Annual Financial Report Announcement

RNS Number : 9074Q

Aberdeen Asian Smaller Co's Inv Tst

21 October 2013

 



ABERDEEN ASIAN SMALLER COMPANIES INVESTMENT TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JULY 2013

1.  CHAIRMAN'S STATEMENT

Results

I am very pleased to report that, for the year ended 31 July 2013, the diluted net asset value ("NAV") total return was 35.0%. During the same period, the MSCI AC Asia Pacific ex Japan Index's total return was 11.4% and the MSCI AC Asia Pacific ex Japan Small Cap Index's total return was 15.6%.

During the year, the share price rose by 36.7% on a total return basis, ending at £10.00 per share on 31 July 2013 moving from a discount of 0.6% to a 0.7% premium to the diluted NAV.  At the time of writing (18 October 2013), the share price was 999.5p and the diluted NAV stands at 947.2p, with the premium to diluted NAV at 5.5%.

The continuing strong performance of the Company in volatile markets once again validates your Manager's disciplined investment approach. The focus on investing in quality companies backed by robust cash flows, strong balance sheets and proven management has been the cornerstone of the Company's success over the last 18 years and the returns for the Company are testament to the soundness of this approach. The Manager's Review discusses this performance in detail.

Overview

Asian markets had another good year driven by the loose monetary policies of the major Central Banks. These gains, however, masked underlying volatility. In the last quarter of the financial year, Asia and other emerging markets bore the brunt of the sharp sell-off as investors adjusted to the prospect of an end to cheap funding. Regional currencies that were deemed vulnerable to capital flight, owing to their high current account deficits, came under pressure with the Rupiah, Thai Baht, Malaysian Ringgit and Indian Rupee all falling against the US Dollar. Since July, these concerns have increased with the Indian and Indonesian Central Banks intervening to stem currency slides.

The region is seeing signs of an economic slowdown. This emanated in China, where the new leadership is attempting to restructure the investment-led economy towards a more sustainable consumption-led one. India has been affected by lack of political action leading to underinvestment into badly needed infrastructure, high inflation and growing deficits. Similarly Indonesia's economy, one of the more resilient in the region because of its large domestically-driven economy, has also lost momentum.  Regional Central Banks have followed the lead of the US Federal Reserve and continued with loose monetary policies, however the Indonesian and Indian Central Banks have recently raised interest rates on inflation concerns.

Despite these challenges, the region still benefits from growth numbers that the developed economies cannot begin to match and we expect these to continue albeit at a slower rate.

Benefits of investing in smaller companies

Encouragingly, during last year, smaller Asian companies continued to outperform their large-cap counterparts. Our emphasis on well founded and managed businesses will give us an element of protection during this period of market adjustment and may well throw up opportunities for the more nimble. We have seen some M&A activity with the recent acquisition of Thai cash-and-carry wholesaler Siam Makro by convenience store operator CP All, and Singapore-based property, engineering and construction firm United Engineers' takeover of conglomerate WBL Corp. 

Dividend

As I have advised in previous years, subject to market conditions, it is your Company's aim to maintain or increase the Ordinary dividend so that shareholders can rely on a consistent stream of income.  Therefore, we are pleased to recommend for this year the payment of an increased final dividend of 10.0p per Ordinary share (2012: 9.5p) and the payment of a special dividend of 3.0p (2012: 3.0p) which approximately reflects the level of special dividends that were received during the year. If approved by shareholders at the Annual General Meeting of the Company on 3 December 2013, the final and special dividends will be paid on 6 December 2013 to shareholders on the register on 1 November 2013.

Gearing and share capital management

The Company's year-end net gearing was 3.8%.  The gearing is provided by the Convertible Unsecured Loan Stock of which approximately £33.3 million remains outstanding.  The Company also has a £2 million loan facility with The Royal Bank of Scotland but no drawings were made under this facility during the year. The Directors monitor the Company's gearing on a regular basis in accordance with the Company's investment policy and under advice from the Manager.

During the year there has been strong demand for the Company's shares and they have traded at a premium to the underlying NAV per share for a significant part of the year.  As a result the Company has been able to sell shares from treasury and to issue new Ordinary shares for cash at a premium to NAV and a total of 1.1 million shares were sold from treasury and 1.5 million new shares were issued in the year raising over £24 million.  Subsequent to the year end a further 140,000 new shares have been issued for cash.  The Directors monitor the market in the Company's shares and further issues of new shares may be made as and when there is unfulfilled demand.

Annual General Meeting

The Annual General Meeting is scheduled to be held on 3 December 2013 at 11.30 a.m.  In addition to the usual ordinary business, as special business the Board is seeking to renew its authority to issue new shares and sell treasury shares for cash at a premium without pre-emption rules applying and to renew its authority to buy back shares and either hold them in treasury for future resale (at a premium to the prevailing net asset value per share) or cancel them.  At the conclusion of the AGM there will be an opportunity for shareholders to meet the Board and the Manager over a buffet lunch and your Board looks forward to seeing as many shareholders as possible.  The Board is happy to take general questions on the Annual Report and Accounts at the meeting but would advise that questions of a technical nature should be addressed in writing to the Company Secretary, in advance.

Directorate

Alan Kemp has advised that he intends to retire from the Board at the AGM and he will not be seeking re-election.  I would like to take this opportunity to thank Alan, on behalf of the shareholders, for his dedicated service and outstanding contribution to the Company since his appointment in 1996. He has served with distinction as a Director and also in the often unacknowledged but demanding role as Chairman of the Audit Committee. 

I am very pleased to welcome Randal Dunluce and Mark Hadsley-Chaplin to the Board as independent non-executive Directors of the Company. They were appointed on 1 July 2013, and their appointment represented the culmination of a detailed search process which utilized the services of an external recruitment agency.  Randal and Mark bring a wealth of international and commercial experience to the Board. In accordance with the Company's Articles of Association, Randal and Mark will retire at the forthcoming AGM and submit themselves for election.

Following Alan Kemp's retirement at the AGM in December Chris Maude has agreed to become Chairman of the Audit Committee.

Outlook

As I mentioned in the Half Yearly Report, the investment environment continues to be challenging and we believe that it is right to be cautious in the current year. The climate in the wider world economy as well as in Asia continues to be plagued with uncertainties. Most regional economies have better defences to withstand any economic fallout as the stronger external accounts and higher reserves common to the region give Governments the scope to both absorb losses and stimulate their economies. Smaller companies earn most of their profits from domestic markets, compared to large caps which are more exposed to global conditions. Your Company, with its heavy exposure to consumer-related sectors, where prospects remain upbeat, is therefore well positioned to take advantage of these opportunities.

The care with which your Manager selects and monitors the companies in which we invest should continue to deliver good long term returns but with markets volatile and the economies of the region slowing, it is difficult to make any predictions for the short term.

Nigel Cayzer

Chairman

18 October 2013

2.  MANAGER'S REPORT

Overview

Asian equities posted solid gains during the year under review, despite volatility in the final two months. Smaller companies outpaced their larger counterparts. Regional markets rose steadily through most of the period, buoyed by flush liquidity. This was mainly the result of stimulatory policy responses, as sovereign debt woes in Europe and a potential US fiscal cliff threatened the nascent global recovery. The US Federal Reserve launched its third round of quantitative easing, while the European Central Bank cut interest rates and initiated its own bond-buying programme. Given ultra-loose monetary conditions in the West, yield-seeking capital flowed from developed markets to emerging markets. Asia was a key beneficiary.

However, markets reeled in June, when Fed chairman Bernanke appeared to signal a tapering of bond purchases later in the year. The knee-jerk sell-off underscored the extent to which sentiment was driven by policy expectations rather than fundamentals. A cash crunch in China's interbank lending market also came at an inopportune time, compounding market volatility. Subsequently, reassurances from key central banks of continued accommodative policy led to a late rebound. 

On the economic front, conditions worsened as sluggish external demand hurt manufacturers and exporters. China's slowdown was worrying, given its importance as an export destination for the rest of Asia. Even countries with a big domestic base, such as Indonesia and Malaysia, were not immune. Inflation was mostly benign, thus freeing central banks to cut interest rates to support growth. Unsurprisingly, economic restructuring received greater urgency. China implemented measures to rebalance towards domestic-led growth. India attempted to enact bold reforms, such as liberalising the banking and retail sectors as well as reducing fuel subsidies. Hong Kong and Singapore were more concerned with tackling overheating in specific areas, such as property.

Portfolio review

The portfolio's outperformance was driven by our consumer holdings in South-east Asia, which benefited from resilient domestic demand and were less sensitive to external weakness. We favour the consumer sector because business models are simple and we have found some good quality companies there. Many companies have incumbent advantages of efficient and well-established distribution networks, while regulations help limit foreign competition. Further, they are often family-owned, conservative in approach and have low borrowing levels. This often translates to a net cash position, with solid returns on equity and assets.

