Half Yearly Report

RNS Number : 0462D

Aberdeen Asian Smaller Co's Inv Tst

24 April 2017

 

ABERDEEN ASIAN SMALLER COMPANIES INVESTMENT TRUST PLC

ANNOUNCEMENT OF UNAUDITED HALF YEARLY RESULTS

for the six months ended 31 January 2017

INTERIM BOARD REPORT

Background

I am very pleased to report a good start to the year. On a total return basis the net asset value ("NAV") per Ordinary share increased by 8.9%, outperforming the MSCI AC Asia Pacific ex Japan Small Cap Index's return of 5.1%. The share price rose by 7% to 978.0p although the discount remained stubbornly high at 13.1% to the NAV per share as at 31 January 2017 despite the Company buying back in excess of 500,000 shares during this period. This is in line with the peer group in the market but, nonetheless, disappointing.

The portfolio continues to perform well, with the underlying investments enjoying a very healthy average return on equity of 15.6% and return on assets of 7.5%. Valuations are also reasonable at around 15 times earnings and the average dividend yield of the underlying holdings at 3.0% is a respectable return, given the low interest rate environment. This reflects the policy of Hugh Young and his team in investing in high quality companies with good prospects and strong management.

Overview

In a world of great economic and political uncertainty, the Company's focus on Asian companies with a market capitalisation of less than US$1bn gives the portfolio a certain stability as many of these companies are domestically focused.

The economic growth of the region continues to outpace Europe and the US. The population of the ASEAN economies alone is more than 600 million and, as it is relatively youthful, offers tremendous potential.  Combined with the behemoths of China and India, the growing middle classes across the whole region are driving demand for everything from milk to mobile phones and cars. This continuing expansion in consumers' purchasing power which is forecast to continue over many years makes it an ideal place for domestically focused small companies to thrive.

A sounder Chinese economy also buoyed sentiment, given the mainland's economic dominance in Asia. Worries over China's slowing growth, rife at the beginning of last year, receded as the leadership prioritised economic stability ahead of the key Party Congress in late 2017. Besides propping up its economy with fiscal stimulus, Beijing tightened controls to stem capital outflows and imposed new measures to cool the property frenzy which should bode well for the health of the economy longer term.

Portfolio

The Company performed well both in absolute terms and against the small cap index. This was driven largely by the lack of exposure to Korea, which underperformed the region. Sentiment there was affected by a political scandal that saw President Park Geun-hye suspended from office. Already anaemic domestic consumption was further eroded as protracted protests against Park dampened retail activity. Although your Company has currently no investments in Korea, your Manager continues to look for opportunities to invest in the country, which has gained a reputation for its technological expertise.

The heavy exposure to Southeast Asia further boosted returns. In Thailand, the market outpaced most of its regional peers, lifted by political stability following the death of the revered King Bhumibol Adulyadej. While stocks in Indonesia underperformed the region, the companies in our portfolio performed well. A top contributor was local dairy company Ultrajaya Milk, one of our most recent purchases. A market leader in the domestic milk market, Ultrajaya generates good margins and has a net cash balance sheet. With a growing middle class and shifts in local diets, increasing demand for milk and dairy products is expected to boost growth. Indonesia's level of milk consumption of about 13 litres per person remains very low compared to its neighbours such as Malaysia, which consumes almost four times more than the average Indonesian.

Elsewhere, your Company gained from the high exposure to India, which has also contributed to performance over the longer term as small-cap stocks have benefited from improved policies and reforms under Prime Minister Narendra Modi and the central bank's commitment to inflation targeting and monetary policy discipline. The market wobble in late 2016 post-demonetisation was a small setback relative to the longer-term small-cap performance. The move called for scrapping two banknotes that made up almost 90% of all local currency in circulation by the year-end. City Union Bank, a recent introduction to the portfolio, was one of the beneficiaries of the government's demonetisation drive in November, as the move led to a massive scramble to deposit cash into bank accounts before the deadline. The conservatively run regional bank, which operates in the southern Indian state of Tamil Nadu, has steady asset quality and good loan growth.

In Hong Kong, Pacific Basin Shipping rebounded sharply after prolonged weakness in step with the shipping industry cycle. The Hong Kong-based dry bulk carrier remains well placed to benefit from a cyclical recovery, given its size and balance sheet strength. The company had recently raised money through a rights issue with the proceeds being used to buy distressed assets from smaller players who were impacted harder by the cyclical downturn. We had supported this move as the company had also historically proven itself a good manager across business cycles, a decision well justified as the share price has more than doubled since the rights issue.

