Background

Global markets remained volatile over the review period, with sentiment influenced by a sharp rise in interest rates from the US Federal Reserve (Fed) and fears that this could lead to a global recession. Towards the end of the period, China's decision to ease Covid-19 restrictions led to expectations that the country's re-opening would boost consumer demand and help export-oriented markets such as Taiwan and South Korea. Likewise, the diversification of supply chains has seen net benefits to Vietnam, India and Indonesia, amongst others in South East Asia.

Against this volatile market background, your Company's share price gained 5.5% on a total return basis with the discount to the net asset value("NAV") narrowing to 12.1%. The NAV total return was 3.0% although that came in slightly lower than the benchmark MSCI AC Asia Pacific ex-Japan Small Cap Index's 3.8% increase.

Despite continued short-term market volatility, the Board is as confident as ever in the potential for Asia and its smaller companies over the long-term. It is worth noting that £1,000 invested in your Company at inception is now worth over £22,950 on a NAV basis with dividends reinvested, a return of over 2195%. Indeed, according to a recent press release from the Association of Investment Companies (AIC) we are one of the top five companies that would have made investors £1,000,000 if they had invested their full isa allowance from 1999 to 2023.

This is the world's fastest-growing region, underpinned by powerful structural trends such as increasing affluence, rising urbanisation, and growing technology adoption. Exciting opportunities continue to abound in its small and mid-cap investment universe, where companies tend to be domestically oriented and low research coverage leaves considerable scope for active managers to take advantage of market mispricing.

Dividend

The Board recognises the importance of your Company's dividend income for many shareholders. The Ordinary dividend has been maintained or raised every year since 1998, and your Board is firmly committed to the new enhanced and progressive dividend policy approved by shareholders in 2022.

Two interim dividends have been paid in the first six months of the year. The first interim dividend of 1.6p per Ordinary share was paid on 20 December 2022 to Ordinary shareholders on the register on 25 November 2022 and the second interim dividend was paid on 21 March 2023 to Ordinary shareholders on the register on 24 February 2023. The Board has set a target dividend of at least 6.4p per Ordinary Share for the financial year ending 31 July 2023. The Board plans to maintain the progressive policy of the last 27 years in order to provide shareholders with a regular level of income alongside capital growth prospects.

Share Capital Management and Gearing

During the period the Ordinary shares have traded at an average discount of 11.9% and we did not buy back any Ordinary shares in the market. However, subsequent to the period 120,000 Ordinary shares have been acquired for treasury at a discount to the prevailing NAV per share. The Board will continue to consider the use of share buybacks to both reduce the volatility of any discount and to modestly enhance the NAV per share for shareholders.

The Company's net gearing at 31 January 2023 was 13.7% with the debt provided by the £30 million unsecured Loan Notes 2035 and the £36.6m Convertible Unsecured Loan Stock redeemable in 2025. As at 30 March 2023, the latest practicable date, the net gearing stood at 12.9%.

ESG

In my first report to Shareholders, I wanted to draw out the importance that your Board and Manager place upon Environmental, Social and Governance ("ESG") matters. While ESG concerns do not form a specific part of the Company's investment objective, and the investment process does not exclude exposure to certain industries, the Investment Manager has long believed that a holistic assessment of business risks and active engagement, with the goal of improving the performance of the Company's portfolio, is vital before, during and after an investment is made. That includes a detailed understanding of the environmental, social and governance risks and opportunities associated with each holding. It is, therefore, very much embedded in the Investment Manager's approach to managing the Company and we will provide more detail on these important matters in your Company's Annual Report.

Outlook

The purpose of the Company remains the same as ever, to give investors access to Asia's exciting growth prospects via a concentrated portfolio of high-quality smaller companies. Your Company continues to benefit from a highly experienced management team, with excellent on-the-ground access to companies, business leaders and policymakers. They continue to uncover under-researched quality companies in what is a large and varied universe of Asian small caps.

Considering the current fragile state of the global economy, our view is that Asia is in a better position than many Western economies. For the most part, government finances and corporate balance sheets in the region are in good health. The wider macroeconomic risks (whether inflation or geopolitics related) persist, but one of the benefits of this Trust's small-cap emphasis is that it allows for a portfolio that is more geared to Asia's domestic growth story - indeed, at the end of the reporting period, over 80% of the underlying revenues of the companies in the portfolio came from within Asia itself.

In this regard, the Board is pleased to note there are positive signs for structural growth right across the region. China's re-opening should lead to a recovery in both domestic consumption and industry production. In turn, this could be a spur for Asia-wide exports, services, trade, and tourism.

Valuations are attractive and your Manager has positioned the portfolio to weather near-term risks - the majority of the companies in the portfolio hold net cash on their balance sheet - while keeping in mind the long-term secular trends across Asia: rising local demand, a move to a lower-carbon future and the growth of Asia's technology and supply chains. Accordingly, your Company's core investment strategy remains judicious - quality companies at a reasonable price with strong balance sheets and demonstrating sustainable earnings, delivering outperformance over the long-term.

Krishna Shanmuganathan
Chairman
30 March 2023

Discrete performance (%)

Total return; NAV to NAV, net income reinvested, GBP. Share price total return is on a mid-to-mid basis. Dividend calculations are to reinvest as at the ex-dividend date. NAV returns based on NAVs with debt valued at fair value. Source: abrdn Investments Limited and Morningstar. A Including current year revenue.

Dividend per share

Important information

Risk factors you should consider prior to investing:

• The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
• Past performance is not a guide to future results.
• Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
• The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
• The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
• The Company may charge expenses to capital which may erode the capital value of the investment.
• The Company invests in smaller companies which are likely to carry a higher degree of risk than larger companies.
• Movements in exchange rates will impact on both the level of income received and the capital value of your investment.
• There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
• As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
• The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down.
• Specialist funds which invest in small markets or sectors of industry are likely to be more volatile than more diversified trusts.
• Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

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