Annual Financial Report

RNS Number : 5089U

Aberdeen Asian Smaller Co's Inv Tst

25 October 2017

 

ABERDEEN ASIAN SMALLER COMPANIES INVESTMENT TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JULY 2017

Legal Entity Identifier (LEI):  5493000FBZP1J92OQY70

STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS

Financial Highlights

Share price total return{A}			Discount to net asset value (diluted){A}			Earnings per share (revenue)
2017	2016		2017	2016		2017	2016
+16.2%	+19.4%		10.9%	11.4%		+109.4%	-49.4%
Net asset value capital return (diluted){A}			MSCI AC Asia Pacific ex Japan Index capital return{B}			Ordinary dividend per share{C}
2017	2016		2017	2016		2017	2016
+14.3%	+16.4%		+22.1%	+13.8%		16.00p	10.50p
Net asset value total return (diluted){A}			MSCI AC Asia Pacific ex Japan Small Cap Index capital return{B}
2017	2016		2017	2016
+15.4%	+18.4%		+11.5%	+16.1%
{A}        Alternative Performance Measures.
{B}        Currency adjusted, capital gains basis
{C}                Dividends are subject to shareholder approval at the Annual General Meeting.

STRATEGIC REPORT - CHAIRMAN'S STATEMENT

Results

I am pleased to report that your Company's net asset value (NAV) increased by 15.4% on a total return basis, which is ahead of the MSCI Asia Pacific ex Japan Small Cap Index's return of 14.3%. For UK-based investors the weakness in sterling following the UK's referendum to leave the European Union boosted investment returns. The share price rose by 16.2% to 1062.0p, while the discount narrowed to 10.9% as at 31 July 2017, from 13.1% reported in the Interim Board Report, reflecting investors' renewed interest in smaller companies.

Overview

During the year under review strong global economic news and an improved outlook in earnings has driven asset prices across all markets. The Company's focus on smaller companies in Asia benefited the portfolio as many of these domestically-focused businesses are rooted within the region's higher-growth economies.

In China, the government's moderate but sustained credit and monetary policy tightening appear to have yielded the economic stability that the leadership desired ahead of the key October party congress. Concerns over a sharp slowdown in the mainland, which were prevalent last year, have eased. Economic growth of 6.9% in the first-half was better than expected and the currency has strengthened steadily against the US dollar. A combination of improved trade and economic performance, as well as tighter capital controls, has meant money and investment are returning to the mainland. In addition, the structure of the economy has continued to improve, with the economy rebalancing towards more consumer-led growth. While China is an exciting growth story, your Manager remains circumspect when investing in the mainland, owing to concerns over corporate governance and quality of smaller companies there.

In contrast, India remains the place where your Manager sees good opportunities. Since Prime Minister Narendra Modi took office three years ago, he has not only ushered in an acceleration in economic growth but also pushed through stalled reforms, including the nationwide sales tax. While the effects of the levy are still unfolding, the economy is expected to benefit in the long run as it will simplify the tax regime, boost tax revenues and make it easier to do business. Modi is expected to push even harder on reforms after the ruling party's victory in recent key state elections consolidated his position. Meanwhile, the pain from the surprise demonetisation in November receded, as the effects were less damaging than initially feared.

Consumption in Asia is another bright spot. It is a long-term structural driver, and the portfolio is well positioned in this aspect. A growing middle class and relatively youthful population, particularly within South-East Asia and India, offer tremendous potential. A new generation of younger consumers, who are increasingly affluent and digitally sophisticated, are not only fuelling consumption growth but also transforming traditional consumption patterns. The Company's bias towards these economies makes it well placed to benefit from these trends, alongside the broader based economic recovery.

Dividend

As advised in previous years and 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. Since its launch in 1995, with the exception of the 1997 and 1998 years when the Asian Crisis gripped much of Asia, the Company has maintained or increased level of final dividend every year.

In the current year, we have seen a significant increase in both the ordinary income and the income that we receive as special dividends.  In view of this, the Board is recommending a final dividend of 12.0p per share, an increase of 14.3% from 2016 and a special dividend of 4.0p per share (2016 no special dividend). The payments will allow for a small surplus to be transferred to the brought forward revenue reserves which can be used in future years in the event of any temporary shortfalls in revenue. If approved by shareholders at the Annual General Meeting of the Company on 1 December 2017, the final dividend will be paid on 7 December 2017 to shareholders on the register on 3 November 2017.

Gearing and Share Capital Management

The Company's year-end net gearing was 8.8%. The majority of the gearing is provided by the Convertible Unsecured Loan Stock of which approximately £32.9 million remains outstanding. On 9 June 2017 the Company agreed a new three year multicurrency revolving loan facility and a term loan facility in an aggregate amount of $25 million with The Royal Bank of Scotland plc. Under the term loan facility $12.5 million was drawn down and fixed for three years at an all-in rate of 2.506%. On the same date a maturing loan of $9 million was repaid to State Street.  Up to $12.5 million remains available for drawing in the future under the new revolving loan facility.  At the year end $12.5 million had been drawn down under the Company's $25m million multi currency loan facility.

During the year the Company purchased for treasury 1,091,750 Ordinary shares at a discount to the prevailing NAV (exclusive of income). Subsequent to the period end a further 390.500 Ordinary shares have been purchased into treasury. Share buy backs can reduce the volatility of any discount as well as modestly enhancing the NAV for shareholders.

Annual General Meeting

The Annual General Meeting is scheduled to be held on 1 December 2017 at 11.30 a.m. In addition to the usual ordinary business, as special business the Board is seeking to renew the authority to issue new shares and sell treasury shares for cash at a premium without pre-emption rules applying and to renew the authority to buy back shares and either hold them in treasury for future resale (at a premium to the prevailing NAV per share) or cancel them.

The Board is happy to take general questions on the Annual Report and financial statements at the meeting but would advise that questions of a technical nature should be addressed in writing to the Company Secretary, in advance.

We look forward to seeing as many shareholders as possible and very much hope that any, who wish, will stay for lunch afterwards.

Aberdeen Merger Update

The Board notes the completion of the merger between Aberdeen and Standard Life. The Board observes that the merger process to date has not created any issues for the Company but we shall continue to ensure that the management team remain focussed upon looking after the interests of the Company and its shareholders during the integration of the two businesses.

Outlook

Asian equity markets have been resilient so far, but could face a pullback amid the still uncertain environment. Geopolitical tensions are simmering in the Korean peninsula. China's high debt level remains a risk. In the US Donald Trump's election as president has been tempered by concerns over his policy unpredictability and the administration's ability to deliver the agenda. All that market noise does not dim the appeal of smaller companies in Asia, however. Rising affluence, healthy consumption, as well as structural reforms and economic liberalisation create opportunities, and the smaller businesses stand to benefit. Many of them are nimble and can evolve their strategy to exploit niches unexplored by their larger counterparts. In addition, your Company's greater exposure to domestic market growth makes them less vulnerable to global macroeconomic developments. These factors, along with your Manager's focus on seeking out holdings with solid fundamentals, should underpin returns for long term investors.

Nigel Cayzer

Chairman

24 October 2017

STRATEGIC REPORT - OVERVIEW OF STRATEGY

Business Model

The business of the Company is that of an investment company which seeks to qualify as an investment trust for UK capital gains tax purposes.

Investment Objective

The Company's revised Investment Objective and Investment Policy was approved by shareholders at the Annual General Meeting held on 29 November 2016.

The Company aims to maximise total return to shareholders over the long term from a portfolio made up predominantly 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 by following the investment policy described below. When it is in shareholders' interests to do so, the Company reserves the right to participate in the rights issue of an investee company notwithstanding that the market capitalisation of that investee may exceed the stated ceiling. The Directors do not envisage any change in this activity in the foreseeable future.

Investment Policy

The Company's assets are invested in a diversified portfolio of securities (including equity shares, preference shares, convertible securities, warrants and other equity-related securities) predominantly in quoted smaller companies spread across a range of industries and economies in the investment region including Australia, Bangladesh, Cambodia, China, Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Myanmar, New Zealand, Pakistan, The Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam, together with such other countries in Asia as the Directors may from time to time determine, (collectively, the ''Investment Region''). Investments may also be made through collective investment schemes, in unquoted equities (up to 10% of the net assets of the Company, calculated at the time of investment) and in companies traded on stock markets outside the Investment Region provided that over 75% of their consolidated revenue, operating income or pre-tax profit is earned from trading in the Investment Region or they hold more than 75% of their consolidated net assets in the Investment Region.  In order to provide further flexibility to the Manager, the revenue qualification outlined above has been modified to include 'operating income or pre-tax profit' with effect from 1 August 2017.

Risk Diversification

The Company does not invest more than 15% of its gross assets at the time of investment either in other listed investment companies (including listed investment trusts), or in the shares of any one company. The Manager is authorised to invest up to 15% of the Company's gross assets in any single stock.

Gearing

The Board is responsible for determining the gearing strategy for the Company. Gearing is used selectively to leverage the Company's portfolio in order to enhance returns where and to the extent this is considered appropriate to do so. Gearing is subject to a maximum gearing level of up to 25% of adjusted NAV at the time of draw down.

Delivering the Investment Policy

The Directors are responsible for determining the investment policy and the investment objective of the Company. Day to day management of the Company's assets has been delegated, via the AIFM, to the Investment Manager, AAM Asia. AAM Asia invests in a diversified range of companies throughout the Investment Region in accordance with the investment policy. AAM Asia follows a bottom-up investment process based on a disciplined evaluation of companies through direct visits by its fund managers. Stock selection is the major source of added value. No stock is bought without the fund managers having first met management. The Investment Manager estimates a company's worth in two stages, quality then price. Quality is defined by reference to management, business focus, the balance sheet and corporate governance. Price is calculated by reference to key financial ratios, the market, the peer group and business prospects. Top-down investment factors are secondary in the Investment Manager's portfolio construction, with diversification rather than formal controls guiding stock and sector weights. Except for the maximum market capitalisation limit, little regard is paid to market capitalisation.

A detailed description of the investment process and risk controls employed by the Investment Manager is disclosed in the Annual Report.  A comprehensive analysis of the Company's portfolio is disclosed below including a description of the ten largest investments, the portfolio investments by value, sector/geographical analysis and currency/market performance. At the year end the Company's portfolio consisted of 76 holdings.

Comparative Indices

The Company does not have a benchmark. The Investment 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 Investment Manager seeks to minimise risk by using in depth research and does not see divergence from an index as risk.

Key Performance Indicators (KPIs)

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determine the progress of the Company in pursuing its investment policy.  The main KPIs identified by the Board in relation to the Company which are considered at each Board meeting are as follows:

KPI	Description
NAV Return (per share)	The Board considers the Company's NAV total return figures to be the best indicator of performance over time and is therefore the main indicator of performance used by the Board. The figures for this year and for the past 1, 3, 5, 10 years and since inception are set out in the Annual Report.
Performance against comparative indices	The Board also measures performance against a combination of two 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) together with comparison against its peers. Graphs showing performance are shown in the Annual Report.  The Board also monitors share price performance relative to competitor investment trusts over a range of time periods, taking into consideration the differing investment policies and objectives employed by those companies.
Share price (on a total return basis)	The Board also monitors the price at which the Company's shares trade relative to the MSCI Asia Pacific ex Japan Index (sterling adjusted) on a total return basis over time. A graph showing the total NAV return and the share price performance against the comparative index is shown in the Annual Report.
Discount/Premium to NAV	The discount/premium relative to the NAV per share represented by the share price is closely monitored by the Board. The objective is to avoid large fluctuations in the discount relative to similar investment companies investing in the region by the use of share buy backs subject to market conditions.  A graph showing the share price premium/(discount) relative to the NAV is also shown in the Annual Report.
Dividend	The Board's aim is to maintain or increase the Ordinary dividend so that shareholders can rely on a consistent stream of income. Dividends paid over the past 10 years are set out in the Annual Report.