Against this, the Company's low exposure to China detracted as the mainland market rebounded from a rocky start and ended as the region's best performer. Although there are a number of quality smaller companies emerging in the mainland, Hugh Young and his team continue to find it difficult to invest there, given the opaque regulatory boundaries and governance standards.

Portfolio Activity

Besides the above-mentioned introduction of City Union Bank, your Manager also initiated a position in Aegis Logistics, which handles bulk liquids and LPG. The Indian oil & gas logistics provider has successfully utilised its first-mover advantage to establish a strategic network of terminals close to clients, and is backed by a robust balance sheet, solid operations and good growth potential. 

Meanwhile, your Manager's engagement with UK-listed MP Evans proved beneficial. The plantation company, which received a takeover bid from KL Kepong, successfully fought off the unsolicited approach that undervalued its plantations portfolio in Southeast Asia. Its share price rose in response, given MP Evans' commitment to disposing of non-core assets to improve shareholder returns. Your Manager had engaged with the Boards of both players during the attempted takeover and was happy to support MP Evans, given its quality assets and longer-term growth potential.

Corporate actions elsewhere led to the loss of a few holdings such as traditional Chinese medicine retailer Eu Yan Sang and hospitality information system company City E-Solutions. Several stocks - DGB Financial Group, Hung Hing Print Group and Pos Malaysia - were sold over the period in view of their deteriorating prospects. The cash was recycled into more attractive prospects which have been highlighted earlier such as Aegis Logistics, City Union Bank and Pacific Basin.

Share Capital Management and Gearing

During the period, 516,750 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 257,500 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 2017 was 9.2%. The majority of the gearing is provided by the Convertible Unsecured Loan Stock redeemable in 2019 of which approximately £33.0 million remains outstanding.  The Company also has a £20 million multi-currency loan facility with State Street and $9 million was drawn down under the facility at the period end. 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.

Aberdeen

You will have seen the announcement of the proposed recommended merger between Aberdeen and Standard Life. This is still subject to a number of regulatory hurdles and the approval of both sets of shareholders.

The Board has made enquiries as to whether this will have any impact on the management of this Company. We have concluded that it will not make a material difference as the equity team in Singapore will be largely unaffected by the merger and the companies share many of the same investment philosophies. We will continue to monitor events as they unfold.

Outlook

As we have previously stated, the case for small companies in Southeast Asia remains a compelling story with considerable opportunities for growth in both the short and medium term. While the markets of Asia cannot be immune from external shocks impacting markets elsewhere in the world, the underlying performance of the portfolio should continue to grow given the quality of the businesses and their domestic focus.

Principal Risks and Uncertainties

The principal risks and uncertainties affecting the Company are set out in detail on pages 9 to 10 of the Annual Report and Financial Statements for the year ended 31 July 2016 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 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

21 April 2017

FINANCIAL HIGHLIGHTS

	31 January 2017	31 July 2016	% change
Total assets{A} (£'000)	448,676	427,725	+4.9
Net asset value per Ordinary share - basic	1,160.25p	1,068.92p	+8.5
Net asset value per Ordinary share - diluted	1,125.01p	1,042.99p	+7.9
Share price (mid)	978.00p	924.00p	+5.8
Discount to diluted net asset value	13.1%	11.4%
{A} Total assets as per the Statement of Financial Position less current liabilities (excluding prior charges such as bank loans).

Performance	Six months ended 31 January 2017	Year ended 31 July 2016
Net asset value per Ordinary share - diluted	+8.9%	+18.4%
Share price	+7.0%	+19.4%
MSCI AC Asia Pacific ex Japan Index (currency adjusted)	+10.4%	+17.6%
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted)	+5.1%	+19.1%
{A} Total return represents the capital return plus dividends reinvested.

Condensed Statement of Comprehensive Income (unaudited)

