Final Results

Invesco Asia Trust plc Annual Financial Report Announcement for the Financial Year Ended 30 April 2009 FINANCIAL INFORMATION AND PERFORMANCE STATISTICS The benchmark index of the Company is the MSCI All Countries Asia Pacific ex Japan Index (adjusted for sterling) Performance Statistics At At 30 April 30 April % 2009 2008 change Net assets (£'000) 98,667 118,862 -17.0 Actual gearing 100 102 Asset gearing 100 101 Net asset value (`NAV') per ordinary share: - from balance sheet 105.1p 126.7p -17.0 - after charging proposed final 103.6p 125.2p -17.3 dividend (capital NAV) Benchmark Index(i) - capital return 190.6 247.9 -23.1 Mid-market price per ordinary share 94.5p 112.8p -16.2 Discount per ordinary share on capital 8.8% 9.9% NAV Total Returns(i): - NAV -16.2 - Benchmark Index -20.3 (i) Source: Thomson Financial Datastream. Revenue Gross income (£'000) 2,711 3,247 -16.5 Net revenue available for ordinary 1,463 1,762 -17.0 shares (£'000) Dividend per share 1.5p 1.5p Total expense ratio 1.0% 1.3% Return per Ordinary Share Revenue return 1.6p 1.8p Capital return (21.6)p 16.2p Total return (20.0)p 18.0p CHAIRMAN'S STATEMENT Performance and Prospects The issues which were growing in importance at the time of the previous annual report, including weaker global growth and stress in financial sectors, increased in significance over the last twelve months. These factors combined to create a global recession from which Asia was unable to escape, despite not having the structural weaknesses of Western economies. Authorities in the region responded quickly by cutting interest rates and implementing large fiscal packages to fill the void left by the sharp contraction in global activity. Whilst the period was characterised by weakness in both economic data and in equity markets, it ended with a tone of cautious optimism based on signs that the worst of the economic slump may have passed. Over a period of unprecedented volatility, the net asset value per ordinary share fell 16.2%, compared to the benchmark, the MSCI All Countries Asia Pacific ex Japan index adjusted for sterling, which fell 20.3% (all figures are on a total return basis). The Company's share price dropped from 112.8p to 94.5p, while the discount to net asset value at which the shares traded narrowed to 8.8%, from 9.9% at the start of the year. Dividend The Board is pleased to recommend a final dividend of 1.5p per ordinary share (2008: 1.5p). The dividend, which is subject to the approval of shareholders at the Annual General Meeting, will be payable on 14 August 2009 to shareholders on the register on 17 July 2009. £55,000 will be carried forward to the Revenue Reserve. Gearing The Company has a £15 million uncommitted revolving credit facility. During the second part of the year and at the year-end, the Company was ungeared. Since the year-end, the Manager has drawn down a modest amount and at the latest practical time before publication of this document, the gearing was 102 based on a draw-down of £1,500,000. Board Renewal There has been some change to the membership of the Board over the past months. On 10 March 2009, Carol Ferguson and Tom Maier were appointed new Directors of the Company and we look forward to their contribution in the future. On 30 April 2009, Sir Robin McLaren retired from the Board. Having been a Director of the Company since 1995 he had decided that it was time for him to step down. The Board thanks Sir Robin warmly for his invaluable and important contribution to the Company's business during his 14 years' service as a Director. His presence will be sorely missed and his colleagues wish him all the very best for the future. Robin Baillie has informed the Board that he will stand down from the Board following the 2010 Annual General Meeting. Proposed Bonus Issue of Subscription Shares Together with this annual financial report, shareholders will have received documentation in respect of a proposed bonus issue of subscription shares to shareholders pro rata on a one-for-five basis. An Extraordinary General Meeting will follow this year's Annual General Meeting to ask for shareholders' approval to the proposal, the details of which can be found in the enclosed prospectus and in my letter to shareholders. Special Business at the Annual General Meeting * Share Issues and Buy Backs Pursuant to Ordinary Resolution 10 and Special Resolution 11, the Board seeks authority from shareholders to issue new ordinary shares, if necessary, while disapplying pre-emption rights. This authority was denied by shareholders at the last AGM, but the Board considers that it is prudent to have the power to issue shares as and when they consider it appropriate. New shares and any held in treasury would not be issued at prices below the prevailing net asset value, and shares held in treasury would only be reissued on terms that are seen to be in the best interests of shareholders. With Special Resolution 12, the Board seeks renewed authority to undertake buy backs of the Company's ordinary shares. As last year, we are proposing that shares so acquired by the Company can be held in treasury with a view to their resale, if appropriate, or later cancellation. Shares that are purchased but not cancelled are known as Treasury Shares. The holding of Treasury Shares is restricted to 10% of each class of a Company's share capital. During the year, the Board has not bought back any shares and no shares are held in treasury. * Calling General Meetings at 14 Days' Notice It is expected that the new EU Shareholder Rights Directive that comes into effect on 3 August 