In Malaysia, Shangri-La Hotels posted higher-than-expected earnings, as occupancy levels rebounded at a key resort, following major refurbishment. It expects occupancy to rise at its hotels and resorts, and prime office rentals in the capital of Kuala Lumpur to hold up well with regard to its investment properties.  Retailer Aeon was bolstered by contributions from new stores and rental growth in its property management business. The company is well managed and continues to fund expansion through healthy cash flows. Pos Malaysia, meanwhile, appeared to make good progress on its restructuring. Its latest results showed improvements in direct mail revenues and higher courier volumes. The potential extension into gold pawning should help ease margin pressure and alleviate its high fixed-cost structure. Management continues to extract value from its assets, such as the postal network and land bank. Another solid performer was brewer Guinness Anchor, which consolidated its market leadership through effective advertising and promotions. It remains focused on enhancing its core products while keeping a tight rein on cost.   

In Thailand, cash-and-carry store operator Siam Makro delivered solid full-year profits, underpinned by better margins. Its emphasis is on domestic expansion, with a long-term target of having at least one store in every province. The company's share price rose sharply after convenience store operator CP All offered to acquire a 64.3% stake at 787 baht per share. We pared our position following the record tender offer. At the time of writing, we have accepted CP All's offer and sold out of Siam Makro, given the good exit price.

Elsewhere, Indonesian brewer Multi Bintang Indonesia benefited from a good set of quarterly results that highlighted continued growth in its flagship Bintang Beer and robust sales for its non-alcoholic Bintang Zero drink. It also produces Heineken beer and is the dominant domestic player. Recent news that the government is planning to loosen rules on the alcoholic beverages sector and allow producers to expand output is also positive for the brewer's prospects.

Portfolio activity

We invested in four new holdings over the year. One of them was Singapore-listed Yoma Strategic, which has quality property assets in Myanmar. Yoma is well placed to capitalise on the pressing need for top-quality hotels, serviced apartments and residential housing, particularly in Yangon. It has other interests in agriculture, automotive, retail and tourism. Yoma is also a good proxy for the resource-rich economy, which is reaping the benefits of re-assimilation into the global community after decades of international isolation.

In Thailand, we initiated a position in Thai Stanley Electric, a manufacturer of automotive light bulbs and other lighting parts which counts carmakers Honda, Nissan and Toyota among its major clients. Backed by a net-cash balance sheet, the company is investing 1.7 billion baht to expand capacity. Over the longer term, it is eyeing joint ventures with domestic partners in other Asian countries including Indonesia, Laos and Vietnam.

The other two new holdings are from India. We bought a stake in Linde India, a supplier of industrial gases, during a placement by the parent, Linde Group, to reduce its shareholding to comply with new exchange rules. Listed in 1959, the company was absorbed by Linde as part of its acquisition of BOC Group in 2006. It is a leading domestic player with more than 20 plants. The company also has a sizeable engineering division, which derives most of its business from repeat customers. Other strengths include a well-developed franchise and access to its parent company's technology and project execution know-how. While the company has been aggressively expanding capacity, this has been underpinned by steady cash flows over the past few years.

The other entrant, Madras Cement, is a regional player with exposure to consumer and infrastructure spending in southern India. While its earnings were weighed down by overcapacity, we expect the situation to improve once infrastructure investments picks up. We favour the company for its operating efficiency and cash flow visibility, although its high dependence on imported coal makes it vulnerable to volatile coal prices and rupee weakness.

In a significant portfolio-related development, Singapore's Straits Trading Co (STC) accepted United Engineers' latest offer of S$4.50 a share for WBL Corp after previous rejections. We believe that the revised bid better reflects WBL's value and are pleased that we will benefit from the deal through our holding in STC.

Outlook

While the global backdrop remains challenging, we view hasty portfolio changes in response to short-term market noise as a fool's game. Certainly, there is cause for caution in view of China's slowing growth and Europe's fiscal fissures. The likelihood of a Fed tapering is increasing in tandem with improvements in the US economy, with June's volatility giving a foretaste of how markets are likely to react should that happen. Asia and the broader emerging markets, as well as currencies, could face further pressure from liquidity tightening and capital outflows.

Given those uncertainties, it would be imprudent to expect corporate earnings and portfolio performance over the short run to remain as robust as that of the past year. We are already seeing some pressure on corporate revenues, which could translate into lower earnings. That said, the longer-term prospects of Asia, and its smaller companies, are attractive when one considers growth potential, fundamentals and demographics. It is still the world's fastest-growing region. Corporate and government balance sheets are mostly solid. Asia is also home to an expanding and increasingly affluent middle class, which bodes well for future consumption. Ultimately, we are convinced that investing in well-run companies with good market positions at the right price is the sensible way to achieve long-term returns. This approach has served us well thus far.

Aberdeen Asset Management Asia Limited

18 October 2013

3.  RESULTS

	31 July 2013	31 July 2012	% change
Total assets	£414,620,000	£294,157,000	+41.0
Total equity shareholders' funds (net assets)	£382,932,000	£260,994,000	+46.7
Share price (mid market)	1000.00p	742.00p	+34.8
Net Asset Value per share (basic)	1013.82p	746.55p	+35.8
Net Asset Value per share (diluted)	992.81p	746.55p	+33.0
Premium/(discount) to Net Asset Value (diluted)	0.7%	-0.6%
MSCI AC Asia Pacific ex Japan Index (currency adjusted, capital gains basis)	543.15	503.14	+8.0
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted, capital gains basis)	1,159.26	1,032.84	+12.2
Net gearing{A}	3.8%	10.0%
Dividends and earnings
Total return per share (basic){B}	275.43p	68.56p
Revenue return per share (basic)	13.84p	13.18p	+5.0
Dividends per share{C}	13.00p	12.50p	+4.0
Dividend cover	1.06	1.05	+1.0
Revenue reserves{D}	£9,152,000	£8,513,000	+7.5
Operating costs
Ongoing Charges Ratio{E}	1.25%	1.51%
{A} Calculated in accordance with AIC guidance "Gearing Disclosures post RDR"
{B} Measures the total earnings for the year divided by the weighted average number of Ordinary shares in issue (see note 8).
{C} The figures for dividends per share reflect the dividends for the year in which they were earned.
{D} Prior to payment of final and special dividends.
{E} Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses divided by the average cum income net asset value throughout the year.  Management fees are charged on the basis of the average net asset value of the Company over a rolling 24 month period.

Performance (total return)

	1 year	3 year	5 year	Since
	% return	% return	% return	inception
Share price	+36.7	+112.6	+309.0	+1319.3
Net Asset Value per Ordinary share - diluted	+35.0	+85.7	+240.7	+1197.5
MSCI AC Asia Pacific ex Japan Index (currency adjusted)	+11.4	+22.3	+61.8	+187.4
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted)	+15.6	+13.8	+63.6	N/A
Source: Aberdeen Asset Management PLC, Fundamental Data, Factset & Russell Mellon

Dividends

	Rate	xd date	Record date	Payment date
Proposed final 2013	10.00p	30 October 2013	01 November 2013	06 December 2013
Proposed special 2013	3.00p	30 October 2013	01 November 2013	06 December 2013
	13.00p
Final 2012	9.50p	17 October 2012	19 October 2012	23 November 2012
Special 2012	3.00p	17 October 2012	19 October 2012	23 November 2012
	12.50p

4.  BUSINESS REVIEW

The business of the Company is that of an investment trust investing in the economies of Asia and Australasia excluding Japan. The Company is registered as a public limited company in England & Wales with registered number 03106339 and is an investment company as defined by Section 833 of the Companies Act 2006. 

The investment objective of the Company, approved by shareholders at the General Meeting held on 17 May 2012, is to maximise total return to shareholders over the long term from a portfolio of smaller quoted companies (with a market capitalisation of up to approximately US$1 billion at the time of investment) in the economies of Asia and Australasia, excluding Japan. 

The Company does not have a benchmark. The Manager utilises two general regional indices, the MSCI AC Asia Pacific ex Japan Index (currency adjusted) and the MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted), as well as peer group comparisons for Board reporting. It is likely that performance will diverge, possibly quite dramatically in either direction, from these or any other indices. The Manager seeks to minimise risk by using in depth research and does not see divergence from an index as risk.

A review of the Company's activities is given in the Chairman's Statement and the Manager's Review. This includes a review of the business of the Company and its principal activities, likely future developments of the business, recommended dividends and details of the issue of new shares during the year by the Company. The major risks associated with the Company are detailed below.  The Key Performance Indicators for the Company are NAV performance and share price performance and are detailed above under Results.

Principal Risk Factors

1. General Market Risks

1.1 Securities issued by the Company are designed to be held over the long-term and may not be suitable as short-term investments. There can be no guarantee that any appreciation in the value of the Company's investments will occur and the value of securities issued by the Company may go down as well as up. Accordingly, investors may not get back the full value of their original investment in any such securities.

1.2 The past performance of the Company is not, and should not be relied upon as, a guide to the future performance of the Company and there can be no guarantee that the Company will achieve its investment objective.

