Half-year Report

RNS Number : 6458K

Aberdeen Asian Smaller Co's Inv Tst

12 April 2018

 

ABERDEEN ASIAN SMALLER COMPANIES INVESTMENT TRUST PLC

Legal Entity Identifier (LEI): 5493000FBZP1J92OQY70

ANNOUNCEMENT OF UNAUDITED HALF YEARLY RESULTS

for the six months ended 31 January 2018

INTERIM BOARD REPORT

Introduction

For the six months ended 31 January 2018, the Company's net asset value (NAV) rose by 0.2% in sterling terms, the share price total return declined by 1.6%. Consequently, the discount to NAV per share widened to 12.7%. During the same period, the MSCI AC Asia Pacific ex Japan Small Cap Index, returned 9.3%.

While this result is disappointing, the NAV over the last three years has increased by 23.3% and the share price by 17.6%.

Your Board has looked to see if there are any fundamental reasons for this underperformance by the portfolio or whether any one particular factor caused the index to outperform. During the life of your Company we have experienced periods of sharp divergence from the index, both positive and negative. This is to be expected given the very different make-up of your portfolio from that of the index (with the portfolio diverging statistically by over 98% from the constituents of the index). In this particular period the underperformance was due to the strong performance of certain countries and sectors in the index to which we have limited exposure. The basis on which the portfolio has been constructed since the Company's foundation in 1995 has been to invest in businesses that have good management, strong balance sheets and good prospects. This has stood us in good stead over the years but, as with all strategies, it is always worth posing the question as to whether any changes or improvements can be made.

Your Board has had a number of in-depth discussions with Hugh Young and his team and have concluded that the construction of the portfolio is strong, the companies in which we are invested continue to perform well, have good prospects and that the value proposition on which our success has been based is correct.

To this, we can add that the opportunities within the region remain as compelling as ever; the Asian economies are a huge powerhouse of world growth and the ever increasing spendable income of the hard working population will fuel the growth of many sectors in which the companies in our portfolio operate. The momentum investor may be being rewarded by a world which is flush with liquidity but ultimately there is no substitute for the fundamentals of investing in good businesses that make increasing profits, generate strong cash flows and manage their balance sheets in a prudent and conservative fashion.

Last year, we sought permission from the shareholders to extend the mandate so that the Company could invest up to 10% in unquoted securities. This was to give the Company, if the right opportunities arose, the ability to invest in companies that were contemplating listing on one of the regional exchanges. To date, no such opportunities have been identified. However, your Board has stressed to Aberdeen the importance of continuing to seek out small, interesting and well managed companies in both the quoted and unquoted sectors that meet the investment criteria on which our previous success has been based.

Aberdeen's network of regional offices across the region, give the managers strong access to local knowledge and contacts with a wide range of professional firms to assist them in the quest to find the hidden gems on which the long term performance so heavily depends. This, combined with the in depth research they undertake with local management has and continues to provide a flow of good investment prospects.

In 2012, we increased the market capitalisation limit on companies in which we can invest from US$750 million to US$1 billion. In our recent discussions, it has become apparent that the size and complexity of small companies in the region has greatly increased particularly in the technology sector. Accordingly your Board feels it would be appropriate to now increase the investment limit to $1.5 billion and your Board is, therefore, putting the necessary resolution to shareholders (see below).

Overview

Over the six months to January 2018, markets were helped by a favourable growth environment, upbeat corporate earnings, recovering oil prices and optimism over the passage of US tax reform. Also aiding sentiment was the resilience of the Chinese economy, as GDP growth accelerated in spite of worries over financial tightening to dampen speculation. Across markets, easing political tensions between Beijing and Seoul fuelled a rally in Korea. India performed well, helped by the ruling party's programme to recapitalise state-owned banks, and its victories in key state elections. Investors also took advantage of generally low interest rates, both in Asia and globally, and largely shrugged off worries that major central banks could soon remove stimulus and normalise monetary policy. Easy monetary conditions, along with the hunt for higher yields, meant riskier assets remained in favour, which supported sentiment for Asian small-cap equities. However, it has also led to some distortion in asset prices.