2009 will amend the Companies Act 2006 so that the notice period for a general meeting will be 21 days (at present 14 days). However, companies are able to pass a special resolution permitting them to continue to call general meetings (other than AGMs) on a 14 day notice period if they allow voting by electronic means. Approval of Special Resolution 13 will therefore enable the Board to call any general meetings other than AGMs on 14 days' notice, should that be necessary. The Board recommends that shareholders vote in favour of all resolutions as each of the Directors intend to do in respect of their own shares. Outlook A degree of uncertainty continues to surround the near-term outlook for Asian economies. Demand from Western trading partners remains weak as businesses and consumers reduce leverage, whilst the extent to which Asian domestic growth can offset this remains unclear. However, the commitment of Asian governments and central banks to supporting growth is not in dispute and there is growing evidence that their efforts have been successful. Key economic indicators including exports and industrial production have stabilised and China, which remains an important regional driver, has been among the earliest to demonstrate the potential for recovery. The outlook for Asia is also supported by its intrinsic advantages. Asia has a large and youthful population that will be critical to support growth over the long-term. While Western economies are shackled by high levels of debt, financial sectors reliant on government support and the prospect of rising tax burdens to fund sovereign borrowing, Asia has high savings rates and governments with generally sound finances. These factors are positive for Asia's growth outlook, particularly relative to other world economies, and they are likely to help Asian businesses to grow earnings in the years ahead. Valuations, at around 1.6 times book value, are not demanding in an historical context and the Company has the potential to capitalise on current stock specific opportunities as well as what we see as the region's longer-term growth prospects. I look forward to seeing shareholders at the Annual General Meeting of the Company on 12 August 2009, when there will be opportunities for them to meet members of the Board and the Investment Manager. David Hinde Chairman 3 July 2009 MANAGER'S REPORT Market & Economic Review Asian equity markets experienced a difficult period during the 12 months under review against a poor economic backdrop. Whilst Asian economies were reasonably resilient during the early part of the period, the declining global economy and weakening Western financial sector led to a fall in activity across the region. Against this background, investors moved into perceived `safe-haven' assets as risk aversion increased and the outlook for growth weakened. In China, economic performance in the early part of the period remained robust, though it had already started to slow from previous highs. In April 2008, exports were still growing in excess of 20% year-on-year, but inflation remained a concern. Chinese authorities tried to cool lending growth by increasing bank reserve requirements. By the end of the period, inflation had turned negative with food and oil prices dropping heavily, whilst interest rates and reserve requirements had been lowered dramatically. With Western economies in turmoil, exports were a prominent casualty and recorded double digit annualised falls early in the year. The weak external situation combined with weakness in certain domestic areas, such as housing, led to an inevitable easing in the pace of economic growth. First quarter growth in 2009 of 6.1% was the slowest rate of expansion for almost a decade, well behind the 10.6% achieved in the first quarter of 2008. However, whilst many other leading global economies sank into recession, China's economy continued to grow and government initiatives helped to mitigate some of the downward pressures. In November 2008, authorities announced a RMB4 trillion (US$586 billion) stimulus plan, which signalled their commitment to maintaining growth, and by the end of the period there were signs that these measures were feeding through to the economy. The chain of events characterised by stalling export demand, faltering growth and the implementation of interest rate cuts and stimulus measures was common throughout the region. Countries that are particularly sensitive to export demand fared the worst, for example Hong Kong and Singapore recorded GDP contractions of -7.8% year-on-year and -10.1% year-on-year respectively in the first quarter of 2009. Early in the year Singapore's government had outlined stimulus plans totalling just under US$14 billion to help slow the pace of decline and similar measures were undertaken across the region, including spending plans valued at US$26 billion, US$13 billion and US$6 billion in Australia, Korea and Taiwan respectively. In Taiwan and Korea, exports recorded year-on-year declines of 44% and 34% respectively in January, as demand from key trading partners fell heavily. Although still contracting, the pace of decline moved off these lows in subsequent months, adding to hopes that the worst of the current downturn may have been seen. Industrial production data from these two countries also contributed to the early signs of stabilisation as year-on-year declines again hit lows in January and then showed some evidence of recovery. Taiwan also benefited from an improvement in cross-straits links with China. Towards the end of the period, equity markets in Taiwan