abrdnchina.co.uk
abrdn China Investment Company Limited
Annual Report 31 October 2023
Seeking long-term capital growth by investing
predominantly in Chinese equities
For more information visit abrdnchina.co.uk
abrdn.com
2 abrdn China Investment Company Limited
Overview
Financial Highlights 3
Strategic Report
Chairman’s Statement 4
Investment Managers Report 7
Portfolio
Ten Largest Investments 10
Portfolio 11
Governance
Board of Directors 14
Directors’ Report 17
Corporate Governance Statement 26
Promoting the Success of the Company 33
Report of the Audit Committee 36
Directors’ Remuneration Report 38
Statement of Directors’ Responsibilities 40
Depositary Report 41
Financial Statements
Independent Auditor's Report 42
Statement of Comprehensive Income 47
Statement of Financial Position 48
Statement of Changes in Equity 49
Statement of Cash Flows 50
Notes to the Financial Statements 51
Corporate Information
Alternative Performance Measures (“APMs”)
(unaudited) 72
Investor Information 74
AIFMD Disclosures (unaudited) 76
Glossary of Terms 77
Contact Addresses 83
Contents
abrdn China Investment Company Limited 83
Directors
Helen Green (Chairman)
Mark Bridgeman
Anne Gilding
Sarah MacAulay
Eleonore de Rochechouart
Registered Office
BNP Paribas House
St Julian’s Avenue
St Peter Port
Guernsey
GY1 1WA
Company Registration Number
Incorporated in Guernsey Number 50900
Alternative Investment Fund Manager
abrdn Fund Managers Limited
280 Bishopsgate
London
EC2M 4AG
Investment Manager
abrdn Hong Kong Limited
30/F LHT Tower
31 Queen’s Road
Central Hong Kong
Company Secretary
abrdn Holdings Limited
280 Bishopsgate
London
EC2M 4AG
Independent Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Registrar
Link Asset Services
Longue Hougue House
St Sampson
Guernsey
GY2 4JN
Custodian
BNP Paribas SA, London Branch
10 Harewood Avenue
London
NW1 6AA
Administrator and Depositary
BNP Paribas SA, Guernsey Branch
BNP Paribas House
St Julian’s Avenue
St Peter Port
Guernsey
GY1 1WA
Financial Adviser 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
Contact Addresses
abrdn China Investment Company Limited 3
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Financial Highlights
31 October 2023 31 October 2022 % change
Total equity shareholders’ funds (net assets) £213,247,000 £231,843,000 –8.0
Market capitalisation 167,197,000 202,870,000
Net asset value per Ordinary share (including current year income) 499.97p 511.98p –2.3
Net asset value per Ordinary share (excluding current year income)
A
499.00p 507.89p –1.8
Share price (mid market) 392.00p 448.00p –12.5
Discount to net asset value per Ordinary share (including current year income)
B
21.6% 12.5%
Discount to net asset value per Ordinary share (excluding current year income)
A
21.4% 11.8%
MSCI AC China All Shares Index (currency adjusted, capital gains basis) 1,953.68 1,885.64 +3.6
Net gearing/(cash)
B
3.1% –3.6%
Dividend and earnings
Revenue return per share 0.95p 4.00p –76.3
Dividends per share
C
– 3.20p –100.0
Dividend cover N/A 1.25
Revenue reserve
D
(£3,226,000) (£3,640,000)
Operating costs
Ongoing charges ratio
BE
1.07% 0.60%
A
Based on capital only NAV.
B
Considered to be an Alternative Performance Measure (see pages 72 to 73 for details).
C
The figures for dividends reflect the years in which they were earned (see note 8 on page 59).
D
Prior to payment of proposed Interim dividend.
E
2022 includes the effect of the management fee waiver arrangement following the combination with Aberdeen New Thai Investment Trust in November 2021.
Performance (total return)
1 year 3 years 5 years since 31/10/2021
% return % return % return % return
Net asset value
A
–1.9 –26.0 –8.1 –38.2
Share price
A
–12.0 –32.7 –14.6 –43.3
MSCI China All Shares Index (currency adjusted) +6.1 –31.8 +6.4 –27.3
A
Alternative Performance Measure (see page 73).
Financial Hi
g
hli
g
hts
4 abrdn China Investment Company Limited
Overview
China has proved a challenging country for many
investors over the 12 months to 31 October 2023 (“the
Financial Year”). Overall, Chinese equities (as represented
by the MSCI China All Shares Index), were up 6.1% in
sterling terms, but this belies the significant volatility
investors experienced during the Financial Year in which
investors sought out value stocks over those considered
higher quality. The abrdn China Investment Company
Limited (“the Company” or “ACIC”) net asset value (“NAV”)
total return for the Financial Year was -1.9% and the
Ordinary share price total return was -12.0% in sterling
terms, with the discount ranging from 10.8% in February
2023 to 21.6% in October 2023, trading at an average
discount of 14.4% throughout the Financial Year.
Market review
The Financial Year began with optimism for recovery as
the zero-Covid measures swiftly rolled back on 1
November 2022. Investors hoped that pent-up consumer
demand would herald a strong economic recovery.
However, the reality did not live up to market expectations.
The economic recovery was not as smooth as many
had anticipated and the predicted rebound fell short
of expectations.
Meanwhile, investor confidence was also eroded by
several lingering issues. Alongside geopolitical tensions
between the US and China, there have been concerns
over liquidity in China’s real estate sector and the country’s
Local Government Financing Vehicles, which have
amassed large levels of debt funding China’s
infrastructure boom. While government policy has been
supportive, it has come through in small ripples rather than
one big wave as investors had hoped. Again, the
mismatch in expectations has been the cause of market
volatility over the Financial Year.
Against this backdrop, many investors switched their focus
away from high-quality structural growth companies
favoured by your Manager and backed short-term trends,
notably artificial intelligence (“AI”) and China’s state-
owned enterprises (“SOE”). Investors were focused on
deep value opportunities in SOE-heavy sectors such as
energy and financials. Your Manager remains cautious
about investing in these areas, preferring to take a long-
term view. While AI-related businesses have seen a large
rise in their share prices in a very short time, the popularity
among investors is not necessarily matched by the
relevant companies’ fundamentals. While SOE reform is
promising for some companies, it is important to consider
whether the reforms are aligned with the needs of
minority shareholders.
Performance
In terms of the Company’s performance, the area hardest
hit was the portfolio’s consumption-focused holdings. With
consumer confidence fragile across a wide section of the
Chinese economy, these businesses saw their share
prices suffer despite strong fundamentals and solid
results. The strongest relative contribution to performance
at a sector level was from communication services. You
can read in more detail about the performance and
portfolio activity in the Investment Managers Report on
page 7.
The Board visited China and Hong Kong in October 2023.
Due to the previous limitations of zero-Covid travel
restrictions, this was the Board’s first opportunity to meet
the Company’s wider investment and support teams in
person since the Company’s change of investment
mandate in November 2021. The visit was an excellent
chance to talk to the team in more detail about the
current challenges and long-term opportunities in the
Chinese market and how the portfolio can best
reflect these.
Strate
g
ic Report - Chairman’s Statement
abrdn China Investment Company Limited 5
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Earnings & Dividend
Net revenue earnings after tax for the Financial Year to 31
October 2023 were £414K as compared to £1,851K in
2022. Most of the difference can be attributed to the
Company having benefited from a fee waiver for six
months of the previous year and the rise in the cost of debt
as interest rates have risen.
The Company will not be declaring a dividend for the
Financial Year (2022: 3.2 pence per share). Last year’s
dividend was required to be paid because the surplus
earnings generated as a result of the fee waiver from your
Manager reduced the cost base, such that a dividend was
required for the Company to qualify as an investment
trust. This year the costs are normalised and there is not
sufficient excess income to necessitate a dividend.
Proposal for the Reconstruction and
Voluntary Winding-up of the Company
On 28 November 2023, the Board announced that heads
of terms had been agreed in principle for a proposed
combination of the assets of the Company with the assets
of Fidelity China Special Situations PLC (“Fidelity China”)
(the "Proposals"). The Board believes the Proposals will
benefit shareholders in the Company ("Shareholders")
going forward. Fidelity China is the top performing, largest
and most liquid UK investment trust investing in China. The
combination, if approved by each company’s
shareholders, will be implemented through a Guernsey
scheme of reconstruction, under which the Company will
be placed into voluntary liquidation and part of its cash,
assets and undertaking will be transferred to Fidelity China
in exchange for the issue of new ordinary shares in Fidelity
China to Shareholders.
We have posted a circular to shareholders convening
general meetings for Monday 11 March 2024 and
Wednesday 13 March 2024 at which Shareholders will be
asked to approve the resolutions necessary to effect the
Proposals. Details of the business to be considered at
each general meeting and directions for voting are
included in the circular. It is expected that the effective
date for the completion of the Proposals and members’
voluntary liquidation, will take place before the deadline
for the convening of an Annual General Meeting in respect
of the Financial Year, which is 30 April 2024. In the event
that the effective date of the Proposals is delayed beyond
30 April 2024 a Notice of AGM will be published and an
Annual General Meeting in respect of the Financial Year
will have to be convened, but this is viewed as unlikely.
Loan Facility and Gearing
During the Financial Year, the Company amended its two
year £15 million revolving credit facility with the Industrial
and Commercial Bank of China (“ICBC”). In September
2023, the Company agreed with ICBC an amendment to
the financial covenants within the Loan Facility with ICBC.
It was agreed that the acceptable Net Asset Value (“NAV”)
of the Company should be reduced from £200 million to
£175 million. It was also agreed that, should the
Company’s NAV reach £250 million then the minimum
NAV covenant would revert back to £200 million. The
Company’s option to increase the level of the
commitment from £15 million to £30 million is subject to a
minimum NAV of £200 million.
The Loan Facility was due to expire on 13 April 2024.
However, on 15 January 2024, the loan was fully repaid
and cancelled in anticipation of the completion of
the Proposals.
Discount and buy backs
During the Financial Year, the Board closely monitored the
Company’s share price discount to NAV. The Board’s
intention is that ACIC’s shares should not trade at a price
which, on average, represents a discount that is out of line
with its direct peer group over the long-term.
The Board seeks authority from Shareholders annually to
buy back shares to assist the management of the
discount.
Shares may be repurchased when, in the opinion of the
Board, and taking into account factors such as market
conditions and the discounts of comparable companies,
the Company’s discount is out of line with ACIC’s direct
peers and shares are available to purchase in the market.
The Board believes that the principal purpose of share
repurchases is to enhance the NAV for remaining
shareholders, although it may also assist in addressing the
imbalance between the supply of and demand for ACIC’s
shares and thereby reduce the scale and volatility of the
discount at which the shares trade in relation to the
underlying NAV.
During the Financial Year, ACIC bought back 2,631,266
shares or 4.2% of the share capital in issue at a cost of
£13.78 million and a weighted average discount of 13.78%.
This enhanced the Company’s NAV by 0.79%.
The Company has not bought back any shares since the
Financial Year End.
6 abrdn China Investment Company Limited
Management Team
The Board has been impressed by the calibre, experience
and insight of the investment team that has been
managing the Company’s portfolio, and commends it to
Shareholders. The Board is keen to stress the rationale for
the Proposals is not driven by any shortcomings in the
portfolio management, but by issues of liquidity which
have proved insurmountable given the market’s change in
sentiment towards China.
Board Composition
There have been no changes to the Board Composition
during the financial year. It is expected that the Board will
all resign when the Company is put into liquidation at the
end of the combination process.
I would like to thank my fellow Board Members for their
support and guidance during a challenging year and for
their assistance in the coming months.
Change of Portfolio Administrator,
Depositary, Registered Office, Custodian
and Company Secretary
In April 2023, the Company completed the process of
moving most of its support functions to various entities
within BNP Paribas S.A. Group (“BNP”). The depositary and
administration of the portfolio moved to BNP Paribas S.A.,
Guernsey Branch. The registered office of the Company
moved to BNP Paribas House, St Julian's Avenue, St Peter
Port, Guernsey, GY1 1WA. The custodian was also moved
to BNP Paribas S.A. At the same time abrdn Holdings
Limited was appointed Company Secretary.
The Board decided to make these changes as BNP is the
preferred service partner of the Company’s Investment
Manager, abrdn plc, and currently BNP provides these
services to the majority of the investment companies that
abrdn plc manages.
Annual General Meeting (“AGM”)
Normally, the notice of the Company's AGM would
accompany this Annual Report and the AGM would take
place in mid-April.
However, in light of the Proposals, it is likely that the
Company will be placed into voluntary liquidation before
the Company’s AGM would be scheduled to take place.
The Board will update shareholders on the timings of all
shareholder meetings once these are confirmed by notice
of meeting as usual and by announcement on the London
Stock Exchange.
Outlook
The Company’s portfolio retains a significant exposure to
stocks which are heavily influenced by Chinese
consumers and, although the quick economic rebound
some had expected has yet to emerge and recovery has
been slower than anticipated, it is surely a matter of
when
,
not
if
this gathers momentum. While negative headlines
may have discouraged many foreign investors in recent
months, there are still reasons for optimism for those
investors looking for long-term capital growth in China.
Policy guidance is likely to remain supportive. China’s
government is introducing fiscal and monetary measures
that should promote domestic consumption and enhance
liquidity in the system. A large step forward came when
the government announced plans to provide 1 trillion
renminbi of low-cost financing for urban village
renovations and affordable housing programmes. While
not a panacea, this should help stabilise the country’s
property sector, generate demand and restore household
confidence.
In terms of geopolitics, after the Financial Year end, US
president Joe Biden met China’s premier Xi Jinping. While
most commentators considered this meeting as not an
unqualified success, dialogue between the two states is a
positive step toward easing relations.
The Board remains convinced of the long-term
investment potential in China and hope that Shareholders
will embrace the opportunity to be part of the larger, more
liquid, Fidelity China Special Situations PLC and will benefit
from the latter’s extensive experience of investing in
China.
Helen Green
Chairman
16 February 2024
Chairman’s Statement
Continued
abrdn China Investment Company Limited 7
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Market Environment
The Financial Year was marked by considerable market
volatility, with a sharp contrast between strong
performance in the first six months, followed by an
extended period of weakness in the second half. At the
beginning of the Financial Year, the central government’s
strict Covid policies hampered economic progress. As the
authorities pivoted to reliance on herd immunity, policies
were removed more quickly than expected. This
effectively brought to an end to the nationwide zero-
Covid policy. Share prices briefly surged on hopes of a big
increase in activity, fuelled by the knowledge that
considerable demand had built up during the Covid
lockdowns. However, the strength of the recovery proved
rather underwhelming and short-lived and company
reports began to indicate that the market had run ahead
of corporate fundamentals.
Other factors also began to influence sentiment. Among
them was the difficult global macroeconomic backdrop,
as many central banks tightened monetary policy as they
attempted to stem inflationary pressures. Added to this
was a flare-up in geopolitical tensions between the US and
China. At home, there were growing concerns about the
financial health of China’s domestic real estate sector.
Liquidity problems made life very difficult for some of the
heavily indebted property giants, epitomised by Country
Garden, one of the country’s top three developers, which
subsequently defaulted on an international bond. The high
level of debt held by local government was also a concern,
given the cost of servicing the debt and the fact that it is
not permitted to sell land.
As China’s economic recovery faltered, calls mounted for
central government measures to support demand.
Gradually some measures were implemented, but it
became clear government was hesitant to provide the
level of support investors expected, preferring to drip-feed
a range of small, targeted measures, as opposed to an
immediate and powerful boost.
The mood was lifted by a Politburo meeting in July when
the government indicated a significantly increased level of
economic support, aimed at improving the operating
environment for private enterprises and the platform
economy, boosting capital markets, and increasing
investor confidence. Other measures included support
aimed at the struggling property sector, including 1 trillion
yuan in planned government bond issuance for
infrastructure investment. Towards the end of the
Financial Year there were signs the medicine was
beginning to work, with third-quarter Gross Domestic
Product (“GDP”) better than expected.
If the global macroeconomic picture remains soft, more
support may well be necessary, especially in the real
estate sector. For investors, history suggests a patient,
long-term approach leads to the best returns and that is
likely to be the case once again in China.
Investment Themes
In constructing and managing the Company’s portfolio,
we employ a five-pronged thematic approach to
identifying companies which we believe will deliver
superior returns over the long-term. While this approach
will not prevent us from buying into a position where we
see fundamental value, we would expect most of the
holdings to benefit from one of the themes below:
Aspiration: We expect consumer companies to fare well
as China strives for a self-sufficient economic model.
Positioning goods and services as high-quality, in part to
gain pricing power is a powerful consumer trend. We
believe urbanisation and rising middle-class wealth will
drive demand for premium goods and services in the
long-run.
Digital: This theme is aligned with the government’s
objectives of localisation, improving productivity, lowering
costs, increasing innovation and helping to propel
economic growth. Our holdings in this segment are
primarily software-related names. Chinese companies
have historically performed strongly given their
knowledge of the domestic market and preference
for localisation in areas such as cybersecurity and
cloud services.
Green: This theme is set to benefit from government policy
on decarbonisation and net-zero emissions by 2060.
China dominates global manufacturing capacity for
renewable energy and storage, accounting for 90% of
solar and 75% of battery capacity and is well positioned to
benefit from the huge global investment required in
renewable energy and electricity storage. Other industries
also need to decarbonise, so we expect greater
investment in upgrading machinery and increasing
energy efficiency. Our holdings include solar wafer-
producers, component-makers, battery and related
component-makers and automation-related firms.
Health: This theme aligns with government policy
objectives to make healthcare cheaper and more
accessible. This is particularly relevant in view of China’s
rapidly ageing society. The portfolio is overweight in
healthcare services, including companies providing
innovative research and clinical trial services that seek to
bring high-quality therapies to market.
Investment Mana
g
ers Report
8 abrdn China Investment Company Limited
Wealth: This theme aligns with the government’s objective
of China becoming a moderately prosperous society by
2035. The financial services sector plays a key role in
creating and protecting wealth. Our holdings contribute to
the creation of strong financial and capital markets, and
also include software companies that support the
development of capital markets, such as trading and
portfolio management. The adoption of insurance
services remains low in China relative to the rest of the
world. We see a large potential market in terms of life
and health insurance, especially given China’s
ageing population.
Portfolio Performance
During the Financial Year, the Company’s NAV total return
was -1.9%, underperforming the total return of the MSCI
China All Shares Index (“the Benchmark”). The Ordinary
share price total return was -12.0% in sterling terms.
As referenced by your Chairman on page 4, while the
market rose over the Financial Year, many of the top
performing stocks were clustered around two specific
themes: artificial intelligence (“AI”) systems, including the
rise of ChatGPT, and the reform of state-owned
enterprises (“SOEs”). There was a notable move away
from growth-orientated stocks to those offering more
value, so our focus on quality companies detracted
from performance.
Looking in more detail at the portfolio, the
underperformance relative to the Benchmark was driven
mainly by poor stock selection in three sectors: financials,
consumer discretionary and information technology. With
fragile domestic consumer confidence across a wide
section of the Chinese economy, initial hopes of a strong
recovery faded, and domestic investors rotated away
from consumer names. As a result, some of our
consumption-focused holdings suffered despite having
strong fundamentals and posting solid results. Travel
retailer China Tourism Group Duty Free (China Tourism)
and food flavourings group Foshan Haitian were examples
of this. Despite the negative sentiment, some of the
Company’s other consumer holdings were still able to
deliver earnings growth, including Kweichow Moutai, Midea
Group and Fuyao Glass.
There were also some contrasting fortunes from our
China internet names over the year. Pinduoduo (“PDD”)
performed well after it exceeded the market’s
expectations with higher merchandise volumes, lower
costs, and improved profitability. We brought it into the
portfolio in the first half of the year for several reasons. It
has expanded into the US through its Temu subsidiary and,
in China, gained market share by offering its customers
better value for money. We think the value of the overseas
operations is not yet fully reflected in the stock. In the
same space, JD.com underperformed due to some
investors concerned about increasing competition in the
e-commerce space.
The gaming sector proved more resilient than other
consumer activities and returns from our holdings were
strong, especially Tencent and Netease, which
outperformed over the year. Steady growth and
diversified revenue streams were the main attractions at
Tencent while Netease benefited from product launches
which were well received.
On a less positive note, two of our holdings in the
alternative energy sector, Longi Green Energy Technology
(Longi) and Sungrow Power Supply, proved to be a drag
on performance. Solar panel producer Longi fell back on
concerns over a potential drop in demand as well as
geopolitical tensions. We reduced our position in the stock,
although Longi remains the world’s leading solar mono-
wafer manufacturer with a cost advantage versus peers
and a strong distribution network. Elsewhere, Yunnan New
Material was also weak over the year, affected by the
market’s concerns about over capacity in the battery
separator segment and rising geopolitical tension
obstructing its growth overseas.