1.3 There can be no guarantee that a liquid market will exist in securities issued by the Company and it may be difficult to realise an investment in such securities at their quoted market price.

1.4 An investment in the Company should constitute part of a diversified investment portfolio and is only suitable for investors capable of evaluating the risks (including the potential risk of capital loss) and merits of such investment and who have sufficient resources to bear any loss which may result from such investment.

2. CULS

2.1 The market price of the CULS will be influenced by a number of factors, including the supply of, and demand for, CULS, the price, NAV and dividend yield of the Ordinary shares, prevailing interest rates, market conditions and investor sentiment, either general or specific to the Company and there can be no guarantee that the market price of the CULS will fully reflect any value inherent in their convertibility into Ordinary shares. Accordingly, the value of an investment in the CULS may go down as well as up and CULS Holders may not be able to realise the amount of their original investment.

2.2 If, at any time after 31 May 2014, the middle market price of the Ordinary shares is 20 per cent. or more above the Conversion Price for at least 20 dealing days during a period of 30 consecutive dealing days, the Company will be able to require CULS Holders to redeem their CULS at par. In such event, CULS Holders would be given a final opportunity to convert their CULS into Ordinary shares. Following conversion of 80 per cent. or more of the CULS originally issued, the Company will be entitled to require remaining CULS Holders to convert their outstanding CULS into Ordinary shares after they have been given an opportunity to have their CULS redeemed. If at any time after 31 May 2014 the nominal value of the outstanding CULS represents 30 per cent. or more of the Company's net assets, the Company shall be entitled to redeem all outstanding CULS at its nominal amount together with accrued interest up to (but excluding) the date of redemption. If any of these situations were to occur, CULS Holders would not be able to hold their CULS until the final maturity date of the CULS of 31 May 2019 and to have their CULS redeemed for cash on that date.

2.3 The CULS Trust Deed does not contain any restriction on borrowings (including borrowings ranking ahead of the CULS), the disposal of assets or the creation of charges by, or changes in, the nature of the business of the Company. Any material increase in the Company's borrowings, material disposal of assets or creation of charges by, or material changes in, the nature of the Company's business could adversely affect the rights of the CULS Holders and the value of the CULS and/or the Ordinary shares.

2.4 On a winding-up of the Company, the nominal amount of the CULS will rank ahead of the Ordinary shares but will be subordinated to the Company's other borrowings and creditors. Therefore, the rights and remedies available to the CULS Trustee and CULS Holders may be limited by applicable winding-up, insolvency, re-organisation, moratorium or similar provisions relating to or affecting creditors' rights generally.

3. Ordinary Shares

3.1 The Company will only pay dividends on the Ordinary shares to the extent that it has profits available for that purpose, which will largely depend on the amount of income that the Company receives on its investments and the timing of such receipt. Accordingly, the amount of dividends payable by the Company may fluctuate.

3.2 The market price and the realisable value of the Ordinary shares as well as being affected by their underlying net asset value, also take into account supply and demand, market conditions and general investor sentiment. As such, the market value and the realisable value of the Ordinary shares may fluctuate and vary considerably from the NAV per Ordinary Share and may fall when the underlying NAV per Ordinary Share is rising, or vice versa. Accordingly, the value of an investment in the Ordinary shares may go down as well as up and shareholders may not be able to realise the amount of their original investment.

3.3 The Company does not have a fixed winding-up date and shareholders have no right to have their Ordinary shares repurchased by the Company. Accordingly, unless shareholders vote to wind up the Company, shareholders wishing to realise their investment in the Company will be required to dispose of their Ordinary shares through the market and they may be unable to realise their Ordinary shares at their quoted market price.

3.4 In the event of a winding-up of the Company, the Ordinary shares will rank behind any creditors or prior ranking capital of the Company, including the CULS.

4. The Company's Investments

4.1 Investment in Far East equities or those of companies that derive significant revenue or profit from the Far East involves a greater degree of risk than that usually associated with investment in the securities in major securities markets. The securities that the Company owns may be considered speculative because of this higher degree of risk.

4.2 The Company's investments are subject to normal market fluctuations and the risks inherent in the purchase, holding or selling of securities and there can be no assurance that appreciation in the value of those investments will occur. Investment in emerging securities markets in the Asia Pacific region involves a greater degree of risk than that usually associated with investment in more developed securities markets including the risk of social, economic and political instability which may have an adverse effect on economic reforms or restrict investment opportunities.

4.3 There are many factors, including changes in economic or industry conditions (including, for example, interest rates, recession, inflation, deflation, foreign exchange rates, demand for or production of commodities and competition), changes in environmental, tax or other laws or regulations, natural disasters, social or political instability, events or trends, acts of terrorism or war and general investor sentiment which could have a material adverse effect on the value of the Company's investments or materially restrict the investment opportunities available to the Company and, therefore, could substantially and adversely affect the Company's performance and prospects.

4.4 The Company invests in smaller capitalisation companies. As smaller companies may not have the financial strength, diversity and resources of larger companies, they may find it more difficult to operate in periods of economic slowdown or recession. In addition, the relatively small capitalisation of such companies could make the market in their shares less liquid and, as a consequence, their share price more volatile than investments in larger companies.

4.5 The Company may invest in securities that are not readily tradable or may accumulate investment positions that represent a significant multiple of the normal trading volumes of an investment, which may make it difficult for the Company to sell its investments and may lead to volatility in the market price of the Ordinary shares. Accordingly, the Company will not necessarily be able to realise, within a short period of time, an illiquid investment and any such realisation that may be achieved may be at considerably lower prices than the Company's valuation of that investment for the purpose of calculating the NAV per Ordinary Share.

4.6 The Company may purchase investments that may be subject to exchange controls or withholding taxes in various jurisdictions. In the event that exchange controls or withholding taxes are imposed with respect to any of the Company's investments, the effect will generally be to reduce the income received by the Company on affected investments. Any reduction in the income received by the Company may lead to a reduction in the dividends paid on the Ordinary shares.

4.7 A proportion of the Company's portfolio may be held in cash or cash-equivalent investments from time to time. Such proportion of the Company's assets will be out of the market and will not benefit from positive stockmarket movements, but may give some protection against negative stockmarket movements.

5. Gearing

5.1 The CULS provides gearing for the Company. All gearing used by the Company must be in accordance with its investment policy. Whilst the use of gearing should enhance the total return on the Ordinary shares where the return on the Company's underlying assets is rising and exceeds the costs associated with the gearing, it will have the opposite effect where the underlying return is less than the cost of borrowing, further reducing the total return on the Ordinary shares.

5.2 The use of borrowings by the Company may increase the volatility of the NAV and market price of the Ordinary shares and, as a result, the market price of the CULS.

6. Foreign Exchange

The Company accounts for its activities, reports its results and the NAV per Ordinary Share and declares and pays dividends in sterling while its investments are made and realised in other currencies. It is not the Company's present intention to engage in currency hedging, although it reserves the right to do so. 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, favourable or unfavourable, on the returns otherwise experienced on the investments made by the Company.

7. Taxation

7.1 The Company seeks to conduct its business so as to satisfy the conditions for approval as an investment trust under Chapter 4 of Part 24 of the CTA 2010. Breach of the tests that the Company must meet to obtain approval as an investment trust could lead to the Company being subject to tax on capital gains and, if that were to occur, would reduce the returns to shareholders.

7.2 Any change in the Company's tax status, tax treaty rates, tax laws (or their interpretation) or in the tax treatment of interest, dividends or other investment income received by the Company could affect the value of the investments held by the Company, affect the Company's ability to provide returns to its shareholders or alter the post-tax returns to its shareholders.

7.3 The Company may purchase investments that may be subject to exchange controls or withholding taxes in various jurisdictions (see item 4.6 above).

8. Accounting Practices and Policies

8.1 Any change in financial reporting standards or accounting practices applicable to the Company could affect the reported value of investments held by the Company or the level of profits available for the payment of dividends and, accordingly, could reduce the returns to shareholders.

8.2 The interest expense on the CULS is calculated according to the effective interest rate method by assuming the coupon rate of an equivalent non-convertible obligation of the Company. The interest expense on the CULS is charged to the revenue account in accordance with the Company's existing policy of charging all expenses to the revenue account. This could reduce the level of profit available for the payment of dividend and could reduce the returns to Ordinary shareholders.

9. The Manager

9.1 The success of the Company and the achievement of its investment objective are largely dependent on the Aberdeen investment team's expertise in acquiring, managing and disposing of assets in accordance with the Company's investment policy. There can be no guarantee that any individual referred to in this Annual Report will remain with the Manager and the personnel employed by the Investment Manager may change from time to time. The departure of a key fund manager may have an adverse effect on the performance of the Company.

9.2 Although the Manager has been successful in identifying suitable investments for the Company in the past, it may not be able to do so in the future. Any failure to find a sufficient number of attractive investment opportunities for the Company could have a material adverse effect on the Company's performance and prospects.

