Abrdn China Investment : Interim Report to 30 April 2022

abrdn China Investment Company Limited

Seeking long-term capital growth by investing predominantly in Chinese equities

Half-Yearly Report 30 April 2022

abrdn.com

Contents

Overview
Performance Highlights and Financial Calendar	1
Chairman's Statement	3
Investment Manager's Review	5
Portfolio
Ten Largest Investments	8
Investment Portfolio	9
Investment Case Studies	11
Governance
Interim Management Report	13
Statement of Directors' Responsibilities	14
Financial Statements
Independent Review Report	15
Condensed Unaudited Statement of Comprehensive Income	16
Condensed Unaudited Statement of Financial Position	17
Condensed Unaudited Statement of Changes in Equity	18
Condensed Unaudited Statement of Cash Flow	19
Selected Explanatory Notes to the Condensed Unaudited
Financial Statements	20
General Information
Alternative Performance Measures ("APMs")	30
Investor Information	32
Company Information	35

Investment Objective

To produce long-term capital growth by investing predominantly in Chinese equities.

Reference Index

MSCI China All Shares Index

Performance Highlights and Financial Calendar

Performance Highlights for the six months ended 30 April 2022

Net asset value ("NAV") per Ordinary share	NAV per Ordinary share2
total return1,5		637.7p
-21.5%
Year ended 31 October 2021	+19.8%	As at 31 October 2021	813.2p
Ordinary share price total return1,5		Ordinary share price - Closing price
-22.9%		536.0p
Year ended 31 October 2021	+18.7%	As at 31 October 2021	695.0p - Closing price
MSCI China All Shares Index		Net Assets
Net Total Return in sterling terms		£296.5m
-16.8%
Year ended 31 October 2021	+10.7%4	As at 31 October 2021	£373.8 m
Net cash3,5		Revenue return per Ordinary share
4.0%		-0.47p
As at 31 October 2021	53.8%	Year ended 31 October 2021	-0.61p

1. Performance figures stated above include reinvestment of dividends on the ex-date.
2. See note 8 in the Selected Explanatory Notes to these Financial Statements for basis of calculation.
3. Based on the net of the drawn down loan value and cash, as a percentage of NAV.
4. The Company's previous benchmark was the MSCI Emerging Markets Net Total Return Index in sterling terms.
5. Definitions of these Alternative Performance Measures ('APMs') together with how these have been calculated can be found on pages 30 and 31.

abrdn China Investment Company Limited

1

Financial Calendar

Financial year end

31 October 2022

Expected announcement of results for year ended 31 October 2022

February 2023

Annual General Meeting	April 2023

2	abrdn China Investment Company Limited

Chairman's Statement

Overview

This is the first report of the Company as an investor in Chinese equities since shareholders approved the change of mandate in October 2021. It has been a testing period for most equity markets, but China has been particularly challenging. While the Board recognises that this is not the most auspicious start, it remains confident in the long-term prospects for China and for an investment trust investing therein remain strong. The net asset value ("NAV") total return of the Company for the six month period ended 30 April 2022 was -21.5%. This return is behind the return from the reference index, the MSCI China All Shares Index (in Sterling terms), of -16.8%.

It was a turbulent period for Chinese equities as they battled against numerous challenges. Beijing's zero- tolerance approach to Covid-19 outbreaks, regulatory upheaval, property and energy woes, significant disruption to supply chains and the potential delisting of US-listed Chinese companies over auditing requirements all weighed on markets. This was compounded at a global level by sharply rising inflation, further fueled by the war in Ukraine, and the rising threat of a prolonged tighter monetary policy in the US and Europe but loosening

in China.

Fundamentals have taken a back seat since January, with the direction of share prices being dictated by the current heightened levels of macroeconomic and geopolitical risk. This has led to a general rotation from growth to value stocks and the Company struggled to keep pace against such a strong wave of negative sentiment. Many of your Company's high-quality growth holdings, in areas such as renewable energy, technology and healthcare, experienced aggressive profit-taking. On the other hand, the energy sector, to which the Company has no direct exposure, rallied sharply as global energy prices soared on the back of concerns around the impact of the war

in Ukraine on supply. Similarly, strong flows into the large state-owned banks, where the Company is underweight, counted against performance. The performance for the period under review is discussed in more detail in the Investment Manager's Review.

Scheme of Reconstruction

As reported in the Company's Annual Report, I am pleased to confirm the Company successfully completed the merger with Aberdeen New Thai Investment Trust PLC ("New Thai") on 9 November 2021. As part of the merger, a tender offer to shareholders was made

and 6,894,773 Ordinary shares were tendered and bought back into treasury. Simultaneously, 7,554,440 new Ordinary shares were issued to the shareholders of New Thai who elected to roll their shareholding into the Company.

Discount and Share Buy Backs

The discount at which the Company's shares trade relative to the NAV narrowed significantly following the completion of the merger with New Thai from 14.5% to less than 10% for much of the period. Unfortunately, in the final days of April, the discount widened as the news of renewed Covid-19 lockdowns in Shanghai weighed slightly on Chinese equities and the discount at the end of the period was 15.9%. At 24 June 2022 the discount narrowed to 14.8%.

In December 2021, the Company undertook its first share buy back for over two years. During the period ended

30 April 2022, 134,749 Ordinary shares were bought back by the Company, representing 0.3% of the issued share capital, at a weighted average discount of 10.3%. At the time of writing, a further 228,610 Ordinary shares have been bought back. The Board monitors the discount on a continual basis and expects to buy back shares when it considers that it is in the best interests of shareholders to do so.

Loan Facility and Gearing

In April 2022, the Company announced that it had entered into a £15 million unsecured multi-currency revolving loan facility with Industrial and Commercial Bank of China, London Branch, for two years. Under the terms of the facility, the Company has the option to increase the level of the commitment from £15 million to £30 million at any time. The facility was undrawn at the end of the period and has yet to be drawn.

The Board continues to believe that the use of gearing, which is one of the advantages of a closed end structure, within pre-determined ranges and at times when

the Investment Manager sees attractive investment opportunities, will be beneficial to the longer term performance of the Company.

Compliance with US Executive Orders

Following the release of US Presidential Executive Orders ("Orders") which prohibit US Persons from purchasing publicly traded securities of certain Chinese companies identified as Communist Chinese Military Companies, the Company can confirm that its policy is to adhere to the Orders and that it has no direct investments in any of these companies.

Board Composition

William Collins retired from the Board at the Company's Annual General Meeting in April 2022. Helen Green has taken on the role of Senior Independent Director. On behalf of the Board, I would like to thank Bill for his significant contribution to the Company over the ten year period that he served as a Director.

abrdn China Investment Company Limited

3