Within the information technology sector, construction
software company Glodon dropped back after
underwhelming results and concerns about the real
estate sector. We remain confident about the company’s
prospects as property developers focus increasingly on
cost management and operational efficiency.
Helping to mitigate some of the losses in the sector was a
strong contribution from component maker Maxscend
Microelectronics, which delivered solid results and was
boosted by signs of a pickup in mobile phone sales.
Investment Mana
g
ers Report
Continued
abrdn China Investment Company Limited 9
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Portfolio Activity
The changes made to existing holdings over the year fell
broadly into two categories. Firstly, we exited stocks
where we did not want to hold a position through volatile
market conditions, or where we expected fundamental
weakness to outweigh promising long-term potential.
Secondly, we increased our positions in existing holdings in
quality businesses when valuations reached very
attractive levels and we had more confidence in near-
term earnings. As such, adjustments have been stock-
specific and not related to broad themes or sectors.
In terms of new positions, we introduced BYD, a leading
new-energy electric vehicle manufacturer that controls
multiple steps in its supply chain. We also established a
new position in drivetrain components manufacturer
Zhejiang Shuanghuan. The company’s products have wide
application across a range of machinery, including
internal combustion engine vehicles, electric vehicles,
and motorcycles.
We added China Resources Beer, a conglomerate with
businesses including retail, beverages, food processing
and distribution, which is run by a strong management
team, for its balanced combination of defensive and
growth brands. In financial services, we established a new
position including China Life, which looks set to benefit
from improving life insurance sales in China.
Finally, in the property sector, we added China’s largest
online real estate broker, KE Holdings, which boasts a
diverse range of growing businesses related to property.
As restrictions on property transactions begin to ease, we
expect the company will see growing transaction volumes
in the secondary market and, over the long-term,
continue to increase its market share.
As mentioned in the Interim Report, the Company
received regulatory approval for a Qualified Foreign
Investor (“QFI”) licence status, which provides access to
the broader Chinese equity market. As a result of this, we
purchased two new stocks: Centre Testing International
and OPT Machine Vision.
Conversely, we exited real estate firm China Vanke,
following sustained pressure on property developers and
piecemeal support from the government and sold our
stake in data-centre operator GDS as increased
competition from large cloud businesses and state-
owned enterprises had raised the level of uncertainty over
GDS’s earnings recovery. Other sales included Anhui
Conch Cement, Shenzhou International and
Meidong Auto.
Outlook
China’s post-Covid economic recovery was weaker than
expected, but the central government is implementing
incremental measures to support the economy and we
remain optimistic about the longer-term case for investing
in Chinese equities.
There are already signs the economy is responding to the
economic stimulus measures implemented so far by the
central government. While some property developers
continue to struggle under large debt burdens, further
support measures may be required.
At a time when markets in Europe and the US are having to
cope with the higher interest rate environment, China’s
market offers a differentiated opportunity to investors.
Some high-quality names have been sold off into the
cyclical downturn, but the potential for a recovery could
now provide a dual tailwind for these stocks. We have
already seen early signs of this in the IT hardware sector,
one of the first industries where de-stocking has been
completed.
We continue to believe the best strategy is to focus on
quality companies. It was reassuring to see that, despite
the challenging conditions, around 74% of the companies
we hold reported results that were at least in line with
market expectations. Towards the end of the Financial
Year, we saw nascent signs that investors are refocusing
on fundamentals.
Volatile markets can often throw up compelling
opportunities for investors. Across several sectors we are
finding high-quality companies trading at attractive
valuations. In some cases, these are businesses with
strong growth profiles trading on valuations more typical
of companies with little or no growth.
We expect a focus on quality and a disciplined approach
to stock-picking should bear fruit as the recovery gathers
pace. Stimulus measures will gradually lead to better
prospects for consumers, helped further as they begin to
use some of the considerable household savings built up in
recent years. As a result, we continue to believe strongly in
the long-term growth potential of China.
Nicholas Yeo and Elizabeth Kwik
abrdn Hong Kong Limited
16 February 2024
10 abrdn China Investment Company Limited
As at 31 October 2023
Tencent Holdings Ltd Kweichow Moutai Co Ltd
(9.7% of net assets)
(7.0% 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.
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.
Alibaba Group Holding Ltd China Merchants Bank Co Ltd
(5.9% of net assets)
(4.0% of net assets)
A leading global e-commerce company with leading
platforms including Taobao and T-mall. The company also
has interests in logistics and media as well as cloud
computing platforms and payments.
A best-in-class retail bank in China, offering diversified
financial services with a solid track record and sound risk
management practices.
PDD Holdings Inc AIA Group Ltd
(3.7% of net assets)
(3.2% of net assets)
The owner of popular shopping app Pinduoduo, which is gaining
market share within China’s e-commerce sector.
A leading pan-Asian life insurance company, it is poised to take
advantage of Asia’s growing affluence, backed by an effective
agency sales force and a strong balance sheet.
Contemporary Amperex Technology Co Ltd Meituan Dianping
(3.0% of net assets)
(2.8% of net assets)
The largest lithium battery maker in the world with leading
technology and supply chain advantage, which is set to benefit
from rise of electric vehicles and energy storage.
A 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.
BYD Bank of Ningbo Co Ltd
(2.8% of net assets)
(2.7% of net assets)
The largest electric vehicle OEM in China, with its vertical
integration providing the company with a cost advantage,
strong supply chain management, and flexibility in the battery
technology roadmap.
A 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.
Portfolio - Ten Lar
g
est Investments
abrdn China Investment Company Limited 11
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
As at 31 October 2023
Percentage
Value of net assets
Company Industry (sub-sector) (£’000) (%)
Tencent Holdings Ltd Interactive Media & Services 20,740 9.7
Kweichow Moutai Co Ltd (A) Beverages 14,874 7.0
Alibaba Group Holding Ltd Broadline Retail 12,640 5.9
China Merchants Bank Co Ltd (AH) Banks 8,573 4.0
PDD Holdings Inc Broadline Retail 7,772 3.7
AIA Group Ltd Insurance 6,885 3.2
Contemporary Amperex Technology Co Ltd (A) Electrical Equipment 6,338 3.0
Meituan Dianping – Class B Hotels, Restaurants & Leisure 6,066 2.8
BYD (AH) Automobile Components 5,965 2.8
Bank of Ningbo Co Ltd (A) Banks 5,738 2.7
Top ten investments 95,591 44.8
NetEase Inc Entertainment 5,311 2.5
Wuxi Biologics Cayman Inc Life Sciences Tools & Services 4,244 2.0
Aier Eye Hospital Group Co Ltd (A) Health Care Providers & Services 4,204 2.0
Maxscend Microelectronics Co Ltd (A) Electronic Equipment Instruments &
Components
4,180 2.0
Shenzhen Mindray Bio-Medical Electronics Co Ltd (A) Health Care Equipment & Supplies 4,170 2.0
Hong Kong Exchanges & Clearing Ltd Capital Markets 4,165 1.9
JD.com Inc – Class A Broadline Retail 3,988 1.9
Proya Cosmetics Co Ltd (A) Personal Care Products 3,916 1.8
China Life Insurance (AH) Insurance 3,806 1.8
Fuyao Glass Industry Group Co Ltd (H) Automobile Components 3,660 1.7
Top twenty investments 137,235 64.4
Portfolio
12 abrdn China Investment Company Limited
Portfolio
Continued
As at 31 October 2023
Percentage
Value of net assets
Company Industry (sub-sector) (£’000) (%)
Wanhua Chemical Group Co Ltd (A) Chemicals 3,611 1.7
Ping An Bank Co Ltd (A) Banks 3,595 1.7
China Tourism Group Duty Free Corp Ltd (AH) Specialty Retail 3,416 1.6
Sungrow Power Supply Co Ltd (A) Electrical Equipment 2,939 1.4
Sinoma Science & Technology Co Ltd (A) Chemicals 2,891 1.3
China Resources Land Limited Real Estate Management & Development 2,851 1.3
Nari Technology Co Ltd (A) Electrical Equipment 2,847 1.3
Chacha Food Co Ltd (A) Food Products 2,767 1.3
Centre Testing International Group Co Ltd (A) Professional Services 2,766 1.3
Shanghai M&G Stationery Inc (A) Commercial Services & Supplies 2,734 1.3
Top thirty investments 167,652 78.6
Hefei Meiya Optoelectronic Technology Inc (A) Machinery 2,639 1.2
Midea Group Co Ltd (A) Household Durables 2,598 1.2
Hundsun Technologies Inc (A) Software 2,530 1.2
Jiangsu Hengrui Medicine Co Ltd (A) Pharmaceuticals 2,479 1.2
Luxshare Precision Industry Co Ltd (A) Electronic Equipment Instruments &
Components
2,442 1.2
Foshan Haitian Flavouring & Food Co Ltd (A) Food Products 2,360 1.1
Zhejiang Weixing New Building Materials Co Ltd (A) Building Products 2,301 1.1
China Resources Beer Beverages 2,230 1.0
Silergy Corp Semiconductors & Semiconductor Equipment 2,177 1.0
Amoy Diagnostics Co Ltd (A) Biotechnology 2,161 1.0
Top forty investments 191,569 89.8
abrdn China Investment Company Limited 13
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
As at 31 October 2023
Percentage
Value of net assets
Company Industry (sub-sector) (£’000) (%)
Li Ning Co Ltd Textiles, Apparel & Luxury Goods 2,144 1.0
Venustech Group Inc (A) Software 2,100 1.0
Inner Mongolia Yili Industrial Group Co Ltd (A) Food Products 2,083 1.0
Estun Automation Co Ltd (A) Machinery 2,020 0.9
Yantai China Pet Foods Co Ltd (A) Food Products 1,958 0.9
LONGi Green Energy Technology Co Ltd (A) Semiconductors & Semiconductor Equipment 1,955 0.9
KE Holdings – Class A Real Estate Management & Development 1,938 0.9
Zhejiang Shuanghuan Driveline Co Ltd (A) Automobile Components 1,818 0.9
Glodon Co Ltd (A) Software 1,680 0.8
StarPower Semiconductor Ltd (A) Semiconductors & Semiconductor Equipment 1,661 0.8
Top fifty investments 210,926 98.9
By-Health Co Ltd (A) Personal Care Products 1,634 0.8
Yunnan Energy New Material Co Ltd Chemicals 1,616 0.8
Hangzhou Tigermed Consulting Co Ltd (H) Life Sciences Tools & Services 1,331 0.6
OPT Machine Vision Tech Co Ltd (A) Electronic Equipment Instruments &
Components
1,243 0.6
Zai Lab Ltd Biotechnology 1,173 0.6
China International Capital Corporation (H) Capital Markets 1,146 0.5
Komodo Fund Unit Trusts 909 0.4
Wuliangye Yibin Co Ltd (A) Beverages 504 0.2
Total investments 220,482 103.4
Cash plus other net current assets and liabilities (7,235) (3.4)
Net assets 213,247 100.0
14 abrdn China Investment Company Limited
Helen Green
Guernsey-resident Independent Non-Executive
Chairman
Experience:
Helen is a chartered accountant and has been employed
by Saffery Champness, a top 20 firm of chartered
accountants since 1984. She qualified as a chartered
accountant in 1988, and became a partner in the London
office in 1998. Since 2000 she has been based in the
Guernsey office where she is a Client Liaison Director,
responsible for trust and company administration.
Length of service:
7 years, appointed a Director on 1 July 2016 and as
Chairman on 1 August 2022
Last re-elected to the Board:
13 April 2023
Committee membership:
Audit Committee. Remuneration Committee,
Management Engagement Committee (Chair) and
Nomination Committee.
All other public company directorships:
Landore Resources Limited, CQS Natural Resources
Growth and Income PLC, and JP Morgan Global Core
Real Assets Limited.
Mark Bridgeman
UK-resident Independent Non-Executive Director and
Chairman of the Audit Committee
Experience:
Until 2009, Mark had a 19 year executive career in fund
management at Schroders plc, as an analyst, fund
manager and latterly Global Head of Research. Previous
roles at Schroders included Head of Pan European
Research, Head of Global Sector Research and an
Emerging Markets Fund Manager.
Length of service:
1 year, appointed a Director on 1 August 2022
Last re-elected to the Board:
13 April 2023
Committee membership:
Audit Committee (Chair), Remuneration Committee,
Management Engagement Committee and
Nomination Committee
All other public company directorships:
Utilico Emerging Markets Trust plc
Governance - Board of Directors
abrdn China Investment Company Limited 15
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Eleonore de Rochechouart
UK-resident Independent Non-Executive Director
Experience:
Eleonore is a partner of Res Familiaris LLP, a London-
based wealth and corporate management advisory
boutique. Prior to joining Res Familiaris in 2010, Eleonore
spent 20 years in the financial services industry as an
economist, researcher and asset allocator in both the
traditional and alternative investment arena. She started
her career in 1992 at Dubin & Swieca Capital
Management’s branch in France, before joining Standard
& Poor’s Rating Agency in 1998. She was then appointed
CIO of a French family office in 2003 before moving to
London in 2010.
Length of service:
4 years, appointed a Director on 16 April 2019
Last re-elected to the Board:
13 April 2023
Committee membership:
Audit Committee, Remuneration Committee,
Management Engagement Committee and
Nomination Committee
All other public company directorships:
Nil
Anne Gilding
UK-resident Independent Non-Executive Director
Experience:
Over the last 25 years Anne has led the development of
global communications, branding and marketing solutions
for a broad range of companies including Impax Asset
Management Group plc, BMO (formerly F&C), GAM,
Vernalis Group plc and UBS. She is currently a senior
adviser to Peregrine Communications and has served a
term as a trustee of an educational charity.
Length of service:
2 years, appointed a Director on 9 November 2021
Last re-elected to the Board:
13 April 2023
Committee membership:
Audit Committee, Remuneration Committee,
Management Engagement Committee and
Nomination Committee
All other public company directorships:
Nil
16 abrdn China Investment Company Limited
Sarah MacAulay
UK-resident Senior Independent Non-Executive Director
Experience:
Sarah was formerly a Director of Baring Asset
Management (Asia) Limited in Hong Kong and Asian
Investment Manager at Eagle Star and Kleinwort
Benson in London. She has over 20 years of Asian
fund management experience in London and Hong
Kong, managing and marketing portfolios across
numerous jurisdictions.
Length of service:
2 years, appointed a Director on 9 November 2021
Last re-elected to the Board:
13 April 2023
Committee membership:
Audit Committee, Remuneration Committee (Chair),
Management Engagement Committee and Nomination
Committee (Chair)
All other public company directorships:
Fidelity Japan Trust PLC, JPMorgan Multi-Asset Growth &
Income plc (Chairman) and Schroder Asian Total Return
Investment Company plc (Chairman)
Board of Directors
Continued
abrdn China Investment Company Limited 17
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
The Directors of abrdn China Investment Company
Limited (“the Company”) present the report and financial
statements for the Financial Year ended 31 October 2023.
Investment Objective
The Company’s investment objective is to produce long-
term capital growth by investing predominantly in Chinese
equities.
Investment Policy
The Company invests 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 Investment 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.
The Company is expected to have an ESG rating equal to,
or better than, the MSCI China All Shares Index and have
meaningfully lower carbon intensity than the Index.
The portfolio is actively managed and the Company aims
to outperform the MSCI China All Shares Index (in sterling
terms). This index is used as a reference point for portfolio
construction and as a basis for setting risk constraints, but
does not incorporate any sustainability criteria. In order to
achieve its objective, the Company will take positions
whose weightings diverge from the index or invest in
securities which are not included in the index. Investments
may deviate significantly from the components of, and
their respective weightings in, the MSCI China All Shares
Index. Due to the active nature of the management
process, the Company’s performance profile may deviate
significantly from that of the index.
The portfolio is expected normally to comprise between
30 and 60 securities (including any unlisted securities held)
but may hold up to 100. No individual issuer will represent a
greater weight in the portfolio than the lower of (i) 10% or
(ii) its weight in the MSCI China All Shares Index (in sterling
terms) plus 5%, as measured at the time of investment.
The maximum permitted exposure to a single group is
20% of the Company’s total assets, as measured at the
time of investment.
The Company may continue to hold certain illiquid assets
which were acquired prior to adoption of this policy
pending their orderly disposal. These assets are not
expected to represent a significant proportion of the
portfolio.
Risk Management
The Company will at all times be invested in several
sectors. While there are no specific limits placed on
exposure to any one particular sector, the Company will at
all times invest and ensure that the portfolio is managed in
a manner consistent with spreading investment risk.
The Company may invest in unquoted securities and/or
securities with lock-up periods provided that such
investments, in aggregate, are limited to 10% of the
Company’s net assets at the time any such investment
is made.
With prior approval of the Board, the Company may use
derivatives for the purposes of efficient portfolio
management in order to reduce, transfer or eliminate
investment risk in the Company’s portfolio. Derivative
instruments in which the Company may invest may
include foreign exchange forwards, exchange-listed and
over-the-counter options, futures, options on futures,
swaps and similar instruments. The Company does not
intend to enter into derivative or hedging transactions to
mitigate against wholesale general currency or interest
rate risk.
The Company may invest no more than 10% in aggregate
of its gross asset value at the time of acquisition in other
listed closed-ended investment funds, but this restriction
will not apply to investments in such funds which
themselves have stated investment policies to invest no
more than 15% of their gross asset value in other closed-
ended investment funds.
Directors’ Report
18 abrdn China Investment Company Limited
Gearing
The Company may employ gearing and may in
aggregate, borrow amounts equalling up to 20% of gross
asset value, although the Board expects that borrowings
will typically not exceed 15% of gross asset value at the
time of drawdown.
While it is intended that the Company will be fully invested
in normal market conditions, the Company may hold cash
on deposit or invest on a temporary basis in a range of
cash equivalent instruments. There is no restriction on the
amount of cash or cash-equivalent instruments that the
Company may hold.
Business Activities
The Company is a closed-ended investment company
incorporated and resident in Guernsey and holds a
Premium Listing on the London Stock Exchange.
The Company became an investment trust with effect
from 9 November 2021 and is registered in the UK for tax
purposes.
Results
The Company’s total comprehensive income for the
Financial Year was a loss of £3,390,000 (2022: loss of
£140,954,000). The Company’s revenue return for the
Financial Year amounted to a profit of £414,000 (2022:
profit of £1,851,000).
Investment Report and Outlook
The Chairman’s Statement and Investment Managers
Report incorporate a review of the highlights during the
Financial Year and the outlook for the forthcoming year.
Key Performance Indicators (“KPIs”)
The Company’s success in attaining its objectives is
measured by reference to the following KPIs:
a) The Company seeks to generate consistent relative
returns ahead of those generated by its Benchmark.
b) The Company seeks to achieve a positive absolute
return over the longer term through its exposure to
Chinese equities.
Performance
An overview of the Company’s performance is contained
in the Chairman’s Statement and Investment Managers
Report.
Ongoing Charges
For the Financial Year ended 31 October 2023, the
Company’s ongoing charges figure, calculated using the
Association of Investment Companies’ (“AIC”)
methodology, was 1.07% (2022: 0.60%), the calculation of
which can be found in the Alternative Performance
Measures section of this Report. The ongoing charges
figure for 2022 includes the effect of the management fee
waiver arrangement following the combination with
Aberdeen New Thai Investment Trust in November 2021.
Directors’ Report
Continued
abrdn China Investment Company Limited 19
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Principal Risks and Uncertainties
The Board and Audit Committee carry out a regular
review of the risk environment in which the Company
operates, changes to the environment and individual risks.
The Board also identifies emerging risks which might
affect the Company.
The Board is aware that there are a number of principal
risks and uncertainties which, if realised, could have a
material adverse effect on the Company and its financial
condition, performance and prospects. The Board,
through the Audit Committee carries out a robust
assessment of the Company’s principal and emerging
risks, which include those that would threaten its business
model, future performance, solvency, liquidity
or reputation.
The principal risks and uncertainties faced by the
Company have been reviewed by the Audit Committee in
the form of a risk matrix and the Committee also gives
consideration to the emerging risks facing the Company.
During the Financial Year, the Board identified the
implications for the Company’s investment portfolio of a
changing climate, and the increased use of AI, as
emerging risks which could impact investee companies in
the future. The global geopolitical situation and investor
attitudes towards China are also emerging, and
crystalising risks.
The Board has continued to assess these emerging risks
and their impact on the portfolio as they develop. The
Board receives regular reporting from the Manager on its
approach to engagement with investees on these
emerging risks amongst a variety of different topics.
The principal risks currently facing the Company, together
with a description of the mitigating actions the Board has
taken, are set out in the table below.
The Board considers its risk appetite in relation to each
principal risk and monitors this on an ongoing basis. Where
a risk is approaching or is outside the tolerance level, the
Board will consider taking action to manage the risk.
Currently, the Board considers the risks to be managed
within acceptable levels.