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has carried out a robust assessment of these risks, in the table below together with a description of the mitigating actions taken by the Board.  The principal risks associated with an investment in the Company's shares are published monthly on the Company's factsheet or they can be found in the pre-investment disclosure document published by the Manager, both of which are on the Company's website. The Board reviews the risks and uncertainties faced by the Company in the form of a risk matrix and heat map at its annual Audit Committee and a summary of the principal risks are set out below.

Description	Mitigating Action
Investment strategy and objectives - the setting of an unattractive strategic proposition to the market and the failure to adapt to changes in investor demand may lead to the Company becoming unattractive to investors, a decreased demand for shares and a widening discount.	The Board keeps the level of discount at which the Company's shares trade as well as the investment objective and policy under review and in particular holds an annual strategy meeting where the Board reviews updates from the Investment Manager, investor relations reports and the Broker on the market. In particular, the Board is updated at each board meeting on the make up of and any movements in the shareholder register.
Investment portfolio, investment management - investing outside of the investment restrictions and guidelines set by the Board could result in poor performance and inability to meet the Company's objectives, as well as a weakening discount.	The Board sets, and monitors, its investment restrictions and guidelines, and receives regular board reports which include performance reporting on the implementation of the investment policy, the investment process and application of the guidelines. The Investment Manager attends all Board meetings. The Board also monitors the Company's share price relative to the NAV.
Financial obligations - the ability of the Company to meet its financial obligations, or increasing the level of gearing, could result in the Company becoming over-geared or unable to take advantage of potential opportunities and result in a loss of value to the Company's shares. It could also result in the Company being unable to meet the interest repayments due on the CULS.	The Board sets a gearing limit and receives regular updates on the actual gearing levels the Company has reached from the Investment Manager together with the assets and liabilities of the Company and reviews these at each Board meeting. In addition, Aberdeen Fund Managers Limited, as alternative investment fund manager, has set an overall leverage limit of 2x on a commitment basis (2.5x on a gross notional basis) and includes updates in its reports to the Board.
Financial and Regulatory - the financial risks associated with the portfolio could result in losses to the Company. In addition, failure to comply with relevant regulation (including the Companies Act, the Financial Services and Markets Act, the Alternative Investment Fund Managers Directive, Accounting Standards and the listing rules, disclosure and prospectus rules) may have an impact on the Company.	The financial risks associated with the Company include market risk, liquidity risk and credit risk, all of which are mitigated by the Investment Manager. Further details of the steps taken to mitigate the financial risks associated with the portfolio are set out in note 18 to the financial statements. The Board relies upon the Standard Life Aberdeen Group to ensure the Company's compliance with applicable regulations and from time to time employs external advisers to advise on specific concerns.
Operational - the Company is dependent on third parties for the provision of all systems and services (in particular, those of Aberdeen Asset Management) and any control failures and gaps in these systems and services could result in a loss or damage to the Company.	The Board receives reports from the Manager on internal controls and risk management at each board meeting. It receives assurances from all its significant service providers, as well as back to back assurances where activities are themselves sub-delegated to other third party providers with which the Company has no direct contractual relationship. Further details of the internal controls which are in place are set out in the Directors' Report.
Investing in unlisted securities - since shareholder approval at the 2016 AGM, the Company has had the ability to invest in unlisted securities, although no such investments have yet been made.  Unquoted investments are long-term in nature and they may take a considerable period to be realised. Unquoted investments are less readily realisable than quoted securities. Such investments may therefore carry a higher degree of risk than quoted securities. In valuing investments the Company may rely to a significant extent on the accuracy of financial and other information provided to the Manager.  Furthermore, unquoted valuations are subject to the economic performance of the countries that the companies are based in or trade with, wider global economic trends and the performance of listed peer multiples which may influence valuations significantly.  If public markets decline or economic growth falters then this will impact negatively.	The Board recognises that investing in unlisted securities carries a higher risk/reward profile. Accordingly it seeks to mitigate this risk by limiting investment into such securities to 10% of the Company's net assets (calculated at the time of investment).

Promoting the Company

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares.  The Board believes an effective way to achieve this is through subscription to and participation in the promotional programme run by the Manager on behalf of a number of investment trusts under its management. The Company's financial contribution to the programme is matched by the Manager.  The Manager reports quarterly to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make up of that register.

The purpose of the programme is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares. Communicating the long-term attractions of your Company is key and therefore the Company also supports the Manager's investor relations programme which involves regional roadshows, promotional and public relations campaigns. 

Board Diversity

The Board recognises the importance of having a range of skilled and experienced individuals with the right knowledge in order to allow the Board to fulfill its obligations and notes that gender is only one aspect of diversity.  At 31 July 2017, there were five male Directors and one female Director on the Board.

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated day to day management and administrative functions to Aberdeen Fund Managers Limited. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined below.

Socially Responsible Investment Policy

The Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner and has noted the Manager's policy on social responsibility. The Investment Manager considers social, environmental and ethical factors which may affect the performance or value of the Company's investments as part of its investment process.  In particular, the Investment Manager encourages companies in which investments are made to adhere to best practice in the area of Corporate Governance. They believe that this can best be achieved by entering into a dialogue with company management to encourage them, where necessary, to improve their policies in this area. The Company's ultimate objective, however, is to deliver superior investment return for its shareholders. Accordingly, whilst the Investment Manager will seek to favour companies which pursue best practice in the above areas, this must not be to the detriment of the return on the investment portfolio.

Modern Slavery Act

Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement. In any event, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board formally considers risks and strategy at least annually. The Board considers the Company, with no fixed life, to be a long term investment vehicle, but for the purposes of this viability statement has decided that a period of three years is an appropriate period over which to report. The Board considers that this period reflects a balance between looking out over a long term horizon and the inherent uncertainties of looking out further than three years.

In assessing the viability of the Company over the review period the Directors have conducted a robust review of the principal risks focussing upon the following factors:

-    The principal risks detailed in the Strategic Report;

-    The ongoing relevance of the Company's investment objective in the current environment;

-    The demand for the Company's Shares evidenced by the historical level of premium and or discount;

-    The level of income generated by the Company;

-    The liquidity of the Company's portfolio; and,

-    The flexibility of the Company's bank facilities.

Accordingly, taking into account the Company's current position, the fact that the Company's investments are mostly liquid and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report. In making this assessment, the Board has considered that matters such as significant economic or stock market volatility, a substantial reduction in the liquidity of the portfolio, or changes in investor sentiment could have an impact on its assessment of the Company's prospects and viability in the future.

Future

Many of the non-performance related trends likely to affect the Company in the future are common across all closed ended investment companies, such as the attractiveness of investment companies as investment vehicles, the impact of regulatory changes (including MiFID II and Packaged Retail Investment and Insurance Products) and the recent changes to the pensions and savings market in the UK.  These factors need to be viewed alongside the outlook for the Company, both generally and specifically, in relation to the portfolio. The Board's view on the general outlook for the Company can be found in my Chairman's statement whilst the Investment Manager's views on the outlook for the portfolio are included Investment Manager's Review.

Nigel Cayzer

Chairman

24 October 2017

STRATEGIC REPORT - INVESTMENT MANAGER'S REVIEW

Overview

Asian markets maintained their upward trajectory in the year under review amid renewed interest in the region. Returns were further flattered by sterling's bouts of weakness, especially in the wake of the UK's surprise decision to leave the European Union and the subsequent aftershocks from the Conservative Party's political missteps, including the call for a snap election that ended in a hung parliament.

In Asia, risk appetite improved on the back of a recovery in commodity prices, aided by steadier oil prices, as well as better economic data from China. Leading the region higher were markets in India, Taiwan and China, while laggards included Indonesia, the Philippines and South Korea. The small-cap sector also benefited from liquidity inflows driven by investors' search for growth.

Portfolio Review

For the year under review, the portfolio did well both in absolute and relative terms, outperforming the MSCI AC Asia Pacific ex Japan Small Cap Index.

At the stock level, financial-sector holdings were at the forefront in contributing to relative performance. Making up the top-performing names were India's City Union Bank and Thailand's Tisco Financial. They were helped in part by prospects of higher interest rates that could result in better profit margins, but also driven by very local factors. For instance, City Union Bank benefited from Prime Minister Narendra Modi's demonetisation policy that drove consumers holding cash to place them in bank deposits instead; and Tisco Financial was lifted by improving asset quality that outpaced that of the larger lenders. Separately, Tisco bought Standard Chartered's Thai retail operations which will be integrated into the group. The move, which we view positively, is in line with its long-term strategy.

Several portfolio holdings saw their share prices rise because they were rumoured to be, or were actual targets of mergers and acquisitions. This included MP Evans, which faced a hostile takeover. The company successfully fought off the unsolicited bid from KL Kepong, which had undervalued its plantations portfolio. We had engaged with the Boards of both parties during the offer process and welcomed the outcome, as MP Evans has shown that it has a clear strategy for growth. In addition, management has since started divesting non-core assets to improve shareholders' returns, which have supported its share price. Indonesia's Bank OCBC Nisp was also buoyed by market rumours about a possible takeover, which fuelled a spike in its share price at the end of 2016. In Singapore, small-cap property companies were also the subject of speculation amid a flurry of deals. In particular, property developer Bukit Sembawang was bandied about as a possible target, given its valuable and highly sought-after land bank. It also enjoyed a re-rating after a moderate relaxation of government measures lifted stocks in the real estate sector.

Other underlying holdings that did well included Millennium and Copthorne Hotels, which was boosted by good fundamentals and New Zealand's upbeat tourism sector; as well as Pacific Basin Shipping, which is seeing a recovery in freight rates amid a rosier operating backdrop and is well positioned to capitalise on industry consolidation. We had supported its earlier rights issue that helped strengthen its balance sheet, which will allow it to pick up bargains from among distressed shipping assets.

Conversely, we missed out to an extent on the technology sector's strong performance. This was largely because of the portfolio's lack of exposure to the tech-heavy Taiwanese stockmarket, which did well as share prices of Apple suppliers rose ahead of the iPhone 8 launch. We remain cautious about investing in this export-oriented economy that offers a relatively narrow selection of companies, many of which lack market leadership, in terms of both technology and branding, and are subject to the pricing whims of their large global customers. However, we do have exposure to Hana Microelectronics, which benefited the portfolio as its shares gained from brighter sales prospects underpinned by a strengthening US economy.

Portfolio Activity

Since the interim report, we continued to find attractive opportunities as we scoured the small-cap universe for potential additions to the portfolio. We initiated four new holdings: Taiwanese power-tools maker Basso, Korean contact-lens maker Interojo, attractively-valued Pakistani cement company Maple Leaf and Thailand's Mega Life Sciences.

We like Basso for its focus on maintaining profitability through vertical integration and investments in innovation. The company has a diversified clientele, including Hong Kong-listed Techtronic Industries, which also makes such tools.

Interojo's attractiveness lies in its high entry barriers, thanks to its manufacturing capability, distribution and products that are approved by regulators. It has a solid balance sheet and an operating margin of around 30%, with growth driven by an expanding product portfolio at home and a broadening distribution presence in China and Japan.

We found Maple Leaf appealing, given its solid niche in northern Pakistan, as well as a firm commitment to establishing a sound brand and a good distribution network that will allow it to improve its long-term profitability.