rose sharply on news that the Chinese government was set to lift the ban on investments in the country. The news was accompanied by the announcement that China Mobile is to purchase a 12% stake in Far EasTone, which could lead the way for future investments in Taiwan by Chinese companies. India, like China, also proved to be resilient and whilst the pace of growth slowed, the economy continued to expand. Having grown by 8.8% in the first quarter of 2008, growth had eased to 5.3% by the final quarter of the year, which still represented a robust level of expansion by comparison with peers both within Asia and in the West. In a difficult economic climate, steep equity market declines were seen across Asia. The heaviest falls occurred in October and November following the demise of Lehman Brothers, and also in the first 2 months of 2009, although, unlike developed markets, Asia did not go through October lows unlike Developed markets, as concerns surrounding the global economic outlook and the weakness of bank balance sheets intensified. China's equity markets were extremely volatile and the Shanghai Composite index dropped by more than 50% before bottoming and rising by over 45% from its low by the end of the period. At their lows, many Asian markets had lost more than half their value from the start of the period, but the strong rally from early March of this year saw a significant part of those losses recouped. Equity markets in Hong Kong, Korea and Taiwan all rose more than 40% from their lows and the Indonesian equity market gained more than 50%. The improvement in markets was based around perceptions that the worst of the economic slowdown had passed. The bounce in prices helped to mitigate part of the earlier steep falls, but could not prevent indices in the region closing in negative territory over the period as a whole. Company Performance In the year ended 30 April 2009, the Company's net asset value declined by 16.2% (total return, £), but a stronger performance than the benchmark, the MSCI All Countries Asia Pacific ex Japan Index, which fell 20.3% (total return, £). Although the relative return was above the benchmark, the Company's negative absolute performance was a consequence of elevated volatility and a number of exceptional events that resulted in equity markets globally falling in value. These included the failure, acquisition or government rescue of high profile Western banking groups. At a sector level, the Company's exposure to industrial conglomerates, e.g. Beijing Enterprise Holdings, was positive for performance, and stock selection in the sector was strong. The exposure to the insurance sector was beneficial and stock selection was again strong, with China Insurance International providing a robust performance. A low exposure to the commercial banking sector was positive, but stock selection detracted from overall performance with Dah Sing Banking Group providing a disappointing return. Stock selection within food products was also negative, including the holding in Global Bio-Chem Technology, as its average selling prices fell substantially in the second half of the year. At a country level, the low exposure to Australia was positive as the country's equity market is dominated by financials and resources groups which suffered during the period. The high weighting in Hong Kong also added to returns. Whilst a low exposure to Korea for the majority of the period was positive, stock selection detracted from performance. Outlook for Asian economies and markets As Asia continues to adjust to the global slowdown, year-on-year comparisons leave many of Asia's key economic indicators in negative territory. However, there are some indications that the pace of decline has started to slow. Looking ahead, we believe that the negative annual comparisons will continue to abate further into the year, particularly from the third quarter onwards. This should signal that the trough of the current cycle has passed. However, our cautiously optimistic outlook is predicated on developed economies also stabilising and the Western financial system improving. In neither case do we require robust recovery, but rather that conditions stop deteriorating and stabilise gradually. This would add impetus to Asia's recovery, which is already likely to outpace that of the West because of Asia's stronger economic fundamentals. Asia's banking systems are generally healthy, with relatively low loan to deposit ratios and high levels of capital. Domestic demand is supported by generally low levels of sovereign, corporate and personal debt. Asia has also seen sustained loosening of monetary policy over recent months which, allied to government stimulus measures, should help to underpin future growth. Corporate earnings have seen significant declines from recent years' highs and the outlook remains tough. Whilst we are not expecting a strong rebound in corporate profits during the year, we are optimistic about the longer-term potential for Asian businesses, and despite the recent rally in markets we believe that the challenging earnings environment is largely discounted in valuations. Currently, many Asian economies, particularly the most export-orientated, are either in or approaching recession but several, including China and India are likely to post GDP growth in 2009. Over time, we expect them to help bring other Asian economies out of recession, and recent data from these economies has been encouraging. In China, this has been assisted by the vast stimulus package announced in November of last year, which is now feeding through