The principal risks associated with an investment in the
Company’s shares are published monthly in the
Company’s factsheet and they can be found in the
pre-investment disclosure document (“PIDD”) published
by the Manager, both of which are available on the
Company’s website.
Risk Trend Mitigating Action
Strategy - the Company’s
objectives or the investment
trust sector as a whole
become unattractive to
investors, leading to a fall in
demand for the Company’s
shares.
Through regular updates from the Manager, the Board has monitored the relevance of
the Company’s strategy, the performance of equity markets, the economic and
political environment, risks to the delivery of the Company’s strategy in light of the
external environment and the discount/ premium at which the Company’s shares
have traded relative to the net asset value. It receives feedback from the Company’s
broker and updates from the Manager’s investor relations team at Board meetings to
help to better understand investor sentiment towards the Company and its strategy.
The Company engaged with its largest shareholders extensively during the
development of the Proposals.
The Company consulted with a number of its major shareholders during the
development of the Proposals. Those shareholders, which comprise approximately
73 per cent of the Company’s shareholder register, have indicated support for
the Proposals.
Investment Performance - the
Board recognises that market
risk is significant in achieving
performance and it reviews
investment guidelines to
The Board meets the Manager on a regular basis and has kept investment
performance under close review. The Board recognises that market risk is significant
in achieving performance and consequently it reviews strategy and investment
guidelines to ensure that these are appropriate.
20 abrdn China Investment Company Limited
Directors’ Report
Continued
Risk Trend Mitigating Action
ensure that they are
appropriate. The Board
regularly reviews the impact
of geopolitical instability and
change on market risk.
The Board has set and has monitored the investment restrictions and guidelines and
regular reports are received from the Manager on stock selection, asset allocation,
gearing, revenue forecasts and the costs of running the Company.
Representatives of the Manager attend all Board meetings and a detailed formal
appraisal of the Manager is carried out by the Management Engagement Committee
on an annual basis to ensure that the continued appointment of the Manager remains
in the best interests of the shareholders.
The Board engages with shareholders at its AGM and with larger shareholders at least
annually to listen to sentiment towards the Company and its performance directly. As
set out above, the Company engaged with its largest shareholders extensively during
the development of the Proposals in light of performance challenges during the year.
Exogenous risks such as health,
social, financial, economic and
geopolitical - the effects of
instability or change arising
from these risks could have an
adverse impact on stock
markets and the value of the
investment portfolio.
The Board has discussed issues as they emerged with the Manager. During the year
under review, such issues included increased inflation and interest rates and the
resulting volatility that it created in global stock markets, the Russian invasion of Ukraine
and associated sanctions, investor attitudes towards China and equity markets, and
the steps that the Manager had taken or might take to limit their impact on the portfolio
and the operations of the Company.
The Board oversees the Manager’s performance at each Board Meeting and formally
considers whether the Company’s strategy remains fit for purpose, in light of
exogenous risks. The Board also regularly discusses the economic environment,
geopolitical risks, industry trends and the potential impact on the Company with the
Company’s broker.
Operational Risk – in common
with most investment trusts,
the Board delegates the
operation of the business to
third parties, the principal
delegate being the Manager.
Failure of internal controls and
poor performance of any
service provider could lead
to disruption, reputational
damage or loss to
the Company.
The Audit Committee receives and reviews reports from the Manager on its internal
controls and risk management (including an annual ISAE3402 Report). It also receives
and reviews report from all its other significant service providers on at least an annual
basis, including on matters relating to business continuity and cyber security. Written
agreements are in place with all third party service providers.
The Manager has monitored closely the control environments and quality of services
provided by third parties, including those of the Depositary, through service level
agreements, regular meetings and key performance indicators.
A formal appraisal of the Company’s main third party service providers is carried out
by the Management Engagement Committee on an annual basis.
Governance Risk – the
Directors recognise the
impact that an ineffective
board, unable to discuss,
review and make decisions,
could have on the Company
and its shareholders.
The Board is aware of the importance of effective leadership and board composition.
The Board regularly reviews its own performance and, at least annually, formally
reviews the performance of the Board and Chair through its performance evaluation
process.
abrdn China Investment Company Limited 21
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Risk Trend Mitigating Action
Discount / Premium to NAV – a
significant share price
discount or premium to net
asset value per share could
lead to high levels of
uncertainty for shareholders.
The Board has kept the level of the Company’s discount / premium under regular
review and has agreed parameters with the Manager for the management of share
premium / discount to NAV.
The Company has participated in the Manager’s investment trust promotional
programme where the Manager has an annual programme of meetings with
institutional shareholders and reports back to the Board on these meetings.
Financial obligations -
inadequate controls over
financial record keeping and
forecasting, the setting of an
inappropriate gearing
strategy or the breaching of
loan covenants could result in
the Company being unable to
meet its financial obligations,
losses to the Company and its
ability to continue trading as a
going concern.
At each Board meeting, the Board reviewed management accounts and
revenue forecasts.
The Directors set the gearing policy within which the portfolio is managed.
The Company’s annual financial statements are audited by the independent auditor.
Legal and regulatory Risks –
the Company operates in a
complex legal and regulatory
environment. As a Guernsey
company investing in China
with shares publicly quoted on
the London Stock Exchange,
as an alternative investment
fund and an investment trust,
there are several layers of risk
of this nature.
The Board has ensured that there is a breadth and depth of expertise within the
Board and the organisations to which the Company has delegated to manage legal
and regulatory risks. There are also authorities whereby the Board or individual
Directors can take further advice by employing experts should that ever be
considered necessary.
Borrowings
The Company may employ gearing and may in
aggregate borrow amounts equalling up to 20% of gross
asset value, although the Board expects that borrowings
will typically not exceed 15% of gross asset value at the
time of drawdown.
On the 13 April 2022 the Company entered into an
unsecured 2 year multicurrency revolving loan facility with
Industrial and Commercial Bank of China Limited, London
Branch (“ICBC”), under which loans with a maximum
principal amount of £15 million may be drawn (with a £15
million accordion option). The revolving loan facility
agreement with ICBC terminates on 12 April 2024. As at 31
October 2023, CNH 137m was drawn down (equivalent to
£15.4m) (2022: £nil). Subsequent to the year end, the loan
facility was repaid and cancelled on 15 January 2024 in
anticipation of the Proposals.
The Directors monitor the Company’s gearing on a
regular basis in accordance with the Company’s
investment policy and under advice from the
Investment Manager.
22 abrdn China Investment Company Limited
Market Information
The NAV per Ordinary share is calculated for each
business day and is published through a regulatory
information service.
Ordinary Shares in Issue
As at 31 October 2023, the Company had 42,652,309
(2022: 45,283,575) Ordinary shares in issue (excluding
shares held in treasury). The Company also held
19,520,638 Ordinary shares in treasury (2022: 16,889,372).
Purchase of Own Shares
The Company purchased 2,631,266 Ordinary shares
during the Financial Year (2022: 1,341,251). The Company
has not bought back any shares since the Financial
Year End.
As described above, the Company normally seeks
authority from shareholders annually to buy back shares,
in order to assist the Board in taking action to deal with
material and sustained deviation in the Company's
discount from its peer group.
The Company’s present authority to make market
purchases of its own Ordinary shares will expire at the
earlier of the General Meeting to approve the Proposals
(more details are set out in the Chairman’s Statement), or
conclusion of the Annual General Meeting ("AGM") at
which time a new authority to buy back shares will be
sought. The timing of any purchase will be decided by the
Board. Any shares bought back by the Company will
either be cancelled, or if the Directors so determine, held in
treasury (and may be re-sold). Purchases of own shares
will only be made at a price representing a discount to
NAV per Ordinary share.
The Panel on Takeovers and Mergers (the “Panel”) must
be consulted in advance in any case where Rule 9 of the
Takeover Code (the “Code”) might be relevant. The
Company has consulted with the Panel in relation to its
buy-back authority. On the basis that City of London
Investment Management Company Limited (“CoL”) has
not appointed a representative to the Board of the
Company and that none of the directors of the Company
are acting in concert with CoL, the Panel has confirmed on
an ex parte basis to the Company that the increase in
CoL's shareholding, as a result of the purchase by the
Company of its own shares pursuant to the authority
granted at the last AGM, will not trigger an obligation for
CoL to make a mandatory offer for the Company under
Rule 9 of the Code.
Significant Shareholders
As at 31 October 2023 and as at the date of this report, the
Company had noted the following significant
shareholdings of the issued Ordinary shares (excluding
treasury shares):
Number of
Ordinary
Shares
% held
City of London Investment
Management 12,804,675 30.02
Lazard Asset Management 9,274,384 21.74
Allspring Global Investments 9,149,451 21.45
1607 Capital Partners 2,576,195 6.04
West Yorkshire Pension Fund 1,522,656 3.57
The Company has not been notified of any changes to
these holdings as at the date of this Report.
Non-Mainstream Pooled Investments
(“NMPIs”)
Financial Conduct Authority (“FCA”) rules determine which
investment products can be promoted to ordinary retail
investors. Under these rules, certain investment products
are classified as NMPIs and as a result face restrictions on
their promotion to retail investors.
The Company currently conducts its affairs so that its
shares can be recommended by Independent Financial
Advisers (“IFAs”) to retail investors in accordance with the
FCA rules in relation to NMPIs and intends to continue to do
so for the foreseeable future.
The Board has been advised that the Company’s shares
are excluded from the FCA’s restrictions which apply to
NMPIs because they are shares issued by a non-UK
company which would qualify as an investment trust if
resident in the UK.
Continuation Vote and Future Performance
Linked Tender Offers
The Company does not have a fixed life but the Directors
consider it desirable that shareholders have the
opportunity to review the future of the Company at
appropriate intervals.
Directors’ Report
Continued
abrdn China Investment Company Limited 23
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
The Company’s Articles of Association, adopted on 26
October 2021, contain a provision for continuation
ordinary resolutions to be put to shareholders at the
Company’s AGM to be held in 2027 and at every fifth AGM
thereafter (the “Continuation Resolution”). If the
Continuation Resolution is not passed then within four
months of the continuation vote failing the Directors shall
formulate and put to Members proposals relating to the
future of the Company having had regard to, inter alia,
prevailing market conditions and applicable regulations
and legislation.
In addition, the Board intends that, if the Company’s net
asset value total return over the five years ending October
2026 does not exceed the total return of the MSCI China
All Shares Index (in sterling terms), the Company will
undertake a tender offer for up to 25% of the Company’s
issued share capital (excluding any shares held in
treasury). Any such tender offer will be at a price equal to
the then prevailing formula asset value ("FAV") per share
less 2%.
However, as set out in the Proposals, the Company is
expected to be placed into voluntary liquidation before
any continuation vote.
Automatic Exchange of Information
Foreign Account Tax Compliance Act (“FATCA”)
FATCA legislation, which was introduced in the United
States of America, places obligations on foreign financial
institutions such as the Company. In Guernsey, local law
has been introduced that gives effect to the FATCA
requirements and certain reporting obligations are placed
on financial institutions as defined by this act. The
Company is registered as a reporting financial institution
and is subject to ongoing reporting obligations under
the legislation.
The Common Reporting Standard (“CRS”)
CRS is the result of the drive by the G20 nations to develop
a global standard for the automatic exchange of financial
account information, developed by the Organisation for
Economic Cooperation and Development. Guernsey has
introduced local legislation to give effect to CRS. Guernsey
financial institutions are required to identify, review and
report on accounts maintained by them which are held by
account holders resident in jurisdictions with which
Guernsey has agreed to exchange information.
Depositary and Custody Services
In April 2023, the depositary of the portfolio moved from
Northern Trust (Guernsey) Limited to BNP Paribas S.A.,
Guernsey Branch. The custody services were also moved
to BNP Paribas S.A from Northern Trust (Guernsey) at the
same time.
Management
Since 1 June 2016, the Company’s Alternative Investment
Fund Manager has been abrdn Fund Managers Limited
(previously called Aberdeen Standard Fund Managers
Limited) (“AFML”), which is a wholly owned subsidiary of
abrdn plc and is authorised and regulated by the FCA.
AFML has been appointed to provide investment
management, risk management and promotional
activities to the Company.
The Company’s portfolio is managed by abrdn Hong Kong
Limited (“aHKL”) by way of a group delegation agreement
in place between AFML and aHKL. Promotional activities
have been delegated to abrdn Investments Limited ("AIL")
(previously called Aberdeen Asset Managers Limited).
Further details of the key terms of the agreement and fees
payable to the Manager can be found in note 4 to the
financial statements.
Alternative Investment Fund Managers
Directive (“AIFMD”)
The Company appointed AFML as its Alternative
Investment Fund Manager (“AIFM”) with effect from 1 June
2016.
An AIFM must ensure that an Annual Report for the
Company is made available to investors for each financial
year, provide the Annual Report to investors on request
and make the Annual Report available to the FCA. The
investment funds sourcebook of the FCA details the
requirements of the Annual Report.
All the information required by those rules and relevant
AIFM remuneration disclosures are or will be available on
the Company’s website (abrdnchina.co.uk).
Company Secretary and Administrators
BNP Paribas S.A., Guernsey Branch was appointed as the
Company’s Administrator in April 2023, replacing Vistra
Fund Services (Guernsey) Limited (“Vistra”), abrdn
Holdings Limited was appointed as Company Secretary in
April 2023, in place of Vistra..
Further details on the fees payable under these
agreements can be found in note 5 to the
financial statements.
24 abrdn China Investment Company Limited
Payment of Suppliers
It is the Company’s payment policy to obtain the best
terms for all business and therefore there is no consistent
policy as to the terms used. The Company contracts with
its suppliers setting out the terms on which business will
take place and abides by such terms. A high proportion of
expenses, including management and administration
fees, are paid within the month when invoiced.
Settlement of Share Transactions
Transactions in the Company’s Ordinary shares are
settled by the CREST share settlement system.
Donations
The Company did not make any political or charitable
donations during the Financial Year under review.
Going Concern
The Board has considered and sought advice on the
appropriateness of continuing to prepare the Financial
Statements on a going concern basis given the material
uncertainty in relation to the announcement of the
Proposals - which would involve a scheme of
reconstruction resulting in the voluntary liquidation of the
Company - the Board concluded that it remained
appropriate to continue to prepare the Financial
Statements on a going concern basis.
The Directors believe that, should the Proposals not
proceed, 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 31 October 2023, the Company held £8.7 million
(2022: £8.5 million) in cash and £220.5 million in
investments (2022: £224.1 million). It is estimated that
approximately 99% (2022: 99%) of the investments held at
the Financial Year end could be realised in one month. The
total operating expenses for the Financial Year ended
were £2.9 million (2022: £1.9 million), which on an
annualised basis represented approximately 1.07% (2022:
0.60%) of average net assets during the Financial Year. 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 14 February 2024 were £187.1 million.
The Company’s assets consist of equity shares in
companies listed on recognised stock exchanges and in
normal circumstances are realisable within a short
timescale. The Board has reviewed the results of stress
testing prepared by the Manager in relation to the
ability of the assets to be realised in the current
market environment.
The Company does not have a fixed life. However, as
required by the Company’s Articles of Association,
adopted on 26 October 2021, in normal circumstances,
the Company would submit a continuation resolution to
shareholders at the Annual General Meeting to be held
in 2027.
At the year end, the Company had a £15 million revolving
loan facility with Industrial and Commercial Bank of China
limited, London Branch (`ICBC'), terminating in April 2024.,
As at 31 October 2023, CNH 137m was drawn down
(equivalent to £15.4m) (2022: £nil). The liquidity of the
Company's portfolio supports the Company's ability to
repay its borrowings at short notice. However, subsequent
to the year end, the loan facility was repaid and cancelled
on 15 January 2024 in anticipation of the Proposals.
The Board is confident that the Company could obtain
a broadly similar loan facility if the Proposals do
not proceed.
Taking the above factors into consideration, the Board has
a reasonable expectation that the Company has
adequate resources to continue in operational existence
and discharge its liabilities as they fall due for a period of at
least twelve months from the date of approval of these
financial statements, subject to approval of the Proposals.
Accordingly, the Board continues to adopt the going
concern basis in preparing the financial statements.
Material Uncertainty
On 28 November 2023, the Board announced that heads
of terms had been agreed in principle for a proposed
combination of the Company with the assets of Fidelity
China Special Situations PLC (“Fidelity China”) (“the
Proposals”). The Proposals, if approved by each
company’s shareholders, will be implemented through a
Guernsey scheme of reconstruction under which the
Company will be placed into voluntary liquidation and part
of its cash, assets and undertaking will be transferred to
Fidelity China in exchange for the issue of new ordinary
shares in Fidelity China to Shareholders. More detail can
be found in the Chairman’s Statement on pages 4 and 5
and in the RNS announcement itself.
Directors’ Report
Continued
abrdn China Investment Company Limited 25
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
The Board believes that the Proposals are in the best
interests of shareholders and recommends that
shareholders vote in favour of the relevant resolutions.
However, there can be no certainty of the outcome at the
date of this Annual Report and, therefore, there remains
material uncertainty which may cast significant doubt on
the Company’s ability to continue as a going concern.
Should the Proposals not receive the necessary
shareholder approvals the Board has a reasonable
expectation that the Company has adequate resources
to continue in operational existence and discharge its
liabilities as they fall due for a period of at least twelve
months from the date of approval of these financial
statements. Accordingly, the Board continues to adopt the
going concern basis in preparing the financial statements.
Viability Statement
The Directors have assessed the prospects of the
Company over the period from the date of this report up
until 31 October 2026 (the “Period”). They have done this
on the basis, which they consider highly unlikely as 73 per
cent of the Company’s share register has indicated
support for the Proposals, that the Proposals are rejected
by Shareholders at the General meeting in March 2024.
The Directors believe that the Period, being approximately
three years, is an appropriate time horizon over which to
assess the viability of the Company, particularly when
taking into account the long-term nature of the
Company’s investment strategy.
In their evaluation of the prospects of the Company, the
Directors have carried out a robust assessment of the
emerging and principal risks facing the Company in the
event that the Proposals are rejected, including those that
would threaten its business model, future performance,
solvency or liquidity, as set out on pages 19 to 21 of this
report. Developments in Chinese and other Asian markets
and portfolio changes are discussed at quarterly Board
meetings and the internal control framework of the
Company is subject to formal review on at least an annual
basis. Under normal market conditions, over 99% of the
investments held by the Company could be sold within
one month. However, there are circumstances which
could lead to a reduction in market liquidity and, therefore,
the ability of the Company to realise its investments.
The Directors do not expect there to be any material
increase in the annual ongoing charges of the Company
over the Period. The Company’s income from investments
and cash realisable from the sale of its investments
provide substantial cover to the Company’s operating
expenses, and any other costs likely to be faced by the
Company over the Period.
In normal circumstances, the continuation of the
Company is subject to the approval of shareholders every
five years, with the next vote due to take place at the
Annual General Meeting in 2027.
Taking the above into account, the Directors have a
reasonable expectation that, should the Proposals not
proceed, the Company will be able to continue in
operation and meet its liabilities as they fall due over
the Period.
Auditor
KPMG Channel Islands Limited (“KPMG “) was re-
appointed as auditor of the Company at the AGM held on
13 April 2023.
Annual General Meeting (“AGM”)
Normally, the notice of the Company's AGM would
accompany this Annual Report and the AGM would take
place in mid-April. The deadline for the convening of an
AGM in respect of the Financial Year is 30 April 2024. The
Company has not scheduled the AGM for 2024 in light of
the Proposals. If the Company is not placed into
member’s voluntary liquidation before then, the Company
will issue an RNS announcement convening an AGM.
Corporate Governance
The Corporate Governance Statement on pages 26 to 33
forms part of this report.
Statement of Directors’ Responsibilities
The Statement of Directors’ Responsibilities on page 40
forms part of this report.
Helen Green
Chairman
16 February 2024
26 abrdn China Investment Company Limited
This Corporate Governance Statement forms part of the
Directors’ Report.
The Board of abrdn China Investment Company Limited
(“the Company”) has considered the principles and
recommendations of the Association of Investment
Companies’ (“AIC”) Code of Corporate Governance (“AIC
Code”) by reference to the AIC Corporate Governance
Guide for Investment Companies (“AIC Guide”) as issued
in February 2019 and available on the AIC’s website
(theaic.co.uk). The AIC Code, as explained by the AIC
Guide, addresses all of the principles set out in the UK
Corporate Governance Code, issued in July 2018 and
available on the FRC’s website (frc.org.uk), as well as
setting out additional principles and recommendations on
issues that are of specific relevance to the Company.
The Board considers that reporting against the principles
and recommendations of the AIC Code, and by reference
to the AIC Guide (which incorporates the UK Corporate
Governance Code), will provide better information to
shareholders.
The Guernsey Financial Services Commission revised its
Code of Corporate Governance (the “Guernsey Code”)
in 2021.