		Six months ended			Six months ended
		31 January 2017			31 January 2016
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments		-	33,229	33,229	-	(20,770)	(20,770)
Income	2	5,824	-	5,824	4,175	-	4,175
Exchange losses		-	(443)	(443)	-	(428)	(428)
Investment management fees		(1,766)	-	(1,766)	(2,170)	-	(2,170)
Administrative expenses		(751)	-	(751)	(709)	-	(709)
		______	______	______	______	______	______
Net return before finance costs and taxation		3,307	32,786	36,093	1,296	(21,198)	(19,902)
Finance costs		(664)	-	(664)	(659)	-	(659)
		______	______	______	______	______	______
Net return on ordinary activities before taxation		2,643	32,786	35,429	637	(21,198)	(20,561)
Taxation on ordinary activities	3	(214)	-	(214)	(174)	-	(174)
		______	______	______	______	______	______
Return attributable to equity shareholders		2,429	32,786	35,215	463	(21,198)	(20,735)
		______	______	______	______	______	______
Return per share (pence)
Basic	4	6.82	92.12	98.94	1.24	(56.77)	(55.53)
		______	______	______	______	______	______
Diluted	4	n/a	82.86	90.28	n/a	n/a	n/a
		______	______	______	______	______	______
The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company.
A Statement of Total Recognised Gains and Losses has not been presented as all gains and losses are recognised in the Condensed Statement of Comprehensive Income.
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 2017	31 July 2016
		(unaudited)	(audited)
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		445,945	414,812
Current assets
Debtors and prepayments		382	600
Cash and short term deposits		3,642	13,623
		______	______
		4,024	14,223
		______	______
Creditors: amounts falling due within one year
Bank loans	6	(7,154)	(11,779)
Other creditors		(1,293)	(1,310)
		______	______
		(8,447)	(13,089)
		______	______
Net current (liabilities)/assets		(4,423)	1,134
		______	______
Total assets less current liabilities		441,522	415,946
Non-current liabilities
3.5% Convertible Unsecured Loan Stock 2019	7	(32,329)	(32,211)
		______	______
Net assets		409,193	383,735
		______	______
Capital and reserves
Called-up share capital	8	9,794	9,794
Capital redemption reserve		2,062	2,062
Share premium account		39,668	39,646
Equity component of 3.5% Convertible Unsecured Loan Stock 2019	7	1,361	1,361
Capital reserve	9	349,270	322,525
Revenue reserve		7,038	8,347
		______	______
Equity shareholders' funds		409,193	383,735
		______	______
Net asset value per share (pence)
Basic	10	1,160.25	1,068.92
		______	______
Diluted	10	1,125.01	1,042.99
		______	______

Condensed Statement of Changes in Equity (unaudited)

Six months ended 31 January 2017
		Capital	Share		Equity
	Share	redemption	premium	Special	component	Capital	Revenue
	capital	reserve	account	reserve	CULS 2019	reserve	reserve	Total
	£'000	£'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 on ordinary activities 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
	______	______	______	______	______	______	______	______
Six months ended 31 January 2016
		Capital	Share		Equity
	Share	redemption	premium	Special	component	Capital	Revenue
	capital	reserve	account	reserve	CULS 2019	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 July 2015	9,794	2,062	39,644	10,578	1,361	269,975	10,553	343,967
Purchase of own shares to treasury	-	-	-	(7,591)	-	-	-	(7,591)
Conversion of 3.5% Convertible Unsecured Loan Stock (note 7)	-	-	1	-	-	-	-	1
Return on ordinary activities after taxation	-	-	-	-	-	(21,198)	463	(20,735)
Dividends paid (note 5)	-	-	-	-	-	-	(5,601)	(5,601)
	______	______	______	______	______	______	______	______
Balance at 31 January 2016	9,794	2,062	39,645	2,987	1,361	248,777	5,415	310,041
	______	______	______	______	______	______	______	______

Condensed Statement of Cash Flows (unaudited)

	Six months ended	Six months ended
	31 January 2017	31 January 2016
	£'000	£'000
Operating activities
Net return/(loss) on ordinary activities before finance costs and taxation	36,093	(19,902)
Adjustments for:
Dividend income	(5,786)	(4,124)
Interest income	-	(3)
Dividends received	5,818	4,743
Interest received	2	4
(Gains)/losses on investments	(33,229)	20,770
Increase in prepayments	(16)	(12)
Increase in other debtors	(2)	-
(Decrease)/increase in accruals	(160)	403
Stock dividends included in investment income	(38)	(47)
Interest paid	(660)	(655)
CULS notional interest and amortisation of issue expenses	140	133
Withholding tax suffered	(214)	(174)
	___________	___________
Net cash flow from operating activities	1,948	1,136
Investing activities
Purchases of investments	(14,114)	(12,176)
Sales of investments	16,589	13,696
	___________	___________
Net cash flow from investing activities	2,475	1,520
Financing activities
Purchase of own shares to treasury	(6,041)	(7,591)
(Repayment)/drawdown of loan	(4,625)	6,345
Equity dividends paid (note 5)	(3,738)	(5,601)
	___________	___________
Net cash flow used in financing activities	(14,404)	(6,847)
	___________	___________
Decrease in cash and cash equivalents	(9,981)	(4,191)
	___________	___________
Analysis of changes in cash and cash equivalents during the period
Opening balance	13,623	6,678
Decrease in cash and cash equivalents as above	(9,981)	(4,191)
	___________	___________
Closing balance	3,642	2,487
	___________	___________