Finally, Mega Life Sciences manufactures and sells pharmaceutical and nutraceutical products domestically and across frontier markets. We like the company because its earnings continue to be resilient. It is also well positioned to benefit from its growing exposure to key frontier markets that are structurally attractive over the longer term.

Against this, we sold Hong Kong's casual-dining restaurant chain Café De Coral, which faces a tough operating environment. Holding this company over the long term has proven beneficial, as we made a tidy profit when we exited the position.

Outlook

We are cautiously optimistic about Asian small-cap equities in the months ahead, with positive momentum in the global economy providing the underpinning for growth within the region. China's increased pragmatism, backed by Beijing's desire to keep the economy on a sustainable growth path, while holding in check its reform agenda ahead of leadership changes, should also bode well for market sentiment. As such, each economy within Asia is likely to maintain their current trajectories, backed by the broad recovery in exports, which will benefit smaller companies dependent on the domestic sector. In addition, inflation is expected to remain benign, with oil prices penned in by a significant oversupply and record US shale production.

However, risks to this global backdrop persist too, particularly with a combative Trump administration and its penchant for brinksmanship, uncertainties surrounding the Brexit negotiations, federal elections in Germany and the direction of monetary policy among the world's major central banks, as well as geopolitical developments on the Korean peninsula and the Middle East, all of which will play a part in shaping investor sentiment. However, we are confident that the portfolio's underlying holdings, backed by healthy balance sheets and helmed by experienced management, should be able to overcome these challenges and keep their businesses on course, achieving their strategic goals.

Aberdeen Asset Management Asia Limited

Investment Manager

24 October 2017

STRATEGIC REPORT - RESULTS

FINANCIAL HIGHLIGHTS

	31 July 2017	31 July 2016	% change
Total assets	£472,028,000	£427,725,000	+10.4
Total equity shareholders' funds (net assets)	£430,105,000	£383,735,000	+12.1
Net asset value per share (basic)	1,235.45p	1,068.92p	+15.6
Net asset value per share (diluted)	1,192.49p	1,042.99p	+14.3
Share price (mid market)	1,062.00p	924.00p	+14.9
Market capitalisation	£369,722,000	£331,710,000	+11.5
Discount to net asset value (diluted)	10.9%	11.4%
MSCI AC Asia Pacific ex Japan Index (currency adjusted, capital gains basis)	751.08	615.34	+22.1
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted, capital gains basis)	1,473.25	1,321.89	+11.5
Net gearing{A}	-8.8%	-7.9%
Dividends and earnings
Total return per share (basic){B}	172.29p	165.38p
Revenue return per share (basic)	19.31p	9.22p	+109.4
Dividends per share{C}	16.00p	10.50p	+52.4
Dividend cover	1.21	0.88	+37.4
Revenue reserves{D}	£11,426,000	£8,347,000	+36.9
Operating costs
Ongoing charges ratio{E}	1.16%	1.69%
{A}    Calculated in accordance with AIC guidance "Gearing Disclosures post RDR" (see method of calculation in note 20).
{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 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	10 year	Since
	% return	% return	% return	% return	inception
Share price{A}	+16.2	+17.4	+53.8	+290.9	+1496.6
Net asset value per Ordinary share - diluted{A}	+15.4	+30.3	+71.1	+281.0	+1544.2
MSCI AC Asia Pacific ex Japan Index (currency adjusted)	+25.7	+46.0	+74.5	+131.2	+350.1
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted)	+14.3	+35.1	+63.4	+80.6	n/a
{A}        Alternative Performance Measures
Source: Standard Life Aberdeen PLC, Morningstar, Lipper & MSCI

DIVIDENDS

	Rate	xd date	Record date	Payment date
Proposed final 2017	12.00p	2 November 2017	3 November 2017	7 December 2017
Proposed special 2017	4.00p	2 November 2017	3 November 2017	7 December 2017
	16.00p
	______
Final 2016	10.50p	5 November 2016	6 November 2016	2 December 2016
	______

Ten Year Financial Record

Year to 31 July	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Total revenue (£'000)	5,021	4,954	6,103	8,380	9,168	11,512	11,427	14,746	10,992	13,896
Per share (p)
Net revenue return	5.88	6.75	12.85	15.42	13.18	13.84	11.43	18.21	9.22	19.31
Total return	(50.80)	48.21	236.82	137.91	68.56	275.43	(31.46)	(50.13)	165.38	172.29
Net ordinary dividends paid/proposed	4.00	5.00	8.20	9.50	9.50	10.00	10.00	10.50	10.50	12.00
Net special dividends paid/proposed	1.00	-	1.90	2.80	3.00	3.00	3.00	4.50	-	4.00
	____	____	____	____	____	____	____	_____	_____	____
Net asset value per share (p)
Basic	347.24	390.96	619.37	686.39	746.55	1,013.82	968.89	906.16	1,068.92	1,235.45
Diluted	316.46	355.95	562.57	n/a	n/a	992.81	952.52	896.31	1,042.99	1,192.49
	____	____	____	____	____	____	____	_____	_____	____
Shareholders' funds (£'000)	109,829	121,963	192,851	239,965	260,994	382,932	369,118	343,967	383,735	430,105
	____	____	____	____	____	____	____	_____	_____	____

INVESTMENT PORTFOLIO

As at 31 July 2017

Investment Portfolio - Ten Largest Investments

			Valuation	Total	Valuation
			2017	assets	2016
Company	Industry	Country	£'000	%	£'000
Bank OCBC NISP
Indonesian subsidiary of Singapore-based OCBC Bank.	Banks	Indonesia	15,204	3.2	11,988
Bukit Sembawang Estates
Singapore-based residential property developer with a large land bank.	Real Estate Management & Development	Singapore	14,822	3.1	10,979
Millennium & Copthorne Hotels New Zealand{A}
Owns and operates a chain of hotels across New Zealand and also active in property development there. It is majority owned by London-listed Millennium & Copthorne Hotels.	Hotels, Restaurants & Leisure	New Zealand	13,849	2.9	8,550
Hana Microelectronics (Foreign)
Thai company with diversified product lines in IC packaging and microelectronics, proven management ability to manage through cycles, debt-free balance sheet and strong cash flow.	Electronic Equipment, Instruments & Components	Thailand	13,582	2.9	10,299
Dah Sing Financial Holdings
A conservative medium-sized Hong Kong based bank with exposure to both Hong Kong and China. The bank offers appealing valuation and strong asset quality.	Banks	Hong Kong	13,340	2.8	12,547
Multi Bintang Indonesia
A well-run Indonesian brewery which has good long-term prospects and steady cash flow.	Beverages	Indonesia	12,986	2.8	11,890
Ramco Cements
A mid-sized cement manufacturer in India with a leading market share in the southern region.	Construction Materials	India	12,605	2.7	10,745
M.P. Evans Group
Owns and operates plantations, both directly and through associated undertakings, with plantation interests in Indonesia and Malaysia.	Food Products	United Kingdom	12,573	2.7	6,387
Yoma Strategic Holdings
Singapore-listed conglomerate with businesses in property, agriculture and tourism in Myanmar.	Real Estate Management & Development	Singapore	11,431	2.4	10,961
LPI Capital
Malaysia-based insurance company involved in underwriting fire, motor, marine, aviation, transit and miscellaneous insurance.	Insurance	Malaysia	11,030	2.3	14,228
Top ten investments			131,422	27.8
{A}        Holding includes investment in both common and preference lines.

Investment Portfolio - Other Investments

			Valuation	Total	Valuation
			2017	assets	2016
Company	Industry	Country	£'000	%	£'000
Kansai Nerolac Paints	Chemicals	India	10,566	2.2	7,569
Cebu Holdings	Real Estate Management & Development	Philippines	10,175	2.2	10,100
AEON Co (M)	Multiline Retail	Malaysia	10,135	2.1	11,654
AEON Credit Service (M)	Consumer Finance	Malaysia	10,088	2.1	7,401
City Union Bank	Banks	India	9,811	2.1	6,101
Tisco Financial Group (Foreign)	Banks	Thailand	9,750	2.1	12,075
AEON Thana Sinsap Thailand (Foreign)	Consumer Finance	Thailand	9,671	2.0	10,437
First Sponsor Group	Real Estate Management & Development	Singapore	9,231	2.0	9,915
Gujarat Gas	Gas Utilities	India	8,758	1.9	8,103
Jollibee Foods Corporation	Hotels, Restaurants & Leisure	Philippines	8,635	1.9	10,437
Top twenty investments			228,242	48.4
Eastern Water Resources Development and Management (Foreign)	Water Utilities	Thailand	8,630	1.8	8,316
Thai Stanley Electric (Foreign)	Auto Components	Thailand	8,558	1.8	6,713
Shangri-La Hotels Malaysia	Hotels, Restaurants & Leisure	Malaysia	8,366	1.8	9,126
United International Enterprises	Food Products	Denmark	8,327	1.8	7,457
Asian Terminals	Transportation Infrastructure	Philippines	8,168	1.7	8,890
Sanofi India	Pharmaceuticals	India	7,989	1.7	8,074
Public Financial Holdings	Banks	Hong Kong	7,888	1.7	7,101
ARB Corporation	Auto Components	Australia	7,811	1.6	8,445
Convenience Retail Asia	Food & Staples Retailing	Hong Kong	7,498	1.6	4,957
Pacific Basin Shipping	Marine	Hong Kong	7,278	1.5	3,658
Top thirty investments			308,755	65.4
Kingmaker Footwear Holdings	Textiles, Apparel & Luxury Goods	Hong Kong	7,193	1.5	6,001
Heineken Malaysia	Beverages	Malaysia	7,167	1.5	7,494
Giordano International	Specialty Retail	Hong Kong	6,923	1.5	6,426
United Plantations	Food Products	Malaysia	6,614	1.4	6,642
Straits Trading Company	Metals & Mining	Singapore	6,260	1.4	5,107
Hong Kong Economic Times Holdings	Media	Hong Kong	6,210	1.3	6,629
Castrol India	Chemicals	India	5,732	1.2	6,042
AEON Stores Hong Kong	Multiline Retail	Hong Kong	5,683	1.2	4,723
AEON Credit Service (Asia)	Consumer Finance	Hong Kong	5,391	1.1	4,709
Commercial Bank of Ceylon	Banks	Sri Lanka	5,246	1.1	4,609
Top forty investments			371,174	78.6
Wheelock Properties Singapore	Real Estate Management & Development	Singapore	5,198	1.1	4,094
Ultrajaya Milk Industry & Trading	Food Products	Indonesia	5,058	1.1	-
Basso Industry Corporation	Household Durables	Taiwan	4,914	1.0	-
The Hong Kong & Shanghai Hotels	Hotels, Restaurants & Leisure	Hong Kong	4,904	1.0	2,906
YNH Property	Real Estate Management & Development	Malaysia	4,521	1.0	6,229
Interojo	Health Care Equipment & Supplies	South Korea	4,295	0.9	-
John Keells Holdings	Industrial Conglomerates	Sri Lanka	4,244	0.9	3,458
Thaire Life Assurance (Foreign)	Insurance	Thailand	4,231	0.9	4,992
Tasek Corporation	Construction Materials	Malaysia	4,123	0.9	4,975
Aegis Logistics	Oil, Gas & Consumable Fuels	India	4,014	0.9	-
Top fifty investments			416,676	88.3
Cabcharge Australia	Commercial Services & Supplies	Australia	3,728	0.8	6,134
SBS Transit	Road & Rail	Singapore	3,704	0.8	3,397
Concepcion Industrial Corp	Building Products	Philippines	3,555	0.7	2,482
United Malacca	Food Products	Malaysia	3,381	0.7	3,239
Riverstone Holdings	Commercial Services & Supplies	Singapore	3,003	0.6	2,090
Haad Thip (Foreign)	Beverages	Thailand	2,956	0.6	2,275
Hong Leong Finance	Consumer Finance	Singapore	2,656	0.6	2,290
CDL Hospitality Trusts	Equity Real Estate Investment Trusts	Singapore	2,629	0.6	2,020
Mega Lifesciences (Foreign)	Pharmaceuticals	Thailand	2,467	0.5	-
DFCC Bank	Banks	Sri Lanka	2,394	0.5	2,622
Top sixty investments			447,149	94.7
Holcim Indonesia	Construction Materials	Indonesia	2,371	0.5	3,393
Maple Leaf Cement	Construction Materials	Pakistan	2,197	0.5	-
Goodyear Thailand (Foreign)	Auto Components	Thailand	2,188	0.5	2,126
ORIX Leasing Pakistan	Consumer Finance	Pakistan	2,072	0.4	1,448
Oriental Holdings	Automobiles	Malaysia	1,926	0.4	2,015
Asia Satellite Telecommunications Holdings	Diversified Telecommunication Services	Hong Kong	1,848	0.4	2,600
MayAir Group	Machinery	United Kingdom	1,839	0.4	484
National Development Bank	Banks	Sri Lanka	1,210	0.3	1,418
Manulife Holdings	Insurance	Malaysia	1,154	0.2	1,032
Aitken Spence & Co	Industrial Conglomerates	Sri Lanka	1,095	0.2	1,265
Top seventy investments			465,049	98.5
Green Dragon Gas	Oil, Gas & Consumable Fuels	China	850	0.2	3,406
Chevron Lubricants Lanka	Chemicals	Sri Lanka	835	0.2	983
Wintermar Offshore Marine	Energy Equipment & Services	Indonesia	715	0.2	538
CDL Investments New Zealand	Real Estate Management & Development	New Zealand	708	0.2	574
FJ Benjamin Holdings	Specialty Retail	Singapore	235	-	314
Mustika Ratu	Personal Products	Indonesia	222	-	254
Total investments			468,614	99.3
Net current assets (before deducting prior charges{B})			3,414	0.7
Total assets{B}			472,028	100.0
{B} Prior charges is the name given to all borrowings including debentures, long and short term loans and overdrafts that are to be used for investment purposes, reciprocal foreign currency loans, currency facilities to the extent that they are drawn down, index-linked securities, and all types of preference or preferred capital and the income shares of split capital trusts, irrespective of the time until repayment.
All investments are in equities.