9.3 The Manager may be involved in other financial, investment or professional activities that may on occasion give rise to conflicts of interest with the Company. In particular, it currently does, and will continue to, provide investment management, investment advice or other services in relation to a number of other clients that may have similar investment objectives and/or policies to that of the Company and may receive ad valorem and/or performance-related fees for doing so. The Investment Manager may give advice or take action with respect to such other clients that differs from the advice given or actions taken with respect to the Company.

10. Legal and Regulatory

Although the legislation for the Alternative Investment Fund Managers (AIFM) Directive came into force in July 2013, there is a 12 month transitional period meaning that investment companies will have until July 2014 to complete the process of compliance and authorisation with the regulator. The Board continues to review the impact, including costs, of the Directive upon the Company but has agreed, in principle, to appoint a subsidiary of Aberdeen Asset Management PLC as the Company's AIFM and will enter into a new investment management agreement shortly.

5.  STATEMENT OF DIRCTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and financial statements, 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 the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards 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 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; and

·    state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and which 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 Act 2006. They are also responsible 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.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report including Business Review, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.

The financial statements are published on
www.asian-smaller.co.uk which is a website maintained by the Company's Manager. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge that:

·    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;

·    the Chairman's Statement, Manager's Review and Business Review contained within the Report of the Directors (together constituting the Management Report) include 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; and

·    the financial statements and the Directors' Report and Business Review include details on related party transactions.

For Aberdeen Asian Smaller Companies Investment Trust PLC

Nigel Cayzer

Chairman

18 October 2013

6. INVESTMENT PORTFOLIO

As at 31 July 2013

Investment Portfolio - Ten Largest Investments

			Valuation	Total	Valuation
			2013	assets	2012
Company	Sector	Country	£'000	%	£'000
AEON Co (M)
Operator of general merchandise stores, supermarkets and convenience stores.	Multiline Retail	Malaysia	18,312	4.4	11,494
Multi Bintang Indonesia
A subsidiary of Asia Pacific Breweries and an affiliate of Heineken in Indonesia.	Beverages	Indonesia	16,663	4.0	13,237
Shangri-La Hotels Malaysia
Operator of hotels, beach resorts, property management and investment, and commercial laundry.	Hotels, Restaurants & Leisure	Malaysia	13,717	3.3	5,972
Bukit Sembawang Estates
Singapore-based residential property developer with a large land bank.	Real Estate Management & Development	Singapore	12,439	3.0	9,362
Giordano International
A Hong Kong based fashion and clothing retailer with a presence across Asia.	Specialty Retail	Hong Kong	11,268	2.7	7,682
AEON Thana Sinsap (Thailand){A}
Consumer financial services provider offering hire-purchase lending.	Consumer Finance	Thailand	10,950	2.7	4,086
AEON Credit Service (M)
Subsidiary company of Aeon Credit Japan that provides shariah compliant consumer financial services in Malaysia.	Consumer Finance	Malaysia	10,733	2.6	3,912
LPI Capital Berhad
Malaysia-based insurance company involved in underwriting fire, motor, marine, aviation, transit and miscellaneous insurance.	Insurance	Malaysia	9,851	2.4	8,693
Cebu Holdings
Associate of Ayala Land that develops and operates Residential developments and Business Parks in Cebu.	Real Estate Management & Development	Philippines	9,660	2.3	6,753
Asian Terminals
Manages and operates ports in the Philippines.	Transportation Infrastructure	Philippines	9,420	2.3	6,956
Top ten investments			123,013	29.7
{A} Holding includes investment in both common and non-voting depositary receipt lines.

Investment Portfolio - Other Investments

Company	Sector	Country	£'000	%	£'000
Yoma Strategic Holdings	Construction & Engineering	Singapore	9,405	2.3	-
Straits Trading Company	Industrial Conglomerates	Singapore	9,147	2.2	-
Bank OCBC NISP	Commercial Banks	Indonesia	9,030	2.2	8,166
Godrej Consumer Products	Personal Products	India	8,622	2.1	8,615
Siam Makro (Foreign)	Food & Staples Retailing	Thailand	8,602	2.1	10,643
Guinness Anchor	Beverages	Malaysia	8,217	2.0	6,379
United Plantations	Food Products	Malaysia	7,956	1.9	7,968
Eastern Water Resources Development and Management (Foreign)	Water Utilities	Thailand	7,916	1.9	5,733
M.P. Evans Group	Food Products	Indonesia	7,394	1.8	7,190
Thai Stanley Electric (Foreign)	Auto Components	Thailand	7,317	1.8	-
Top twenty investments			206,619	50.0
Millennium & Copthorne Hotels New Zealand	Hotels, Restaurants & Leisure	New Zealand	7,169	1.7	2,786
Tisco Financial Group (Foreign)	Commercial Banks	Thailand	6,871	1.7	6,209
Convenience Retail Asia	Food & Staples Retailing	Hong Kong	6,564	1.6	4,413
ARB Corporation	Specialty Retail	Australia	6,547	1.6	4,646
Cabcharge Australia	Commercial Services & Supplies	Australia	6,273	1.5	-
Hana Microelectronics (Foreign)	Electronic Equipment, Instruments & Components	Thailand	6,272	1.5	6,006
Asia Satellite Telecommunications Holdings	Diversified Telecommunication Services	Hong Kong	6,226	1.5	4,218
Jollibee Foods Corporation	Hotels, Restaurants & Leisure	Philippines	6,027	1.5	4,035
Dah Sing Financial Holdings	Commercial Banks	Hong Kong	6,016	1.5	4,482
Public Financial Holdings	Diversified Financial Services	Hong Kong	5,989	1.4	4,195
Top thirty investments			270,573	65.5
Tasek Corporation	Construction Materials	Malaysia	5,794	1.4	3,512
CMC	IT Services	India	5,780	1.4	5,003
Chevron Lubricants Lanka	Oil, Gas & Consumable Fuels	Sri Lanka	5,584	1.3	3,000
Castrol India	Chemicals	India	5,461	1.3	5,087
Pos Malaysia	Air Freight & Logistics	Malaysia	5,449	1.3	3,253
AEON Credit Service (Asia)	Consumer Finance	Hong Kong	4,970	1.2	4,132
Wheelock Properties (S)	Real Estate Management & Development	Singapore	4,725	1.1	4,655
YHN Property	Real Estate Management & Development	Malaysia	4,687	1.1	2,861
United Malacca	Food Products	Malaysia	4,517	1.1	4,601
Holcim Indonesia	Construction Materials	Indonesia	4,419	1.1	4,734
Top forty investments			321,959	77.8
Linde India	Chemicals	India	4,209	1.0	-
Madras Cements	Construction Materials	India	4,166	1.0	-
AEON Stores Hong Kong	Multiline Retail	Hong Kong	4,160	1.0	6,067
Hong Kong Economic Times Holdings	Media	Hong Kong	4,124	1.0	4,449
Jammu & Kashmir Bank	Commercial Banks	India	4,094	1.0	3,551
Kansai Nerolac Paints	Chemicals	India	4,091	1.0	3,274
Eu Yan Sang International	Pharmaceuticals	Singapore	4,030	1.0	3,230
John Keells Holdings	Industrial Conglomerates	Sri Lanka	3,917	0.9	2,695
Commercial Bank of Ceylon	Commercial Banks	Sri Lanka	3,898	0.9	3,085
The Hong Kong & Shanghai Hotels	Hotels, Restaurants & Leisure	Hong Kong	3,587	0.9	2,931
Top fifty investments			362,235	87.5
Sanofi India	Pharmaceuticals	India	3,237	0.8	3,059
DGB Financial Group	Commercial Banks	South Korea	2,942	0.7	2,193
Cafe de Coral Holdings	Hotels, Restaurants & Leisure	Hong Kong	2,775	0.7	2,386
DFCC Vardhana Bank	Commercial Banks	Sri Lanka	2,477	0.6	1,261
Hong Leong Finance	Consumer Finance	Singapore	2,290	0.6	2,040
Kingmaker Footwear Holdings	Textiles, Apparel & Luxury Goods	Hong Kong	2,230	0.5	1,681
Goodyear (Foreign)	Auto Components	Thailand	2,160	0.5	1,768
CDL Hospitality Trusts	Real Estate Investment Trusts	Singapore	2,112	0.5	2,576
Green Dragon Gas	Oil, Gas & Consumable Fuels	China	2,054	0.5	-
Gujarat Gas Co	Gas Utilities	India	2,027	0.5	3,788
Top sixty investments			386,539	93.4
SBS Transit	Road & Rail	Singapore	1,863	0.4	2,045
Haad Thip (Foreign)	Beverages	Thailand	1,780	0.4	1,894
Pacific Basin Shipping	Marine	Hong Kong	1,394	0.3	1,101
National Development Bank	Commercial Banks	Sri Lanka	1,392	0.3	880
FJ Benjamin Holdings	Specialty Retail	Singapore	1,294	0.3	1,693
Regional Container Lines	Marine	Thailand	1,119	0.3	1,186
Hung Hing Printing	Containers & Packaging	Hong Kong	805	0.2	835
ORIX Leasing Pakistan	Consumer Finance	Pakistan	634	0.2	315
Mustika Ratu	Personal Products	Indonesia	609	0.1	719
City e-Solutions	Hotels, Restaurants & Leisure	Hong Kong	590	0.1	496
Top seventy investments			398,019	96.0
Riverview Rubber Estates	Food Products	Malaysia	342	0.1	-
Total investments			398,361	96.1
Net current assets			16,259	3.9
Total assets			414,620	100.0
All investments are in equities.