into the real economy. China's corporate sector has also seen substantial loan growth, with the annual lending target already met. This has led to concerns about a rise in non-performing loans, and over the medium-term there may be an increase but we believe it will be manageable as much of the lending has been to state-led institutions to build much needed infrastructure. Healthcare is also an area that is experiencing significant investment. This has positive long-term implications, as stronger state provision would encourage greater domestic consumption and could see the traditionally high savings rates in China come down. We do not envisage China returning to double-digit rates of expansion, but we expect growth to be positive and to be well ahead of performance globally in the medium-term. We expect Asia's contribution to global GDP to become increasingly significant in the years ahead, which would be positive for its equity markets. The region is not beset by the structural financial sector issues of the West and we believe it is in a good position to benefit as global economies start to recover. Strategy The Company is positioned to benefit from a sustainable recovery in Asian economies but at the same time we believe our valuation focus helps to limit the potential downside. Consumer demand is a prominent theme within the Trust as we seek to exploit the long-term potential of the Chinese consumer sector. The current exposure is through holdings in companies such as Hengan, Wumart and China Green, which have strong growth prospects and good earnings visibility. We have indirect exposure also to the consumer through the real estate and insurance sectors. We feel that valuations among property groups reflect an overly pessimistic outlook and the immature nature of the insurance sector in China offers the potential for sustainable growth. The semiconductor sector is another area of focus where we hold quality companies, including Samsung Electronics and Taiwan Semiconductor Manufacturing. We believe these will emerge from the economic slowdown with stronger competitive positions and enhanced earnings potential. In our view, many traditional defensive sectors, including utilities and telecoms, are overvalued and already discount an optimistic outlook. The Company has low exposure in these areas and in energy and materials, where we expect the economic background to remain a constraint for earnings in the near-term. We prefer to focus on areas where valuations are undemanding and prospects for sustainable earnings growth are strong. Geographically we favour China, as, in our view, it is best placed to recover from the global downturn. Although the price-to-book value has rebounded to 1.6x on average, it remains below the historical average and we believe that attractive opportunities still exist at the company level. We continue to have low exposure to Australia which has the least attractive equity market prospects in our view. Our focus continues to be on companies with sound balance sheets which can provide reliable earnings and robust levels of cash flow. Valuation is integral to our investment strategy and we seek exposure to businesses where we feel future growth potential is not adequately reflected in stock prices. Stuart Parks Investment Manager 3 July 2009 INVESTMENTS IN ORDER OF VALUATION Classification of Investments at 30 April 2009 Ordinary shares unless stated otherwise R Red Chip Holdings H H-Shares At % of Market Value Portfolio Company Principal Activity Country £'000 Samsung Electronics Technology Hardware South Korea 5,528 5.6 Equipment Taiwan Semiconductor Semiconductors Taiwan 4,977 5.1 Manufacturing Jardine Matheson Capital Goods Hong Kong 4,435 4.5 Wharf Diversified Financials Hong Kong 3,319 3.4 QBE Insurance Insurance Australia 3,066 3.1 China InsuranceR Insurance Hong Kong 3,000 3.0 Far Eastern Textile Capital Goods Taiwan 2,765 2.8 China MobileR Telecommunication Hong Kong 2,550 2.6 Services Ping An InsuranceH Insurance China 2,528 2.6 United Phosphorus Materials India 2,337 2.4 Top Ten Holdings 34,505 35.1 BHP Billiton Materials Australia 2,326 2.4 Shinsegae Food & Staples Retailing South Korea 2,047 2.1 Housing Development Banking India 1,967 2.0 Finance China Life Insurance Taiwan 1,949 2.0 Cheung Kong Real Estate Hong Kong 1,863 1.9 West China Cement Materials United 1,816 1.8 Kingdom KT&G Food, Beverages & Tobacco South Korea 1,766 1.8 China Green Food, Beverages & Tobacco Hong Kong 1,743 1.8 Bank of ChinaH Banking China 1,724 1.7 Bharti Airtel Telecommunication India 1,698 1.7 Services Top Twenty Holdings 53,404 54.3 Newcrest Mining Materials Australia 1,534 1.6 Hengan International Household & Personal Hong Kong 1,530 1.5 Products Jain Irrigation Capital Goods India 1,435 1.5 Infosys Technologies Software & Services India 1,422 1.4 Beijing EnterpriseR Capital Goods Hong Kong 1,405 1.4 SK Telecom Telecommunication South Korea 1,404 1.4 Services PetrochinaH Energy China 1,393 1.4 Industrial & Banking China 1,390 1.4 Commercial Bank of ChinaH Sina Software & Services China 1,311 1.3 Macquarie Korea Transportation South Korea 1,283 1.3 Infrastructure Top Thirty Holdings 67,511 68.5 Keppel Capital Goods Singapore 1,267 1.3 Polaris Securities Diversified Financial Taiwan 1,231 1 2 Korea Electric Power Utilities South Korea 1,228 1.2 Downer Commercial & Professional Australia 1,204 1.2 Services Venture Technology Hardware Singapore 1,171 1.2 Equipment Hon Hai Precision Technology Hardware Taiwan 1,162 1.2 Equipment APA Utilities Australia 1,160 1.2 Delta Electronics Technology Hardware