DIRECTORS' REPORT EXTRACTS

The Directors present their Report and the audited financial statements for the year ended 31 July 2017.

Results and Dividends

Details of the Company's results and proposed dividends are shown under Financial Highlights above.

Investment Trust Status

The Company (registered in England & Wales No. 03106339) has been accepted by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 August 2012.  The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 July 2017 so as to enable it to comply with the ongoing requirements for investment trust status.

Individual Savings Accounts

The Company has conducted its affairs so as to satisfy the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner.

Capital Structure, Buybacks and Issuance

The Company's capital structure is summarised in note 14 to the financial statements.  At 31 July 2017, there were 34,813,725 fully paid Ordinary shares of 25p each (2016 - 35,899,334 Ordinary shares) in issue with a further 4,369,874 Ordinary shares of 25p held in treasury (2016 - 3,278,124 treasury shares). During the year 1,091,750 Ordinary shares were purchased in the market for treasury (2016 - 2,059,834).  Subsequent to the period a further 390,500 Ordinary shares have been purchased in the market for treasury.  During the period and up to the date of this report no new Ordinary shares were issued for cash at a premium to the prevailing NAV per share and no shares were sold from treasury.

On 14 December 2016, 21,594 units of Convertible Unsecured Loan Stock were converted into 2,595 new Ordinary shares and on 14 June 2017, 29,473 units of CULS were converted into 3,546 new Ordinary shares. In accordance with the terms of the CULS Issue, the conversion price of the CULS was determined at 830.0 pence nominal of CULS for one Ordinary share. 

Voting Rights

Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The ordinary shares carry a right to receive dividends. On a winding up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.

CULS holders have the right to attend but not vote at general meetings of the Company. A separate resolution of CULS holders would be required to be passed before any modification or compromise of the rights attaching to the CULS can be made.

Borrowings

On 9 June 2017 the Company agreed a new three year multicurrency revolving loan facility and a term loan facility in an aggregate amount of $25 million with The Royal Bank of Scotland plc. Under the term loan facility $12.5 million was drawn down and fixed for three years at an all-in rate of 2.506%. On the same date a maturing loan of $9 million was repaid to State Street.  Up to $12.5 million remains available for drawing in the future under the new revolving loan facility.  At the year end $12.5 million had been drawn down under the Company's $25m million multi currency loan facility.

Management Agreement

The Company has appointed Aberdeen Fund Managers Limited, a wholly owned subsidiary of Aberdeen Asset Management PLC, as its alternative investment fund manager. Under the management arrangements with AFML, management of the Company's portfolio has been delegated to Aberdeen Asset Management Asia Limited by way of a group delegation agreement in place between AFML and AAM Asia.  An investment management fee is payable monthly in arrears based on an annual amount of 1.0% (previously calculated using a rate of 1.2% until July 2016) calculated on the average net asset value of the Company over a 24 month period, valued monthly. The fee is calculated by reference to the value of the Company's net assets (gross assets less liabilities excluding the amount of any loan facilities or overdraft facilities drawn down).

Company secretarial services are also provided by Aberdeen and accounting and administrative services are delegated to Aberdeen Asset Managers Limited, which then outsources those arrangements to BNP Paribas Securities Services Limited. Aberdeen Asset Managers also operates the Manager's promotional programme.

The management agreement may be terminated by either the Company or the Manager on the expiry of twelve months' written notice. On termination, the Manager would be entitled to receive fees which would otherwise have been due to that date.  Details of the fees payable by the Company to the Manager for the provision of management, secretarial and promotional services are shown in notes 4 and 5 to the financial statements.

The Management Engagement Committee reviews the terms of the management agreement on a regular basis and have confirmed that, due to the long-term relative performance, investment skills, experience and commitment of the investment management team, in their opinion the continuing appointment of AFML and AAM Asia is in the interests of shareholders as a whole.

Political and Charitable Donations

The Company does not make political donations (2016 - nil) and has not made any charitable donations during the year (2016 - nil).

Risk Management

Details of the financial risk management policies and objectives relative to the use of financial instruments by the Company are set out in note 18 to the financial statements.

The Board

The current Directors, Messrs N K Cayzer, Randal McDonnell (Viscount Dunluce), M J Gilbert (alternate H Young), C S Maude, P Yea and Ms H Fukuda together with M Hadsley-Chaplin who retired on 29 November 2016 were the only Directors who served during the year. Messrs Cayzer, Maude and Ms Fukuda have each served on the Board for more than nine years and, in accordance with corporate governance best practice, will retire at the Annual General Meeting ("AGM") on 1 December 2017 and, being eligible, offer themselves for re-election.  Mr Gilbert has served on the Board for more than nine years and is also deemed not to be independent as he is a representative of the Manager, and therefore, in accordance with corporate governance best practice, Mr Gilbert will also retire at the AGM on 1 December 2017 and, being eligible, offer himself for re-election. Mr Yea retires by rotation at the AGM and, being eligible, offers himself for re-election. 

The Board considers that there is a balance of skills and experience within the Board relevant to the leadership and direction of the Company and that all the Directors contribute effectively

In common with most investment trusts, the Company has no employees. Directors' & Officers' liability insurance cover has been maintained throughout the year at the expense of the Company.

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and, as required by the Listing Rules of the UK Listing Authority, has applied the principles identified in the UK Corporate Governance Code (published in April 2016). The UK Corporate Governance Code is available on the Financial Reporting Council's website: frc.org.uk.

The Board has considered the principles and recommendations of the AIC Code of Corporate Governance (AIC Code) by reference to the AIC Corporate Governance Guide for Investment Companies (AIC Guide). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues which are of specific relevance to the Company. Both the AIC Code and the AIC Guide are available on the AIC's website: theaic.co.uk.

The Company has complied throughout the accounting period with the relevant provisions contained within the AIC Code and the relevant provisions of the UK Corporate Governance Code except as set out below.

The UK Corporate Governance Code includes provisions relating to:

-    the role of the chief executive (A.1.2);

-    executive directors' remuneration (D.2.1 and D.2.2);

-    and the need for an internal audit function (C.3.6).

For the reasons set out in the AIC Code, and as explained in the UK Corporate Governance Code, the Board considers that these provisions are not relevant to the position of the Company, being an externally-managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions. The full text of the Company's Corporate Governance Statement can be found on the Company's website: asian-smaller.co.uk.

During the year ended 31 July 2017, the Board had six scheduled meetings and a further ad hoc meeting to approve the new Bank facility. In addition, the Audit Committee met twice and the Management Engagement Committee met once. Between meetings the Board maintains regular contact with the Manager. Directors have attended the following scheduled Board meetings and Committee meetings during the year ended 31 July 2017 (with their eligibility to attend the relevant meeting in brackets):

Director	Board	Audit Committee	Nomination Committee	Management Engagement Committee
NK CayzerA	6 (6)	n/a	1 (1)	1 (1)
Viscount DunluceA	6 (6)	1 (1)	1 (1)	1 (1)
H FukudaA	5 (6)	0 (1)	0 (1)	0 (1)
MJ GilbertAB	5 (6)	n/a	0 (1)	n/a
P Yea	6 (6)	2 (2)	1 (1)	1 (1)
CS Maude	6 (6)	2 (2)	1 (1)	1 (1)
M Hadsley-ChaplinC	6 (6)	2 (2)	1 (1)	1 (1)

^A    Mr Cayzer, Mr Gilbert are not members of the Audit and Management Engagement Committees. Ms Fukuda resigned from the Audit Committee in September 2016 and Viscount Dunluce joined the Audit Committee in September 2016

^B    Including attendance by Mr Young as Alternate Director to Mr Gilbert.

^C       Mr Hadsley-Chaplin retired as a Director on 29 November 2016

Policy on Tenure

The Board's policy on tenure is that Directors need not serve on the Board for a limited period of time only. The Board does not consider that the length of service of a Director is as important as the contribution he or she has to make, and therefore the length of service will be determined on a case-by-case basis. In accordance with corporate governance best practice, Directors who have served for more than nine years or who are non-independent voluntarily offer themselves for re-election on an annual basis. 

Board Committees

Audit Committee

The Audit Committee Report is contained in the Annual Report.

Nomination Committee

All appointments to the Board of Directors are considered by the Nomination Committee which comprises the entire Board and is chaired by Nigel Cayzer. The Board's overriding priority in appointing new Directors to the Board is to identify the candidate with the best range of skills and experience to complement existing Directors. The Board also recognises the benefits of diversity and its policy on diversity is referred to in the Strategic Report.

Management Engagement Committee

The Board has separated out the Management Engagement Committee responsibilities previously undertaken as part of the Audit Committee and established a new Management Engagement Committee.

The Management Engagement Committee comprises all of the Directors except Mr Gilbert and his Alternate Mr Young and is chaired by Mr Maude. The Committee reviews the performance of the Investment Manager and its compliance with the terms of the management and secretarial agreement. The terms and conditions of the Investment Manager's appointment, including an evaluation of fees, are reviewed by the Committee on an annual basis. The Committee believes that the continuing appointment of the Manager on the terms agreed is in the interests of shareholders as a whole.