7.   INCOME STATEMENT

		Year ended 31 July 2013​			Year ended 31 July 2012​
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	9	-	95,470	95,470	-	19,559	19,559
Income	2	11,512	-	11,512	9,168	-	9,168
Exchange losses		-	(186)	(186)	-	(211)	(211)
Investment management fees	3	(3,170)	-	(3,170)	(2,665)	-	(2,665)
Administrative expenses	4	(1,058)	-	(1,058)	(867)	-	(867)
		_______	_______	_______	_______	_______	_______
Net return on ordinary activities before finance costs and taxation		7,284	95,284	102,568	5,636	19,348	24,984
Finance costs	5	(1,470)	-	(1,470)	(518)	-	(518)
		_______	_______	_______	_______	_______	_______
Return on ordinary activities before taxation		5,814	95,284	101,098	5,118	19,348	24,466
Taxation	6	(766)	142	(624)	(511)	13	(498)
		_______	_______	_______	_______	_______	_______
Return on ordinary activities after taxation		5,048	95,426	100,474	4,607	19,361	23,968
Return per share (pence):
Basic	8	13.84	261.59	275.43	13.18	55.38	68.56
		_______	_______	_______	_______	_______	_______
Diluted	8	n/a	234.71	249.43	n/a	n/a	n/a
		_______	_______	_______	_______	_______	_______
The total column of this statement represents the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.
The accompanying notes are an integral part of the financial statements.

8.  BALANCE SHEET

		As at	As at
		31 July 2013	31 July 2012
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	9	398,361	287,637
		__________	__________
Current assets
Debtors and prepayments	10	488	627
Cash and short term deposits	17	17,244	7,042
		__________	__________
		17,732	7,669
		__________	__________
Creditors: amounts falling due within one year
Other creditors	11	(1,473)	(1,149)
		__________	__________
Net current assets		16,259	6,520
		__________	__________
Total assets less current liabilities		414,620	294,157
Non-current liabilities
3.5% Convertible Unsecured Loan Stock 2019	12	(31,688)	(33,163)
		__________	__________
Net assets		382,932	260,994
		__________	__________
Capital and reserves
Called-up share capital	13	9,712	9,287
Capital redemption reserve		2,062	2,062
Share premium account		36,617	14,512
Special reserve		11,715	8,372
Equity component of 3.5% Convertible Unsecured Loan Stock 2019	12	1,361	1,361
Capital reserve	14	312,313	216,887
Revenue reserve	14	9,152	8,513
		__________	__________
Equity shareholders' funds		382,932	260,994
		__________	__________
Net asset value per share (pence):
Basic	15	1,013.82	746.55
		__________	__________
Diluted	15	992.81	-
		__________	__________

9.   RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 July 2013
			Capital	Share		Equity
		Share	redemption	premium	Special	Component	Capital	Revenue
		capital	reserve	account	reserve	CULS 2019	reserve	reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 August 2012		9,287	2,062	14,512	8,372	1,361	216,887	8,513	260,994
Conversion of 3.5% Convertible Unsecured Loan Stock 2019	12	51	-	1,660	-	-	-	-	1,711
Issue of own shares	13	374	-	14,368	-	-	-	-	14,742
Issue of own shares from treasury	13	-	-	6,077	3,343	-	-	-	9,420
Return on ordinary activities after taxation		-	-	-	-	-	95,426	5,048	100,474
Dividends paid	7	-	-	-	-	-	-	(4,409)	(4,409)
		_______	_________	_______	_______	_______	_______	_______	_______
Balance at 31 July 2013		9,712	2,062	36,617	11,715	1,361	312,313	9,152	382,932
		_______	_________	_______	_______	_______	_______	_______	_______
For the year ended 31 July 2012
			Capital	Share		Equity
		Share	redemption	premium	Special	Component	Capital	Revenue
		capital	reserve	account	reserve	CULS 2019	reserve	reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 August 2011		9,287	2,062	14,512	8,372	-	197,526	8,206	239,965
Issue of 3.5% Convertible Unsecured Loan Stock 2019		-	-	-	-	1,361	-	-	1,361
Return on ordinary activities after taxation		-	-	-	-	-	19,361	4,607	23,968
Dividends paid	7	-	-	-	-	-	-	(4,300)	(4,300)
		_______	_________	_______	_______	_______	_______	_______	_______
Balance at 31 July 2012		9,287	2,062	14,512	8,372	1,361	216,887	8,513	260,994
		_______	_________	_______	_______	_______	_______	_______	_______
The accompanying notes are an integral part of the financial statements.

10.   CASH FLOW STATEMENT

		Year ended		Year ended
		31 July 2013		31 July 2012
	Notes	£'000	£'000	£'000	£'000
Net cash inflow from operating activities	16		7,156		5,176
Servicing of finance
Interest paid			(1,288)		(208)
Financial investment
Purchases of investments		(58,522)		(37,619)
Sales of investments	9	43,289		11,533
		_______	_______	_______	_______
Net cash outflow from financial investment			(15,233)		(26,086)
Equity dividends paid	7		(4,409)		(4,300)
		_______	_______	_______	_______
Net cash outflow before financing			(13,774)		(25,418)
Financing
Issue of own shares	13	24,162		-
Issue of 3.5% Convertible Unsecured Loan Stock 2019		-		34,452
Drawdown of loan		-		14,062
Repayment of loan		-		(19,634)
		_______	_______	_______	_______
Net cash inflow from financing activities			24,162		28,880
		_______	_______	_______	_______
Increase in cash			10,388		3,462
		_______	_______	_______	_______
Reconciliation of net cash flow to movements in net debt{A}
Increase in cash as above			10,388		3,462
Drawdown of loan			-		(14,062)
Repayment of loan			-		19,634
Issue of 3.5% Convertible Unsecured Loan Stock 2019			-		(34,452)
Other non-cash movements			1,475		1,289
Exchange movements			(186)		(211)
		_______	_______	_______	_______
Movement in net debt in the year			11,677		(24,340)
Net debt at 1 August			(26,121)		(1,781)
		_______	_______	_______	_______
Net debt at 31 July	17		(14,444)		(26,121)
		_______	_______	_______	_______
{A} The prior year disclosure has been amended to accord with current year disclosure.
The accompanying notes are an integral part of the financial statements.

11.   NOTES TO THE FINANCIAL STATEMENTS

For the Year Ended 31 July 2013

1.	Accounting policies
	(a)	Basis of preparation and going concern
		The financial statements have been prepared in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'.
		The financial statements have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. The Directors believe this is appropriate for the reasons outlined in the Annual Report.
		The financial statements have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP).
	(b)	Valuation of investments
		Listed 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 time frame established by the market concerned, and are initially measured at cost. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices. Gains and losses arising from changes in fair value and disposals are included in net profit or loss for the period as a capital item in the Income Statement and are ultimately recognised in the capital reserve.
	(c)	Borrowings
		Interest-bearing bank loans and overdrafts are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses. Subsequently, they continue to be valued at fair value, which is determined by aggregating the expected future cash flows for that loan or overdraft at a rate comprising the borrower's margin plus an average of market rates applicable to loans or overdrafts of a similar period of time and currency.  Finance charges are accounted for on an accruals basis using the effective interest rate method and are charged 100% to revenue.
	(d)	Income
		Dividends (other than special dividends), including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. 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. Fixed returns on non-equity shares are recognised on a time apportioned basis so as to reflect the effective yield on shares. Other returns on non-equity shares are recognised when the right to return is established. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend is recognised as revenue. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is dealt with on an accruals basis.
	(e)	Expenses
		All expenses are accounted for on an accruals basis. Expenses, including management fees and finance costs, are charged 100% through the revenue column of the Income Statement with the exception of transaction costs incurred on the purchase and disposal of investments which are charged to the capital column of the Income Statement and are separately identified and disclosed in note 9 within gains on investments.
	(f)	Taxation
		Tax relief is allocated between revenue and capital on the Statement of Comprehensive Income using the marginal method in accordance with the SORP.
		Deferred tax
		Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more, or right to pay less, tax in the future have occurred at the balance sheet 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 available from which the future reversal of the underlying temporary differences can be deducted.  Deferred taxation is measured without discounting and based on substantially enacted tax rates.
	(g)	Capital reserve
		The capital reserve reflects the following:
		gains and losses on the sale of investments and changes in fair values of investments held; and
		applicable capital tax charges.
	(h)	Foreign currency
		Overseas monetary assets are converted into Sterling at the rate of exchange ruling at the Balance Sheet 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 in the capital reserve or in the revenue account depending on whether the gain or loss is of a capital or revenue nature respectively.
	(i)	3.5% Convertible Unsecured Loan Stock 2019
		Convertible Unsecured Loan Stock ("CULS") issued by the Company is regarded as a compound instrument, comprising of a liability component and an equity component.  At the date of issue, the fair value of the liability component was estimated by assuming that an equivalent non-convertible obligation of the Company would have a coupon rate of 4.662%. The fair value of the equity component, representing the option to convert liability into equity, is derived from the difference between the issue proceeds of the CULS and the fair value assigned to the liability. The accounting treatment of the CULS resulted in an uplift in the NAV of just under 1%. The liability component is subsequently measured at amortised cost using the effective interest rate and the equity component remains unchanged.
		Direct expenses associated with the CULS issue are allocated to the liability and equity components in proportion to the split of the proceeds of the issue. Expenses allocated to the liability component are amortised over the life of the instrument using the effective interest rate.
		The interest expense on the CULS is calculated according to the effective interest rate method by applying the assumed rate of 4.662% to the liability component of the instrument.
		On conversion of CULS, equity is issued and the liability component is derecognised. The original equity component recognised at inception remains in equity. No gain or loss is recognised on conversion.
		When CULS is repurchased for cancellation, the fair value of the liability at the redemption date is compared to its carrying amount, giving rise to a gain or loss on redemption that is recognised through profit or loss. The amount of consideration allocated to equity is recognised in equity with no gain or loss being recognised.