Taiwan 1,095 1.1 Equipment Daegu Bank Banking South Korea 1,088 1.1 China Petroleum & Energy China 1,050 1.1 ChemicalH Top Forty Holdings 79,167 80.3 At % of Market Value Portfolio Company Principal Activity Country £'000 Dah Sing Banking Banking Hong Kong 1,050 1.1 HKR International Real Estate Hong Kong 1,036 1.0 Posco Materials South Korea 985 1.0 Westpac Banking Banking Australia 956 1.0 Filinvest Land Real Estate Philippines 944 1.0 Wumart StoresH Food & Staples Retailing China 904 0.9 PTT Energy Thailand 900 0.9 Chroma ATE Technology Hardware Taiwan 860 0.9 Equipment Cosco PacificR Transportation Hong Kong 854 0.9 Korean Reinsurance Insurance South Korea 854 0.9 Top Fifty Holdings 88,510 89.9 Unilever Indonesia Household & Personal Indonesia 851 0.9 Products M.P. Evans Food, Beverages & Tobacco United 759 0.8 Kingdom Zhejiang ExpresswayR Transportation China 748 0.8 CPN Retail Growth Real Estate Thailand 724 0.7 Wah Lee Industrial Capital Goods Taiwan 700 0.7 Parkway Life Real Real Estate Singapore 679 0.7 Noble Capital Goods Hong Kong 612 0.6 Hong Kong Aircraft Transportation Hong Kong 589 0.6 Bandar Raya Real Estate Malaysia 459 0.5 Development 62 0.1 Ords Warrants 521 0.6 Global Bio-Chem Materials Hong Kong 493 0.5 Technology Top Sixty Holdings 95,186 96.8 Tambang Batubara Materials Indonesia 433 0.4 Petra Foods Food, Beverages & Tobacco Singapore 374 0.4 Taiwan Sogo Shingkong Commercial & Professional Taiwan 374 0.4 Security Services Banco De Oro Banking Philippines 358 0.4 Universal China Real Estate Real Estate United 358 0 4 Opportunities Kingdom Dickson Concept Retailing Hong Kong 348 0.3 Singapore Petrol Energy Singapore 345 0.3 Dabur India Household & Personal India 188 0.2 Products Jardine Strategic Capital Goods Hong Kong 173 0.2 Krisassets Capital Goods Malaysia 87 0.1 Top Seventy Holdings 98,224 99.9 Shandong WeigaoR Healthcare Equipment & China 76 0.1 Services Bharat Heavy Capital Goods India 16 0.0 TOTAL 98,316 100.0 CLASSIFICATION OF INVESTMENTS BY COUNTRY/SECTOR at 30 April 2009 2008 At % of At % of Valuation Portfolio Valuation Portfolio £'000 £'000 Australia Materials 3,860 4.0 6,638 5.6 Consumer Discretionary - - 393 0.3 Industrials 1,204 1.2 1,669 1.4 Financials 4,022 4.1 2,460 2.1 Utilities 1,160 1.2 1,163 1.0 10,246 10.5 12,323 10.4 China Energy 2,443 2.5 771 0.6 Consumer Staples 904 0.9 667 0.6 Consumer Discretionary - - 691 0.6 Industrials 748 0.8 694 0.6 Healthcare 76 0.1 - - Financials 5,642 5.7 701 0.6 Information Technology 1,311 1.3 2,384 2.0 11,124 11.3 5,908 5.0 Hong Kong Energy - - 1,618 1.3 Consumer Staples 3,273 3.3 1,021 0.9 Materials 493 0.5 - - Consumer Discretionary 348 0.3 2,099 1.8 Industrials 8,068 8.2 4,873 4.0 Financials 10,268 10.4 16,021 13.3 Telecommunication Services 2,550 2.6 6,306 5.2 Utilities - - 3 - 25,000 25.3 31,941 26.5 India Consumer Staples 188 0.2 2,482 2.0 Materials 2,337 2.4 2,480 2.1 Consumer Discretionary - - 1,112 0.9 Industrials 1,451 1.5 1,996 1.7 Financials 1,967 2.0 965 0.8 Information Technology 1,422 1.4 1,981 1.6 Telecommunication Services 1,698 1.7 1,237 1.0 9,063 9.2 12,253 10.1 Indonesia Consumer Staples 851 0.9 641 0.5 Materials 433 0.4 1,097 0.9 Industrials - - 333 0.3 1,284 1.3 2,071 1.7 CLASSIFICATION OF INVESTMENTS BY COUNTRY/SECTOR Continued 2009 2008 At % of At % of Valuation Portfolio Valuation Portfolio £'000 £'000 Malaysia Consumer Discretionary - - 604 0.5 Industrials 87 0.1 74 0.1 Financials 521 0.6 1,699 1.4 Utilities - - 428 0.4 608 0.7 2,805 2.4 Philippines Consumer Staples - - 417 0.3 Financials 1,302 1.4 2,413 2.0 1,302 1.4 2,830 2.3 Singapore Energy 345 0.3 2,598 2.2 Consumer Staples 374 0.4 660 0.6 Industrials 1,267 1.3 2,923 2.4 Healthcare - - 1,367 1.1 Financials 679 0.7 2,505 2.1 Information Technology 1,171 1.2 1,106 0.9 3,836 3.9 11,159 9.3 South Korea Consumer Staples 3,813 3.9 - - Materials 985 1.0 1,138 0.9 Industrials 1,283 1.3 4,099 3.4 Financials 1,942 2.0 6,283 5.2 Information Technology 5,528 5.6 5,218 4.3 Telecommunication Services 1,404 1.4 - - Utilities 1,228 1.2 - - 16,183 16.4 16,738 13.8 Taiwan Materials - - 186 0.2 Consumer Discretionary - - 1,637 1.4 Industrials 3,839 3.9 1,236 1.0 Financials 3,180 3.2 7,130 6.0 Information Technology 8,094 8.3 7,840 6.5 15,113 15.4 18,029 15.1 Thailand Energy 900 0.9 - - Financials 724 0.7 816 0.7 1,624 1.6 816 0.7 CLASSIFICATION OF INVESTMENTS BY COUNTRY/SECTOR Continued 2009 2008 At % of At % of Valuation Portfolio Valuation Portfolio £'000 £'000 Other Materials 1,816 1.8 748 0.6 Financials 358 0.4 1,335 1.1 Consumer Staples 759 0.8 1,199 1.0 2,933 3.0 3,282 2.7 Total 98,316 100.0 120,155 100.0 RELATED PARTY TRANSACTIONS David Hinde, the Chairman of the Company, is a non-executive director of Dah Sing Banking Group, and the Fund holds shares in that company equivalent to 1.1% (2008: 1.3%) of the value of the portfolio. The Board has delegated authority for investment selection to the Manager and the Manager has selected this investment independently in accordance with the investment objective set out in the annual financial report. The Board as a whole reviews the investment portfolio on a regular basis and is satisfied that the investment was selected in an objective manner and that no conflict of interest has arisen as a result of the selection of this stock. PRINCIPAL RISKS AND UNCERTAINTIES The principal risk factors relating to the Company can be divided into the following areas: Investment Objective The Company's investment objective is described in the annual financial report. There is no guarantee that the Company's investment objective will be achieved