Remuneration Committee

Under the UK Listing Authority rules, where an investment trust has only non-executive directors, the Code principles relating to directors' remuneration do not apply. Accordingly, matters relating to remuneration are dealt with by the full Board, which acts as the Remuneration Committee, and is chaired by Mr Cayzer.

The Company's remuneration policy is to set remuneration at a level to attract individuals of a calibre appropriate to the Company's future development. Further information on remuneration is disclosed in the Directors' Remuneration Report in the Annual Report.

Terms of Reference

The terms of reference of all the Board Committees may be found on the Company's website asian-smaller.co.uk and copies are available from the Company Secretary upon request. The terms of reference are reviewed and re-assessed by the Board for their adequacy on an annual basis.

Going Concern

In accordance with the Financial Reporting Council's guidance the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern. The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking covenants.

The Directors are mindful of the principal risks and uncertainties and the Viability Statement contained within the Strategic Report and have reviewed forecasts detailing revenue and liabilities and they believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future and at least 12 months from the date of this Annual Report. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements.

Management of Conflicts of Interest

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his wider duties is affected. Each Director is required to notify the Company Secretary of any potential, or actual, conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.

No Director has a service contract with the Company although Directors are issued with letters of appointment upon appointment. The Directors' interests in contractual arrangements with the Company are as shown in note 17 to the financial statements. No other Directors had any interest in contracts with the Company during the period or subsequently.

The Board has adopted appropriate procedures designed to prevent bribery.  The Company receives periodic reports from its service providers on the anti-bribery policies of these third parties. It also receives regular compliance reports from the Manager.

Accountability and Audit

The respective responsibilities of the Directors and the auditor in connection with the financial statements are set out in the Annual Report.

Each Director confirms that:

-    so far as he or she is aware, there is no relevant audit information of which the Company's auditor is unaware; and,

-    each Director has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Additionally there have been no important events since the year end that impact the audit of this Annual Report.

The Directors have reviewed the level of non-audit services provided by the independent auditor during the year, together with the independent auditor's procedures in connection with the provision of such services, and remain satisfied that the auditor's objectivity and independence is being safeguarded.

Independent Auditor

The auditor, Ernst & Young LLP, has indicated its willingness to remain in office. The Directors will place a resolution before the Annual General Meeting to re-appoint Ernst & Young LLP as auditor for the ensuing year, and to authorise the Directors to determine its remuneration.

Internal Control

The Board is ultimately responsible for the Company's system of internal control and for reviewing its effectiveness and confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the year under review and up to the date of approval of this Annual Report and Accounts. It is regularly reviewed by the Board and accords with the FRC Guidance.

The Board has reviewed the effectiveness of the system of internal control. In particular, it has reviewed and updated the process for identifying and evaluating the significant risks affecting the Company and policies by which these risks are managed.

The Directors have delegated the investment management of the Company's assets to the Standard Life Aberdeen Group within overall guidelines, and this embraces implementation of the system of internal control, including financial, operational and compliance controls and risk management. Internal control systems are monitored and supported by the Standard Life Aberdeen Group's internal audit function which undertakes periodic examination of business processes, including compliance with the terms of the management agreement, and ensures that recommendations to improve controls are implemented.

Risks are identified and documented through a risk management framework by each function within the Standard Life Aberdeen Group's activities. Risk includes financial, regulatory, market, operational and reputational risk. This helps the internal audit risk assessment model identify those functions for review. Any weaknesses identified are reported to the Board, and timetables are agreed for implementing improvements to systems. The implementation of any remedial action required is monitored and feedback provided to the Board.

The significant risks faced by the Company have been identified as being financial; operational; and compliance-related.

The key components of the process designed by the Directors to provide effective internal control are outlined below:

-    the Standard Life Aberdeen Group prepares forecasts and management accounts which allow the Board to assess the Company's activities and review its performance;

-    the Board and Investment Manager have agreed clearly defined investment criteria, specified levels of authority and exposure limits. Reports on these issues, including performance statistics and investment valuations, are regularly submitted to the Board and there are meetings with the Manager and Investment Manager as appropriate;

-    as a matter of course the Standard Life Aberdeen Group's compliance department continually reviews the Standard Life Aberdeen Group's operations and reports to the Board on a six monthly basis;

-    written agreements are in place which specifically define the roles and responsibilities of the Manager and other third party service providers and, where relevant, ISAE3402 Reports, a global assurance standard for reporting on internal controls for service organisations, or their equivalents are reviewed;

-    the Board has considered the need for an internal audit function but, because of the compliance and internal control systems in place within the Standard Life Aberdeen Group, has decided to place reliance on the Standard Life Aberdeen Group's systems and internal audit procedures; and

-    at its September 2017 meeting, the Audit Committee carried out an annual assessment of internal controls for the year ended 31 July 2017 by considering documentation from the Manager, Investment Manager and the Depositary, including the internal audit and compliance functions and taking account of events since 31 July 2017. The results of the assessment, that internal controls are satisfactory, were then reported to the Board at the next Board meeting.

Internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against mis-statement and loss.

Substantial Interests

The Board has been advised that the following shareholders owned 3% or more of the issued Ordinary share capital of the Company at 31 July 2017:

Shareholder	No. of Ordinary shares held	% held
Aberdeen Asset Managers Savings Scheme (non-beneficial)	3,323,325	9.5
Hargreaves Lansdown	2,499,450	7.2
Funds managed by Standard Life Aberdeen	2,207,035	6.3
Alliance Trust Savings	2,156,021	6.2
Investec Wealth Management	1,701,036	4.9
City of London Investment Management	1,668,078	4.8
Charles Stanley, Stockbrokers	1,187,728	3.4
Wells Capital Management	1,049,323	3.0

Subsequent to the period end the Company has been notified:

-    on 17 August 2017, as a result of the completion of the court-sanctioned scheme of arrangement and all-share merger of Aberdeen Asset Management PLC and Standard Life plc which became effective on 14 August 2017, Standard Life Aberdeen plc is interested in 2,886,005 shares representing 8.3% of the issued class;

-    on 5 September 2017, City of London Investment Management is interested in 1,732,848 shares representing 5.0% of the issued class.

Directors' Report continued

The UK Stewardship Code and Proxy Voting

Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the AIFM which has sub-delegated that authority to the Investment Manager.

The full text of the Company's response to the Stewardship Code may be found on the Company's website.

Relations with Shareholders

The Directors place a great deal of importance on communication with shareholders. The Annual Report is widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up to date information on the Company through the Manager's freephone information service and the Company's website asian-smaller.co.uk.  The Company responds to letters from shareholders on a wide range of issues.

The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of the Standard Life Aberdeen Group (either the Company Secretary or the Manager) in situations where direct communication is required and usually a representative from the Board meets with major shareholders on an annual basis in order to gauge their views.

The Notice of the Annual General Meeting, included within the Annual Report and Accounts, is sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board or the Manager, either formally at the Company's Annual General Meeting or at the subsequent buffet luncheon for shareholders. The Company Secretary is available to answer general shareholder queries at any time throughout the year.

Special Business at the Annual General Meeting

Directors' Authority to Allot Relevant Securities

Approval is sought in Resolution 12, an ordinary resolution, to renew the Directors' existing general power to allot securities but will also, provide a further authority (subject to certain limits), to allot shares under a fully pre-emptive rights issue. The effect of Resolution 12 is to authorise the Directors to allot up to a maximum of 22,948,816 shares in total (representing approximately 2/3 of the existing issued capital of the Company, of which a maximum of 11,474,408 shares (approximately 1/3 of the existing issued share capital) may only be applied to fully pre-emptive rights issues. This authority is renewable annually and will expire at the conclusion of the next Annual General Meeting in 2018. The Board has no present intention to utilise this authority.

Disapplication of Pre-emption Rights

Resolution 13 is a special resolution that seeks to renew the Directors' existing authority until the conclusion of the next Annual General Meeting to make limited allotments of shares for cash of up to 10% of the issued share capital other than according to the statutory pre-emption rights which require all shares issued for cash to be offered first to all existing shareholders.

This authority includes the ability to sell shares that have been held in treasury (if any), having previously been bought back by the Company. The Board has established guidelines for treasury shares and will only consider buying in shares for treasury at a discount to their prevailing NAV and selling them from treasury at or above the then prevailing NAV.

New shares issued in accordance with the authority sought in Resolution 13 will always be issued at a premium to the NAV per Ordinary share at the time of issue. The Board will issue new Ordinary shares or sell Ordinary shares from treasury for cash when it is appropriate to do so, in accordance with its current policy. It is therefore possible that the issued share capital of the Company may change between the date of this document and the Annual General Meeting and therefore the authority sought will be in respect of 10% of the issued share capital as at the date of the Annual General Meeting rather than the date of this document.

Purchase of the Company's Shares

Resolution 14 is a special resolution proposing to renew the Directors' authority to make market purchases of the Company's shares in accordance with the provisions contained in the Companies Act 2006 and the Listing Rules of the Financial Conduct Authority. The minimum price to be paid per Ordinary share by the Company will not be less than 25p per share (being the nominal value) and the maximum price should not be more than the higher of (i) 5% above the average of the middle market quotations for the shares for the preceding five business days; and (ii) the higher of the last independent trade and the current highest independent bid on the trading venue where the purchase is carried out.

The Directors do not intend to use this authority to purchase the Company's Ordinary shares unless to do so would result in an increase in NAV per share and would be in the interests of shareholders generally.

The authority sought will be in respect of 14.99% of the issued share capital as at the date of the Annual General Meeting rather than the date of this document. 

The authority being sought in Resolution 14 will expire at the conclusion of the Annual General Meeting in 2018 unless it is renewed before that date. Any Ordinary shares purchased in this way will either be cancelled and the number of Ordinary shares will be reduced accordingly or under the authority granted in Resolution 13 above, may be held in treasury.

If Resolutions 13 and 14 are passed then an announcement will be made on the date of the Annual General Meeting which will detail the exact number of Ordinary shares to which each of these authorities relate.

These powers will give the Directors additional flexibility going forward and the Board considers that it will be in the interests of the Company that such powers be available. Such powers will only be implemented when, in the view of the Directors, to do so will be to the benefit of shareholders as a whole.

Notice of Meetings

Resolution 15 is a special resolution seeking to authorise the Directors to call general meetings of the Company (other than Annual General Meetings) on 14 days' notice. This approval will be effective until the Company's next Annual General Meeting in 2018.  In order to utilise this shorter notice period, the Company is required to ensure that shareholders are able to vote electronically at the general meeting called on such short notice. The Directors confirm that, in the event that a general meeting is called, they will give as much notice as practicable and will only utilise the authority granted by Resolution 15 in limited and time sensitive circumstances.

Recommendation

Your Board considers Resolutions 12 to 15 to be in the best interests of the Company and its members as a whole and most likely to promote the success of the Company for the benefit of its members as a whole.  Accordingly, your Board unanimously recommends that shareholders should vote in favour of Resolutions 12 to 15 to be proposed at the AGM, as they intend to do in respect of their own beneficial shareholdings amounting to 149,928 Ordinary shares. 

By order of the Board

Aberdeen Asset Management PLC - Secretaries

Bow Bells House

1 Bread Street

London EC4M 9HH

24 October 2017

STATEMENT OF DIRECTORS' 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 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.

The Directors listed in the Directors' Report, being the persons responsible, hereby confirm to the best of their knowledge that:

-    the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

-    that in the opinion of the Directors, the Annual Report and financial statements taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy. In reaching this conclusion the Board has assumed that the reader of the Annual Report and financial statements would have a reasonable level of general investment knowledge, and in particular, of investment trusts; and

-    the Strategic Report and Directors' 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 the Company faces.