Notes to the Financial Statements

For the period ended 31 January 2017

1.	Accounting policies
	(a)	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 2017	31 January 2016
2.	Income	£'000	£'000
	Income from investments
	Overseas dividends	5,786	4,124
	Stock dividends	38	48
		___________	___________
		5,824	4,172
		___________	___________
	Other income
	Deposit interest	-	3
		___________	___________
	Total income	5,824	4,175
		___________	___________

3.	Taxation
	The taxation charge for the period represents withholding tax suffered on overseas dividend income.

		Six months ended	Six months ended
		31 January 2017	31 January 2016
4.	Return per Ordinary share	p	p
	Basic
	Revenue return	6.82	1.24
	Capital return	92.12	(56.77)
		___________	___________
	Total return	98.94	(55.53)
		___________	___________
	The figures above are based on the following:
		Six months ended	Six months ended
		31 January 2017	31 January 2016
		£'000	£'000
	Revenue return	2,429	463
	Capital return	32,786	(21,198)
		___________	___________
	Total return	35,215	(20,735)
		___________	___________
	Weighted average number of shares in issue{A}	35,590,006	37,338,757
		___________	___________
		Six months ended	Six months ended
		31 January 2017	31 January 2016
	Diluted{B}	p	p
	Revenue return	n/a	n/a
	Capital return	82.86	n/a
		___________	___________
	Total return	90.28	n/a
		___________	___________
	The figures above are based on the following:
		£'000	£'000
	Revenue return	2,938	891
	Capital return	32,786	(21,198)
		___________	___________
	Total return	35,724	(20,307)
		___________	___________
	Number of dilutive shares	3,980,142	3,981,065
		___________	___________
	Diluted shares in issue{AB}	39,570,148	41,319,822
		___________	___________
	{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 3,980,142 (31 January 2016 - 3,981,065) to 39,570,148 (31 January 2016 - 41,319,822) Ordinary shares.
	For the period ended 31 January 2017 there was no dilution to the revenue return per Ordinary share (31 January 2016 - no dilution to the revenue, capital and total return per Ordinary share due to a loss being incurred). 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.

		Six months ended	Six months ended
		31 January 2017	31 January 2016
5.	Dividends	£'000	£'000
	Final dividend for 2016 - 10.50p (2015 - 10.50p)	3,738	3,921
	Special dividend for 2016 - Nil (2015 - 4.50p)	-	1,680
		___________	___________
		3,738	5,601
		___________	___________

6.	Bank loan
	In June 2014 the Company entered into a £20 million multi-currency revolving loan facility with State Street Bank and Trust Company. The agreement contains a covenant that total debt shall not exceed 25% of the adjusted net asset value of the Company, where total debt is the sum of total borrowings including loan stock excluding any liabilities under derivative instruments which would otherwise be included on the basis that such a contract or instrument was being closed out on the date of calculation.
	The adjusted net asset value is defined as the net asset value of the borrower adjusted by deducting:
	·      market value of any investments not quoted on an internationally recognised exchange;
	·      total market value of investments in Sub-Investment Grade or Unrated Corporate Bonds;
	·      amount by which the market value of investments in a single issuer exceeds 5% of the Net Asset Value;
	·      amount by which the market value of the largest twenty holdings exceeds 65% of the Net Asset Value;
	·      the amount by which market value of investments in any one country exceeds 25% of the Net Asset Value; or
	·      the amount by which market value of investments in any Sub-Investment Grade Country exceeds 30%.
	The Company met this covenant for the period which the loan was utilised with State Street.
	As at 31 January 2017, US$9,000,000 (31 July 2016 - £5,000,000 and US$9,000,000) had been drawn down at a rate of 1.67% (31 July 2016 - 1.40% and 1.40%) which matured on 24 February 2017. At the time of writing the US$9,000,000 bank loan has been rolled over at an interest rate of 1.88389% until maturity on 24 April 2017.