Portfolio

Your Manager's approach of investing in quality stocks at reasonable valuations for the long term remains prudent. One example of this long-term conviction being rewarded was the good performance of Thai financial services firm Aeon Thana Sinsap, a major contributor to returns over the review period. It has been held within the underlying portfolio for some years, but its quality has only been recently recognised by the broader market, with its share price surging following encouraging forecasts on the back of robust results, healthy loan growth and portfolio expansion.

The ability to seek out new investments was reflected in your Manager's recent initiation of Taiwanese company Sunonwealth, a designer and manufacturer of cooling fans and thermal modules. Not only are its micro-cooling devices already used in smartphones, drones and personal computers, but it also appears well placed to benefit from the increasing demand for thermal solution in a wider range of applications. For example, the auto industry's electrification push is expected to contribute to its earnings due to the need for cooling of batteries. Trends like automation and the internet-of-things may be other areas of future growth, as thermal solutions become more important for new uses.

Share Capital Management and Gearing

During the period 570,500 Ordinary shares were purchased in the market at a discount to the prevailing ex income NAV and transferred to treasury. Subsequent to the period end a further 322,500 Ordinary shares have been purchased into treasury.  Your Board continues to use share buy backs in periods of market uncertainty to both reduce the volatility of any discount as well as modestly enhancing the NAV for shareholders. Conversely, in times of market optimism, shares have been issued to the market at a premium to NAV. 

The Company's net gearing at 31 January 2018 was 10.6%. The majority of the gearing is provided by the Convertible Unsecured Loan Stock redeemable in 2019 of which approximately £30.3m million remains outstanding.  The Company also has a 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 remains drawn down and fixed until June 2020 at an all-in rate of 2.506%. A further $10.0 million has been drawn down under the $12.5m revolving credit facility. The Directors monitor the Company's gearing on a regular basis in accordance with the Company's investment policy and under advice from the Manager.

Proposals for Convertible Unsecured Loan Stock 2019 ("CULS")

In February 2018 the Company announced that the Board had commissioned its advisers to develop a detailed proposal to the Company's shareholders and CULS holders in relation to restructuring the current CULS.  We will be writing to shareholders and CULS holders in the very near future with further details of the CULS and steps that can be taken to approve of, and participate in, the CULS reorganisation.

Proposal to Amend Investment Objective

In conjunction with the reorganisation of the CULS, the Directors are also taking the opportunity to increase the investment ceiling contained within the Company's Investment Objective to permit investment in companies with a market capitalisation of up to approximately US$1.5 billion at the time of investment. The proposed change is not expected to result in any significant changes to the manner in which the Company is managed, however, it will provide the Manager with greater investment flexibility going forward. An ordinary resolution to approve the change will be contained in the separate Notice of General Meeting.

Outlook

Asian equities enjoyed an unexpectedly sanguine 2017 amid a synchronised global economic upswing, but signs abound of choppier waters ahead. Already, markets have suffered sharp sell-offs amid fears that the loose monetary policy which propped up asset prices may soon start to recede. But such corrections do not have to cause alarm. In fact, it may bring asset prices back to more sustainable levels, presenting astute investors, including your Manager, with new opportunities. Tighter liquidity, along with an evident rise in volatility, may also see the indiscriminate buying that characterised the past year give way to a more discerning approach, as investors begin to re-focus on fundamentals. Encouragingly, however, corporate fundamentals appear healthy. Many companies, including several of the Trust's underlying holdings, are seeing earnings forecasts upgraded and improving margins, on the back of better cost-efficiencies and capital allocation. Structural factors also seem compelling, including the increasing affluence of Asia's middle classes, which supports stocks across a wide range of sectors. As such, the Board remains assured that growth prospects for smaller companies in Asia remain compelling. Your Manager's quality-focused, bottom-up approach will ensure that the Company's underlying portfolio comprises best-in-class corporates that can tap into these opportunities, and underpin returns for shareholders.