For Aberdeen Asian Smaller Companies Investment Trust PLC

Nigel Cayzer

Chairman

24 October 2017

STATEMENT OF COMPREHENSIVE INCOME

		Year ended 31 July 2017			Year ended 31 July 2016
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	10	-	54,249	54,249	-	58,314	58,314
Income	3	13,896	-	13,896	10,992	-	10,992
Exchange losses		-	(223)	(223)	-	(817)	(817)
Investment management fees	4	(3,641)	-	(3,641)	(4,335)	-	(4,335)
Administrative expenses	5	(1,206)	-	(1,206)	(1,135)	-	(1,135)
		_______	_______	_______	_______	_______	_______
Net return on ordinary activities before finance costs and tax		9,049	54,026	63,075	5,522	57,497	63,019
Finance costs	6	(1,620)	-	(1,620)	(1,592)	-	(1,592)
		_______	_______	_______	_______	_______	_______
Net return on ordinary activities before tax		7,429	54,026	61,455	3,930	57,497	61,427
Tax expense	7	(612)	(9)	(621)	(534)	-	(534)
		_______	_______	_______	_______	_______	_______
Net return on ordinary activities after tax		6,817	54,017	60,834	3,396	57,497	60,893
		_______	_______	_______	_______	_______	_______
Return per share (pence):
Basic	9	19.31	152.98	172.29	9.22	156.16	165.38
Diluted	9	n/a	137.49	157.96	n/a	140.93	152.04
		_______	_______	_______	_______	_______	_______
For the years ended 31 July 2017 and 31 July 2016 the conversion option for potential Ordinary shares within the Convertible Unsecured Loan Stock was non-dilutive to the revenue return per Ordinary share but dilutive to the capital return per Ordinary share.
The total column of this statement represents the profit and loss account of the Company. There is no other comprehensive income and therefore the return on ordinary activities after tax is also the total comprehensive income for the year.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.

STATEMENT OF FINANCIAL POSITION

		As at	As at
		31 July 2017	31 July 2016
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	10	468,614	414,812
		_______	_______
Current assets
Debtors and prepayments	11	627	600
Cash and short term deposits		4,009	13,623
		_______	_______
		4,636	14,223
		_______	_______
Creditors: amounts falling due within one year
Bank loans		-	(11,779)
Other creditors		(1,222)	(1,310)
		_______	_______
	12	(1,222)	(13,089)
		_______	_______
Net current assets		3,414	1,134
		_______	_______
Total assets less current liabilities		472,028	415,946
Non-current liabilities
Bank loans	12	(9,482)	-
3.5% Convertible Unsecured Loan Stock 2019	13	(32,441)	(32,211)
		_______	_______
		(41,923)	(32,211)
		_______	_______
Net assets		430,105	383,735
		_______	_______
Capital and reserves
Called-up share capital	14	9,796	9,794
Capital redemption reserve		2,062	2,062
Share premium account		39,695	39,646
Equity component of 3.5% Convertible Unsecured Loan Stock 2019	13	1,361	1,361
Capital reserve	15	365,765	322,525
Revenue reserve		11,426	8,347
		_______	_______
Equity shareholders' funds		430,105	383,735
		_______	_______
Net asset value per share (pence):
Basic	16	1,235.45	1,068.92
		_______	_______
Diluted	16	1,192.49	1,042.99
		_______	_______

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 July 2017
				Capital	Share	Equity
			Share	redemption	premium	Component	Capital	Revenue
			capital	reserve	account	CULS 2019	reserve	reserve	Total
	Note		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 August 2016			9,794	2,062	39,646	1,361	322,525	8,347	383,735
Conversion of 3.5% Convertible Unsecured Loan Stock 2019	13		2	-	49	-	-	-	51
Purchase of own shares to treasury	15		-	-	-	-	(10,777)	-	(10,777)
Return on ordinary activities after taxation			-	-	-	-	54,017	6,817	60,834
Dividends paid	8		-	-	-	-	-	(3,738)	(3,738)
			_____	_____	_____	_____	_____	_____	_____
Balance at 31 July 2017			9,796	2,062	39,695	1,361	365,765	11,426	430,105
			_____	_____	_____	_____	_____	_____	_____
For the year ended 31 July 2016
			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 2015		9,794	2,062	39,644	10,578	1,361	269,975	10,553	343,967
Conversion of 3.5% Convertible Unsecured Loan Stock 2019	13	-	-	2	-	-	-	-	2
Purchase of own shares to treasury	15	-	-	-	(10,578)	-	(4,947)	-	(15,525)
Return on ordinary activities after taxation		-	-	-	-	-	57,497	3,396	60,893
Dividends paid	8	-	-	-	-	-	-	(5,602)	(5,602)
		_____	_____	_____	_____	_____	_____	_____	_____
Balance at 31 July 2016		9,794	2,062	39,646	-	1,361	322,525	8,347	383,735
		_____	_____	_____	_____	_____	_____	_____	_____

CASH FLOW STATEMENT

		Year ended	Year ended
		31 July 2017	31 July 2016
	Notes	£'000	£'000
Cash flows from operating activities
Return on ordinary activities before finance costs and tax		63,075	63,019
Adjustments for:
Dividend income	3	(13,895)	(10,822)
Interest income	3	(1)	(10)
Dividends received		13,714	11,466
Interest received		2	9
Interest paid		(1,303)	(1,321)
Gains on investments	10	(54,249)	(58,314)
Foreign exchange movements		223	817
Decrease in prepayments		1	3
Increase in other debtors		(32)	(10)
(Decrease)/increase in accruals		(393)	358
Stock dividends included in investment income		-	(160)
Overseas withholding tax suffered	7	(621)	(534)
		_______	_______
Net cash inflow from operating activities		6,521	4,501
Cash flows from investing activities
Purchase of investments		(29,627)	(15,504)
Sales of investments		30,498	33,404
		_______	_______
Net cash inflow from investing activities		871	17,900
Cash flows from financing activities
Purchase of own shares to treasury		(10,748)	(15,816)
Drawdown of loan	12	9,482	6,868
Repayment of loan	12	(11,643)	-
Equity dividends paid	8	(3,738)	(5,602)
		_______	_______
Net cash outflow from financing activities		(16,647)	(14,550)
		_______	_______
(Decrease)/increase in cash and cash equivalents		(9,255)	7,851
		_______	_______
Analysis of changes in cash and cash equivalents
Opening balance		13,623	6,678
(Decrease)/increase in cash and cash equivalents		(9,255)	7,851
Foreign exchange movements		(359)	(906)
		_______	_______
Closing balance		4,009	13,623
		_______	_______

NOTES TO THE FINANCIAL STATEMENTS

Notes to the Financial statements
For the year ended 31 July 2017
1.	Principal activity
	The Company is a closed-end investment company, registered in England & Wales No 03106339, with its Ordinary shares being listed on the London Stock Exchange.

2.	Accounting policies
	(a)	Basis of preparation and going concern
		The financial statements have been prepared in accordance with Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. The financial statements are prepared in Sterling which is the functional currency of the Company and rounded to the nearest £'000. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.
		The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is included in the Directors' Report (unaudited).
	(b)	Valuation of investments
		The Company has chosen to apply the recognition and measurement provisions of IAS 39 Financial Instruments: Recognition and Measurement (as adopted for use in the EU) and investments have been designated upon initial recognition at fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured at cost. Subsequent to initial recognition, investments are measured 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 as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the capital reserve.
	(c)	Borrowings
		Bank loans are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses. Subsequently, they are measured at amortised cost using the effective interest method.  Finance charges are accounted for on an accruals basis using the effective interest rate method and are charged 100% to revenue.
	(d)	Income
		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. The fixed return on a debt security, if material, is recognised on a time apportioned basis so as to reflect the effective yield on each security. 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 income. 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 Statement of Comprehensive Income with the exception of transaction costs incurred on the purchase and disposal of investments which are charged to the capital column of the Statement of Comprehensive Income and are separately identified and disclosed in note 10 within gains on investments.
	(f)	Taxation
		The tax expense represents the sum of tax currently payable and deferred tax. Any tax payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that were applicable at the Statement of Financial Position date.
		Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the Statement of Financial Position date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the Statement of Financial Position date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods. Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted or substantively enacted at the Statement of Financial Position date.
		Due to the Company's status as an investment trust company and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
		The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue within the Statement of Comprehensive Income on the same basis as the particular item to which it relates using the Company's effective rate of tax for the year, based on the marginal basis.
	(g)	Foreign currency
		Assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the Statement of Financial Position date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. Gains and losses on dividends receivable are recognised in the Statement of Comprehensive Income and are reflected in the revenue reserve. Gains and losses on the realisation of foreign currencies are recognised in the Statement of Comprehensive Income and are then transferred to the capital reserve.
	(h)	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 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.
		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 early 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.
	(i)	Nature and purpose of reserves
		Capital redemption reserve
		The capital redemption reserve arose when Ordinary shares were redeemed and cancelled, at which point an amount equal to the par value of the Ordinary share capital was transferred from the Statement of Comprehensive Income to the capital redemption reserve.
		Special reserve
		The special reserve was created by a transfer from the share premium account and is used to fund the value of purchases in the market of the Company's own shares to be held in treasury.
		Capital reserve
		This reserve reflects any gains or losses on investments realised in the period along with any movement in the fair value of investments held that have been recognised in the Statement of Comprehensive Income. These include gains and losses from foreign currency exchange differences. Additionally, the cost of share buybacks to be held in treasury is also deducted from this reserve.
		Revenue reserve
		This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.
	(j)	Treasury shares
		When the Company purchases the Company's equity share capital as treasury shares, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effects, and is recognised as a deduction from equity. When these shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to or from the capital reserve.
	(k)	Dividends payable
		Dividends are recognised in the financial statements in the period in which they are paid.
	(l)	Segmental reporting
		The Directors are of the opinion that the Company is engaged in a single segment of business activity, being investment business. Consequently, no business segmental analysis is provided however an analysis of the geographic exposure of the Company's investments is provided above.

		2017	2016
3.	Income	£'000	£'000
	Income from investments
	Overseas dividends	13,510	10,822
	UK dividend income	254	-
	REIT income	131	-
	Stock dividends	-	160
		_______	_______
		13,895	10,982
		_______	_______
	Other income
	Deposit interest	1	10
		_______	_______
	Total income	13,896	10,992
		_______	_______

		2017	2016
4.	Investment management fees	£'000	£'000
	Investment management fees	3,641	4,335
		_______	_______
	The Company has an agreement with AFML for the provision of management services, which has been delegated to AAM Asia.
	During the year the management fee was payable monthly in arrears and is based on an annual amount of 1.00% (2016 - 1.2%), calculated on the average net asset value of the Company over a 24 month period, valued monthly. The management fee is calculated by reference to the value of the Company's net assets (gross assets less liabilities excluding the amount of any loan facilities or overdraft facilities drawn down). The balance due to the Manager at the year end was £319,000 (2016 - £724,000) which represents one month's fee (2016 - two months). The agreement is terminable on one year's notice.