Companies which report under the AIC Code are deemed
to meet the requirements of the Guernsey Code.
The Company has complied with the recommendations
of the AIC Code and the relevant provisions of the UK
Corporate Governance Code, except as set out below.
The UK Corporate Governance Code includes provisions
relating to:
· interaction with the workforce (provisions 2, 5 and 6);
· the role and responsibility of the chief executive
(provisions 9 and 14);
· previous experience of the chairman of a remuneration
committee (provision 32); and
· executive directors’ remuneration (provisions 33 and 36
to 41).
The Board considers these provisions are not relevant
to the position of the Company, being an externally
managed investment company. The Company has
therefore not reported further in respect of
these provisions.
The Board
The Board aims to provide effective leadership so the
Company has the platform from which it can achieve its
investment objective. Its role is to guide the overall
business strategy for the benefit of shareholders and
stakeholders, ensuring that their interests are its primary
consideration. The intention is to create a supportive
working environment which allows the Investment
Manager the opportunity to manage the portfolio in
accordance with the investment policy, through a
framework of effective controls which enable risks to be
assessed and managed.
A procedure has been adopted for the Directors, in the
furtherance of their duties, to take independent
professional advice at the expense of the Company.
Directors are encouraged to attend industry and other
seminars, including courses run by the AIC, covering issues
and developments relevant to investment companies.
Upon joining the Board, new Directors receive an induction
and other relevant training is available to Directors on an
ongoing basis.
Composition
Helen Green was appointed by the Board on 1 July 2016,
Eleonore de Rochechouart was appointed by the Board
on 16 April 2019, Anne Gilding and Sarah MacAulay were
appointed by the Board on 9 November 2021, and Mark
Bridgeman was appointed by the Board on 1 August 2022.
All the Directors hold their office in accordance with the
Company’s Articles of Incorporation.
All Directors are considered by the Board to be
independent at the date of this report.
Directors’ and Officers’ Liabilities Insurance
An insurance policy covering Directors’ and officers’
liabilities is maintained by the Company.
.
Corporate Governance Statement
abrdn China Investment Company Limited 27
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Board Diversity
The Board recognises the importance of having a range
of skilled and experienced individuals with the right
knowledge represented on the Board in order to allow it to
fulfil its obligations. The Board also recognises the benefits
and is supportive of the principle of diversity in its
recruitment of new Board members. The Board will not
display any bias for age, gender, race, sexual orientation,
socio-economic background, religion, ethnic or national
origins or disability in considering the appointment of its
Directors. In view of its size, the Board will continue to
ensure that all appointments are made on the basis of
merit against the specification prepared for each
appointment. In doing so, the Board will take account of
the targets set out in the FCA’s Listing Rules, which are set
out in the tables below.
The Board has resolved that the Company’s year-end
date is the most appropriate date for disclosure purposes.
The following information has been provided by each
Director through the completion of questionnaires. There
have been no changes since the year end.
Board Gender as at 31 October 2023
Number of Board
members
Percentage of the
Board
Number of senior
positions on the Board
(note 3)
Number in
executive
management
Percentage
of executive
management
Men 1 20% 1
n/a
n/a
Women 4 80%
(note 1)
2
Not specified/prefer not to say - - -
Board Ethnic Background as at 31 October 2023
Number of Board
members
Percentage of the
Board
Number of senior
positions on the
Board
(note 3)
Number in
executive
management
Percentage
of executive
management
White British or other White
(including minority-white groups)
5
(note 2)
100% 3
n/a
n/a
Not specified/prefer not to say - - -
Notes:
1. Meets the target of at least 40% as set out in LR 9.8.6R (9)(a)(i).
2. Does not meet the target of at least one individual on the board of directors being from a minority ethnic background
as set out in LR 9.8.6R (9)(a)(iii).
3. The Company considers that the role of Chairman, who is also the Chairman of the Management Engagement
Committee, the role of the Senior Independent Director (“SID”) who is also the Chairman of the Remuneration
Committee and Nomination Committee, and the Chairman of the Audit Committee are senior positions.
28 abrdn China Investment Company Limited
Directors’ Shareholdings
At 31 October 2023 and at the date of this report, the Directors had the following shareholdings in the Company.
Ordinary shares at
the date of this
report
Ordinary shares At
31 October
2023
Ordinary shares
At 31 October
2022
Helen Green 1,800 1,800 1,800
Mark Bridgeman (appointed on 1 August 2022) – – –
Eleonore de Rochechouart 142 142 142
Anne Gilding 1,667 1,667 1,667
Sarah MacAulay 2,779 2,779 2,779
Board Meetings
The number of scheduled meetings of the Board and Committees for the Financial Year under review is given below,
together with individual Directors’ attendance at those meetings. The first number in the table is the meetings attended
by the individual Director and the second number is the number of meetings that Director was eligible to attend.
Board
Nomination
Committee
Audit
Committee
Management
Engagement
Committee
Remuneration
Committee
Helen Green 4/4 1/1 2/2* 1/1 1/1
Mark Bridgeman 4/4 1/1 3/3 1/1 1/1
Eleonore de Rochechouart 4/4 1/1 3/3 1/1 1/1
Anne Gilding 4/4 1/1 3/3 1/1 1/1
Sarah MacAulay 4/4 1/1 3/3 1/1 1/1
* Helen Green stepped down as a Member of the Audit Committee when she was appointed as Chairman of the Board. Helen Green was re-appointed to the Audit Committee on
21 June 2023.
There were several ad hoc meetings of the Board and its Committee which dealt with the Proposals (further details of
which are set out in the Chairman’s Statement) and general administration matters. There were also two meetings held
to authorise the publication of the respective interim and annual reports.
Corporate Governance Statement
Continued
abrdn China Investment Company Limited 29
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Board’s Policy on Tenure
In normal circumstances, it is the Board’s expectation that
Directors will not serve beyond the Annual General
Meeting following the ninth anniversary of their
appointment. However, the Board takes the view that
independence of individual Directors is not necessarily
compromised by length of tenure on the Board and that
continuity and experience can add significantly to the
Board’s strength. The Board believes that
recommendation for re-election should be on an
individual basis following a rigorous review which assesses
the contribution made by the Director concerned, but also
taking into account the need for regular refreshment
and diversity.
It is the Board’s policy that the Chairman of the Board will
not normally serve as a Director beyond the Annual
General Meeting following the ninth anniversary of his or
her appointment to the Board. However, this may be
extended in certain circumstances or to facilitate effective
succession planning and the development of a diverse
Board. In such a situation the reasons for the extension will
be fully explained to shareholders and a timetable for the
departure of the Chairman clearly set out.
The Role of the Chairman and Senior
Independent Director
The Chairman is responsible for providing effective
leadership to the Board, by setting the tone of the
Company, demonstrating objective judgement and
promoting a culture of openness and debate. The
Chairman facilitates the effective contribution and
encourages active engagement by each Director. In
conjunction with the Company Secretary, the Chairman
ensures that Directors receive accurate, timely and clear
information to assist them with effective decision making.
The Chairman acts upon the results of the Board
evaluation process by recognising strengths and
addressing any weaknesses and also ensures that the
Board engages with major shareholders and that all
Directors understand shareholder views.
The Senior Independent Director acts as a sounding board
for the Chairman and acts as an intermediary for other
Directors, when necessary. Working closely with the
Nomination Committee, the Senior Independent Director
takes responsibility for an orderly succession process for
the Chairman and leads the annual appraisal of the
Chairman’s performance. The Senior Independent
Director is also available to shareholders to discuss any
concerns they may have.
Re-election of Directors
The services of each of the Directors are provided under
the terms of letters of appointment between each of them
and the Company. Each Director’s appointment is for an
initial three year period subject to renewal and
termination upon three months’ notice.
In line with corporate governance best practice, all of the
Directors, apart from those stepping down, will normally
retire and offer themselves for re-election at the Annual
General Meeting of the Company. However, as set out in
the Proposals, the Company is expected to be placed
into voluntary liquidation prior to the next Annual
General Meeting.
Conflicts of Interest
As required by law, a Director must avoid a situation where
he or she has an interest that conflicts with the Company’s
interests. The Company’s Articles of Incorporation provide
the Directors authority to authorise potential conflicts of
interest. The Directors are able to impose limits or
conditions when giving authorisation if they think this is
appropriate. The procedure observed by the Board in
considering dealing with conflicted matters is as follows:
· Any Board member so conflicted must excuse themself
from the discussion involving the relevant conflict;
· Only Directors who have no interest in the matter being
considered are able to debate the matter and take the
relevant decision; and
· In taking the decision the Directors must act in a way
they consider, in good faith, will be most likely to
promote the Company’s success.
The Directors have declared any potential conflicts of
interest to the Company. These are entered into the
Company’s register of potential conflicts, which is
reviewed regularly by the Board. The Directors are obliged
to advise the Company Secretary as soon as they
become aware of any potential conflicts of interest.
30 abrdn China Investment Company Limited
Board Committees
The Company has established an Audit Committee, a
Management Engagement Committee, a Nomination
Committee and a Remuneration Committee. Other
committees of the Board may be formed from time to
time to deal with specific matters.
Audit Committee
A report on pages 36 and 37 provides details of the role,
composition and meetings of the Audit Committee
together with a description of the work of the Committee
in discharging its responsibilities.
Mark Bridgeman is the Chairman of the Audit Committee.
The Audit Committee has formal terms of reference and
copies of these are available on request from the
Company Secretary and on the Company’s website.
Management Engagement Committee
The Company has established a Management
Engagement Committee which at the Financial Year end
comprised all members of the Board. The Committee
meets on at least an annual basis to consider the
appointment and remuneration of the Manager. The
Committee also considers the appointment and
remuneration of other suppliers of services to the
Company.
Helen Green is Chairman of the Management
Engagement Committee. The Committee has formal
terms of reference and copies of these are available on
request from the Company Secretary.
During the year, the Management Engagement
Committee supported the Board in its review of the
Proposals and whether to retain AFML as the Manager of
the Company.
Nomination Committee
The Company has established a Nomination Committee
which at the Financial Year end comprised all members of
the Board. Sarah MacAulay is Chairman of the
Nomination Committee. The Committee has been
established for the purpose of considering the
composition of the Board as a whole and for identifying
and putting forward candidates for the office of Director
of the Company and meets on at least an annual basis.
The Committee considers job specifications and assesses
whether candidates have the necessary skills and time
available to devote to the job. When considering the
appointment of new Directors, the Nomination
Committee will engage the services of an external
recruitment firm. The Nomination Committee appointed
Fletcher Jones to assist in its latest search for a Director,
which resulted in the appointment of Mark Bridgeman on
1 August 2022. The Company does not have any other
connection with Fletcher Jones.
The Nomination Committee has formal terms of
reference and copies of these are available on request
from the Company Secretary and on the Company’s
website.
Remuneration Committee
The Company has established a Remuneration
Committee, which at the Financial Year end comprised all
members of the Board. The Committee meets at least on
an annual basis to consider the remuneration of the
Directors. The Committee reviews the remuneration of
the Directors and Chairman against the fees paid to the
directors of other investment companies of a similar size
and nature, as well as taking into account other
comparable data.
Sarah MacAulay is the Chairman of the Remuneration
Committee. The Remuneration Committee has formal
terms of reference and copies of these are available on
request from the Company Secretary and on the
Company’s website.
Performance Evaluation
A formal annual performance appraisal process is
performed to consider the performance of the Board, the
committees, and the individual Directors. The appraisal
was performed internally during the year led by the
Chairman with support from the Company Secretary.
The Board considers that an internal evaluation was
appropriate given the nature and size of the Company.
A questionnaire consisting of open and closed end
questions was completed by all Directors. The results were
reviewed by the Chairman and were then discussed with
the Board and an action list of suggestions for
improvements compiled. A separate appraisal of the
Chairman was carried out under the supervision of the
Senior Independent Director and the results were
reviewed and reported back to the Chairman. The results
of the performance appraisal carried out in the Financial
Year ended 31 October 2023 demonstrated that the
structure of the Board and the diverse experience of the
Directors are appropriate to meet the Company’s
requirements.
Corporate Governance Statement
Continued
abrdn China Investment Company Limited 31
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
The Directors are aware that the Board should have an
appropriate balance of skills, experience, independence
and knowledge. The annual performance evaluation
report covers this issue and the Board understands the
requirement for this balance to be maintained.
Internal Controls
The AIC Code requires the Board to review the
effectiveness of the Company’s system of internal
controls. The Board recognises its ultimate responsibility
for the Company’s system of internal controls and for
monitoring its effectiveness and has applied the Financial
Reporting Council’s (“FRC”) guidance on internal controls.
The system of internal controls is designed to manage
rather than eliminate the risk of failure to achieve business
objectives. It can provide only reasonable assurance
against material misstatement or loss. The Board has
undertaken a review of the aspects covered by the
guidance and has identified risk management controls in
the key areas of business objectives, accounting,
compliance, operations and secretarial as being matters
of particular importance upon which it requires reports.
The Board believes that the existing arrangements, set out
below, represent an appropriate framework to meet the
internal control requirements. Through these procedures
the Directors have kept under review the effectiveness of
the internal control system throughout the Financial Year
and up to the date of this report.
The Board uses a risk assessment matrix to consider the
main risks and controls for the Company. The matrix is
reviewed and updated on a frequent basis by the Audit
Committee on behalf of the Board.
The Board has contractually delegated to external
agencies, including the Manager, the management of the
investment portfolio, the custodial services (which include
the safeguarding of the assets), the registration services
and the accounting and company secretarial
requirements. Each of these contracts was entered into
after full and proper consideration of the quality and cost
of services offered, including the financial control systems
in operation in so far as they relate to the affairs of the
Company.
Financial Aspects of Internal Control
The Directors are responsible for the internal financial
control systems of the Company and for reviewing their
effectiveness. These aim to ensure the maintenance of
proper accounting records, the reliability of the financial
information upon which business decisions are made and
which is used for publication and that the assets of the
Company are safeguarded. As stated above, the Board
has contractually delegated to external agencies the
services the Company requires, but it is fully informed of
the internal control framework established by the
Manager and the Administrator to provide reasonable
assurance on the effectiveness of internal financial
controls.
The key procedures include monthly production of
management accounts and NAV calculations, monitoring
of performance monthly and at regular Board meetings,
review by the Directors of the valuation of securities,
segregation of the administrative function from that of
securities and cash custody and of both from investment
management, maintenance of appropriate insurance and
adherence to physical and computer security procedures.
In addition, the Board keeps under its own direct control all
material payments out of the Company other than for
investment purposes.
The Statement of Directors’ Responsibilities in respect of
the financial statements is on page 40 and a statement of
going concern is on page 24. The Independent Auditor’s
Report is on pages 42 to 46.
Other Aspects of Internal Control
The Board holds at least four regular meetings each year,
plus ad hoc meetings and committee meetings as
required.
Between these meetings there is regular contact with the
Manager, the Administrator and the external Auditor.
The Company Secretary reports in writing to the Board on
operational and compliance issues prior to each meeting,
and otherwise as necessary.
32 abrdn China Investment Company Limited
Directors receive and consider monthly reports from the
Administrator, giving full details of all holdings in the
portfolio and of all transactions and of all aspects of the
financial position of the Company. The Administrator
reports separately in writing to the Board concerning risks
and internal control matters within the scope of their
services, including internal financial control procedures.
Additional ad hoc reports are received as required and
Directors have access at all times to the advice and
services of the Company Secretary, which is responsible
to the Board for ensuring that Board procedures are
followed, and that applicable rules and regulations are
complied with.
The contracts with the Manager, Administrator and the
external Auditor enable the Board to monitor the
Company’s progress towards its objectives and
encompasses an analysis of the risks involved.
These matters are assessed on an ongoing basis through
the year.
Despite the change in service providers, please see the
Chairman’s Statement on page 6, there are no significant
findings to report from the review of internal controls
during the Financial Year.
Principal Risks
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Company,
including those that would threaten its business model,
future performance, solvency or liquidity. The principal
risks and how they are being managed are set out in the
Directors’ Report.
Shareholder Relations
The Board welcomes feedback from the Company’s
shareholders. The Board receives shareholder feedback
directly and via the Company’s Manager and Brokers
through their programme of meetings with shareholders.
All Directors are available to shareholders if they have
concerns over issues they feel have not been dealt with
through the normal mode of communication with
the Chairman.
Exercise of Voting Powers
The Company is committed to exercise diligently its rights
as a shareholder and usually votes on relevant decisions of
its holdings. In making a voting decision all relevant factors
are taken into account, including the performance of the
investee company, its corporate governance where this
bears meaningfully upon the responsiveness of its
management to shareholders’ needs and the readiness of
its management to address any areas where
improvements might be expected to strengthen its share
price or otherwise create real benefit for shareholders.
UK Stewardship Code and Proxy Voting as
an Institutional Shareholder
Responsibility for actively monitoring the activities of
portfolio companies has been delegated by the Board to
the Manager and in turn to the Investment Manager.
Further information on stewardship and ESG matters may
be found on the Company’s website
(www.abrdnchina.co.uk).
Environmental, Social and Corporate
Governance (“ESG”) Policy
The Company is a closed end investment company and
therefore has no staff, premises, manufacturing or other
operations. However, as set out in the Company's
Investment Policy, the Company expects to have an ESG
rating equal to, or better than, the MSCI China All Shares
Index and have meaningfully lower carbon intensity than
the Index. The Investment Manager ensures ESG
considerations are key to and fully integrated into the
investment process. The Investment Manager places
constructive engagement and ESG risk considerations at
the heart of all investment research, ensuring that it is a
responsible steward of its clients’ assets.
The Investment Manager pursues a constructive
approach to encourage improvements to the benefit of
all shareholders.
To reinforce its messages, the team votes at all
shareholder meetings.
Corporate Governance Statement
Continued
abrdn China Investment Company Limited 33
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
This section of the Annual Report covers the Board’s considerations and activities in discharging its duties in promoting
the success of the Company for the benefit of its members as a whole.
This statement includes consideration of the likely consequences of the decisions of the Board in the longer term,
how the Board has taken wider stakeholders’ needs into account and the impact of the Company’s operations
on the environment.
The most significant consideration by the Board during the Financial Year was in relation to the Proposals, which are
explained in more detail within the Chairman's Statement.
The Board, together with the Investment Manager, sets an overall investment strategy and reviews this on an ongoing
basis. In order to ensure strong governance of the Company, the Board has implemented an investment policy which
includes various limits on the size of individual holdings, investments in derivatives and the level of gearing. These limits
and guidelines are regularly monitored.
The Board is ultimately responsible for all stakeholder engagement. As an externally managed investment company, the
Company does not have any employees; rather it employs external suppliers to fulfil a range of functions, including
investment management, secretarial, administration, promotional activities, corporate brokering, depositary and
banking services. All these service providers, which are stakeholders in the Company themselves, help the Board to fulfil
its responsibility to engage with the shareholders and other stakeholders.
The Board has identified the major stakeholders in the Company’s business. On an ongoing basis the Board
monitors both potential and actual impacts of the decisions it makes in respect of the Company upon those major
stakeholders identified.
Promotin
g
the Success of the Company
34 abrdn China Investment Company Limited
Shareholders The Board’s principal concern is the interests of the Company’s shareholders and potential investors. As a
public company listed on the London Stock Exchange, the Company is subject to the FCA's Listing Rules and
Disclosure Guidance and Transparency Rules. The Listing Rules include a listing principle that a listed
company must ensure that it treats all shareholders of the same class of shares that are in the same position
equally in respect of the rights attaching to such shares. With the assistance of regular discussions with and
the formal advice of the Company’s legal counsel, secretary and corporate brokers; the Board abides by the
Listing Rules at all times.
The Company’s investment objective is to produce long-term capital growth by investing predominantly in
Chinese equities. 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.
The portfolio is actively managed and may be invested in companies of any size and in any sector. The
Investment Manager believes this is an attractive profile in the circumstances and one that should hold
broad appeal.
The Board maintains an open dialogue between shareholders, the Manager and other service providers. The
Manager along with the Company’s corporate brokers regularly meet with the Company’s shareholders to
provide Company updates and to foster dialogue. Feedback from meetings between the Manager and
shareholders is communicated to the Board. The Chairman and other members of the Board are available to
support these meetings and to address shareholder questions and consult major shareholders at least on an
annual basis.
These interactions with shareholders were instrumental during the Board’s development of the Proposals
(see the Chairman’s Statement for more details on the Proposals).
The Company’s Annual and Half Yearly Reports are made available on the Company’s website and also
circulated to shareholders, providing an in-depth review of the Company’s financial position and portfolio.
This information is supplemented by the daily calculation and publication of the NAV per share and a monthly
factsheet and portfolio data, which are announced via a Regulatory Information Service and are also
available on the Company’s website.