		2013	2012
2.	Income	£'000	£'000
	Income from investments
	UK dividend income	109	106
	Overseas dividends	11,385	9,021
	Stock dividends	-	30
		11,494	9,157
	Other income
	Deposit interest	18	11
	Total income	11,512	9,168

			2013			2012
		Revenue	Capital	Total	Revenue	Capital	Total
3.	Investment management fees	£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fees	3,170	-	3,170	2,665	-	2,665
	The Company has an agreement with Aberdeen Asset Management Asia Limited ('AAM Asia') for the provision of management services.
	During the period the management fee was payable monthly in arrears and is based on an annual amount of 1.2%, calculated on the average net asset value of the Company over a 24 month period, valued monthly. The agreement is terminable on one year's notice. The balance due to AAM Asia at the year end was £586,000 (2012 - £239,000).

			2013			2012
		Revenue	Capital	Total	Revenue	Capital	Total
4.	Administrative expenses	£'000	£'000	£'000	£'000	£'000	£'000
	Administration fees	82	-	82	80	-	80
	Directors' fees	129	-	129	125	-	125
	Share Plan marketing contribution	215	-	215	172	-	172
	Auditor's remuneration:
	fees payable to the auditor for the audit of the annual accounts	24	-	24	23	-	23
	fees payable to the auditor and its associates for other services:
	- interim review	6	-	6	6	-	6
	- taxation and iXBRL tagging services	9	-	9	4	-	4
	Custodian charges	287	-	287	212	-	212
	Other expenses	306	-	306	245	-	245
		1,058	-	1,058	867	-	867
	The Company has an agreement with Aberdeen Asset Managers Limited ("AAM") for the provision of administration services. The administration fee is payable quarterly in advance and based on an index-linked annual amount of £82,000 (2012 - £80,000) and there was a accrual of £41,000 (2012 - £20,000) at the year end. The agreement is terminable on six months' notice.
	The Company also has an agreement with AAM for the provision of marketing services in relation to the Company's participation in the Aberdeen Investment Trust Share Plan and ISA. The total fee paid and payable under the agreement was £215,000 (2012 - £172,000) and there was a £21,000 (2012 - £58,000) balance due to AAM at the year end.
	All of the expenses above, with the exception of Auditor's remuneration, include irrecoverable VAT where applicable.  For the Auditor's remuneration the VAT amounted to £8,000 (2012 - £7,000).
	No pension contributions were made in respect of any of the Directors.

			2013			2012
		Revenue	Capital	Total	Revenue	Capital	Total
5.	Finance costs	£'000	£'000	£'000	£'000	£'000	£'000
	Loans repayable in less than 1 year	21	-	21	198	-	198
	Interest on 3.5% Convertible Unsecured Loan Stock 2019	1,213	-	1,213	248	-	248
	Notional interest on 3.5% Convertible Unsecured Loan Stock 2019	161	-	161	36	-	36
	Amortisation of 3.5% Convertible Unsecured Loan Stock 2019 issue expenses	75	-	75	15	-	15
	Issue expenses on 3.5% Convertible Unsecured Loan Stock 2019	-	-	-	21	-	21
		1,470	-	1,470	518	-	518

				2013			2012
			Revenue	Capital	Total	Revenue	Capital	Total
6.	Taxation		£'000	£'000	£'000	£'000	£'000	£'000
	(a)	Analysis of charge for the year
		Overseas taxation	624	-	624	498	-	498
		Tax relief to revenue	-	-	-	-	-	-
		Current taxation	624	-	624	498	-	498
		Movement on deferred taxation	142	(142)	-	13	(13)	-
		Total tax	766	(142)	624	511	(13)	498
		No provision for deferred taxation has been made in respect of the holding in CDL Hospitality Trust. This is due to the Company having sufficient excess management expenses available to cover the potential liability and the Company is not expected to generate taxable income in the future in excess of deductible expenses.  CDL is a Singapore based real estate investment trust without distributor or reporting fund status and therefore the realised gains on disposal of its units are subject to corporation tax in the hands of this Company.
	(b)	Factors affecting the tax charge for the year
		The tax assessed for the year is lower than the effective rate of corporation tax in the UK for a large company of 23.67% (2012 - 25.33%). The differences are explained below:
				2013			2012
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
		Return on ordinary activities before taxation	5,814	95,284	101,098	5,118	19,348	24,466
		Return on ordinary activities multiplied by the effective UK standard rate of corporation tax of 23.67% (2012 - 25.33%)	1,376	22,554	23,930	1,296	4,901	6,197
		Effects of:
		Gains on investments not taxable	-	(22,598)	(22,598)	-	(4,954)	(4,954)
		Exchange losses	-	44	44	-	53	53
		Franked dividend receipts not chargeable to corporation tax	(26)	-	(26)	(27)	-	(27)
		Overseas tax	624	-	624	498	-	498
		Non-taxable dividend income	(2,663)	-	(2,663)	(2,260)	-	(2,260)
		Movement in unutilised management expenses	969	-	969	863	-	863
		Movement in unutilised loan relationship deficits	344	-	344	128	-	128
		Current tax charge for the year	624	-	624	498	-	498

		2013	2012
7.	Dividends	£'000	£'000
	Final dividend for 2012 - 9.50p (2011 - 9.50p)	3,351	3,321
	Special dividend for 2012 - 3.00p (2011 - 2.80p)	1,058	979
		4,409	4,300
	Proposed final and special dividends are subject to approval by shareholders at the Annual General Meeting and are not included as a liability in the financial statements.
	We set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158 - 1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the current year is £5,048,000 (2012 - £4,607,000).
		2013	2012
		£'000	£'000
	Proposed final dividend for 2013 - 10.00p (2012 - 9.50p)	3,791	3,351
	Proposed special dividend for 2013 - 3.00p (2012 - 3.00p)	1,137	1,058
	Total	4,928	4,409
	Subsequent to the year end the Company has issued a further 140,000 new Ordinary shares; therefore the amounts reflected above for the cost of the proposed final and special dividends for 2013 are based on 37,911,369 Ordinary shares in issue, being the number of Ordinary shares in issue at the date of this Report.

			2013			2012
8.	Return per Ordinary share	Revenue	Capital	Total	Revenue	Capital	Total
	Basic
	Return on ordinary activities after taxation (£'000)	5,048	95,426	100,474	4,607	19,361	23,968
	Weighted average number of shares in issue{A}			36,478,795			34,960,210
	Return per Ordinary share (p)	13.84	261.59	275.43	13.18	55.38	68.56
			2013			2012
	Diluted	Revenue	Capital	Total	Revenue	Capital	Total
	Return on ordinary activities after taxation (£'000)	5,985	95,426	101,411	n/a	n/a	n/a
	Weighted average number of shares in issue{B}			40,656,854			n/a
	Return per Ordinary share (p)	n/a	234.71	249.43	n/a	n/a	n/a
	{A} Calculated excluding shares held in treasury.
	{B} The calculation of the diluted total, revenue and capital returns per Ordinary share are carried out in accordance with Financial Reporting Standard 22, "Earnings per Share". For the purpose of calculating total, revenue and capital returns per Ordinary share, the number of Ordinary shares used is the weighted average number used in the basic calculation plus the number of Ordinary shares deemed to be issued for no consideration on exercise of all 3.5% Convertible Unsecured Loan Stock 2019 (CULS). The calculations indicate that the exercise of CULS would result in an increase in the weighted average number of Ordinary shares of 4,178,059 (2012 - nil) to 40,656,854 (2012 - nil) Ordinary shares.
	For the year ended 31 July 2013 there was no dilution to the revenue return per Ordinary share and for the period ended 31 July 2012 there was no dilution to the revenue return per Ordinary share nor to the capital return per Ordinary share. Where dilution occurs, the net returns are adjusted for items relating to the CULS. Total earnings for the period are tested for dilution. Once dilution has been determined individual revenue and capital earnings are adjusted. Accrued CULS finance costs for the period and unamortised issues expenses are reversed.