Principal Risks and Uncertainties

The principal risks and uncertainties affecting the Company are set out in detail on pages 8 and 9 of the Annual Report and Financial Statements for the year ended 31 July 2017 and have not changed. They can be summarised under the following headings:

·    Investment Strategy and Objectives;

·    Investment Portfolio and Investment Management Risks;

·    Financial Obligations;

·    Financial and Regulatory;

·    Operational; and,

·    Investment in Unlisted Securities.

Going Concern

The Company's assets consist of a diverse portfolio of listed equities which in most circumstances are realisable within a short timescale. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Directors' Responsibility Statement

The Directors are responsible for preparing this half-yearly financial report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

·    the condensed set of financial statements contained within the half-yearly financial report has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

·    the Interim Board Report (constituting the interim management report) includes a fair review of the information  required by rule 4.2.7R of the UK Listing Authority Disclosure Guidance and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year) and 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could so do).

Nigel Cayzer

Chairman

11 April 2018

FINANCIAL HIGHLIGHTS

	31 January 2018	31 January 2018	31 January 2018
Total assets{A} (£'000)	466,824	472,028	-1.1
Net asset value per Ordinary share - basic	1,218.22p	1,235.45p	-1.4
Net asset value per Ordinary share - diluted	1,180.08p	1,192.49p	-1.0
Share price (mid)	1,030.00p	1,062.00p	-3.0
Discount to diluted net asset value	12.7%	10.9%
Ongoing charges ratio {B}	1.23%	1.16%
{A} Total assets as per the Statement of Financial Position less current liabilities (excluding prior charges such as bank loans).
{B} Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses (annualised) divided by the average cum income net asset value throughout the year. The ratio for 31 January 2018 is based on forecast ongoing charges for the year ending 31 July 2018.

Performance {A}	Six months ended 31 January 2018	Year ended 31 July 2017
Net asset value per Ordinary share - diluted	-1.6%	+16.2%
Share price	+0.2%	+15.4%
MSCI AC Asia Pacific ex Japan Index (currency adjusted)	+7.7%	+25.7%
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted)	+9.3%	+14.3%
{A} Total return represents the capital return plus dividends reinvested.

Condensed Statement of Comprehensive Income (unaudited)

		Six months ended			Six months ended
		31 January 2018			31 January 2017
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments		-	(3,425)	(3,425)	-	33,229	33,229
Income	2	5,976	-	5,976	5,824	-	5,824
Exchange gains/(losses)		-	1,008	1,008	-	(443)	(443)
Investment management fees		(2,002)	-	(2,002)	(1,766)	-	(1,766)
Administrative expenses		(529)	-	(529)	(751)	-	(751)
		______	______	______	______	______	______
Net return/(loss) before finance costs and taxation		3,445	(2,417)	1,028	3,307	32,786	36,093
Finance costs		(876)	-	(876)	(664)	-	(664)
		______	______	______	______	______	______
Net return/(loss) before taxation		2,569	(2,417)	152	2,643	32,786	35,429
Taxation	3	(301)	(9)	(310)	(214)	-	(214)
		______	______	______	______	______	______
Return/(loss) attributable to equity shareholders		2,268	(2,426)	(158)	2,429	32,786	35,215
		______	______	______	______	______	______
Return/(loss) per share (pence)
Basic	4	6.57	(7.03)	(0.46)	6.82	92.12	98.94
		______	______	______	______	______	______
Diluted	4	n/a	n/a	n/a	n/a	82.86	90.28
		______	______	______	______	______	______
The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company.
There is no other comprehensive income and therefore the return attributable to equity shareholders is also the total comprehensive income for the period.
All revenue and capital items in the above statement derive from continuing operations.