In addition, the Board oversees the maintenance and integrity of the corporate and financial information
included on the Company’s website. The Company has engaged abrdn Fund Managers Limited (“AFML”) for
the provision of promotional activities to ensure that information and news about the Company is regularly
available for existing and potential shareholders.
For more information on shareholder engagement please see the Corporate Governance section of this
report which contains further information on shareholder engagement.
Manager /
Investment Manager
The most significant service provider for the Company’s long-term success is AFML, which has been
appointed as the Company’s AIFM in accordance with the Alternative Investment Fund Managers Directive
(AIFMD), for the purpose of providing investment advisory services to the Company. The portfolio is
managed by abrdn Hong Kong Limited which is responsible for the management of the Company’s portfolio
in accordance with the Company’s investment policy and the terms of the Management Agreement.
The Board monitors the Company’s investment performance in relation to its objectives, investment policy
and strategy. The Board regularly assesses the experience and resources of the investment management
team and the commitment of the Manager; to promote the Company and foster shareholder relations and
to ensure that the Company’s objective is met. The Board receives and reviews regular reports and
presentations from the Manager. An open and active relationship is maintained with the Investment
Manager at Board meetings and additional meetings when needed.
Promotin
g
the Success of the Company
Continued
abrdn China Investment Company Limited 35
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Suppliers As an externally managed investment company, the Company conducts all its business through its key
service providers. On an annual basis, the Board reviews the continuing appointment of each service
provider to ensure re-appointment is in the best interests of the Company’s shareholders. Separately, the
Auditor is invited to attend the Audit Committee meeting at least twice per year. The Audit Committee Chair
maintains regular contact with the Audit partner to ensure the audit process is undertaken effectively. During
the Financial Year under review, the Board appointed a new Company Secretary, Custodian, Administrator
and Depositary. Please see the Chairman’s Statement for more details on those changes..
Lenders The Company may employ gearing and may in aggregate, borrow amounts equalling up to 20% of gross
asset value, although the Board expects that borrowings will typically not exceed 15% of gross asset value at
the time of drawdown.
Regulators The Company and its appointed professional suppliers keep abreast of the rules, regulations and guidance
affecting the listed investment company sector. The Board, Company Secretary and AIFM are responsible
for ensuring that various regulatory and statutory obligations are met.
Wider community
and the Environment
Under its investment objective, the Company seeks to have an ESG rating equal to, or better than, the MSCI
China All Shares Index and have meaningfully lower carbon intensity than the Index. The Investment
Manager places constructive engagement and ESG risk considerations at the heart of all investment
research, ensuring that it is a responsible steward of its clients’ assets. The Investment Manager believes this
approach can mitigate risks and actively enhance returns for shareholders over the longer term.
In summary, the Directors are cognisant of their duties to make decisions taking into account the long-term
consequences of all the Company’s key stakeholders and reflect the Board’s belief that the long-term sustainable
success of the Company is linked directly to its key stakeholders.
For and on behalf of the Board
Helen Green
Director
16 February 2024
36 abrdn China Investment Company Limited
Role, Composition and Meetings
The Board has established an Audit Committee, which at
the Financial Year end comprised all members of the
Board. Helen Green was re-appointed as a member of
the Committee during the year. Although she is the
Chairman of the Board, she continues to be considered
independent. Mark Bridgeman, who has recent and
relevant financial experience is Chairman of the
Audit Committee.
As a minimum, the Audit Committee meets on a bi-annual
basis and its main functions include, inter alia, reviewing
and monitoring internal financial control systems and risk
management systems on which the Company is reliant,
considering annual and interim financial statements and
reports from the auditor, making recommendations to the
Board in relation to the appointment and remuneration of
the Company’s auditor and monitoring and reviewing
annually the auditor’s independence, objectivity,
effectiveness and qualifications and, where relevant,
compliance with corporate governance changes.
The Committee is responsible for the development and
implementation of a policy on the supply of any non-audit
services provided by the auditor. The Board has also
requested that the Audit Committee advise it on whether
it believes that the Annual Report and Financial
Statements taken as a whole is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy.
The Audit Committee as a whole has competence
relevant to the investment company sector.
During the Financial Year ended 31 October 2023, there
were three meetings of the Audit Committee. The
Company’s external auditor also attends the meetings at
the Committee’s request and reports on its work
procedures and its findings in relation to the Company’s
statutory audit. The Company’s external auditor attended
all of the Audit Committee meetings during the Financial
Year ended 31 October 2023.
Financial Statements and Significant
Accounting Matters
The Audit Committee considered the following significant
accounting issues in relation to the Company’s financial
statements for the Financial Year ended 31 October 2023.
Valuation of Investments
The Company, as an investment company, invests
virtually all of its assets into Chinese equities. As at 31
October 2023, investments represented 103% of its
net assets.
The valuation of investments is therefore the most
significant factor in relation to the accuracy of the
financial statements. The portfolio consists of investments
in predominantly in quoted companies. The estimates,
assumptions and judgements required to be made by
management in determining the valuation of investments
and method of accounting are described in more detail in
notes 2(g) and 18 to the financial statements.
The Audit Committee reviewed the portfolio valuation as
at 31 October 2023. The Audit Committee obtained
confirmation from the Administrator and the Manager
that the Company’s accounting policies on valuation of
investments had been followed. The Audit Committee
made enquiries of the Administrator and the Manager
with regards to the procedures that are in place to ensure
that the portfolio is valued correctly.
The Audit Committee agreed the approach to the audit of
the valuation of investments with the external auditor prior
to the commencement of the audit. The results of the
audit in this area were reported by the external auditor
and there were no significant disagreements between
management and the external auditor’s conclusions.
Report of the Audit Committee
abrdn China Investment Company Limited 37
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Effectiveness of External Audit
The Audit Committee reviews the effectiveness of the
Company’s external audit. The Audit Committee received
a presentation of the audit plan from the external auditor
prior to the commencement of the audit and a
presentation of the results of the audit following
completion of the main audit testing. The Audit
Committee performed a review of the external auditor
following the presentation of the results of the audit. The
review included a discussion of the audit process and the
ability of the external auditor to fulfil its role. The factors
considered by the Audit Committee included the external
auditor’s resources, independence, the performance of
the team employed to conduct the audit, audit planning,
communication and scope of the audit.
Audit Tenure
KPMG Channel Islands Limited (“KPMG”) has been the
Company’s external auditor since 2009 and the audit of
the Company’s accounts for the Financial Year ended 31
October 2023 will be the 14th year that KPMG has acted
as auditor.
Following professional guidelines, the audit partner rotates
after five years. The current audit partner is in his 3rd year
of appointment. The Company is committed to the
highest standards of corporate governance and, in
accordance with best practice for premium-segment
listed companies, in 2019 the Audit Committee decided to
put the audit out to tender. The Audit Committee identified
three suitably experienced audit firms, including KPMG.
The three firms were asked to provide detailed written
proposals to the Audit Committee and two of the firms
were then interviewed by the Committee.
Following the interviews, and having given full
consideration to the proposed fees, auditor independence
and quality of the audit teams, the Audit Committee
concluded that it would be in the best interests of the
Company for KPMG to be re-appointed as auditor.
Should the Proposals not be successful, the Audit
Committee has agreed that the re-appointment of KPMG
as auditor would be recommended to the Board and put
to shareholders for approval at the Company’s next AGM.
Provision of Non-Audit Services
The Audit Committee has put a policy in place for the
supply of any non-audit services provided by the external
auditor. Such services are considered on a case-by-case
basis and may only be provided to the Company if the
provision of such services is at a reasonable and
competitive cost and does not constitute a conflict of
interest or potential conflict of interest which would
prevent the auditor from remaining objective and
independent. During the Financial Year ended 31 October
2023 there were no non-audit services provided, other
than interim review and reporting on the Company’s
half year financial statements. The fee payable to the
Auditor for this additional service amounted to £21,528
(2022: £17,100).
Mark Bridgeman
Audit Committee Chairman
16 February 2024
38 abrdn China Investment Company Limited
This Directors’ Remuneration Report has been prepared
on a voluntary basis in accordance with UK regulations
governing the disclosure and approval of Directors’
remuneration, and comprises three parts:
1. a Remuneration Policy which the Board has
decided will be subject to a binding shareholder
vote every three years (or sooner if varied during
this interval). At the AGM held on 13 April 2023, a
resolution to approve the Directors’ Remuneration
Policy covering the three year period to 31 October
2025 was passed.
1. an Implementation Report which is subject to an
advisory vote on the level of remuneration paid
during the year; and
2. an Annual Statement.
A Remuneration Committee has been formed which
comprises Helen Green, Mark Bridgeman, Eleonore de
Rochechouart, Anne Gilding and Sarah MacAulay. The
Directors’ Remuneration Policy and level of Directors’
Remuneration are determined by the Remuneration
Committee.
Remuneration Policy
The Board’s policy is that the remuneration of non-
executive Directors should be fair and should reflect the
experience, work involved, responsibilities and potential
liabilities of the Board as a whole. The non-executive
Directors’ fees are determined within the limits set out in
the Company’s Articles of Incorporation and Directors are
not eligible for bonuses, pension benefits, share benefits,
share options, long-term incentive schemes or other
benefits. In accordance with the Company’s Articles, the
maximum amount payable in aggregate to the Directors
is £250,000 per annum.
No services have been provided by, or fees paid to,
advisers in respect of remuneration policy during the
Financial Year ended 31 October 2023.
No shareholder views have been sought in setting the
Remuneration Policy although any comments received
from shareholders are considered.
Directors’ Service Contracts
The Directors do not have service contracts. The Directors
have appointment letters subject to termination upon
three months’ notice. The Directors are subject to re-
election by shareholders.
There were no changes to the Directors’ Remuneration
Policy during the Financial Year nor are there any
proposals for changes in the foreseeable future. The
Remuneration Policy is reviewed by the Remuneration
Committee on an annual basis and it is the Committee’s
intention that this Remuneration Policy will apply until the
Company is entered into voluntary liquidation in
accordance with the Proposals, or, if earlier, for the three
year period ending 31 October 2025.
Implementation Report
Directors’ Emoluments for the Financial Year
Fees payable with effect from 12 April 2022 have been at
a rate of £45,000 per annum for the Chairman, £37,000
per annum for the Audit Committee Chairman and
£32,000 per annum for the other Directors.
During the Financial Year ended 31 October 2023, there
were no additional fees paid to the Directors. All fees are
at a fixed rate and there is no variable remuneration.
The following emoluments in the form of fees were
payable in the Financial Year ended 31 October 2023 to
the Directors who served during the year:
Fees 2023
£’000
Fees 2022
£’000
Helen Green (Chairman) 45.0 37.2
Mark Bridgeman
(appointed on 1 August 2022)
37.0 9.3
William Collins
(Retired on 12 April 2022)
- 12.5
Eleonore de Rochechouart 32.0 30.2
Anne Gilding
(appointed on 9 November 2021)
32.0 29.6
Sarah MacAulay
(appointed on 9 November 2021)
32.0 29.6
Mark Hadsley-Chaplin
(Retired on 31 July 2022)
- 30.6
Total 178.0 179.0
Directors’ Remuneration Report
abrdn China Investment Company Limited 39
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Statement of Voting at the AGM
At the Company’s last AGM, held on 13 April 2023,
shareholders approved the Directors’ Remuneration
Report in respect of the year ended 31 October 2022.
99.77% of proxy votes were in favour of the resolution and
0.23% of proxy votes were against.
At the Company’s AGM held on 13 April 2023,
shareholders approved the Directors’ Remuneration
Policy in respect of the three years ending 31 October
2025. 99.94% of proxy votes were in favour of the
resolution and 0.06% of proxy votes were against.
Spend on Pay
As the Company has no employees, the Directors do not
consider it appropriate to present a table comparing
remuneration paid to employees with distributions to
shareholders. The total fees paid to Directors are
shown above.
Annual Statement
The Board confirms that the above Directors’
Remuneration Report summarises, as applicable, for the
Financial Year ended 31 October 2023:
· the major decisions on Directors’ remuneration;
· any substantial changes relating to Directors’
remuneration; and
· the context in which the changes occurred and
decisions have been taken.
Sarah MacAulay
Remuneration Committee Chairman
16 February 2024
40 abrdn China Investment Company Limited
The Directors are responsible for preparing the Annual
Report and Accounts in accordance with applicable law
and regulations.
Guernsey company law requires the Directors to prepare
financial statements for each financial year. The Directors
have elected to prepare the financial statements in
accordance with International Financial Reporting
Standards as issued by the IASB and applicable law.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Company and of its profit or loss for that period. In
preparing these financial statements, the directors are
required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable,
relevant and reliable;
· state whether applicable accounting standards have
been followed, subject to any material departures
disclosed and explained in the financial statements;
· assess the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to
going concern; and
· use the going concern basis of accounting unless they
either intend to liquidate the Company or to cease
operations or have no realistic alternative but to do so.
The Directors are responsible for keeping proper
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the
Company and enable them to ensure that its financial
statements comply with the Companies (Guernsey) Law,
2008. They are responsible for such internal control as
they determine is necessary to enable the preparation of
financial statements that are free from material
misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of
the Company and to prevent and detect fraud and
other irregularities.
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). Legislation
in Guernsey governing the preparation and dissemination
of financial statements may differ from legislation in
other jurisdictions.
Disclosure of Information to the Auditor
The Directors who held office at the date of approval of
the Directors’ Report confirm that, so far as they are each
aware, there is no relevant audit information of which the
Company’s auditor is unaware; and each Director has
taken all the steps that they ought to have taken as a
Director to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is
aware of that information.
Responsibility Statement of the Directors in
Respect of the Annual Report
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Company; and
· the Management Report (comprising the Chairman’s
Statement, the Investment Managers Report and the
Governance reports including the Directors’ Report)
includes a fair review of the development and
performance of the business and the position of the
Company, together with a description of the principal
risks and uncertainties that it faces.
The Board considers that the Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy.
Helen Green
Chairman
16 February 2024
Statement of Directors’ Responsibilities
abrdn China Investment Company Limited 41
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
BNP Paribas S.A., Guernsey Branch (the “Depositary”) has
been appointed to provide depositary services to abrdn
China Investment Company Limited (the “Company”) in
accordance with the requirements of Article 36 and
articles 21(7), (8) and (9) of the Directive 2011/61/EU of
the European Parliament and of the Council of 8 June
2011 on Alternative Investment Fund Managers and
amending Directives 2003/41/EC and 2009/65/ EC and
Regulations (EC) No. 1060/2009 and (EU) No. 1095/2010
(the “AIFM Directive”).
Our obligations as Depositary are stipulated in the
relevant provisions of the AIFM Directive and the relevant
sections of the Guernsey AIFMD Marketing Rules and
Guidance 2021.
As Depositary, we have carried out reviews which we
consider necessary in order to comply with our obligations
and to ensure that, the Company has been managed in
accordance with the limitations imposed on the
investment and borrowing powers of the Company and its
constitutional documents and the appropriate regulations.
We can confirm that we have no matters of concern
to report.
For and on behalf of
BNP Paribas S.A., Guernsey
16 February 2024
Depositary Report
42 abrdn China Investment Company Limited
Our opinion is unmodified
We have audited the financial statements of abrdn China
Investment Company Limited (the “Company”), which
comprise the statement of financial position as at 31
October 2023, the statements of comprehensive income,
changes in equity and cash flows for the year then ended,
and notes, comprising material accounting policies and
other explanatory information.
In our opinion, the accompanying financial statements:
· give a true and fair view of the financial position of the
Company as at 31 October 2023, and of the Company’s
financial performance and cash flows for the year then
ended;
· are prepared in accordance with International Financial
Reporting Standards; and
· comply with the Companies (Guernsey) Law, 2008
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities are described below. We have
fulfilled our ethical responsibilities under, and are
independent of the Company in accordance with, UK
ethical requirements including the FRC Ethical Standard as
required by the Crown Dependencies' Audit Rules and
Guidance. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for
our opinion.
Material uncertainty relating to going concern
The risk Our response
Going concern
We draw attention to note 2 to the financial
statements which indicates that on 28
November 2023, the Board announced that
heads of terms had been agreed in principle for
a proposed combination of the Company with
the assets of Fidelity China Special Situations PLC
(“Fidelity China”) (“the Proposal”). The Proposal, if
approved by each company’s shareholders, will
be implemented through a Guernsey scheme of
reconstruction under which the Company will be
placed into voluntary liquidation and part of its
cash, assets and undertaking will be transferred
to Fidelity China in exchange for the issue of new
ordinary shares in Fidelity China to Shareholders.
These events and conditions, along with the
other matters explained in note 2, constitute that
a material uncertainty exists that may cast
significant doubt on the Company’s ability to
continue as a going concern.
Our opinion is not modified in respect of this
matter
Disclosure Quality:
The financial statements explain how the
Board has formed a judgement that it is
appropriate to adopt the going concern
basis of preparation for the Company.
That judgement is based on an evaluation
of the inherent risks to the Company’s
business model and how those risks might
affect the Company’s financial resources
or ability to continue operations over a
period of at least a year from the date of
approval of the financial statements.
The risk for our audit is whether or not those
risks are such that they amounted to a
material uncertainty that may cast
significant doubt about the ability to
continue as a going concern. If so, that fact
is required to be disclosed (as has been
done) and, along with a description of the
circumstances, is a key financial statement
disclosure.
Our audit procedures included:
Funding assessment:
· We obtained the subsequent
cancellation correspondence in
relation to the loan that was paid
post year end
Key dependency assessment:
· Reviewed post-year end minutes
summarising discussions with the
majority shareholders in negotiating
the combination deal;
· Reviewed post-year end
termination contracts.
Assessing transparency:
· Considered whether the going
concern disclosure in note 2 to the
financial statements gives a full and
accurate description of the
directors’ assessment of going
concern, including the identified
risks and dependencies.
Our results: We found the going
concern disclosure in note 2 with a
material uncertainty to be acceptable.
Financial Statements - Independent Auditor's Report
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44 abrdn China Investment Company Limited
equates to £3,360,000. We applied this percentage in our
determination of performance materiality because we
did not identify any factors indicating an elevated level
of risk.
We reported to the Audit Committee any corrected
or uncorrected identified misstatements exceeding
£224,500 (2022: £231,000), in addition to other
identified misstatements that warranted reporting
on qualitative grounds.
Our audit of the Company was undertaken to the
materiality level specified above, which has informed our
identification of significant risks of material misstatement
and the associated audit procedures performed in those
areas as detailed above.
Going concern
The Board concluded that it remained appropriate to
continue to prepare the financial statements on a going
concern basis despite the material uncertainty in relation
to the announcement of the Proposal – which would
involve a scheme of reconstruction resulting in the
voluntary liquidation of the Company at a future date.
As stated in section Material uncertainty relating to going
concern of our report, they have also concluded that
there is a material uncertainty related to going concern.
Our conclusions based on this work:
· we consider that the directors’ use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate;
· we have nothing material to add or draw attention to in
relation to the directors’ statement in Note 2 to the
financial statements on the use of the going concern
basis of accounting, and their identification therein of a
material uncertainty over the Company’s ability to
continue to use that basis for the going concern period.
Fraud and breaches of laws and regulations
– ability to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud
(“fraud risks”) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or
provide an opportunity to commit fraud. Our risk
assessment procedures included:
· enquiring of management as to the Company’s policies
and procedures to prevent and detect fraud as well as
enquiring whether management have knowledge of
any actual, suspected or alleged fraud;
· reading minutes of meetings of those charged with
governance; and
· using analytical procedures to identify any unusual or
unexpected relationships.
As required by auditing standards, we perform
procedures to address the risk of management override
of controls, in particular the risk that management may be
in a position to make inappropriate accounting entries. On
this audit we do not believe there is a fraud risk related to
revenue recognition because the Company’s revenue
streams are simple in nature with respect to accounting
policy choice, and are easily verifiable to external data
sources or agreements with little or no requirement for
estimation from management. We did not identify any
additional fraud risks.
We performed procedures including
· Identifying journal entries and other adjustments to test
based on risk criteria and comparing any identified
entries to supporting documentation; and
· incorporating an element of unpredictability in our
audit procedures.
Identifying and responding to risks of
material misstatement due to non-
compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
financial statements from our sector experience and
through discussion with management (as required by
auditing standards), and from inspection of the
Company’s regulatory and legal correspondence, if any,
and discussed with management the policies and
procedures regarding compliance with laws and
regulations. As the Company is regulated, our assessment
of risks involved gaining an understanding of the control
environment including the entity’s procedures for
complying with regulatory requirements.
The Company is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation and taxation legislation and we
assessed the extent of compliance with these laws and
regulations as part of our procedures on the related
financial statement items.
Independent Auditor's Report
Continued
abrdn China Investment Company Limited 45
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
The Company is subject to other laws and regulations
where the consequences of non-compliance could have
a material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or
litigation or impacts on the Company’s ability to operate.