		Listed	Listed
		in UK	overseas	Total
9.	Investments	£'000	£'000	£'000
	Fair value through profit or loss:
	Opening book cost	3,375	136,392	139,767
	Opening fair value gains on investments held	3,815	144,055	147,870
	Opening fair value	7,190	280,447	287,637
	Movements in year:
	Purchases at cost	1,941	56,602	58,543
	Sales - proceeds	-	(43,289)	(43,289)
	Sales - gains on sales	-	34,530	34,530
	Movement in fair value gains on investments held	317	60,623	60,940
	Closing fair value	9,448	388,913	398,361
		Listed	Listed
		in UK	overseas	Total
		£'000	£'000	£'000
	Closing book cost	5,316	184,235	189,551
	Closing fair value gains on investments held	4,132	204,678	208,810
		9,448	388,913	398,361
		Listed	Listed
		in UK	overseas	Total
	Gains on investments	£'000	£'000	£'000
	Gains on sales	-	34,530	34,530
	Movement in fair value gains on investments held	317	60,623	60,940
		317	95,153	95,470
	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 gains on investments in the Income Statement. The total costs were as follows:
			2013	2012
			£'000	£'000
	Purchases		103	102
	Sales		63	49
			166	151

		2013	2012
10.	Debtors: amounts falling due within one year	£'000	£'000
	Other debtors	21	15
	Prepayments and accrued income	467	612
		488	627

		2013	2012
11.	Creditors: amounts falling due within one year	£'000	£'000
	Amounts due to brokers	481	460
	Other creditors	992	689
		1,473	1,149
	On 27 May 2011 the Company entered into a £20 million 3 year multi currency revolving advance loan facility with Royal Bank of Scotland. The amount available under this facility was reduced to £2 million from 1 June 2012. As at 31 July 2013, there were no amounts drawn down from the loan facility (2012 - nil) and there were no amounts drawn down during the year. The agreement contains covenants requiring that the on-going gearing ratio (Gross Borrowings divided by Adjusted Assets) shall not exceed 25%. Gross Borrowings are calculated by deducting from the Company's assets (Portfolio Value plus cash) (1) the value of any unquoted investments; (2) the value of any bonds rated below investment grade or which are unrated; (3) the extent to which the value of any single security or asset exceeds 5% of Investment Portfolio Value; (4) the extent to which the aggregate value of the 20 largest securities or assets exceeds 65% of Investment Portfolio Value; (5) the extent to which the aggregate value of securities or assets in any one country exceeds 25% of Investment Portfolio Value; (6) the extent to which the aggregate value of securities or assets in countries with a S&P foreign sovereign debt rating lower than BBB- exceeds 30% of Investment Portfolio Value. The Company met these covenants throughout the year and up to the date that this report was signed.

12.	Non-current liabilities
		Number of units	Liability component	Equity component
	3.5% Convertible Loan Stock 2019	£'000	£'000	£'000
	Balance at beginning of year	35,000	33,163	1,361
	Conversion of 3.5% Convertible Unsecured Loan Stock 2019	(1,712)	(1,711)	-
	Notional Interest on CULS transferred to revenue reserve	-	161	-
	Amortisation and issue expenses	-	75	-
	Balance at end of year	33,288	31,688	1,361
	The 3.5% Convertible Unsecured Loan Stock 2019 ("CULS") can be converted at the election of holders into Ordinary shares during the months of May and November each year throughout their life, commencing 30 November 2012 to 31 May 2019 at a rate of 1 Ordinary share for every 830.0p nominal of CULS. Interest is paid on the CULS on 31 May and 30 November each year, commencing 30 November 2012. 100% of the interest is charged to revenue in line with the Board's expected long-term split of returns from the investment portfolio of the Company.
	The CULS has been constituted as an unsecured subordinated obligation of the Company by the Trust Deed between the Company and the Trustee, The Law Debenture Trust Corporation p.l.c., dated 17 May 2012. The Trust Deed details the CULS holders' rights and the Company's obligations to the CULS holders and the trustee oversees the operation of the Trust Deed. In the event of a winding-up of the Company the rights and claims of the Trustee and CULS holders would be subordinate to the claims of all creditors in respect of the Company's secured and unsecured borrowings, under the terms of the Trust Deed.
	During the period ended 31 July 2013 the Company converted £1,711,586 (31 July 2012 - £nil) nominal amount of CULS into 206,159 (31 July 2012 - nil) Ordinary shares.
	As at 31 July 2013, there was £33,288,414 (2012 - £35,000,000) nominal amount of 3.5% Convertible Unsecured Loan Stock 2019 in issue.

			2013	2012
13.	Called up share capital		£'000	£'000
	Allotted, called-up and fully paid
	Ordinary shares of 25p		9,443	8,740
	Treasury shares		269	547
			9,712	9,287
		Ordinary shares	Treasury shares	Total
		Number	Number	Number
	At 31 July 2012	34,960,210	2,186,290	37,146,500
	Conversion of CULS	206,159	-	206,159
	Issue of own shares	1,495,000	-	1,495,000
	Issue of own shares from treasury	1,110,000	(1,110,000)	-
	At 31 July 2013	37,771,369	1,076,290	38,847,659
	During the year 2,605,000 Ordinary shares of 25p were issued by the Company (2012 - nil) at a total consideration of £24,162,000 (2012 - £nil), of which 1,110,000 were issued from treasury. At the year end 1,076,290 (2012 - 2,186,290) shares were held in treasury, which represents 2.77% (2012 - 5.89%) of the Company's total issued share capital at 31 July 2013.
	During the year a further 206,159 Ordinary shares were issued as a result of CULS conversion (2012 - nil).
	Capital management
	The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
	The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. The review includes:
	the planned level of gearing which takes account of the Manager's views on the market;
	the level of equity shares in issue;
	the extent to which revenue in excess of that which is required to be distributed should be retained.
	The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
	The Company does not have any externally imposed capital requirements.

		2013	2012
14.	Retained earnings	£'000	£'000
	Capital reserve
	At 31 July	216,887	197,526
	Movement in investment holdings fair value	60,940	11,062
	Gains on realisation of investments at fair value	34,530	8,497
	Foreign exchange movement	(186)	(211)
	Capital tax charge	142	13
	At 31 July	312,313	216,887
		2013	2012
	Revenue reserve	£'000	£'000
	At 31 July	8,513	8,206
	Revenue	5,048	4,607
	Dividends paid	(4,409)	(4,300)
	At 31 July	9,152	8,513

15.	Net asset value per Ordinary share	2013	2012
	Basic
	Net assets attributable	£382,932,000	£260,994,000
	Number of Ordinary shares in issue{A}	37,771,369	34,960,210
	Net asset value per Ordinary share	1,013.82p	746.55p
	Diluted {B}
	Net assets attributable	£414,815,000	-
	Number of Ordinary shares in issue{A}	41,782,021	-
	Net asset value per Ordinary share{B}	992.81p	-
	{A} Calculated excluding shares held in treasury.
	{B} The diluted net asset value per Ordinary share has been calculated on the assumption that the 33,288,414 3.5% Convertible Unsecured Loan Stock 2019 ("CULS") are converted at 830.0p per share, giving a total of 41,782,021 Ordinary shares. Where dilution occurs, the net assets are adjusted for items relating to the CULS.
	Net asset value per share - debt converted
	In accordance with the Company's understanding of the current methodology adopted by the AIC, convertible financial instruments are deemed to be 'in the money' if the cum income net asset value ("NAV") exceeds the conversion price of 830.0p per share. In such circumstances a net asset value is produced and disclosed assuming the convertible debt is fully converted. At 31 July 2013 the cum income NAV was 1,013.82p and thus the CULS were 'in the money'. At 31 July 2012 the CULS were not 'in the money'.

16.	Reconciliation of net return before finance costs and	2013	2012
	taxation to net cash inflow from operating activities	£'000	£'000
	Net returns before finance costs and taxation	102,568	24,984
	Adjustments for:
	Gains on investments	(95,470)	(19,559)
	Effect of foreign exchange rate losses	186	211
	Decrease in prepayments and accrued income	145	15
	Increase in other debtors	(6)	(3)
	Increase in other creditors	357	56
	Overseas withholding tax suffered	(624)	(498)
	Stock dividends included in investment income	-	(30)
	Net cash inflow from operating activities	7,156	5,176

					Other
		1 August	Cash	Exchange	non-cash	31 July
		2012	flow	movements	movements	2013
17.	Analysis of changes in net debt	£'000	£'000	£'000	£'000	£'000
	Cash and short term deposits	7,042	10,388	(186)	-	17,244
	Debt falling due in more than one year	(33,163)	-	-	1,475	(31,688)
	Net debt	(26,121)	10,388	(186)	1,475	(14,444)
	The prior year opening figures have been amended to accord with current year disclosure.