Condensed Statement of Financial Position (unaudited)

		As at	As at
		31 January 2018	31 July 2017
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		466,066	468,614
Current assets
Debtors and prepayments		788	627
Cash and short term deposits		5,131	4,009
		________	________
		5,919	4,636
		________	________
Creditors: amounts falling due within one year
Bank loans	6	(7,032)	-
Other creditors		(5,161)	(1,222)
		________	________
		(12,193)	(1,222)
		________	________
Net current (liabilities)/assets		(6,274)	3,414
		________	________
Total assets less current liabilities		459,792	472,028
Non-current liabilities
Bank loans	6	(8,790)	(9,482)
3.5% Convertible Unsecured Loan Stock 2019	7	(29,899)	(32,441)
		________	________
		(38,689)	(41,923)
		________	________
Net assets		421,103	430,105
		________	________
Capital and reserves
Called-up share capital	8	9,877	9,796
Capital redemption reserve		2,062	2,062
Share premium account		42,302	39,695
Equity component of 3.5% Convertible Unsecured Loan Stock 2019	7	1,361	1,361
Capital reserve	9	357,315	365,765
Revenue reserve		8,186	11,426
		________	________
Equity shareholders' funds		421,103	430,105
		________	________
Net asset value per share (pence)
Basic	10	1,218.22	1,235.45
		________	________
Diluted	10	1,180.08	1,192.49
		________	________

       Condensed Statement of Changes in Equity (unaudited)

Six months ended 31 January 2018
		Capital	Share	Equity
	Share	redemption	premium	component	Capital	Revenue
	capital	reserve	account	CULS 2019	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 July 2017	9,796	2,062	39,695	1,361	365,765	11,426	430,105
Purchase of own shares to treasury	-	-	-	-	(6,024)	-	(6,024)
Conversion of 3.5% Convertible Unsecured Loan Stock (note 7)	81	-	2,607	-	-	-	2,688
Return/(loss) after taxation	-	-	-	-	(2,426)	2,268	(158)
Dividends paid (note 5)	-	-	-	-	-	(5,508)	(5,508)
	______	______	______	______	______	______	______
Balance at 31 January 2018	9,877	2,062	42,302	1,361	357,315	8,186	421,103
	______	______	______	______	______	______	______
Six months ended 31 January 2017
		Capital	Share	Equity
	Share	redemption	premium	component	Capital	Revenue
	capital	reserve	account	CULS 2019	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 July 2016	9,794	2,062	39,646	1,361	322,525	8,347	383,735
Purchase of own shares to treasury	-	-	-	-	(6,041)	-	(6,041)
Conversion of 3.5% Convertible Unsecured Loan Stock (note 7)	-	-	22	-	-	-	22
Return after taxation	-	-	-	-	32,786	2,429	35,215
Dividends paid (note 5)	-	-	-	-	-	(3,738)	(3,738)
	______	______	______	______	______	______	______
Balance at 31 January 2017	9,794	2,062	39,668	1,361	349,270	7,038	409,193
	______	______	______	______	______	______	______

Condensed Statement of Cash Flows (unaudited)

	Six months ended	Six months ended
	31 January 2018	31 January 2017
	£'000	£'000
Operating activities
Net return before finance costs and taxation	1,028	36,093
Adjustments for:
Dividend income	(5,960)	(5,824)
Interest income	(2)	-
Dividends received	5,928	5,856
Interest received	2	2
Interest paid	(757)	(660)
Losses/(gains) on investments	3,425	(33,229)
Currency (gains)/losses	(1,008)	443
Increase in prepayments	(14)	(16)
Decrease/(increase) in other debtors	18	(2)
Increase/(decrease) in accruals	365	(160)
Stock dividends included in investment income	(14)	-
Withholding tax suffered	(301)	(214)
	______	______
Net cash flow from operating activities	2,710	2,289
Investing activities
Purchases of investments	(8,088)	(14,323)
Sales of investments	10,881	16,589
Capital Gains Tax on sales	(9)	-
	______	______
Net cash flow from investing activities	2,784	2,266
Financing activities
Purchase of own shares to treasury	(6,210)	(5,956)
Drawdown/(repayment) of loan	7,031	(4,567)
Equity dividends paid (note 5)	(5,508)	(3,738)
	______	______
Net cash flow used in financing activities	(4,687)	(14,261)
	______	______
Increase/(decrease) in cash and cash equivalents	807	(9,706)
	______	______
Analysis of changes in cash and cash equivalents during the period
Opening balance	4,009	13,623
Increase/(decrease) in cash and cash equivalents as above	807	(9,706)
Effect of exchange rate fluctuations on cash held	315	(275)
	______	______
Closing balance	5,131	3,642
	______	______