We identified financial services regulation as being the
area most likely to have such an effect, recognising the
regulated nature of the Company’s activities and its legal
form. Auditing standards limit the required audit
procedures to identify non-compliance with these laws
and regulations to enquiry of management and inspection
of regulatory and legal correspondence, if any. Therefore
if a breach of operational regulations is not disclosed to us
or evident from relevant correspondence, an audit will not
detect that breach.
Context of the ability of the audit to detect
fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the financial statements, even
though we have properly planned and performed our
audit in accordance with auditing standards. For example,
the further removed non-compliance with laws and
regulations is from the events and transactions reflected
in the financial statements, the less likely the inherently
limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remains a higher risk of
non-detection of fraud, as this may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not
responsible for preventing non-compliance or fraud and
cannot be expected to detect non-compliance with all
laws and regulations.
Other information
The directors are responsible for the other information.
The other information comprises the information included
in the annual report but does not include the financial
statements and our auditor's report thereon. Our opinion
on the financial statements does not cover the other
information and we do not express an audit opinion or any
form of assurance conclusion thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and, in
doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to
be materially misstated. If, based on the work we have
performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Disclosures of emerging and principal risks
and longer term viability
We are required to perform procedures to identify
whether there is a material inconsistency between the
directors’ disclosures in respect of emerging and principal
risks and the viability statement, and the financial
statements and our audit knowledge. we have nothing
material to add or draw attention to in relation to:
· the directors’ confirmation within the Viability Statement
(page 25) that they have carried out a robust
assessment of the emerging and principal risks facing
the Company, including those that would threaten its
business model, future performance, solvency or
liquidity;
· the emerging and principal risks disclosures describing
these risks and explaining how they are being managed
or mitigated;
· the directors’ explanation in the Viability Statement
(page 25) as to how they have assessed the prospects
of the Company, over what period they have done so
and why they consider that period to be appropriate,
and their statement as to whether they have a
reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
We are also required to review the Viability Statement, set
out on page 25 under the Listing Rules. Based on the
above procedures, we have concluded that the above
disclosures are materially consistent with the financial
statements and our audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify
whether there is a material inconsistency between the
directors’ corporate governance disclosures and the
financial statements and our audit knowledge.
46 abrdn China Investment Company Limited
Based on those procedures, we have concluded that each
of the following is materially consistent with the financial
statements and our audit knowledge:
· the directors’ statement that they consider that the
annual report and financial statements taken as a whole
is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy;
· the section of the annual report describing the work of
the Audit Committee, including the significant issues that
the audit committee considered in relation to the
financial statements, and how these issues were
addressed; and
· the section of the annual report that describes the
review of the effectiveness of the Company’s risk
management and internal control systems.
We are required to review the part of Corporate
Governance Statement relating to the Company’s
compliance with the provisions of the UK Corporate
Governance Code specified by the Listing Rules for our
review. We have nothing to report in this respect.
We have nothing to report on other matters
on which we are required to report by
exception
We have nothing to report in respect of the following
matters where the Companies (Guernsey) Law, 2008
requires us to report to you if, in our opinion:
· the Company has not kept proper accounting records;
or
· the financial statements are not in agreement with the
accounting records; or
· we have not received all the information and
explanations, which to the best of our knowledge and
belief are necessary for the purpose of our audit.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page
40, the directors are responsible for: the preparation of
the financial statements including being satisfied that they
give a true and fair view; such internal control as they
determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the
Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting
unless they either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to
do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of the
financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on
its use by persons other than the Company’s
members as a body
This report is made solely to the Company’s members, as
a body, in accordance with section 262 of the Companies
(Guernsey) Law, 2008 and, in respect of any further
matters on which we have agreed to report, on terms we
have agreed with the Company. Our audit work has been
undertaken so that we might state to the
Company’s members those matters we are required to
state to them in an auditor’s 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 and the Company’s members, as a body, for
our audit work, for this report, or for the opinions we have
formed.
Andrew J. Salisbury
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
16 February 2024
Independent Auditor's Report
Continued
abrdn China Investment Company Limited 47
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Year ended 31 October 2023 Year ended 31 October 2022
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Losses on investments at fair value through profit
or loss
10
–
(4,273)
(4,273)
–
(143,283)
(143,283)
Transaction costs – – – – 832 832
Gains/(losses) on currency movements – 500 500 – (354) (354)
Net investment losses – (3,773) (3,773) – (142,805) (142,805)
Investment income 3 3,997 – 3,997 4,108 – 4,108
Investment management fees 4 (1,700) – (1,700) (1,020) – (1,020)
Other administrative expenses 5 (1,067) – (1,067) (913) – (913)
Net return before finance costs and taxation 1,230 (3,773) (2,543) 2,175 (142,805) (140,630)
Finance costs 6 (562) – (562) (109) – (109)
Operating profit/(loss) before taxation 668 (3,773) (3,105) 2,066 (142,805) (140,739)
Taxation 7 (254) (31) (285) (215) – (215)
Total profit/(loss) and comprehensive income for
the year
414
(3,804)
(3,390)
1,851
(142,805)
(140,954)
Basic earnings and diluted earnings per Ordinary
share (pence)
9
0.95
(8.73)
(7.78)
4.00
(308.70)
(304.70)
The Total column of this statement represents the Company’s Statement of Comprehensive Income, prepared under IFRS. The
revenue and capital columns, including the revenue and capital 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 year.
The notes on pages 51 to 71form part of these financial statements.
Statement of Comprehensive Income
48 abrdn China Investment Company Limited
As at As at
31 October 2023 31 October 2022
Notes £’000 £’000
Non-current assets
Investments at fair value through profit or loss 10 220,482 224,064
Current assets
Cash at bank 8,748 8,534
Other receivables 11 111 56
8,859 8,590
Total assets 229,341 232,654
Current liabilities
Bank loans 12 (15,359) –
Other payables 12 (735) (811)
(16,094) (811)
Net assets 213,247 231,843
Equity shareholders’ funds
Share capital 13 133,945 147,744
Capital reserve 14 82,528 87,739
Revenue reserve (3,226) (3,640)
Equity shareholders’ funds 213,247 231,843
Net asset value per Ordinary share (pence) 15 499.97 511.98
Approved by the Board of Directors and authorised for issue on 16 February 2024 and signed on its behalf by:
Helen Green
Director
Mark Bridgeman
Director
The notes on pages 51 to 71 form part of these financial statements.
Incorporated in Guernsey: Company registration number 50900
Statement of Financial Position
abrdn China Investment Company Limited 49
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
For the year ended 31 October 2023
Share Capital Revenue
capital reserve reserve Total
Notes £’000 £’000 £’000 £’000
Balance at 31 October 2022 147,744 87,739 (3,640) 231,843
Buyback of shares 13 (13,799) – – (13,799)
(Loss)/profit for year – (3,804) 414 (3,390)
Dividends paid 8 – (1,407) – (1,407)
Balance at 31 October 2023 133,945 82,528 (3,226) 213,247
For the year ended 31 October 2022
Share Capital Revenue
capital reserve reserve Total
£’000 £’000 £’000 £’000
Balance at 31 October 2021 148,735 230,544 (5,491) 373,788
Buyback of shares 13 (7,560) – – (7,560)
Profit/(loss) for year – (142,805) 1,851 (140,954)
Scheme of reconstruction: 13
Ordinary shares issued 62,037 – – 62,037
Ordinary shares repurchased (55,291) – – (55,291)
Tender offer and share issue costs (177) – – (177)
Balance at 31 October 2022 147,744 87,739 (3,640) 231,843
The capital reserve at 31 October 2023 is split between realised gains of £178,862,000 (2022 – £207,445,000) and unrealised losses of
£96,334,000 (2022 – £119,706,000).
The revenue reserve represents the amount of the Company’s reserves distributable by way of dividend.
The notes on pages 51 to 71form part of these financial statements.
Statement of Chan
g
es in Equity
50 abrdn China Investment Company Limited
Year ended Year ended
31 October 2023 31 October 2022
Notes £’000 £’000
Operating activities
Dividend income received 3,892 4,144
Interest income received 102 43
Foreign exchange losses on loans (724) –
Management expenses paid (2,085) (2,009)
Overseas withholding tax paid (286) (215)
Net cash from operating activities 899 1,963
Investing activities
Purchases of investments (80,168) (446,496)
Sales of investments 10 79,255 311,504
Net cash from investing activities (913) (134,992)
Financing activities
Equity dividends paid 8 (1,407) –
Borrowing commitment fee and interest paid (425) (118)
Drawdown of loan 16,083 –
Scheme of reconstruction
A
Ordinary shares issued – 3,257
Ordinary shares repurchased – (55,291)
Tender offer and share issue costs paid – (388)
Buy back of Ordinary shares for treasury 13 (13,799) (7,338)
Net cash from/(used in) financing activities 452 (59,878)
Increase/(decrease) in cash 438 (192,907)
Analysis of changes in cash during the year
Opening balance 8,534 201,795
Effect of exchange rate fluctuations on cash held (224) (354)
Increase/(decrease) in cash as above 438 (192,907)
Closing balances 8,748 8,534
A
Actual proceeds received as a result of the Scheme of Reconstruction on 9 November 2021 amounted to £3,257,000 with the remainder being received in the form of a UK
Treasury Bill amounting to £57,980,000. The UK Treasury Bill was immediately sold on 10 November 2021 and subsequently deployed into Chinese equities.
The notes on pages 51 to 71form part of these financial statements.
Statement of Cash Flows
abrdn China Investment Company Limited 51
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
1. Principal activity
The Company is a closed-ended investment company, registered in Guernsey on 16 September 2009, number 50900. 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.
2. Accounting policies
(a) Basis of preparation. The financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the IASB and are in compliance with the Companies (Guernsey) Law, 2008. There have
been no significant changes in the accounting policies of the Company in the year to 31 October 2023. They have also
been prepared on the assumption that approval as an investment trust will continue to be granted.
Where presentational guidance set out in the Statement of Recommended Practice (“SORP”) for Investment Companies
issued by the Association of Investment Companies (“AIC”) in July 2022 is consistent with the requirements of IFRS, the
Directors have prepared the financial statements on a basis compliant with the recommendations of the SORP.
All values are rounded to the nearest thousand pounds (£’000) except where indicated otherwise.
Going concern with Material Uncertainty. The Board has considered and sought advice on the appropriateness of
continuing to prepare the Financial Statements on a going concern basis given the material uncertainty in relation to the
announcement of the Proposals – which would involve a scheme of reconstruction resulting in the voluntary liquidation of
the Company – the Board concluded that it remained appropriate to continue to prepare the Financial Statements on a
going concern basis.
The Directors believe that, should the Proposals not proceed, 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 31 October 2023, the Company held £8,748,000 (2022: £8,534,000) in cash and £220,482,000 in investments (2022:
£224,064,000). It is estimated that approximately 99% (2022: 99%) of the investments held at the financial year end could
be realised in one month. The total operating expenses for the financial year ended were £2,767,000 (2022: £1,933,000),
which on an annualised basis represented approximately 1.07% (2022: 0.60%) of average net assets during the financial
year. 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 14 February 2024 were £187.1 million.
The Company’s assets consist of equity shares in companies listed on recognised stock exchanges and in normal
circumstances are realisable within a short timescale. The Board has reviewed the results of stress testing prepared by
the Manager in relation to the ability of the assets to be realised in the current market environment.
The Company does not have a fixed life. However, as required by the Company’s Articles of Association, adopted on 26
October 2021, in normal circumstances, the Company would submit a continuation resolution to shareholders at the
Annual General Meeting to be held in 2027.
At the year end, the Company had a £15 million revolving loan facility with Industrial and Commercial Bank of China
limited, London Branch (“ICBC”), terminating in April 2024., As at 31 October 2023, CNH 136,833,000 (equivalent to
£15,359,000) was drawn down (2022: £nil). The liquidity of the Company’s portfolio supports the Company’s ability to
repay its borrowings at short notice. However, subsequent to the year end, the loan facility was repaid and cancelled on
15 January 2024 in anticipation of the Proposals. The Board is confident that the Company could obtain a broadly similar
loan facility if the Proposals do not proceed.
Notes to the Financial Statements
For the year ended 31 October 2023
52 abrdn China Investment Company Limited
Taking the above factors into consideration, the Board has a reasonable expectation that the Company has adequate
resources to continue in operational existence and discharge its liabilities as they fall due for a period of at least twelve
months from the date of approval of these financial statements, subject to approval of the Proposals. Accordingly, the
Board continues to adopt the going concern basis in preparing the financial statements.
On 28 November 2023, the Board announced that heads of terms had been agreed in principle for a proposed
combination of the Company with the assets of Fidelity China Special Situations PLC (“Fidelity China”) (“the Proposals”).
The Proposals, if approved by each company’s shareholders, will be implemented through a Guernsey scheme of
reconstruction under which the Company will be placed into voluntary liquidation and part of its cash, assets and
undertaking will be transferred to Fidelity China in exchange for the issue of new ordinary shares in Fidelity China
to Shareholders. More detail can be found in the Chairman’s Statement on pages 4 and 5 and in the RNS
announcement itself.
The Board believes that the Proposals are in the best interests of shareholders and recommends that shareholders vote
in favour of the relevant resolutions. However, there can be no certainty of the outcome at the date of this Annual Report
and, therefore, there remains material uncertainty which may cast significant doubt on the Company’s ability to
continue as a going concern.
Should the Proposals not receive the necessary shareholder approvals the Board has a reasonable expectation that the
Company has adequate resources to continue in operational existence and discharge its liabilities as they fall due for a
period of at least twelve months from the date of approval of these financial statements. Accordingly, the Board
continues to adopt the going concern basis in preparing the financial statements.
Significant estimates and judgements. The preparation of financial statements in conformity with IFRS requires the use of
certain critical accounting estimates which requires management to exercise its judgement in the process of applying
the accounting policies. The Directors do not believe that any accounting judgements or estimates have been applied to
these financial statements that have a significant risk of causing material adjustment to the carrying amount of assets
and liabilities within the next financial year.
Functional currency. The Company’s investments are made in China Yuan Renminbi however the Board considers the
Company’s functional currency to be Sterling. In arriving at this conclusion, the Board considered that the shares of the
Company are listed on the London Stock Exchange, it is regulated in the United Kingdom, principally having its
shareholder base in the United Kingdom and also pays expenses in Sterling, as it would dividends, where declared by
the Company.
New and amended accounting standards and interpretations. The Company applied certain Standards and
Amendments, which are effective for annual periods beginning on or after 1 January 2023. The adoption of these
Standards and Amendments did not have a material impact on the financial results of the Company.:
Classification of Liabilities as Current or no
n
-current and no
n
-current liabilities with covenants (Amendments to IAS 1)
The amendments, as issued in 2020 and 2022, aim to clarify the requirements on determining whether a liability is current
or non-current, and require new disclosures for non-current liabilities that are subject to future covenants. The
amendments apply for annual reporting periods beginning on or after 1 January 2024.
As disclosed in note 12, the Company has an unsecured multicurrency revolving loan facility with Industrial and
Commercial Bank of China that is subject to the covenants disclosed in same note. The loan was repaid after year end
and thus was classified as current.
At the date of authorisation of these financial statements, the following amendments to Standards and Interpretations
were assessed to be relevant and are all effective for annual periods beginning on or after 1 January 2024 and
thereafter;
Notes to the Financial Statements
Continued
abrdn China Investment Company Limited 53
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
– IAS 1 Amendments (Classification of Liabilities as Current or Non-Current)
– IAS 1 Amendments (Disclosure of Accounting Policies and IFRS Practice Statement 2)
– IAS 1 Amendments (Non-current Liabilities with Covenants)
– IAS 8 Amendments (Definition of Accounting Estimates)
– IAS 12 Amendments (Deferred Tax and OECD Pillar 2 Taxes)
– IAS 12 Amendments (Deferred Tax related to Assets and Liabilities arising from a Single Transaction)
The Company intends to adopt the Standards and Interpretations in the reporting period when they become effective
and the Board does not anticipate that the adoption of these Standards and Interpretations in future periods will
materially impact the Company’s financial results in the period of initial application although there may be revised
presentations to the Financial Statements and additional disclosures.
(b) Presentation of Statement of Comprehensive Income. In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the AIC, supplementary information which analyses the
Statement of Comprehensive Income between items of a revenue and capital nature has been presented in the
Statement of Comprehensive Income.
(c) Segmental reporting. The Board has considered the requirements of IFRS 8 ‘Operating Segments’ and is of the view that
the Company is engaged in a single segment business, which is one of investing in Chinese quoted equities and that
therefore the Company has only a single operating segment. The Board of Directors, as a whole, has been identified as
constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to
assess the Company’s performance is the total return on the Company’s net asset value, as calculated under IFRS, and
therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the
financial statements.
(d) Income. Dividends receivable on equity shares are recognised in the Statement of Comprehensive Income on the ex-
dividend date, and gross of any applicable withholding tax. Dividends receivable on equity shares where no ex-dividend
date is quoted are brought into account when the Company’s right to receive payment is established. Special dividends
are credited to capital or revenue, according to their circumstances. Where a company has elected to receive dividends
in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised in the
Statement of Comprehensive Income. Provision is made for any dividends not expected to be received. Interest
receivable from cash and short-term deposits is accrued to the end of the financial year.
(e) Expenses and interest payable. All expenses, with the exception of interest expenses, which are recognised using the
effective interest method, are accounted for on an accruals basis. Expenses are charged to the revenue column of the
Statement of Comprehensive Income except as follows:
– expenses which are incidental to the acquisition or disposal of an investment are charged to the capital column of the
Statement of Comprehensive Income and separately identified and disclosed in note 10; and
– expenses are charged to the capital column of the Statement of Comprehensive Income where a connection with the
maintenance or enhancement of the value of the investments can be demonstrated.
(f) Taxation. The tax expense represents the sum of the tax currently payable and deferred tax. Tax payable is based on
the taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of
Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date.
54 abrdn China Investment Company Limited
Deferred tax. Deferred tax is recognised in respect of all temporary differences at the Statement of Financial Position
date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the
future have occurred at the Statement of Financial Position date. This is subject to deferred tax assets only being
recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the
temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the
legal jurisdictions in which they arise, using enacted tax rates that are expected to apply at the date the deferred tax
position is unwound.
(g) Investments. Investments have been designated upon initial recognition as fair value through profit or loss. Investments
are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require
delivery within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent
to initial recognition, investments are recognised at fair value through profit or loss.
The Company classifies its investments based on their contractual cash flow characteristics and the Company’s
business model for managing the assets. The business model, which is the determining feature, is such that the portfolio
of investments is managed, and performance and risk is evaluated, on a fair value basis. The Manager is also
compensated based on the fair value of the Company’s assets. Consequently, all investments are measured at fair value
through profit or loss.
Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms
require delivery within the timeframe established by the market concerned, and are measured at fair value. For listed
investments, this is deemed to be bid market prices or closing prices (when bid market prices are unavailable) on a
recognised stock exchange.
Gains and losses arising from the changes in fair value are included in net profit or loss for the period as a capital item.
Transaction costs are treated as a capital cost and recognised within losses on investments at fair value through profit or
loss in the Statement of Comprehensive Income..
(h) Cash and cash equivalents. Cash comprises cash in hand and at banks and short-term deposits. Cash equivalents are
short-term, highly-liquid investments that are readily convertible to known amounts of cash, and that are subject to an
insignificant risk of changes in value.
(i) Other receivables. The Company has adopted the classification and measurement provisions of IFRS 9 ‘Financial
Instruments’ as other receivables are held to collect contractual cash flows and give rise to cash flows representing
solely payments of principal and interest. As such they are measured at amortised cost. Other receivables held by the
Company do not carry any interest, they have been assessed as not having any expected credit losses over their lifetime
due to their short-term nature and low credit risk.
(j) Other payables. The Company has adopted the classification and measurement provisions of IFRS 9 ‘Financial
Instruments’. Other payables are non-interest bearing and are stated at amortised cost.
(k) Borrowings. Bank loans are initially recognised at cost, being the fair value of the consideration received, net of any issue
expenses. Subsequently, they are measured at amortised cost using the effective interest method. Finance charges are
accounted for on an accruals basis using the effective interest rate method and are charged 100% to revenue.
(l) Nature and purpose of 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. This reserve reflects any gains or losses on investments realised in the period on a weighted average
cost basis along with any increases and decreases in the fair value of investments held that have been recognised in the
Statement of Comprehensive Income. The part of this reserve represented by realised capital gains is available for
distribution by way of dividend. The capital reserve is used to fund share buy-backs by the Company.
Notes to the Financial Statements
Continued
abrdn China Investment Company Limited 55
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Revenue reserve. This reserve reflects all income and costs which are recognised in the revenue column of the
Statement of Comprehensive Income. The revenue reserve is distributable by way of dividend.
