9% -21.5%
============================ =============== =========== ================== ==============
Dividend reinvestment d n/a 0.0% 0.0%
============================ =============== =========== ================== ==============
Total return (c+d) -22.9% -21.5%
========================================================== ================== ==============
n/a = not applicable
Year ended 31 October 2021 Ordinary share NAV
price
============================= ====== ========= ================== ==============
Opening at 1 November 2020
(pence) a 2 605.00 698.29
============================= ====== ========= ================== ==============
Closing at 31 October 2021
(pence) b 2 695.00 813.20
============================= ====== ========= ================== ==============
Share price/NAV movement (b
÷ a) - 1 c n/a 14.9% 16.5%
============================= ====== ========= ================== ==============
Dividend reinvestment d n/a 3.8% 3.3%
============================= ====== ========= ================== ==============
Total return (c+d) 18.7% 19.8%
===================================== ========= ================== ==============
n/a = not applicable
Company Information
Directors
Mark Hadsley-Chaplin (Chairman)
Helen Green (Senior Independent Director)
Eleonore de Rochechouart
Anne Gilding (appointed on 9 November 2021)
Sarah MacAulay (appointed on 9 November 2021)
William Collins (Retired on 12 April 2022)
Registered Office
11 New Street St Peter Port
Guernsey GY1 2PF
Company Secretary and Administrator
Vistra Fund Services (Guernsey) Limited 11 New Street
St Peter Port Guernsey GY1 2PF
Alternative Investment Fund Manager
Aberdeen Standard Fund Managers Limited Bow Bells House
1 Bread Street London EC4M 9HH
Investment Manager
abrdn Hong Kong Limited 30/F LHT Tower
31 Queen's Road Central Hong Kong
UK Administration Agent
Sanne Fund Services (UK) Limited 6th Floor
125 London Wall London EC2Y 5AS
Registrars
Link Asset Services Longue Hougue House St Sampson
Guernsey GY2 4JN
Depository Services and Custodian
Northern Trust (Guernsey) Limited Trafalgar Court
Les Banques St Peter Port
Guernsey GY1 3DA
Financial Advisor and Joint Corporate Broker
Shore Capital Markets Limited Cassini House
57-58 St James's Street London SW1A 1LD
Joint Corporate Broker
Numis Securities Limited 45 Gresham Street London EC2V 7BF
Advisers as to Guernsey law
Mourant
Royal Chambers St Julian's Avenue
St Peter Port, Guernsey GY1 4HP
Independent Auditor
KPMG Channel Islands Limited Glategny Court
Glategny Esplanade St Peter Port Guernsey GY1 1WR
abrdn Customer Services Department, Investment Plan for
Children, Share Plan and ISA Enquiries
abrdn Investment Trusts PO Box 11020
Chelmsford Essex CM99 2DB
Freephone: 0808 500 0040
(open Monday to Friday, 9.00 a.m. - 5.00 p.m., excluding public
holidays in England and Wales)
Email: inv.trusts@abrdn.com
Company Registration Number
Incorporated in Guernsey Number 50900
Website
abrdnchina.co.uk
United States Internal Revenue Service FATCA Registration Number
("GIIN")
WLL8YJ.99999.SL.831
Legal Entity Identifier ("LEI")
213800RIA1NX8DP4P938
Enquiries:
Aberdeen Standard Fund Managers Limited (Alternative Investment
Fund Manager to the Company)
Evan Bruce-Gardyne
Tel: +44 (0)7720 073216
Luke Mason
Tel +44 (0)207 463 5971
Sanne Fund Services (UK) Limited (UK Administration Agent)Brian
Smith
Tel: +44 (0)20 3327 9720
END
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