Notes to the Financial Statements

For the period ended 31 January 2018

1.	Accounting policies
	Basis of accounting
	The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. 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 interim financial statements have been prepared using the same accounting policies as the preceding annual financial statements.

		Six months ended	Six months ended
		31 January 2018	31 January 2017
2.	Income	£'000	£'000
	Income from investments
	Overseas dividends	5,808	5,786
	Overseas interest	4	-
	REIT income	64	-
	Stock dividends	14	-
	UK dividend income	84	38
		______	______
		5,974	5,824
		______	______
	Other income
	Deposit interest	2	-
		______	______
	Total income	5,976	5,824
		______	______

3.	Taxation
	The taxation charge for the period within revenue represents withholding tax suffered on overseas dividend income. The taxation charge for the period within capital represents capital gains tax on Indian equity sales.

		Six months ended	Six months ended
		31 January 2018	31 January 2017
4.	Return/(loss) per Ordinary share	p	p
	Basic
	Revenue return	6.57	6.82
	Capital return/(loss)	(7.03)	92.12
		______	______
	Total return/(loss)	(0.46)	98.94
		______	______
	The figures above are based on the following:
		Six months ended	Six months ended
		31 January 2018	31 January 2017
		£'000	£'000
	Revenue return	2,268	2,429
	Capital return/(loss)	(2,426)	32,786
	Total return	(158)	35,215
		______	______
	Weighted average number of shares in issue{A}	34,534,682	35,590,006
		______	______
		Six months ended	Six months ended
		31 January 2018	31 January 2017
	Diluted{B}	p	p
	Revenue return	n/a	n/a
	Capital return	n/a	82.86
		______	______
	Total return	n/a	90.28
		______	______
	The figures above are based on the following:
		£'000	£'000
	Revenue return	2,841	2,938
	Capital return/(loss)	(2,426)	32,786
		______	______
	Total return	415	35,724
		______	______
	Number of dilutive shares	3,890,186	3,980,142
		______	______
	Diluted shares in issue{AB}	38,424,868	39,570,148
		______	______
	{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 IAS 33, "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 3,890,186 (31 January 2017 - 3,980,142) to 38,424,868 (31 January 2017 - 39,570,148) Ordinary shares.
	As at 31 January 2018, the CULS conversion has a positive impact on the revenue and capital return per Ordinary share, therefore there is no dilution (31 January 2017 - no dilution to the revenue 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 issue expenses are reversed. Total earnings for the period are tested for dilution. Once dilution has been determined individual revenue and capital earnings are adjusted.

		Six months ended	Six months ended
		31 January 2018	31 January 2017
5.	Dividends	£'000	£'000
	Final dividend for 2017 - 12.00p (2016 - 10.50p)	4,131	3,738
	Special dividend for 2017 - 4.00p (2016 - nil)	1,377	-
		______	______
		5,508	3,738
		______	______

6.

Bank loans

The Company currently has a $25,000,000 revolving facility agreement with The Royal Bank of Scotland PLC.  At the period end, $12,500,000 (31 July 2017 - $12,500,000) was drawn down from the term loan facility at a fixed interest rate of 2.506% until 8 June 2020.  On 24 January 2018 a revolving loan amount of $10,000,000 (31 July 2017 - $nil) was drawn down at a rate of 2.410% and matured on 23 February 2018. 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). All covenants were met during the period.