18.	Transactions with the Manager
	Mr M J Gilbert and his alternate Director, Mr H Young are both directors of Aberdeen Asset Management PLC ("AAM") and its subsidiary, Aberdeen Asset Management Asia ("AAM Asia").
	AAM Asia has an agreement to provide management services to the Company, the terms of which are outlined in note 3. AAM has an agreement to provide both administration and marketing services to the Company, the terms of which are outlined in note 4.

19	Financial instruments
	Risk management
	The Company's financial instruments comprise equities 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 Manager has a dedicated investment management process, which ensures that the investment policy is followed. Stock selection procedures are in place based on the active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a senior investment manager and also by the Manager's investment committee.
	The Company's Manager has an independent investment risk department for reviewing the investment risk parameters of the Company's portfolio on a regular basis. The department reports to the Manager's performance review committee which is chaired by the Manager's chief investment officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk and style characteristics using best practice, industry standard multi-factor models.
	Additionally, the Manager's compliance department continually monitors the Company's investment and borrowing powers and reports to the Manager's risk management committee.
	The main financial risks that the Company faces from its financial instruments are market risk (comprising interest rate risk, currency risk and other price risk), liquidity risk and credit risk.
	The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors.
	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, currency risk and other price risk.
	Interest rate risk
	Interest rate movements may affect:
	the level of income receivable on cash deposits;
	interest payable on the Company's variable rate borrowings;
	valuation of debt securities in the portfolio.
	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.
	Interest rate risk profile
	The interest rate risk profile of the Company's financial assets and liabilities, excluding equity holdings which are all non-interest bearing, at the Balance Sheet date was as follows:
						Weighted average	Weighted
						period for which	average	Fixed	Floating
						rate is fixed	interest rate	rate	rate
	At 31 July 2013					Years	%	£'000	£'000
	Assets
	Indian Rupee					-	-	-	186
	Malaysian Ringgit					-	-	-	117
	Sterling					-	-	-	16,758
	Thailand Baht					-	-	-	183
						-	-	-	17,244
	Liabilities
	3.5% Convertible Loan Stock 2019					5.83	3.5	31,688	-
						Weighted average	Weighted
						period for which	average	Fixed	Floating
						rate is fixed	interest rate	rate	rate
	At 31 July 2012					Years	%	£'000	£'000
	Assets
	Indonesian Rupiah					-	-	-	17
	Malaysian Ringgit					-	-	-	98
	Sterling					-	-	-	6,924
	Thailand Baht					-	-	-	3
						-	-	-	7,042
	Liabilities
	3.5% Convertible Loan Stock 2019					6.83	3.5	33,163	-
	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 interest payable, weighted by the value of the loan. Details of the Company's bank loan facility is shown in note 11 of the financial statements. There were no loan amounts drawn down during the year.
	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.
	Maturity profile
	The maturity profile of the Company's financial assets and liabilities at 31 July was as follows:
								2013	2012
	Assets							£'000	£'000
	In less than one year							17,244	7,042
								2013	2012
	Liabilities							£'000	£'000
	In more than one year							31,688	33,163
	All the other financial assets and liabilities do not have a maturity date. The full contractual liability for the CULS assuming no further conversion is £40,279,000 (2012 - £43,575,000).
	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
	All of the Company's investment portfolio is invested in overseas securities and the Balance Sheet, therefore, can be significantly affected by movements in foreign exchange rates. 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 revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk.

	Foreign currency risk exposure by currency of denomination:
				31 July 2013			31 July 2012
						Total			Total
				Overseas	Net monetary	currency	Overseas	Net monetary	currency
				investments	assets/ (liabilities)	exposure	Investments	assets/ (liabilities)	exposure
				£'000	£'000	£'000	£'000	£'000{A}	£'000
	Australian Dollar			12,820	-	12,820	4,646	-	4,646
	Hong Kong Dollar			60,698	-	60,698	49,067	-	49,067
	Indian Rupee			41,687	186	41,873	32,378	-	32,378
	Indonesian Rupiah			30,721	-	30,721	26,856	17	26,873
	Korean Won			2,942	-	2,942	2,193	-	2,193
	Malaysian Ringgit			89,575	117	89,692	58,644	98	58,742
	New Zealand Dollar			7,169	-	7,169	2,786	-	2,786
	Pakistan Rupee			634	-	634	4,685	-	4,685
	Philippine Peso			25,107	-	25,107	17,744	-	17,744
	Singapore Dollar			47,305	-	47,305	33,001	-	33,001
	Sri Lankan Rupee			17,268	-	17,268	10,921	-	10,921
	Thailand Baht			52,987	183	53,170	37,526	3	37,529
				388,913	486	389,399	280,447	118	280,565
	Sterling			9,448	(14,930)	(5,482)	7,190	(26,239)	(19,049)
	Total			398,361	(14,444)	383,917	287,637	(26,121)	261,516
	{A} Values have been restated to reallocate the cash held across the appropriate currency. The overall total value has not changed.
	Foreign currency sensitivity
	There is no sensitivity analysis included as the Company's significant foreign currency financial instruments are in the form of equity investments, which have been included within security price risk sensitivity analysis so as to show the overall level of exposure. Due consideration is paid to foreign currency risk throughout the investment process.
	Other 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.
	Investment in Far East equities or those of companies that derive significant revenue or profit from the Far East involves a greater degree of risk than that usually associated with investment in the securities in major securities markets. The securities that the Company owns may be considered speculative because of this higher degree of 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.
	Other price risk sensitivity
	If market prices at the Balance Sheet date had been 10% (2012 - 10%) higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 July 2013 would have increased/(decreased) by £39,836,000 (2012 - increased/(decreased) by £28,764,000)) and equity reserves would have increased/(decreased) by the same amount.
	Liquidity risk
	This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
	The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Gearing comprises convertible unsecured loan stock. The Board has imposed a maximum gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of 25%. Details of gearing at the 31 July 2013 are shown in notes 11 and 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 a loan facility, details of which can be found in note 11. 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 Annual Report.
	Liquidity risk exposure
	At 31 July 2013 the Company had borrowings in the form of the £33,288,414 (2012 - £35,000,000) nominal of 3.5% Convertible Unsecured Loan Stock 2019.
	At 31 July 2013 the Company's bank loan amounted to £nil (2012 - £nil). The maximum exposure during the year was £nil (2012 - £19,640,000) and the minimum exposure during the year was £nil (2012 - £nil).
	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. The risk is not considered to be significant, and is managed as follows:
	investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Investment Manager, and limits are set on the amount that may be due from any one broker;
	the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a monthly basis. In addition, the third party administrator carries out a stock reconciliation to Custodian records on a monthly basis to ensure discrepancies are picked up on a timely basis. The Manager's compliance department carries out periodic reviews of the Custodian's operations and reports its finding to the Manager's risk management committee. This review will also include checks on the maintenance and security of investments held; and
	cash is held only with reputable banks with high quality external credit enhancements.
	None of the Company's financial assets is secured by collateral or other credit enhancements.
	Credit risk exposure
	In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 July was as follows:
						2013		2012
						Balance	Maximum	Balance	Maximum
						Sheet	exposure	Sheet	exposure
	Current assets					£'000	£'000	£'000	£'000
	Debtors					465	465	595	595
	Cash and short term deposits					17,244	17,244	7,042	7,042
						17,709	17,709	7,637	7,637
	None of the Company's financial assets is past due or impaired.
	Fair values of financial assets and financial liabilities
	Investments held at fair value through profit or loss are valued at their quoted bid prices which equate to their fair values. The Directors are of the opinion that the other financial assets and liabilities are stated at fair value in the Balance Sheet and considered that this is equal to the carrying amount.

The Annual General Meeting will be held at 11.30 a.m. on 3 December 2013 at Bow Bells House, 1 Bread Street, London EC4M 9HH.

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 July 2013 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2012 and 2013 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 s.498(2) or 498(3) of the Companies Act 2006.  The financial information for 2012 is derived from the statutory accounts for 2012 which have been delivered to the Registrar of Companies. The 2013 accounts will be filed with the Registrar of Companies in due course.

The audited Annual Report and Accounts will be posted to shareholders at the end of October. Copies may be obtained during normal business hours from the Company's Registered Office, Bow Bells House, 1 Bread Street, London EC4M 9HH or from the Company's website, www.asian-smaller.co.uk*

* Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

By Order of the Board

Aberdeen Asset Management PLC

Secretary

18 October 2013

 

END

 

 

FR BUBDGLXBBGXI