or will provide the returns sought by the Company. Investment Process and Policy At the core of the investment manager's philosophy is a belief in active investment management. Fundamental principles drive a genuinely unconstrained investment approach, which aims to deliver attractive total returns over the long term. The investment process emphasises pragmatism and flexibility, active management, a focus on valuation and the combination of top-down and bottom-up fundamental analysis. Bottom-up analysis forms the basis of the investment process. It is the key driver of stock selection and is expected to be the main contributor to alpha generation within the portfolio. Portfolio construction at sector level is largely determined by this bottom-up process but is also influenced by top-down macro economic views. Research is structured to provide a detailed understanding of a company's key historical and future business drivers, such as demand for its products, pricing power, market share trends, cash flow and management strategy. This allows the Manager to form an opinion on a company's competitive position, its strategic advantages/disadvantages and the quality of its management. Each member of the investment management team travels to the region between three and four times per year. In total the team has contact with around 700 companies a year. The Manager will also selectively use valuation models in order to understand the assumptions that the brokers/analysts have incorporated into their valuation conclusions and as a structure into which the Manager can input his own scenarios. Risk Management is an integral part of the investment management process. Core to the process is that risks taken are not incidental but are understood and taken with conviction. The Manager effectively controls stock-specific risk by ensuring that portfolios are always appropriately diversified. Also, in-depth and constant fundamental analysis of the portfolio's holdings provide the Manager a thorough understanding of the individual stock risk taken. The internal Performance and Risk team, an independent team, ensures that the manager adheres to the portfolio's investment objectives, guidelines and parameters. There is also a culture of challenge and debate between managers regarding portfolio construction and risk. Portfolio performance is substantially dependent on the performance of Asian and Australasian equities. These stocks are influenced by the general health of the economies in the Far Eastern region. The Board recognises that market conditions will affect portfolio performance. For a fuller discussion of the economic and market conditions facing the Company and the prospects for future performance, please see the Chairman's Statement and the Manager's Report in the annual financial report. Market Movement and Portfolio Performance The Company's investments are traded on the Far Eastern, Indian and Australasian stockmarkets. The principal risk for investors in the Company is of a significant fall and/or a prolonged period of decline in the markets. This could be triggered by unfavourable developments within the region or events outside it. Additionally, performance can be geared by bank borrowings which may accentuate any decline in performance. Other significant risks include consistent underperformance by the Manager, or the market rating of the Company failing to reflect good performance. The value of investments held within the portfolio is influenced by many factors including the general health of the world economy, interest rates, inflation, government policies, industry conditions, political and diplomatic events, tax laws, environmental laws, and by changing investor demand. The Manager strives to maximise the return from the investments held, but these investments are influenced by market conditions and the Board acknowledges the external influences on portfolio performance. While the Board obviously cannot influence market movements, it is vigilant in monitoring and taking steps to mitigate the effects of falls in markets should they occur. As has been indicated, the performance of the Manager is carefully monitored by the Board, and the continuation of the Manager's mandate is revisited annually. The Board has established guidelines to ensure that the investment policy that it has approved is pursued by the Manager. The Board and the Manager maintain an active dialogue with the aim of ensuring that the market rating of the Company's shares reflects the underlying net asset value, and buy-back facilities are in place to assist in the management of this process. Share issuance facilities were rejected by shareholders at the AGM held in 2008. The past performance of the Company, and all of the investments in the portfolio, are not necessarily indicative of future performance. Foreign Exchange Risks The Company will account for its activities and report its results in sterling while investments will be made and realised in other currencies. The net asset value of the Company will be reported in sterling. It is not generally the Company's policy to engage in currency hedging. Accordingly, the movement of exchange rates between sterling and the other currencies in which the Company's investments are denominated or its borrowings are drawn down may have a material effect, unfavourable or favourable, on the returns otherwise experienced on the investments made by the Company. The Ordinary Shares The market value of, and the income derived from, the Company's ordinary shares can fluctuate and may go down as well as up. The