(m) Foreign currency. Overseas monetary assets and liabilities are converted into Sterling at the rate of exchange ruling at
the Statement of Financial Position date. Transactions during the year involving foreign currencies are converted at the
rate of exchange ruling at the transaction date. Any gain or loss arising from a change in exchange rates subsequent to
the date of the transaction is included as an exchange gain or loss and recognised in the Statement of Comprehensive
Income.
(n) Treasury shares. Where the Company purchases its own share capital, the consideration paid, which includes any
directly attributable costs, is recognised as a deduction from equity shareholders’ funds through the Company’s
reserves. When such shares are subsequently sold or re-issued to the market any consideration received, net of any
directly attributable incremental transaction costs, is recognised as an increase in equity shareholders’ funds through
the share capital account. Shares held in treasury are excluded from calculations when calculating the Company’s net
asset value per share.
(o) Dividends payable. Interim dividend are recognised when the entity has an obligation to make a payment and the
amount to be paid can be determined
3. Investment income
2023 2022
£’000 £’000
Income from investments
Overseas dividends 3,882 4,065
Interest income - 39
3,882 4,104
Other income
Deposit interest 115 4
Total income 3,997 4,108
4. Management fee
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Management fee 1,700 – 1,700 1,020 – 1,020
Management fee (up to 9 November 2021)
Management services are provided by abrdn Fund Managers Limited (“aFML”). During the period, the management fee was
payable monthly in arrears (and pro rata for part of any month during which the management agreement is in force) at an
annualised rate of 0.80% of net assets, reduced by the proportion of the Company’s net assets invested in funds which are
managed by the abrdn Group (“abrdn Funds”), other than the investments in Aberdeen Standard SICAV I – China A Share
Equity Fund and Aberdeen Standard SICAV I – Frontier Markets Bond Fund, which are held in share classes not subject to
management charges at a fund level and the Manager was therefore entitled to a fee on the value of those investments.
56 abrdn China Investment Company Limited
Management fee and Agreement (following the Completion of the Scheme of Reconstruction on 9 November 2021)
(the “Scheme”)
Following completion of the Scheme, the Company entered into a new management agreement (the “Management
Agreement”) with abrdn Fund Managers Limited (“aFML”), pursuant to which the management fee payable by the Company
to aFML is calculated by reference to the market capitalisation of the Company, rather than its net assets (as was the case).
The new management fee is structured on a tiered basis, with the first £150 million of market capitalisation being charged at
0.80%, the next £150 million being charged at 0.75%, and amounts thereafter being charged at 0.65%. aFML has agreed to
make a contribution to the costs of implementing the Scheme 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.
The balance due to aFML at the year at the year end was £234,000 (2022 – £291,000)
5. Administrative expenses
2023 2022
£’000 £’000
Administration fees 105 203
Promotional activities 156 –
Directors’ fees 178 179
Safe custody fees 111 211
Depositary fees 11 –
Auditor’s remuneration:
– fees payable for the audit of the Company’s annual financial statements 57 51
– non-audit services 22 17
Registrar’s fees 33 31
Broker fees 70 76
Other expenses 324 145
1,067 913
Directors’ fees. The Director’s fees payable for the year were £178,000 (2022 – £179,000). There were no other emoluments
paid to the Directors.
Promotional fee. During the year £156,000 (2022 – £nil) was payable to aFML for the provision of promotional activities. There
was £156,000 (2022 – £nil) due to aFML in respect of these promotional activities at the year end.
Company Secretary and Administrator fees. In April 2023, abrdn replaced Vistra Fund Services (Guernsey) Limited (“Vistra”) as
Administrator and Secretary to the Company. During the year to October 2023 the fee payable to abrdn was £68,000. The
balance due at the year end was £68,000. The fee payable to Vistra was £19,000 (2022: £48,000).
UK Administration agent fees. In April 2023, BNP Paribas replaced Sanne Fund Services (UK) Limited (formerly PraxisIFM Fund
Services (UK) Limited) as administration agent in the United Kingdom. During the year to October 2023 the fee payable to
Sanne was £86,000 (2022: £163,000).
Notes to the Financial Statements
Continued
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Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Depositary and custody services and fees. In April 2023, BNP Paribas replaced Northern Trust (Guernsey) Limited, as depositary
in the United Kingdom. During the year to October 2023 the fee payable to BNP Paribas was £39,000. The fee payable to
Sanne was £84,000 (2022: £211,000).
6. Finance costs
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest payable 531 - 531 70 - 70
Facility arrangement fees and other charges 31 - 31 39 - 39
562 - 562 109 - 109
7. Taxation
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
(a) Analysis of charge for the year
Overseas withholding tax 285 – 285 215 – 215
Tax relief to capital (31) 31 – – – –
Total tax charge for the year 254 31 285 215 – 215
58 abrdn China Investment Company Limited
(b) Factors affecting the tax charge for the year. The UK corporation tax rate is 22.50% (2022 – 19%).The tax assessed for the
year is higher (2022 – higher) than the standard rate of corporation tax in the UK. The differences are explained below:
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Net return before taxation 668 (3,773) (3,105) 2,066 (142,805) (140,739)
Corporation tax at effective rate of 22.5%
(2022 – standard rate of 19%)
150
(849)
(699)
393
(27,133)
(26,740)
Effects of: –
Non-taxable overseas dividend income (873) – (873) (769) – (769)
Overseas tax suffered 285 – 285 215 – 215
Tax effect of unrealised gains on non
reporting offshore holdings
(31)
31
–
–
–
Overseas dividends not taxable – – – (3) – (3)
Capital losses not subject to tax – 823 823 – 27,133 27,133
Expenses not deductible for tax purposes 3 26 29 – – –
Other income not taxable – – – (8) – (8)
Finance costs not taxable – – – 21 – 21
Movement in unutilised management
expenses
720
–
720
366
–
366
Total tax charge 254 31 285 215 – 215
(c) Provision for deferred taxation. No provision for deferred taxation has been made in the current year or in the prior year.
At 31 October 2023 the Company had surplus management expenses and loan relationship debits with a tax value of
£1,000,000 (2022 – £234,000) in respect of which a deferred tax asset has not been recognised. This is because the
Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that
future period and, accordingly, it is unlikely that the Company will be able to reduce future tax liabilities through the use of
existing surplus expenses.
ACIC received approval by HMRC to be classified as an investment trust under Chapter 4 of Part 24 CTA 2010 and Chapter 1
of Part 2 of The Investment Trust Tax Regulations. As a result, the Company became an investment trust with effect from 9
November 2021 and is registered in the United Kingdom for tax purposes from that date.
Notes to the Financial Statements
Continued
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8. Dividends
2023 2022
£’000 £’000
Amounts recognised as distributions to equity holders in the period:
Interim dividend for 2022 – 3.20p (2021 – nil) 1,407 –
The table below sets out the proposed Interim dividend in respect of the financial year, which is the basis on which the
requirements of Section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of
dividend for the year is £414,000 (2022 – £1,851,000).
2023 2022
£’000 £’000
Interim dividend for 2023 – nil (2022 – 3.20p) – 1,407
9. Return per Ordinary share
2023 2022
£’000 p £’000 p
Revenue return 414 0.95 1,851 4.00
Capital return (3,804) (8.73) (142,805) (308.70)
Total return (3,390) (7.78) (140,954) (304.70)
Weighted average number of Ordinary shares in issue
A
43,585,131 46,260,167
A
Calculated excluding shares held in treasury.
60 abrdn China Investment Company Limited
10. Investments at fair value through profit or loss
2023 2022
£’000 £’000
Opening book cost 343,770 65,600
Opening investment holding (loss)/gains (119,706) 47,305
Opening fair value 224,064 112,905
Analysis of transactions made during the year
Purchases at cost 79,946 446,496
Sales proceeds received (79,255) (193,446)
(Losses)/gains on investments (27,645) 25,119
Investment holding gains/(losses) 23,372 (167,010)
Closing fair value 220,482 224,064
Closing book cost 316,816 343,770
Closing investment losses (96,334) (119,706)
Closing fair value 220,482 224,064
The Company received £79,225,000 (2022 – £193,446,000) from investments sold in the period. The book cost of these
investments when they were purchased was £106,900,000 (2022 – £168,888,000). These investments have been revalued
over time and until they were sold any unrealised gains/(losses) were included in the fair value of the investments.
Transaction costs. During the year expenses were incurred in acquiring or disposing of investments classified as fair value
through profit or loss. These have been expensed through capital and are included within losses on investments in the
Statement of Comprehensive Income. The total costs were as follows:
2023 2022
£’000 £’000
Purchases 96 620
Sales 132 212
228 832
The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company’s Key Information
Document are calculated on a different basis and in line with the PRIIPs regulations.
Notes to the Financial Statements
Continued
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11. Other receivables
2023 2022
£’000 £’000
Prepayments and accrued income 111 56
111 56
12. Current liabilities
Amounts falling due within one year 2023 2022
a) Bank loans £’000 £’000
Foreign currency loan 15,359 –
In April 2022, the Company entered into a £15 million unsecured multicurrency revolving loan facility with Industrial and
Commercial Bank of China, London Branch (“the Lender”) 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 £15 million
to £30 million at any time, subject to the Lender’s credit approval.
At 31 October 2023, CNH 136,833,000 (equivalent to £15,359,000) was drawn down from the facility at an applicable
interest rate of 5.30758% until 14 December 2023. Net gearing at the year end was 3.1%.
Subsequent to the year end, CNH 135,325,500 was drawn down until 15 January 2024 and this amount was repaid on
that date.
Restrictions imposed by the Lender in connection with the credit facility include the following financial covenants:
– Total borrowings do not exceed 20% of the total assets at any time:
– Its net asset value shall at all times be a minimum of £200 million; and
– 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
2023 2022
b) Other payables £’000 £’000
Amounts due to brokers – 222
Finance costs payable 107 25
Other creditors 628 564
735 811
62 abrdn China Investment Company Limited
13. Share capital
Year ended 31 October 2023
Ordinary Ordinary
shares of 1p Allotted, shares with
nominal value issued and voting Treasury
Authorised £’000 fully paid rights
A
shares
Opening number of shares Unlimited 622 62,172,947 45,283,575 16,889,372
Purchase of own shares – (2,631,266) 2,631,266
Closing number of shares Unlimited 622 62,172,947 42,652,309 19,520,638
Year ended 31 October 2022
Ordinary Ordinary
shares of 1p Allotted, shares with
nominal value issued and voting Treasury
Authorised £’000 fully paid rights
A
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 – – – (1,341,251) 1,341,251
Closing number of shares Unlimited 622 62,172,947 45,283,575 16,889,372
A
Excluding treasury shares.
Scheme of Reconstruction. On 9 November 2021, the Company completed and announced a 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 acquired approximately £62 million of net assets from Aberdeen New Thai Investment Trust PLC 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 £55 million.
The costs incurred in implementing the Scheme amounted to £1,058,000.
Share capital account. The aggregate balance (including share premium) standing to the credit of the share capital account at
the year end was £133,945,000 (2022 – £147,744,000).
Purchase of own shares. There were 2,631,266 Ordinary shares purchased during the year (2022 – 1,341,251) at an aggregate
cost to the Company of £13,799,000 (2022 – £7,560,000).
Notes to the Financial Statements
Continued
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Ordinary shares
Voting rights (as at 31 October 2023). Holders of Ordinary shares are entitled to attend, speak and vote at general meetings of
the Company. Each Ordinary share (excluding shares in treasury) carries one vote. Treasury shares do not carry voting rights.
At its financial year end, the Company had 365 registered shareholders. At 31 October 2023, the Company was notified of
3 shareholders who each held more than 10% of the issued share capital and their holdings were 30.0% (2022: 27.8%), 21.7%
(2022: 23.5%) and 21.5% (2022: 19.5%) respectively.
Dividends. The holders of Ordinary shares are entitled to such dividend as may be declared by the Company from time to time.
Shares held in treasury do not receive dividends.
Capital entitlement. On a winding up, the Ordinary shares (excluding treasury shares) shall rank pari passu for the nominal
capital paid up thereon and in respect of any surplus. Shares held in treasury have no capital entitlement on a winding up of
the Company.
14. Capital reserve
2023 2022
£’000 £’000
Opening balance 87,739 230,544
Movement in fair value gains (4,273) (142,451)
Foreign exchange movement 500 (354)
Taxation (31) –
Dividend (1,407) –
Balance at 31 October 82,528 87,739
The capital reserve includes investment holding losses amounting to £96,334,000 (2022 – losses of £119,706,000), as disclosed
in note 10.
15. Net asset value per share
The net asset value per share and the net asset values attributable to Ordinary shareholders at the year end calculated in
accordance with the Articles of Association were as follows:
Net asset value Net asset values Net asset value Net asset values
per share attributable per share attributable
2023 2023 2022 2022
p £’000 p £’000
Ordinary shares 499.97 213,247 511.98 231,843
The net asset per Ordinary share is calculated based on 42,652,309 (2022 – 45,283,575) Ordinary shares, being the number of
Ordinary shares in issue at the year end excluding Ordinary shares held in treasury.
64 abrdn China Investment Company Limited
16. Analysis of changes in net debt
At At
31 October Currency Cash 31 October
2022 differences flows 2023
£’000 £’000 £’000 £’000
Cash and short term deposits 8,534 (224) 438 8,748
Debt due within one year - 724 (16,083) (15,359)
8,534 500 (15,645) (6,611)
At At
31 October Currency Cash 31 October
2021 differences flows 2022
£’000 £’000 £’000 £’000
Cash and short term deposits 201,795 (354) (192,907) 8,534
201,795 (354) (192,907) 8,534
A statement reconciling the movement in net funds to the net cash flow has not been presented as there are no differences
from the above analysis.
17. Financial instruments
Risk management. The Company’s investment activities expose it to various types of financial risk associated with the financial
instruments and markets in which it invests. The Company’s financial instruments comprise securities and other investments,
cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and
purchases awaiting settlement, and debtors for accrued income.
The Board has delegated the risk management function to abrdn Fund Managers Limited (“aFML”) under the terms of its
management agreement with aFML (further details of which are included under note 4). The Board regularly reviews and
agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager’s
approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the
year and has not changed since the previous accounting period.
Risk management framework. The directors of aFML collectively assume responsibility for aFML’s obligations under the AIFMD
including reviewing investment performance and monitoring the Company’s risk profile during the year.
aFML is a fully integrated member of the abrdn Group (“the Group”), which provides a variety of services and support to aFML
in the conduct of its business activities, including the oversight of the risk management framework for the Company. The AIFM
has delegated the day to day administration of the investment policy to abrdn Asia Limited, which is responsible for ensuring
that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment
disclosures to investors (details of which can be found on the Company’s website). The AIFM has retained responsibility for
monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.
Notes to the Financial Statements
Continued
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The Manager conducts its risk oversight function through the operation of the Group’s risk management processes and
systems which are embedded within the Group’s operations. The Group’s Risk Division supports management in the
identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance,
Business Risk, Market Risk and Risk Management. The team is headed up by the Group’s Chief Risk Officer, who reports to the
Group CEO. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the
organisation using the Group’s operational risk management system (“SHIELD”).
The Group’s Internal Audit Department is independent of the Risk Division and reports directly to the Group CEO and to the
Audit Committee of the Group’s Board of Directors. The Internal Audit Department is responsible for providing an independent
assessment of the Group’s control environment.
The Group’s corporate governance structure is supported by several committees to assist the board of directors, its
subsidiaries and the Company to fulfil their roles and responsibilities. The Group’s Risk Division is represented on all committees,
with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the
functioning of those committees are described on the committees’ terms of reference.
Risk management. The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate
risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk.
(i) Market risk. The fair value of, or future cash flows from a financial instrument held by the Company may fluctuate because
of changes in market prices. This market risk comprises three elements - interest rate risk, foreign currency risk and other
price risk.
Interest rate risk. Interest rate movements may affect:
- the level of income receivable on cash deposits; and,
- interest payable on the Company’s variable rate borrowings.
Management of the risk. The possible effects on fair value and cash flows that could arise as a result of changes in interest rates
are taken into account when making investment and borrowing decisions.
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a
regular basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities. The fixed rate facilities are used to finance
opportunities at low rates and, the revolving and uncommitted facilities to provide flexibility in the short-term. Current bank
covenant guidelines state that the total borrowings will not exceed 20% of the adjusted net assets of the Company as defined
in note 12.
66 abrdn China Investment Company Limited
Interest risk profile. The interest rate risk profile of the portfolio of the Company’s financial assets and liabilities, excluding equity
holdings which are all non-interest bearing, at the Statement of Financial Position date was as follows:
Weighted average Weighted
period for which average Fixed Floating
rate is fixed interest rate rate rate
At 31 October 2023 Years % £’000 £’000
Assets:
China Yuan Renminbi - - - 2,797
China Yuan Renminbi (Offshore) - - - 1,984
Hong Kong Dollar - - - 4
Sterling - 3.69 - 3,912
US Dollar - - - 51
- 8,748
Weighted average Weighted
period for which average Fixed Floating
rate is fixed interest rate rate rate
Years % £’000 £’000
Liabilities:
Bank loan - CNY 136,833,000 0.12 5.31 (15,359) -
(15,359) -
The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted
average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans. The maturity
date of the Company’s loans are shown in note 12.
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.
The Company’s equity portfolio and short-term debtors and creditors (excluding bank loans) have been excluded from the
above tables.
Interest rate sensitivity. Movements in interest rates would not significantly affect net assets attributable to the Company’s
shareholders and total profit.
Foreign currency risk. The Company’s investment portfolio is primarily invested in overseas securities and the Statement of
Financial Position, therefore, can be significantly affected by movements in foreign exchange rates.
Management of the risk. It is not the Company’s policy to hedge this risk on a continuing basis but the Company may, from time
to time, match specific overseas investment with foreign currency borrowings. The Company’s borrowings, as detailed in note
12, are predominantly in sterling.
Notes to the Financial Statements
Continued
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The revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not
hedge this currency risk.
Foreign currency exposure by currency of denomination:
31 October 2023 31 October 2022
Net Total Net Total
monetary currency monetary currency
Investments assets exposure Investments assets exposure
£’000 £’000 £’000 £’000 £’000 £’000
China Yuan Renminbi 4,009 2,797 6,806 131,456 6 131,462
China Yuan Renminbi (Offshore) 112,137 1,984 114,121 - - -
Hong Kong Dollar 93,479 4 93,483 91,289 28 91,317
Taiwan Dollar 2,177 - 2,177 - - -
US Dollar 8,680 51 8,731 1,319 4 1,323
220,482 4,836 225,318 224,064 38 224,102
Foreign currency sensitivity. The following table details the Company’s sensitivity to a 10% increase and decrease in sterling
against the foreign currencies in which the Company has exposure. The sensitivity analysis includes foreign currency
denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates.
2023 2022
£’000 £’000
China Yuan Renminbi 681 13,146
China Yuan Renminbi (Offshore) 11,412 -
Hong Kong Dollar 9,348 9,132
Taiwan Dollar 218 -
US Dollar 873 132
22,532 22,410
Price risk. Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect
the value of the quoted investments.
Management of the risk. It is the Board’s policy to hold an appropriate spread of investments in the portfolio in order to reduce the
risk arising from factors specific to a particular country or sector. Both the allocation of assets and the stock selection process
act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which
meets regularly in order to review investment strategy. The investments held by the Company are listed on various stock
exchanges worldwide.
68 abrdn China Investment Company Limited
Price risk sensitivity. If market prices at the Statement of Financial Position date had been 10% higher or lower while all other
variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 October 2023 would have
increased/(decreased) by £22,048,000 (2022 – increased/(decreased) by £22,406,000) and equity reserves would have
increased/(decreased) by the same amount.
(ii) Liquidity risk. This is the risk that the Company will encounter difficulty in meeting obligations associated with financial
liabilities as they fall due in line with the maturity profile analysed below.
Within
1 year Total
At 31 October 2023 £’000 £’000
Bank loans 15,359 15,359
Interest cash flows on bank loans 107 107
Cash flows on other creditors 628 628
16,094 16,094
Within
1 year Total
At 31 October 2022 £’000 £’000
Bank loans – –
Interest cash flows on bank loans – –
Cash flows on other creditors 811 811
811 811
Management of the risk. The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and
reviews these on a regular basis. Borrowings comprise a £15,000,000 unsecured multicurrency revolving loan facility with a
£15,000,000 accordion option, which expires in April 2024. The Board has imposed a maximum gearing level, equalling up to 20%
of gross asset value. Details of borrowings at 31 October 2023 are shown in note 12.
Liquidity risk is not considered to be significant as the Company’s assets comprise mainly readily realisable securities, which can
be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of the loan facility, details of
which can be found in note 12. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports
on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will
also review the credit rating of a lender on a regular basis. Details of the Board’s policy on gearing are shown in the interest rate
risk section of this note.
(iii) Credit risk. This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction
that could result in the Company suffering a loss.