7.	Non-current liabilities - 3.5% Convertible Unsecured Loan Stock 2019 ("CULS")
		Number of units	Liability component	Equity component
		£'000	£'000	£'000
	Balance at beginning of period	32,990	32,441	1,361
	Conversion of CULS into Ordinary shares	(2,688)	(2,688)	-
	Notional interest on CULS	-	108	-
	Amortisation of discount and issue expenses	-	38	-
		______	______	______
	Balance at end of period	30,302	29,899	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 until 31 May 2019 at a rate of one Ordinary share for every 830.0p nominal of CULS. Interest is paid on the CULS on 31 May and 30 November each year. 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.
	In the event of a winding-up of the Company the rights and claims of the Trustee and CULS holders would be subordinate to the claims of all creditors in respect of the Company's secured and unsecured borrowings, under the terms of the Trust Deed.
	During the period ended 31 January 2018 the holders of £2,687,937 of CULS exercised their right to convert their holdings into Ordinary shares. Following the receipt of the exercise instructions, the Company converted £2,687,937 (31 July 2017 - £51,067) nominal amount of CULS into 323,835 (31 July 2017 - 6,141) Ordinary shares.
	As at 31 January 2018, there was £30,301,810 (31 July 2017 - 32,989,747) nominal amount of CULS in issue.

8.	Called-up share capital
	During the six months ended 31 January 2018 an additional 323,835 (31 July 2017 - 6,141) Ordinary shares were issued after £2,687,937 (31 July 2017 - £51,067) nominal amount of 3.5% Convertible Unsecured Loan Stock 2019 were converted at 830.0p each. The total consideration received was £nil (31 July 2017 - £nil). At the end of the period there were 39,507,434 (31 July 2017 - 39,183,599) Ordinary shares in issue, of which 4,940,374 (31 July 2017 - 4,369,874) were held in treasury.
	Subsequent to the period end, a further 322,500 Ordinary shares were bought back to be held in treasury at a total cost of £3,335,000.

9.	Capital reserve
	The capital reserve reflected in the Condensed Statement of Financial Position at 31 January 2018 includes gains of £217,554,000 (31 July 2017 - gains £222,428,000), which relate to the revaluation of investments held at the reporting date.

		As at	As at
10.	Net asset value per equity share	31 January 2018	31 July 2017
	Basic
	Net assets attributable	£421,103,000	£430,105,000
	Number of Ordinary shares in issue{A}	34,567,060	34,813,725
	Net asset value per Ordinary share	1,218.22p	1,235.45p
		______	______
	Diluted{B}
	Net assets attributable	£451,002,000	£462,456,000
	Number of Ordinary shares	38,217,880	38,788,393
	Net asset value per Ordinary share	1,180.08p	1,192.49p
		______	______
	{A} Excludes shares in issue held in treasury.
	{B} The diluted net asset value per Ordinary share has been calculated on the assumption that the £30,301,810 (31 July 2017 - £32,989,747) 3.5% Convertible Unsecured Loan Stock 2019 ("CULS") are converted at 830.0p per share, giving a total of 38,217,880 (31 July 2017 - 38,788,393) 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 bond instruments are deemed to be 'in the money' if the cum income (debt at fair value) 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 January 2018 the NAV was 1,218.22p and thus the CULS were 'in the money' (31 July 2017 - 1,235.45p, 'in the money').