market value may not always reflect the NAV per ordinary share. The market price of an ordinary share may therefore trade at a discount to its NAV. As at 30 April 2009, an ordinary share of the Company traded at a discount of 8.8%. The market value of the ordinary shares will be affected by a number of factors, including the dividend yield from time to time of the ordinary shares, prevailing interest rates and supply and demand for those ordinary shares, along with wider economic factors and changes in the law, including tax law and political factors. As such, the market value of an ordinary share may vary considerably from its underlying value. There can be no guarantee that any appreciation in the value of the Company's investments will occur and investors may not get back the full value of their investment. Although the ordinary shares are listed on the Official List and admitted to trading on the London Stock Exchange's main market for listed securities, it is possible that there may not be a liquid market in the ordinary shares and shareholders may have difficulties in selling them. Derivatives The Company may enter into derivative transactions for efficient portfolio management. Derivative instruments can be highly volatile and expose investors to a high risk of loss. There is a risk that the returns on the derivative do not exactly correlate to the returns on the underlying investment, obligation or market sector being hedged against. If there is an imperfect correlation, the Company may be exposed to greater loss than if the derivative had not been entered into. Gearing Performance may be geared by way of an unsecured £15 million credit facility. In current market conditions, there is no guarantee that the Company's bank loan facility would be renewable at maturity or on terms acceptable to the Company. If it were not possible to renew this facility or replace it with another lender, the amounts owing by the Company would need to be funded by the sale of securities. Gearing levels may change from time to time in accordance with the Manager's assessment of risk and reward. As a consequence of gearing, any reduction in the value of the Company's investments would lead to a correspondingly greater reduction in its net asset value (which is likely to affect the Company's share price adversely). Any reduction in the number of shares in issue (for example as a result of buy-backs) will, in the absence of a corresponding reduction in borrowings, result in an increase in the Company's gearing. Regulatory and Tax Related The Company is subject to various laws and regulations by virtue of its status as an investment trust and its listing on the London Stock Exchange. A breach of s842 ICTA could lead to the Company being subject to capital gains tax on the profits arising from the sale of its investments. A serious breach of other regulatory rules might lead to suspension from the Stock Exchange or to a qualified Audit Report. Other control failures, either by the Manager or any other of the Company's service providers, might result in operational or reputational problems, erroneous disclosures or loss of assets through fraud, as well as breaches of regulations. The Manager reviews the level of compliance with s842 ICTA and other financial regulatory requirements on a regular basis. All transactions, income and expenditure are reported to the Board. The Board regularly considers all perceived risks and the measures in place to control them. The Board ensures that satisfactory assurances are received from service providers. The Manager's Compliance and Internal Audit Officers produce regular reports for review by the Company's Audit Committee. Risks and risk management policies are also detailed in the notes to the financial statements. DIRECTORS' RESPONSIBILITY STATEMENT IN RESPECT OF THE PREPARATION OF THE ANNUAL FINANCIAL REPORT The Directors are responsible for preparing the annual financial report in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare financial statements in accordance with United Kingdom Generally Accepted Accounting Practice. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to: - select suitable accounting policies and then apply them consistently; - make judgments and estimates that are reasonable and prudent; - state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors, to the best of their knowledge, state that: - the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and - the Report of the Directors 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 Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with Company Law (as updated by the Companies Act 2006). They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. David Hinde Chairman Signed on behalf of the Board of Directors 3 July 2009 INCOME STATEMENT for the year ended 30 April 2009 2008 Revenue Capital Total Revenue Capital Total return return return return return return £'000 £'000 £'000 £'000 £'000 £'000 (Losses)/gains on investments - (19,748) (19,748) - 17,239 17,239 (Losses)/gains on foreign currency revaluation - (98) (98) - 50 50 Income 2,711 - 2,711 3,247 - 3,247 Investment management fee (165) (496) (661) (250) (750) (1,000) Other expenses (437) (23) (460) (441) (30) (471) Return before finance costs and taxation 2,109 (20,365) (18,256) 2,556 16,509 19,065 Finance costs (11) (34) (45) (120) (361) (481) Return on ordinary activities before tax 2,098 (20,399) (18,301) 2,436 16,148 18,584 Tax on ordinary activities (635) 149 (486) (674) 182 (492) Net return on ordinary activities after tax for the financial year 1,463 (20,250) (18,787) 1,762 16,330 18,092 Return per ordinary share: Basic 1.6p (21.6)p (20.0)p 1.8p 16.2p 18.0p The total column of this statement represents the Company's profit and loss account prepared in accordance with the accounting polices detailed in note 1 to the financial statements. The supplementary revenue and capital columns are prepared in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies. All items in the above statement derive from continuing operations and the Company has no other gains or losses, therefore no statement of total recognised gains and losses is presented. No operations were acquired or discontinued in the year. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 30 April Capital Share Share Redemption Special Capital Revenue Capital Premium Reserve Reserve Reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 30 April 2007 10,596 74,588 650 25,796 2,145 2,371 116,146 Net return for - - - - 16,330 1,762 18,092 the year Final dividend - - - - - (1,378) (1,378) Shares bought back and cancelled (1,213) - 1,213 (13,998) - - (13,998) At 30 April 2008 9,383 74,588 1,863 11,798 18,475 2,755 118,862 Net return for - - - - (20,250) 1,463 (18,787) the year Final dividend - - - - - (1,408) (1,408) At 30 April 2009 9,383 74,588 1,863 11,798 (1,775) 2,810 98,667 BALANCE SHEET at 30 April 2009 2008 £'000 £'000 Fixed assets Investments designated at fair value 98,316 120,155 Current assets Debtors 651 555 Cash at bank 568 1,123 1,219 1,678 Creditors: amounts falling due within one (795) (2,858) year Net current assets/(liabilities) 424 (1,180) Total assets less current liabilities 98,740 118,975 Provisions (73) (113) Total net assets 98,667 118,862 Capital and reserves Share capital 9,383 9,383 Share premium 74,588 74,588 Other reserves: Capital redemption reserve 1,863 1,863 Special reserve 11,798 11,798 Capital reserve (1,775) 18,475 Revenue reserve 2,810 2,755 Total Shareholders' funds 98,667 118,862 Net asset value per ordinary share Basic 105.1p 126.7p CASH FLOW STATEMENT for the year ended 30 April 2009 2008 £'000 £'000 Cash inflow from operating activities 1,405 979 Servicing of finance (41) (483) Taxation (112) (206) Capital expenditure and financial investment 2,199 20,299 Dividends paid (1,408) (1,378) Net cash inflow before management of liquid resources and financing 2,043 19,211 Management of liquid resources 56 412 Financing (2,500) (19,498) (Decrease)/increase in cash in the year (401) 125 Reconciliation of cash flow to movement in net funds /(debt) (Decrease)/increase in cash in the year (401) 125 Cash outflow from movement in debt 2,500 5,500 Cash inflow from decrease in liquid resources (56) (412) Change in net funds/(debt) resulting from cash flows 2,043 5,213 Translation differences (98) 50 Movement in net funds/(debt) in the year 1,945 5,263 Net debt at beginning of year (1,377) (6,640) Net funds/(debt) at end of year 568 (1,377) NOTES 1. Basis of Preparation Accounting Standards Applied The financial statements have been prepared under the historical cost convention, except for the measurement at fair value of investments, and in accordance with applicable United Kingdom Accounting Standards and with the Statement of Recommended Practice (`SORP') `Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the Association of Investment Companies in 2009. 2. Income 2009 2008 £'000 £'000 Income from investments Overseas dividends 2,599 2,817 Scrip dividends 58 385 UK dividends 19 19 Total dividend income 2,676 3,221 Other income Interest 35 26 Total income 2,711 3,247 3. Investment management fee 2009 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Investment management fee 167 503 670 250 750 1,000 VAT recovered on management fees (2) (7) (9) - - - 165 496 661 250 750 1,000 4. Return per Ordinary Share The revenue, capital and total returns per ordinary share are based on each applicable return on ordinary activities after tax and on 93,837,425 (2008: 100,690,977) ordinary shares, being the weighted average number of shares in issue throughout the year. 5. Net asset value The net asset value per ordinary share and the net assets attributable at the year-end were as follows: Net asset value Net assets per share attributable 2009 2008 2009 2008 Pence Pence £'000 £'000 Ordinary shares - Basic 105.1 126.7 98,667 118,862 The basic net asset value per ordinary share is based on the net assets at the year-end and on 93,837,425 (2008: 93,837,425) ordinary shares, being the number of ordinary shares in issue at the year-end. The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 30 April 2009 have been agreed with the auditors and are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2008 and 2009 statutory accounts received unqualified reports from the Company's auditors and did not include any reference to matters to which the auditors drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s498 of the Companies Act 2006. The financial information for 2008 is derived from the statutory accounts for 2008 which have been delivered to the Registrar of Companies. The 2009 accounts will be filed with the Registrar of Companies in due course. The Annual General Meeting of the Company will be held at 12.00 noon on 12 August 2009 at 30 Finsbury Square, London EC2A 1AG. The audited Annual Financial Report will be posted to shareholders shortly. Copies may be obtained during normal business hours from the Company's Registered Office, 30 Finsbury Square, London EC2A 1AG. By order of the Board Invesco Asset Management Limited 3 July 2009

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