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	33,041	32,211	1,361
	Conversion of CULS into Ordinary shares	(22)	(22)	-
	Notional interest on CULS	-	102	-
	Amortisation of discount and issue expenses	-	38	-
		___________	___________	___________
	Balance at end of period	33,019	32,329	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 2017 the holders of £21,594 of CULS exercised their right to convert their holdings into Ordinary shares. Following the receipt of the exercise instructions, the Company converted £21,594 (31 July 2016 - £2,329) nominal amount of CULS into 2,595 (31 July 2016 - 278) Ordinary shares.
	As at 31 January 2017, there was £33,019,220 (31 July 2016 - 33,040,814) nominal amount of CULS in issue.

8.	Called-up share capital
	During the six months ended 31 January 2017 an additional 2,595 (31 July 2016 - 278) Ordinary shares were issued after £21,594 (31 July 2016 - £2,329) nominal amount of 3.5% Convertible Unsecured Loan Stock 2019 were converted at 830.0p each. The total consideration received was £nil (31 July 2016 - £nil). At the end of the period there were 39,180,053 (31 July 2016 - 39,177,180) Ordinary shares in issue, of which 3,912,374 (31 July 2016 - 3,278,124) were held in treasury.
	Subsequent to the period end, a further 257,500 Ordinary shares were bought back to be held in treasury at a total cost of £2,572,000.

9.	Capital reserve
	The capital reserve reflected in the Condensed Statement of Financial Position at 31 January 2017 includes gains of £211,332,000 (31 July 2016 - gains £185,317,000), 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 2017	31 July 2016
	Basic
	Net assets attributable	£409,193,000	£383,735,000
	Number of Ordinary shares in issue{A}	35,267,679	35,899,334
	Net asset value per Ordinary share	1,160.25p	1,068.92p
		___________	___________
	Diluted{B}
	Net assets attributable	£441,522,000	£415,946,000
	Number of Ordinary shares	39,245,898	39,880,155
	Net asset value per Ordinary share	1,125.01p	1,042.99p
		___________	___________
	{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 £33,019,220 (31 July 2016 - £33,040,814) 3.5% Convertible Unsecured Loan Stock 2019 ("CULS") are converted at 830.0p per share, giving a total of 39,245,898 (31 July 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 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 2017 the cum income NAV was 1,160.25p and thus the CULS were 'in the money' (31 July 2016 - 1,068.92p, '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/(losses) on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended
		31 January 2017	31 January 2016
		£'000	£'000
	Purchases	60	32
	Sales	32	58
		___________	___________
		92	90
		___________	___________

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 2017	£'000	£'000	£'000	£'000
	Financial assets/(liabilities) at fair value through profit or loss
	Quoted equities	445,945	-	-	445,945
	CULS	(39,541)	-	-	(39,541)
		_________	_________	_________	_________
	Net fair value	406,404	-	-	406,404
		_________	_________	_________	_________
		Level 1	Level 2	Level 3	Total
	As at 31 July 2016	£'000	£'000	£'000	£'000
	Financial assets/(liabilities) at fair value through profit or loss
	Quoted equities	414,812	-	-	414,812
	CULS	(38,080)	-	-	(38,080)
		_________	_________	_________	_________
	Net fair value	376,732	-	-	376,732
		_________	_________	_________	_________
	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
	Transactions with the Manager
	Mr M J Gilbert and his alternate Director, Mr H Young are both directors of Aberdeen Asset Management PLC ('AAM') and its subsidiary Aberdeen Asset Management Asia Limited ('AAM Asia') which has been delegated, under an agreement with Aberdeen Fund Managers Limited ('AFML'), to provide investment management services to the Company. Neither Mr Gilbert nor Mr Young are directors of AFML.
	The 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). During the period £1,766,000 (31 January 2016 - £2,170,000) of investment management fees were charged, with a balance of £611,000 (31 January 2016 - £720,000) 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 £87,000 (31 January 2016 - £87,000). During the period £44,000 (31 January 2016 - £43,000) of fees were charged, with a balance of £22,000 (31 January 2016 - £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 2016 - £250,000), payable quarterly in arrears. During the period £125,000 (31 January 2016 - £125,000) of fees were charged, with a balance of £21,000 (31 January 2016 - £83,000) 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 2016 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 2017 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 21 April 2017.

Copies of the Company's Half Yearly Report for the six months ended 31 January 2017 will be posted to shareholders in April 2017 and will be available thereafter on the Company's website:
www.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

21 April 2017

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 2017 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 and Ireland) "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 Financial Reporting Standard 102. 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 and Ireland) 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 Ireland) 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 2017 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

Edinburgh

21 April 2017

 

END

 

 

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