11.	Transaction costs
	During the period expenses were incurred in acquiring or disposing of investments classified as fair value though profit or loss. These have been expensed through capital and are included within gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended
		31 January 2018	31 January 2017
		£'000	£'000
	Purchases	27	60
	Sales	19	32
		______	______
		46	92
		______	______

12.	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. The fair value hierarchy has the following classifications:
	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 Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:
		Level 1	Level 2	Level 3	Total
	As at 31 January 2018	£'000	£'000	£'000	£'000
	Financial assets/(liabilities) at fair value through profit or loss
	Quoted equities	466,066	-	-	466,066
	CULS	(38,786)	-	-	(38,786)
		______	______	______	______
	Net fair value	427,280	-	-	427,280
		______	______	______	______
		Level 1	Level 2	Level 3	Total
	As at 31 July 2017	£'000	£'000	£'000	£'000
	Financial assets/(liabilities) at fair value through profit or loss
	Quoted equities	468,614	-	-	468,614
	CULS	(42,639)	-	-	(42,639)
		______	______	______	______
	Net fair value	425,975	-	-	425,975
		______	______	______	______
	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.

13.	Related party disclosures
	Mr Gilbert is a director of Standard Life Aberdeen PLC, of which Aberdeen Fund Managers Limited ("AFML") and Aberdeen Asset Management Asia Limited ("AAM Asia") are wholly-owned subsidiaries. The provision of investment management services to the Company has been delegated to AAM Asia by AFML. Both Mr Gilbert and Mr Young are directors of AAM Asia. Neither Mr Gilbert nor Mr Young are directors of AFML.
	On 3 July 2017 Mr Yea was appointed as a director of Equiniti Group Plc and on 29 September 2017 he became chairman. Equiniti acts as the Company's registrar.
	Transactions with the Manager
	The investment management fee is payable monthly in arrears based on an annual amount of 1.0% 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). During the period £2,002,000 (31 January 2017 - £1,766,000) of investment management fees were charged, with a balance of £684,000 (31 January 2017 - £611,000) being payable to AFML at the period end. Investment management fees are charged 100% to revenue.
	The Company also has a management agreement with AFML for, inter alia, the provision of both administration and promotional activities services which are, in turn, delegated to AAM and Aberdeen Asset Managers Limited ('AAML') respectively.
	The administration fee is payable quarterly in advance and is based on a current annual amount of £93,000 (31 January 2017 - £87,000). During the period £45,000 (31 January 2017 - £44,000) of fees were charged, with a balance of £23,000 (31 January 2017 - £22,000) payable to AAM at the period end.
	The promotional activities costs are based on a current annual amount of £250,000 (31 January 2017 - £250,000), payable quarterly in arrears. During the period £125,000 (31 January 2017 - £125,000) of fees were charged, with a balance of £21,000 (31 January 2017 - £21,000) being payable to AAML at the period end.

14.	Segmental information
	The Company is engaged in a single segment of business, which is to invest in equity securities. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment.

15.	Half-Yearly Report
	The financial information in this Report does not comprise statutory accounts within the meaning of Section 434 - 436 of the Companies Act 2006. The financial information for the year ended 31 July 2017 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified and contained no statement under Section 498 (2), (3) or (4) of the Companies Act 2006. The interim accounts have been prepared using the same accounting policies as the preceding annual accounts.
	Ernst & Young LLP has reviewed the financial information for the six months ended 31 January 2018 pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

16.	This Half-Yearly Report was approved by the Board and authorised for issue on 11 April 2018.

Copies of the Company's Half Yearly Report for the six months ended 31 January 2018 will be posted to shareholders in April 2018 and will be available thereafter on the Company's website:
asian-smaller.co.uk* and from the registered office, 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.

* 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.

Aberdeen Asset Management PLC

Secretaries

11 April 2018

Independent Review Report to Aberdeen Asian Smaller Companies Investment Trust PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2018 which comprises a Condensed Statement of Comprehensive Income, Condensed Statement of Financial Position, Condensed Statement of Changes in Equity, Condensed Statement of Cash Flows and the related Notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the company are prepared in accordance with United Kingdom Generally Accepted Accounting Practice. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting).

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2018 is not prepared, in all material respects, in accordance with the Financial Reporting Standard 104 (Interim Financial Reporting) and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Conduct Authority.

Ernst & Young LLP

London

11 April 2018

 

END

 

 

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