			2017	2016
5.	Administrative expenses		£'000	£'000
	Administration fees		89	87
	Directors' fees		156	171
	Promotional activities		250	250
	Auditor's remuneration:
	- fees payable to the auditor for the audit of the annual accounts		27	26
	- fees payable to the auditor and its associates for other services:
		interim review	7	7
		taxation services (compliance){A}	11	8
		iXBRL tagging services	2	2
	Custodian charges		282	235
	Other expenses		382	349
			_______	_______
			1,206	1,135
			_______	_______
	{A} Charge for 2017 relates to services provided up to 31 July 2016.
	The Company has an agreement with AFML for the provision of administration services which is, in turn, delegated to Standard Life Aberdeen group. The administration fee is payable quarterly in advance and based on an index-linked annual amount of £89,000 (2016 - £87,000). The balance due to AFML at the year end was £22,000 (2016 - £22,000). The agreement is terminable on six months' notice.
	Under the management agreement, the Company has also appointed AFML to provide promotional activities to the Company by way of its participation in the Aberdeen Investment Trust Share Plan and ISA. AFML has delegated this role to Standard Life Aberdeen group. The total fee paid and payable under the agreement in relation to promotional activities was £250,000 (2016 - £250,000) and there was a £21,000 (2016 - £21,000) balance due to the Standard Life Aberdeen group at the year end.
	No pension contributions were made in respect of any of the Directors.

		2017	2016
6.	Finance costs	£'000	£'000
	Loans repayable in less than 1 year	183	167
	Interest on 3.5% Convertible Unsecured Loan Stock 2019	1,156	1,156
	Notional interest on 3.5% Convertible Unsecured Loan Stock 2019	206	194
	Amortisation of 3.5% Convertible Unsecured Loan Stock 2019 issue expenses	75	75
		_______	_______
		1,620	1,592
		_______	_______

			2017					2016
			Revenue		Capital		Total	Revenue	Capital	Total
7.	Tax expense		£'000		£'000		£'000	£'000	£'000	£'000
	(a)	Analysis of charge for the year
		Capital gains tax charge	-		9		9	-	-	-
		Overseas taxation	612		-		612	534	-	534
			_______		_______		_______	_______	_______	_______
		Total tax charge for the year	612		9		621	534	-	534
			_______		______		______	_______	______	______
		At 31 July 2017 the Company had surplus management expenses and loan relationship deficits with a tax value of £6,635,000 (2016 - £5,880,000) in respect of which a deferred tax asset has not been recognised. 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.
	(b)	Factors affecting the tax charge for the year
		The tax assessed for the year is  lower than the current standard rate of corporation tax in the UK for a large company of 19.67% (2016 - effective rate 20%). The differences are explained below:
			2017					2016
			Revenue	Capital		Total		Revenue	Capital	Total
			£'000	£'000		£'000		£'000	£'000	£'000
		Return on ordinary activities before taxation	7,429	54,026		61,455		3,930	57,497	61,427
		Return on ordinary activities multiplied by the standard tax rate of corporation tax of 19.67% (2016 - 20%)	1,461	10,627		12,088		786	11,499	12,285
		Effects of:
		Gains on investments not taxable	-	(10,671)		(10,671)		-	(11,663)	(11,663)
		Exchange losses	-	44		44		-	164	164
		Overseas tax	612	-		612		534	-	534
		Capital gains tax charge	-	9		9		-	-	-
		Non-taxable dividend income	(2,707)	-		(2,707)		(2,167)	-	(2,167)
		Movement in unutilised management expenses	927	-		927		1,065	-	1,065
		Movement in unutilised loan relationship deficits	319	-		319		316	-	316
			_______	_______		_______		_______	_______	_______
		Total tax charge for the year	612	9		621		534	-	534
			______	______		______		_______	______	______

		2017	2016
8.	Dividends	£'000	£'000
	Final dividend for 2016 - 10.50p (2015 - 10.50p)	3,738	3,921
	Special dividend for 2016 - nil (2015 - 4.50p)	-	1,681
		_______	_______
		3,738	5,602
		_______	_______
	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 £6,817,000 (2016 - £3,396,000).
		2017	2016
		£'000	£'000
	Proposed final dividend for 2017 - 12.00p (2016 - 10.50p)		3,738
	Proposed special dividend for 2017 - 4.00p (2016 - nil)	XX	-
		_______	_______
		XX	3,738
		_______	_______
	The amount reflected above for the cost of the proposed final and special dividend for 2017 is based on 34,423,225 Ordinary shares, being the number of Ordinary shares in issue at the date of this Report.

		2017			2016
9.	Return per Ordinary share	Revenue	Capital	Total	Revenue	Capital	Total
	Basic
	Return on ordinary activities after taxation (£'000)	6,817	54,017	60,834	3,396	57,497	60,893
	Weighted average number of shares in issue{A}			35,308,359			36,818,139
	Return per Ordinary share (p)	19.31	152.98	172.29	9.22	156.16	165.38
		_______	______	_______	_______	_______	_______
		2017			2016
	Diluted	Revenue	Capital	Total	Revenue	Capital	Total
	Return on ordinary activities after taxation (£'000)	8,042	54,017	62,059	4,534	57,497	62,031
	Weighted average number of shares in issue{AB}			39,287,090			40,799,154
	Return per Ordinary share (p)	n/a	137.49	157.96	n/a	140.93	152.04
		_______	______	_______	_______	_______	_______
	{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 IAS33, "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 3,978,731 (2016 - 3,981,015) to 39,287,090 (2016 - 40,799,154) Ordinary shares.
	For the year ended 31 July 2017 (2016 -same) the assumed conversion for potential Ordinary shares was non-dilutive to the revenue return per Ordinary share but dilutive to the capital return per Ordinary share. Where dilution occurs, the net returns are adjusted for items relating to the CULS. Accrued CULS finance costs for the period and unamortised issues expenses are reversed. Total earnings for the period are tested for dilution. Once dilution has been determined individual revenue and capital earnings are adjusted.

		Listed	Listed
		in UK	overseas	Total
10.	Investments	£'000	£'000	£'000
	Fair value through profit or loss:
	Opening book cost	7,610	221,885	229,495
	Opening fair value gains on investments held	6,329	178,988	185,317
		_______	_______	_______
	Opening fair value	13,939	400,873	414,812
	Movements in year:
	Purchases at cost	1,898	27,967	29,865
	Sales - proceeds	(241)	(30,071)	(30,312)
	Sales - gains on sales	137	17,001	17,138
	Movement in fair value gains on investments held	(1,321)	38,432	37,111
		_______	_______	_______
	Closing fair value	14,412	454,202	468,614
		_______	_______	_______
		Listed	Listed
		in UK	overseas	Total
		£'000	£'000	£'000
	Closing book cost	9,404	236,782	246,186
	Closing fair value gains on investments held	5,008	217,420	222,428
		_______	_______	_______
		14,412	454,202	468,614
		_______	_______	_______
	Gains/(losses) on investments
	Gains on sales	137	17,001	17,138
	Movement in fair value gains on investments held	(1,321)	38,432	37,111
		_______	_______	_______
		(1,184)	55,433	54,249
		_______	_______	_______
	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 Statement of Comprehensive Income. The total costs were as follows:
			2017	2016
			£'000	£'000
	Purchases		90	78
	Sales		56	83
			_______	_______
			146	161
			_______	_______

		2017	2016
11.	Debtors: amounts falling due within one year	£'000	£'000
	Amounts due from brokers	14	200
	Other debtors	48	55
	Prepayments and accrued income	565	345
		_______	_______
		627	600
		_______	_______
	None of the above amounts are past their due date or impaired (2016 - nil).

12.	Creditors		2017	2016
	(a)	Amounts falling due within one year	£'000	£'000
		Bank loans	-	11,779
		Amounts due to brokers	238	-
		Amount due for the purchase of own shares to treasury	186	157
		Other creditors	798	1,153
			_______	_______
			1,222	13,089
			_______	_______
		As at 31 July 2016, £5,000,000 had been drawn down at an all-in rate of 1.4% which matured on 25 August 2016.  In addition, US$9,000,000 had been drawn down at an all-in rate of 1.4% which matured on 25 August 2016.
	(b)	Amounts falling due after more than one year - Bank loan
		The Company currently has a $25,000,000 revolving facility agreement with The Royal Bank of Scotland PLC. At the year end, $12,500,000 (£9,482,000) was drawn down from the term loan facility at a fixed interest rate of 2.506% until 8 June 2020. The terms of the loan facilities contain covenants that the minimum net assets of the Company are £300,000,000, the percentage of borrowings against net assets is less than 20%, and the portfolio contains a minimum of forty five eligible investments (investments made in accordance with the Company's investment policy).

		Number of	Liability	Equity
		units	component	component
13.	Non-current liabilities	£'000	£'000	£'000
	3.5% Convertible Loan Stock 2019
	Balance at beginning of year	33,041	32,211	1,361
	Conversion of 3.5% Convertible Unsecured Loan Stock 2019	(51)	(51)	-
	Notional interest on CULS transferred to revenue reserve	-	206	-
	Amortisation and issue expenses	-	75	-
		_______	_______	_______
	Balance at end of year	32,990	32,441	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 year ended 31 July 2017 the Company converted 51,067 (31 July 2016 - 2,329) nominal amount of CULS into 6,141 (31 July 2016 - 278) Ordinary shares.
	As at 31 July 2017, there was £32,989,747 (2016 - £33,040,814) nominal amount of 3.5% Convertible Unsecured Loan Stock 2019 in issue.

			2017	2016
14.	Called up share capital		£'000	£'000
	Allotted, called-up and fully paid
	Ordinary shares of 25p		8,703	8,975
	Treasury shares		1,093	819
			_______	_______
			9,796	9,794
			_______	_______
		Ordinary shares	Treasury shares	Total
		Number	Number	Number
	At 31 July 2016	35,899,334	3,278,124	39,177,458
	Conversion of CULS	6,141	-	6,141
	Buyback of own shares	(1,091,750)	1,091,750	-
		_______	_______	_______
	At 31 July 2017	34,813,725	4,369,874	39,183,599
		_______	_______	_______
	During the year 1,091,750 Ordinary shares of 25p were purchased by the Company (2016 - 2,059,834 Ordinary shares purchased) at a total cost of £10,777,000 (2016 - total cost of £15,525,000), all of which were held in treasury (2016 - same). At the year end 4,369,874 (2016 - 3,278,124) shares were held in treasury, which represents 11.15% (2016 - 8.37%) of the Company's total issued share capital at 31 July 2017. During the year there were a further 6,141 Ordinary shares issued as a result of CULS conversion (2016 - 278).
	Since the year end a further 390,500 Ordinary shares of 25p have been purchased by the Company at a total cost of £4,100,000, all of which were held in treasury.

		2017	2016
15.	Reserves	£'000	£'000
	Capital reserve
	At 31 July 2016	322,525	269,975
	Movement in investment holdings fair value	37,111	45,502
	Gains on realisation of investments at fair value	17,138	12,812
	Purchase of own shares to treasury	(10,777)	(4,947)
	Capital gains tax charge	(9)	-
	Foreign exchange movement	(223)	(817)
		_______	_______
	At 31 July 2017	365,765	322,525
		_______	_______
	The capital reserve includes investment holding gains amounting to £222,428,000 (2016 - £185,317,000) as disclosed in note 10. The above split in capital reserve is shown in accordance with provisions of the Statement of Recommended Practice 'Financial Statements Of Investment Trust Companies and Venture Capital Trusts'.

16.	Net asset value per Ordinary share	2017	2016
	Basic
	Net assets attributable	£430,105,000	£383,735,000
	Number of Ordinary shares in issue{A}	34,813,725	33,899,334
	Net asset value per Ordinary share	1,235.45p	1,068.92p
		_______	_______
		2017	2016
	Diluted
	Net assets attributable	£462,546,000	£415,946,000
	Number of Ordinary shares in issue {A}	38,788,393	39,880,155
	Net asset value per Ordinary share{B}	1,192.49p	1,042.99p
		_______	_______
	{A}     Calculated excluding shares held in treasury
	{B} The diluted net asset value per Ordinary share has been calculated on the assumption that £32,989,747 (2016 - £33,040,814) 3.5% Convertible Unsecured Loan Stock 2019 ("CULS") is converted at 830.0p per share, giving a total of 38,788,393 (2016 - 39,880,155) 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 2017 the cum income NAV was 1,235.45p (31 July 2016 - 1,068.92p) and thus the CULS were 'in the money'.