Management of the risk. Investment transactions are carried out with a large number of brokers, whose credit-standing is
reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker. Cash is held only
with reputable banks with high quality external credit enhancements. It is the Manager’s policy to trade only with A- and above
(Long-term rated) and A-1/P-1 (Short-term rated) counterparties.
Notes to the Financial Statements
Continued
abrdn China Investment Company Limited 69
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Credit risk exposure. In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to
credit risk at 31 October was as follows:
2023 2022
Statement of Statement of
Financial Maximum Financial Maximum
Position exposure Position exposure
£’000 £’000 £’000 £’000
Current assets
Loans and receivables 111 111 56 56
Cash at bank and in hand 8,748 8,748 8,534 8,534
8,859 8,859 8,590 8,590
None of the Company’s financial assets are past due or impaired.
Fair values of financial assets and financial liabilities. The carrying values of fixed asset investments are stated at their fair values,
which have been determined with reference to quoted market prices. For all other short-term debtors and creditors, their book
values approximate to fair values because of their short-term maturity. Bank loans are valued at amortised cost in accordance
with the Company’s stated accounting policy.
18. Fair value hierarchy
IFRS 13 ‘Fair value measurement’ requires an entity to classify fair value measurements using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications:
Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the
measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the
asset or liability, either directly or indirectly.
Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.
70 abrdn China Investment Company Limited
The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value
hierarchy at the reporting date as follows:
Level 1 Level 2 Level 3 Total
As at 31 October 2023 £’000 £’000 £’000 £’000
Financial assets at fair value through profit or loss
Quoted equities 219,573 - - 219,573
Unquoted equities - - 909 909
Total fair value 219,573 - 909 220,482
Level 1 Level 2 Level 3 Total
As at 31 October 2022 £’000 £’000 £’000 £’000
Financial assets at fair value through profit or loss
Quoted equities 222,745 - - 222,745
Unquoted equities - - 1,319 1,319
Total fair value 222,745 - 1,319 224,064
Quoted equities. The fair value of the Company’s investments in quoted equities has been determined by reference to their
quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised
stock exchanges.
Unquoted securities Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently. The
Level 3 figure consists of an investment in Komodo Fund which is valued at the unadjusted net asset values provided by the
administrator of that fund.
The Company recognises transfers between levels of fair value hierarchy at the date the change occurred. There were no
investments transferred between levels during the year (2022 - no transfers).
The movement on the Level 3 classified investments during the year is shown below:
2023 2022
Opening balance 1,319 1,358
Additions during the year - -
Disposals during the year - -
Profit or loss on disposals during the year - -
Valuation adjustments
A
(410) (39)
909 1,319
A
Total gains/(losses) included in profit or loss on assets held at year end.
Notes to the Financial Statements
Continued
abrdn China Investment Company Limited 71
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
19. Related party transactions and transactions with the Manager
Fees payable during the period to the Directors are disclosed in note 5 on page 56 and within the Directors’ Remuneration
Report on page 37, along with their interests in shares of the Company.
Transactions with the Manager. The company has an agreement with the Manager for the provision of investment
management, secretarial, accounting and administration and promotional activity services.
Details of transactions during the year and balance outstanding at the year end are disclosed in notes 4 and 5.
20. Capital management policies and procedures
The Board of Directors is responsible for ensuring that the Company’s objective and investment strategy is followed. The
Company’s objective is to produce long-term capital growth by investing predominantly in Chinese equities across a number
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
investee funds is taken into account when deciding on the size of each investment so the Company’s exposure to any one
underlying 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.
No single investment accounted for more than 9.1% (2022 – 7.0%) of the Company’s net assets at the Company’s year end. The
Investment Manager aims to identify funds which it considers are likely to deliver consistent capital growth over the longer term.
21. Subsequent events
On 28 November 2023, the Board announced that heads of terms had been agreed in principle for a proposed combination
of the assets of the Company with the assets of Fidelity China Special Situations PLC (“Fidelity China”) (the “Proposals”). The
Proposals, if approved by each company’s shareholders, will be implemented through a Guernsey scheme of reconstruction
under which the Company will be placed into voluntary liquidation and part of its cash, assets and undertaking will be
transferred to Fidelity China in exchange for the issue of new ordinary shares in Fidelity China to Shareholders.
On 15 January 2024, the Company repaid the amount previously drawn down under its bank loan facility with Industrial and
Commercial Bank of China, London Branch.
72 abrdn China Investment Company Limited
Alternative performance measures are numerical measures of the Company’s current, historical or future performance, financial
position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company’s
applicable financial framework includes International Financial Reporting Standards and the Statement of Recommended Practice
issued by Association of Investment Companies. The Directors assess the Company’s performance against a range of criteria which
are viewed as particularly relevant for closed-end investment companies.
Discount to net asset value per Ordinary share
The discount is the amount by which the share price is lower than the net asset value per share with debt at fair value, expressed as a
percentage of the net asset value.
2023 2022
NAV per Ordinary share a 499.97p 511.98p
Share price b 392.00p 448.00p
Discount (a-b)/a 21.6% 12.5%
Net gearing/(cash)
Net gearing/(cash) measures the total borrowings less cash and cash equivalents divided by shareholders’ funds, expressed as a
percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due to and from brokers at the year end.
2023 2022
Borrowings (£’000) a 15,359 –
Cash (£’000) 8,748 8,534
Amounts due to brokers (£’000) – (222)
Amounts due from brokers (£’000) – –
Cash and cash equivalents b 8,748 8,312
Shareholders’ funds (£’000) c 213,247 231,843
Net gearing/(cash) (a-b)/c 3.1% (3.6%)
Corporate Information - Alternative Performance
Measures
(
“APMs”
)
(
unaudited
)
abrdn China Investment Company Limited 73
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Ongoing charges
The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of annualised investment
management fees and administrative expenses and expressed as a percentage of the average daily net asset values with debt at fair
value published throughout the year.
2023 2022
Investment management fees
A
(£’000) 1,700 1,020
Administrative expenses (£’000) 1,067 913
Less: non-recurring charges
B
(£’000) (28) –
Ongoing charges (£’000) 2,739 1,933
Average net assets (£’000) 256,223 319,519
Ongoing charges ratio 1.07% 0.60%
A
2022 includes the effect of the management fee waiver arrangement following the combination with Aberdeen New Thai Investment Trust in November 2021.
B
Professional services considered unlikely to recur.
The ongoing charges ratio provided in the Company’s Key Information Document is calculated in line with the PRIIPs regulations which
amongst other things, includes the cost of borrowings and transaction costs.
Total return
NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking
into account both capital returns and dividends paid to shareholders. Share price and NAV total returns are monitored against open-
ended and closed-ended competitors, and the Benchmark, respectively.
Year ended 31 October 2023 NAV Share price
Opening at 1 November 2022 a 511.98p 448.00p
Closing at 31 October 2023 b 499.97p 392.00p
Price movements c=(b/a)-1 –2.3% –12.5%
Dividend reinvestment
A
d 0.4% 0.5%
Total return c+d –1.9% –12.0%
Year ended 31 October 2022 NAV Share price
Opening at 1 November 2021 a 813.20p 695.00p
Closing at 31 October 2022 b 511.98p 448.00p
Price movements c=(b/a)-1 –37.0% –35.5%
Dividend reinvestment
A
d N/A N/A
Total return c+d –37.0% –35.5%
A
NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return
involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend.
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abrdn China Investment Company Limited 75
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Financial Advisers
To find an adviser who recommends on investment trusts
visit: unbiased.co.uk.
Regulation of Stockbrokers
Before approaching a stockbroker, always check that
they are regulated by the Financial Conduct Authority:
fca.org.uk/firms/financial-services-register
How to Attend and Vote at Company
Meetings
Investors who hold their shares through a platform or
share plan provider (for example Hargreaves Lansdown,
Interactive Investor or AJ Bell) and would like to attend and
vote at Company meetings (including General Meetings
and AGMs) should contact their platform or share plan
provider directly to make arrangements.
Investors who hold their shares through platforms and
have their shares held through platform nominees, may
not necessarily receive notification of general meetings
and are advised to keep themselves informed of
Company business by referring to the Company’s
website. Where voting is required, and the Board
encourages shareholders to vote at all general meetings
of the Company, shareholders with their holdings in
nominees, need to instruct the nominee to vote on their
behalf and should do so in good time before the meetings.
Keeping You Informed
Further information about the Company may be found on
its dedicated website: abrdnequityincome.com.
This provides access to information on the Company’s
share price performance, capital structure, London Stock
Exchange announcements, current and historic Annual
and Half-Yearly Reports, and the latest monthly factsheet
on the Company issued by the Manager.
Details are also available at: invtrusts.co.uk.
Twitter:
@abrdnTrusts
LinkedIn:
abrdn Investment Trusts
Key Information Document (“KID”)
The KID relating to the Company and published by the
Manager can be found on the Company’s website.
Suitable for Retail/NMPI Status
The Company’s shares are intended for investors,
primarily in the UK, including retail investors, professionally-
advised private clients and institutional investors. Investors
should consider consulting a financial adviser who
specialises in advising on the acquisition of shares and
other securities before acquiring shares. Investors should
be capable of evaluating the risks and merits of such an
investment and should have sufficient resources to bear
any loss that may result.
The Company currently conducts its affairs so that the
securities issued by the Company can be recommended
by a financial adviser to ordinary retail investors in
accordance with the Financial Conduct Authority’s rules in
relation to non-mainstream pooled investments (“NMPIs”)
and intends to continue to do so for the foreseeable future.
The Company’s securities are excluded from the Financial
Conduct Authority’s restrictions which apply to NMPIs
because they are securities issued by an investment trust.
Note
Please remember that past performance is not a guide to
the future. Stock market and currency movements may
cause the value of shares and the income from them to
fall as well as rise and investors may not get back the
amount they originally invested.
As with all equity investments, the value of investment
trusts purchased will immediately be reduced by the
difference between the buying and selling prices of the
shares, the market maker’s spread.
Investors should further bear in mind that the value of any
tax relief will depend on the individual circumstances of
the investor and that tax rates and reliefs, as well as the
tax treatment of ISAs, may be changed by future
legislation.
The information on pages 74 and 75 has been approved
for the purposes of Section 21 of the Financial Services
and Markets Act 2000 (as amended by the Financial
Services Act 2012) by abrdn Fund Managers Limited
which is authorised and regulated by the Financial
Conduct Authority in the United Kingdom
.
76 abrdn China Investment Company Limited
abrdn Fund Managers Limited (“AFML”) and the Company are required to make certain disclosures available to
investors in accordance with the Alternative Investment Fund Managers Directive (“AIFMD”). Those disclosures that are
required to be made pre-investment are included within a pre-investment disclosure document (“PIDD”) which may be
found on the Company’s website. There have been no material changes to the disclosures contained within the PIDD
since its most recent update.
The periodic disclosures as required under the AIFMD to investors are made below:
· information on the investment strategy, geographical and sector investment focus and principal stock exposures is
included in the Investment Managers Report on pages 7 to 9;
· none of the Company’s assets are subject to special arrangements arising from their illiquid nature;
· the Investment Managers Report on pages 7 to 9, note 17 to the financial statements and the PIDD, together set out the
risk profile and risk management systems in place. There have been no changes to the risk management systems in
place in the period under review and no breaches of any of the risk limits set, with no breach expected;
· there are no new arrangements for managing the liquidity of the Company or any material changes to the liquidity
management systems and procedures employed by AFML;
· all authorised Alternative Investment Fund Managers are required to comply with the AIFMD Remuneration Code. In
accordance with the Remuneration Code, the AIFM’s remuneration policy is available from the Company’s Manager,
abrdn Fund Managers Limited, on request and the remuneration disclosures in respect of the AIFM’s relevant reporting
period for the year ended 31 December 2023 is available on the Company’s website.
Leverage
The table below sets out the current maximum permitted limit and actual level of leverage for the Company:
2023 2022
Gross
Method
Commitment
Method
Gross
Method
Commitment
Method
Maximum level of leverage 2.00:1 2.00:1 2.00:1 2.00:1
Actual level at 31 October 2023 1.13:1 1.15:1 1.00:1 1.00:1
There have been no breaches of the maximum level during the year and no changes to the maximum level of leverage
employed by the Company. There have been no changes to the circumstances in which the Company may be required
to post assets as collateral and no guarantees granted under the leveraging arrangement. Changes to the information
contained either within this Annual Report or the PIDD in relation to any special arrangements in place; the maximum
level of leverage which AFML may employ on behalf of the Company; the right of use of collateral or any guarantee
granted under any leveraging arrangement; or any change to the position in relation to any discharge of liability by the
Depositary will be notified via a regulatory news service without undue delay in accordance with
the AIFMD.
The information on this page has been approved for the purposes of Section 21 of the Financial Services and Markets Act
2000 (as amended by the Financial Services Act 2012) by abrdn Fund Managers Limited which is authorised and
regulated by the Financial Conduct Authority in the United Kingdom.
AIFMD Disclosures
(
unaudited
)
abrdn China Investment Company Limited 77
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
abrdn
abrdn is the brand of abrdn plc.
abrdn Group
The abrdn plc group of companies
AIC
The Association of Investment Companies
Alternative Investment Fund or “AIF”
An investment vehicle under AIFMD. Under AIFMD (see
below) the Company is classified as an AIF.
Alternative Investment Fund Managers
Directive or “AIFMD”
The Alternative Investment Fund Managers Directive. The
AIFMD is European legislation which created a European-
wide framework for regulating managers of ‘alternative
investment funds’ (“AIFs”). It is designed to regulate any
fund which is not a UCITS fund and which is managed
and/ or marketed in the EU. The Company has been
designated as an AIF.
Annual General Meeting or “AGM”
A meeting held once a year which shareholders can
attend and where they can vote on resolutions to be put
forward at the meeting and ask directors questions about
the company in which they are invested.
Benchmark Index
A basket of stocks which is considered to replicate a
particular stock market or sector.
Compound Annual Growth Rate ("CAGR")
The mean annual growth rate of an investment over a
specified period of time longer than one year.
Discount
The amount, expressed as a percentage, by which the
share price is less than the net asset value per share.
Depositary
Certain AIFs must appoint depositaries under the
requirements of AIFMD. A depositary’s duties include, inter
alia, safekeeping of the Company’s assets and cash
monitoring. Under AIFMD the Depositary is appointed
under a strict liability regime. BNP Paribas S.A, Guernsey
Branch has been appointed to provide depository services
to the Company.
Dividend
Income receivable from an investment in shares.
Ex-dividend date
The date from which you are not entitled to receive a
dividend which has been declared and is due to be paid to
shareholders.
Financial Conduct Authority or “FCA”
The independent body that regulates the financial
services industry in the UK.
Gearing
A way to magnify income and capital returns, but which
can also magnify losses. A bank loan is a common method
of gearing.
Investment Company
A company formed to invest in a diversified portfolio
of assets.
Investment Manager
abrdn Hong Kong Limited is a wholly owned subsidiary
of abrdn plc and acts as the Company’s investment
manager.
Key Information Document or “KID”
The Packaged Retail and Insurance-based Investment
Products (“PRIIPS”) Regulation requires the Manager, as
the Company’s PRIIP ‘manufacturer’, to prepare a Key
Information Document in respect of the Company. This
KID must be made available by the Manager to retail
investors prior to them making any investment decision
and is available via the Company’s website. The Company
is not responsible for the information contained in the KID
and investors should note that the procedures for
calculating the risks, costs and potential returns are
prescribed by law. The figures in the KID may not reflect
the expected returns for the Company and anticipated
performance returns cannot be guaranteed.
Glossary of Terms
78 abrdn China Investment Company Limited
Leverage
An alternative word for “Gearing”.
Under AIFMD, leverage is any method by which the
exposure of an AIF is increased through borrowing of cash
or securities or leverage embedded in derivative positions.
Under AIFMD, leverage is broadly similar to gearing, but is
expressed as a ratio between the assets (excluding
borrowings) and the net assets (after taking account of
borrowing). Under the gross method, exposure represents
the sum of the Company’s positions after deduction of
cash balances, without taking account of any hedging or
netting arrangements. Under the commitment method,
exposure is calculated without the deduction of cash
balances and after certain hedging and netting positions
are offset against each other.
Liquidity
The extent to which investments can be sold at short
notice.
Manager, “AIFM” or “AFML”
abrdn Fund Managers Limited is a wholly owned
subsidiary of abrdn plc and acts as the Alternative
Investment Fund Manager for the Company. It is
authorised and regulated by the Financial
Conduct Authority.
MSCI ESG Rating
A measure performed by MSCI with an aim to access a
company’s management of financially relevant ESG risks
and opportunities. ESG Ratings range from leader (AAA,
AA), average (A, BBB, BB) to laggard (B, CCC).
Net assets
An investment company’s assets less its liabilities.
Net asset value (“NAV”) per Ordinary share
Net assets divided by the number of Ordinary shares in
issue (excluding any shares held in treasury).
Continued
A measure, expressed as a percentage of average net
assets, of the regular, recurring annual costs of running an
investment company.
Ordinary shares
The Company’s ordinary shares in issue.
Portfolio
A collection of different investments held in order to deliver
returns to shareholders and to spread risk.
Premium
The amount, expressed as a percentage, by which the
share price is more than the net asset value per share.
Proposals
The proposed combination of the Company’s assets with
the assets of Fidelity China Special Situations PLC and
subsequent voluntary liquidation of the Company.
Qualified Foreign Investor (“QF”)
QFIs are individuals, groups or associations, who reside
outside China and are permitted to invest in China's
mainland markets.
Shanghai Stock Exchange STAR Market
(“STAR”)
A Chinese science, technology and innovation focused
equities market.
Share buyback
A purchase of a company’s own shares. Shares can either
be bought back for cancellation or held in treasury.
Share price
The price of a share as determined by a relevant stock
market.
The Taskforce on Climate-related Financial
Disclosures (TCFD)
An international body formed with a mission to strengthen
financial systems and increase the stability of international
financial markets by coordinating national monetary
authorities and international standard-setting bodies.
Glossary of Terms
Ongoing charges
abrdn China Investment Company Limited 79
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Total return
A measure of performance that takes into account both
income and capital returns.
Tracking error
A measure, expressed as a percentage, of how closely a
portfolio follows an index over a period of time.
Treasury shares
A company’s own shares which are available to be sold by
it to raise funds.
Value at risk
A statistical technique used to measure and quantify
the level of financial risk within a portfolio over a specific
time frame.
Volatility
A measure of how much a share moves up and down in
price over a period of time.
80 abrdn China Investment Company Limited
abrdn China Investment Company Limited 81
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
82 abrdn China Investment Company Limited
2 abrdn China Investment Company Limited
Overview
Financial Highlights 3
Strategic Report
Chairman’s Statement 4
Investment Managers Report 7
Portfolio
Ten Largest Investments 10
Portfolio 11
Governance
Board of Directors 14
Directors’ Report 17
Corporate Governance Statement 26
Promoting the Success of the Company 33
Report of the Audit Committee 36
Directors’ Remuneration Report 38
Statement of Directors’ Responsibilities 40
Depositary Report 41
Financial Statements
Independent Auditor's Report 42
Statement of Comprehensive Income 47
Statement of Financial Position 48
Statement of Changes in Equity 49
Statement of Cash Flows 50
Notes to the Financial Statements 51
Corporate Information
Alternative Performance Measures (“APMs”)
(unaudited) 72
Investor Information 74
AIFMD Disclosures (unaudited) 76
Glossary of Terms 77
Contact Addresses 83
Contents
abrdn China Investment Company Limited 83
Directors
Helen Green (Chairman)
Mark Bridgeman
Anne Gilding
Sarah MacAulay
Eleonore de Rochechouart
Registered Office
BNP Paribas House
St Julian’s Avenue
St Peter Port
Guernsey
GY1 1WA
Company Registration Number
Incorporated in Guernsey Number 50900
Alternative Investment Fund Manager
abrdn Fund Managers Limited
280 Bishopsgate
London
EC2M 4AG
Investment Manager
abrdn Hong Kong Limited
30/F LHT Tower
31 Queen’s Road
Central Hong Kong
Company Secretary
abrdn Holdings Limited
280 Bishopsgate
London
EC2M 4AG
Independent Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Registrar
Link Asset Services
Longue Hougue House
St Sampson
Guernsey
GY2 4JN
Custodian
BNP Paribas SA, London Branch
10 Harewood Avenue
London
NW1 6AA
Administrator and Depositary
BNP Paribas SA, Guernsey Branch
BNP Paribas House
St Julian’s Avenue
St Peter Port
Guernsey
GY1 1WA
Financial Adviser 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
Contact Addresses
abrdnchina.co.uk
abrdn China Investment Company Limited
Annual Report 31 October 2023
Seeking long-term capital growth by investing
predominantly in Chinese equities
For more information visit abrdnchina.co.uk
abrdn.com