17.	Related party transactions and transactions with the Manager
	Fees payable during the year to the Directors and their interests in shares of the Company are considered to be related party transactions and are disclosed within the Directors' Remuneration Report contained in the Annual Report. The balance of fees due to Directors at the year end was £2,000 (2016 - £14,000).
	Mr Gilbert and his alternate Director, Mr Young are both directors of Aberdeen and its subsidiary AAM Asia which has been delegated, under an agreement with AFML, to provide management services to the Company, the terms of which are outlined in notes 4 and 5 along with details of transactions during the year and balances outstanding at the year end. Neither Mr Gilbert nor Mr Young are directors of AFML.
	With effect from from 3 July 2017  Mr Yea was appointed to the board of Equiniti Group Plc and on 29 September 2017 he became Chairman of the Group. Equiniti acts as registrar to the Company.

18.	Financial instruments
	Risk management
	The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments comprise 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 Board has delegated the risk management function to Aberdeen Fund Managers Limited ("AFML") under the terms of its management agreement with AFML (further details of which are included under note 4 and in the Directors' Report) however, it remains responsible for the risk and control framework and operation of third parties. The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude short-term debtors and creditors.
	Risk management framework
	The directors of Aberdeen Fund Managers Limited collectively assume responsibility for AFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.
	AFML is a fully integrated member of the Standard Life Aberdeen Group, which provides a variety of services and support to AFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to Aberdeen Asset Management Asia Ltd, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.
	The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.
	The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the Chief Executive Officer of the Group. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SWORD").
	The Group's corporate governance structure is supported by several committees to assist the board of directors of Aberdeen, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described in the committees' terms of reference.
	Risk management
	The main risks the Company faces from these financial instruments are (i) market risk (comprising interest rate, foreign currency and other price risk), (ii) liquidity risk and (iii) credit risk.
	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.
	Management of the risk
	The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
	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 reporting date was as follows:
				Weighted average			Weighted
				period for which			average				Fixed				Floating
				rate is fixed			interest rate				rate				rate
	At 31 July 2017			Years			%				£'000				£'000
	Assets
	Sterling			-			-				-				3,774
	Pakistan Rupee			-			-				-				23
	Taiwan Dollar			-			-				-				208
	Thailand Baht			-			-				-				4
				_______			_______				_______				_______
				-			-				-				4,009
				_______			_______				_______				_______
	Liabilities
	Bank loan			2.95			2.5				9,482				-
	3.5% Convertible Unsecured Loan Stock 2019			1.83			3.5				32,441				-
				_______			_______				_______				_______
				-			-				41,923				-
				_______			_______				_______				_______
				Weighted average			Weighted
				period for which			average				Fixed				Floating
				rate is fixed			interest rate				rate				rate
	At 31 July 2016			Years			%				£'000				£'000
	Assets
	Sterling			-			-				-				13,444
	Thailand Baht			-			-				-				179
				_______			_______				_______				_______
				-			-				-				13,623
				_______			_______				_______				_______
	Liabilities
	Bank loan			0.08			1.4				11,779				-
	3.5% Convertible Unsecured Loan Stock 2019			2.83			3.5				32,211				-
				-			-				43,990				-
				_______			_______				_______				_______
	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 loan are shown in note 12 to the financial statements.
	The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.
	The Company's equity portfolio and short term debtors and creditors (excluding bank loans) have been excluded from the above tables.
	Interest rate sensitivity
	Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total return.
	Foreign currency risk
	All of the Company's investment portfolio is invested in overseas securities and the Statement of Financial Position, therefore, can be significantly affected by movements in foreign exchange rates.
	Management of the risk
	It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings.
	The revenue account is subject to currency fluctuations arising on dividends receivable in foreign currencies and, indirectly, due to the impact of foreign exchange rates upon the profits of investee companies. It is not the Company's policy to hedge this currency risk but the Board keeps under review the currency returns in both capital and income.
	Foreign currency risk exposure by currency of denomination:
		31 July 2017							31 July 2016
					Total										Total
		Overseas	Net monetary		currency				Overseas			Net monetary			currency
		investments	assets/ (liabilities)		exposure				Investments			assets/ (liabilities)			exposure
		£'000	£'000		£'000				£'000			£'000			£'000
	Australian Dollar	11,539	-		11,539				14,579			-			14,579
	Chinese Yuan	850	-		850				-			-			-
	Danish Krona	8,327	-		8,327				7,457			-			7,457
	Hong Kong Dollar	74,157	-		74,157				65,392			-			65,392
	Indian Rupee	59,474	-		59,474				46,634			-			46,634
	Indonesian Rupiah	36,553	-		36,553				28,063			-			28,063
	Korean Won	4,295	-		4,295				2,047			-			2,047
	Malaysian Ringgit	68,506	-		68,506				75,126			-			75,126
	Taiwan Dollar	4,914	207		5,121				-			-			-
	New Zealand Dollar	14,557	-		14,557				9,124			-			9,124
	Pakistan Rupee	4,269	24		4,293				1,448			-			1,448
	Philippine Peso	30,534	-		30,534				31,909			-			31,909
	Singapore Dollar	59,169	-		59,169				51,166			-			51,166
	Sri Lankan Rupee	15,024	-		15,024				14,355			-			14,355
	Thailand Baht	62,034	4		62,038				57,235			179			57,414
	United States Dollar	-	(9,482)		(9,482)				-			(6,779)			(6,779)
		_______	_______		_______				_______			_______			_______
		454,202	(9,247)		444,955				404,535			(6,600)			397,935
	Sterling	14,412	(28,667)		(14,255)				10,277			(23,767)			(13,490)
		_______	_______		_______				_______			_______			_______
	Total	468,614	(37,914)		430,700				414,812			(30,367)			384,445
		_______	_______		_______				_______			_______			_______
	Foreign currency sensitivity
	The Company's foreign currency financial instruments are in the form of equity investments and bank loans. The sensitivity of the former has been included within other price risk sensitivity analysis so as to show the overall level of exposure. A 10% increase in Sterling would result in a decrease in the value of the United States Dollar bank loan of £862,000 (2016 - £616,000) and a 10% decrease in Sterling would result in an increase in the value of the United States Dollar bank loan of £1,054,000 (2016 - £753,000). 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, as detailed in the Annual Report, 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 reporting date had been 10% (2016 - 10%) higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 July 2017 would have increased/(decreased) by £46,861,000 (2016 - increased/(decreased) by £41,481,000) 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.
	Management of the risk
	The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Gearing comprises both bank loans and 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 borrowings at the 31 July 2017 are shown in notes 12 and 13.
	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 12. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis. Details of the Board's policy on gearing are shown in the investment policy section above.
	Liquidity risk exposure
	At 31 July 2017 the Company had borrowings in the form of the £32,989,747 (2016 - £33,040,814) nominal of 3.5% Convertible Unsecured Loan Stock 2019.
	At 31 July 2017 the Company's bank loan, amounting to £9,482,000 (2016 - £11,779,000; repayment date 25 August 2016), was due for repayment on 8 June 2020. The maximum exposure during the year was £11,928,000 (2016 - £12,000,000) and the minimum exposure during the year was £6,934,000 (2016 - £5,000,000).
	The maturity profile of the Company's existing borrowings is set out below.
										Due
						Due				between
				Expected		within				3 months			Due after
				cashflows		3 months				and 1 year			1 year
				£'000		£'000				£'000			£'000
	3.5% Convertible Unsecured Loan Stock 2019			35,299		-				1,155				34,144
	Bank loans			7,914		62				180				7,672
				_______		_______				_______				_______
				43,213		62				1,335				41,816
				_______		_______				_______				_______
	Credit risk
	This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.
	Management of the risk
	Investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Investment Manager, and limits are set on the amount that may be due from any one broker. Settlement of investment transactions are also done on a delivery versus payment basis;
	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 ratings.
	It is the Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties.
	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 Statement of Financial Position, the maximum exposure to credit risk at 31 July was as follows:
					2017							2016
					Balance			Maximum				Balance			Maximum
					Sheet			exposure				Sheet			exposure
	Current assets				£'000			£'000				£'000			£'000
	Debtors				627			627				600			600
	Cash and short term deposits				4,009			4,009				13,623			13,623
					_______			_______				_______			_______
					4,636			4,636				14,223			14,223
					_______			_______				_______			_______
	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, excluding CULS which are held at amortised cost, are stated at fair value in the Statement of Financial Position and considered that this approximates to the carrying amount.

19.	Fair value hierarchy
	FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
	Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.
	Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.
	Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.
	The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy at 31 July 2017 as follows:
			Level 1	Level 2	Level 3	Total
	As at 31 July 2017	Note	£'000	£'000	£'000	£'000
	Financial assets and liabilities at fair value through profit or loss
	Quoted equities	a)	468,614	-	-	468,614
	CULS	b)	(42,639)	-	-	(42,639)
			______	______	_______	______
	Net fair value		425,975	-	-	425,975
			______	______	_______	______
			Level 1	Level 2	Level 3	Total
	As at 31 July 2016	Note	£'000	£'000	£'000	£'000
	Financial assets and liabilities at fair value through profit or loss
	Quoted equities	a)	414,812	-	-	414,812
	CULS	b)	(38,080)	-	-	(38,080)
			______	______	_______	______
	Net fair value		376,732	-	-	376,732
			______	______	_______	______
	a) Quoted equities
	The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.
	b) Convertible Unsecured Loan Stock ("CULS")
	The Company's CULS are actively traded on a recognised stock exchange. The fair value of the CULS has therefore been deemed Level 1. The carrying value of the CULS is disclosed in note 13.

20.	Capital management policies and procedures
	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 (comprising bank borrowings and CULS) and equity balance.
	The Company's capital comprises the following:
		2017	2016
		£'000	£'000
	Equity
	Equity share capital	9,796	9,794
	Reserves	420,309	373,941
	Liabilities
	Bank loans	9,482	-
	CULS	32,441	32,211
		_______	_______
		472,028	415,946
		_______	_______
	The Board's policy is to utilise gearing when the Manager believes it appropriate to do so, up to a maximum of 25% geared at the time of drawdown. Gearing for this purpose is defined as the excess amount above shareholders' funds of total assets (including net current assets/liabilities) less cash/cash equivalents, expressed as a percentage of the shareholders' funds. If the amount so calculated is negative, this is shown as a 'net cash' position.
		2017	2016
		£'000	£'000
	Investments at fair value through profit or loss	468,614	414,812
	Current assets excluding cash	627	600
	Current liabilities excluding bank loans	(1,222)	(1,310)
		_______	_______
	Total assets	468,019	414,102
		_______	_______
	Net assets	430,105	383,735
		_______	_______
	Gearing (%)	8.8	7.9
		_______	_______
	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.

The Annual General Meeting will be held at 11.30 a.m. on 1 December 2017 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 2017 are an abridged version of the Company's full financial statements, which have been approved and audited with an unqualified report. The 2016 and 2017 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 2016 is derived from the statutory accounts for 2016 which have been delivered to the Registrar of Companies. The 2017 financial statements will be filed with the Registrar of Companies in due course.

The audited Annual Report and financial statements will be posted to shareholders in early November. 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, 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

24 October 2017

 

END

 

 

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