Half Yearly Results

RNS Number : 9794V

Aberdeen Asian Smaller Co's Inv Tst

22 April 2016

 

ABERDEEN ASIAN SMALLER COMPANIES INVESTMENT TRUST PLC

ANNOUNCEMENT OF UNAUDITED HALF YEARLY RESULTS

for the six months ended 31 January 2016

INTERIM BOARD REPORT

Background

The volatility that we saw in Asian stock markets during last year extended into the six months under review which ended on 31 January 2016. The MSCI AC Asia Pacific ex Japan Small Cap Index fell by 3.0% during this period with your Company's net asset value (NAV) falling by 5.0%, while the share price declined by 5.7% to 730.0p (on a total return basis), reflecting a widening of the discount to NAV from 11.9% to 12.7%.

Since the period end, based upon capital return data as at close on 20 April 2016, the NAV has risen by 9.6% to 937.6p, the share price has risen 13.0% to 825p and the discount has narrowed to 10.8%.

Over the last three years, Asia has been a difficult place in which to invest as we have seen outflows of monies from emerging markets to more developed markets for a variety of reasons. But, as is emphasised below, growth across the region is still strong by European and US standards and the continuing expansion in the purchasing power of the consumer makes it an ideal place for smaller companies to flourish.  This weakness has now lasted for over three years but as you can see from the chart set out below, performance over five years is strong both in absolute terms and against the benchmark.

Performance (total return) to 31 January 2016	6 Month	1 Year	3 years	5 Years	10 Years
	% return	% return	% return	% return	% return
Share price	-5.7	-18.8	-20.4	33.2	196.6
Net Asset Value (undiluted) per Ordinary Share	-5.7	-15.9	-4.8	43.7	210.6
Net Asset Value (diluted) per Ordinary Share	-5.0	-14.5	-3.7	43.2	247.3
MSCI AC Asia Pacific ex Japan Index	-6.3	-12.6	-2.6	6.3	97.4
MSCI AC Asia Pacific ex Japan Small Cap Index	-3.0	-7.3	-0.5	-2.5	98.9

Source: Aberdeen Asset Management, Morningstar and Lipper

Overview

It was an eventful six months with investors' attention captured by a variety of headlines across the region, notably centred on China, commodity prices and the Federal Reserve's latest monetary policy that saw the United States follow a different path to the rest of the world.

Despite the mainland exchanges of China not being readily open to foreign capital and being heavily dependent on domestic investors, their performance has heavily influenced both the local Asian markets and also the stock markets of the developed world. They fell 10.5% over the past six months with a period of considerable volatility in January, which triggered significant falls across world markets in the first days of the New Year.

Slowing growth in China also hurt what previously seemed to be an insatiable global appetite for natural resources. Oil prices have fallen 70% since 2014 and similar falls have been seen in other commodities. While this has benefited those countries like India that are large importers of oil, the sheer scale of the falls has been a cause of considerable concern thus feeding a general nervousness across markets.  

Finally, after almost a decade of loose monetary policy in developed markets, the Federal Reserve raised interest rates at the end of 2015. Liquidity that had found its way to the emerging markets in the hunt for yield may now return home if rates continue to rise in the United States. However, other developed economies, faced with low oil prices and low inflation, have pressed on down the loosening path, with the European Central Bank looking to extend quantitative easing and Japan wading into negative rate territory. Policymakers across Asia maintained their focus on supporting growth. China and India were the most forthright while the key ASEAN countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) also announced various stimulus packages.

Portfolio

Against this turbulent macro-economic background, the economies of Asia continue to grow albeit at different speeds with each country having its own challenges and opportunities.  Growth in the key ASEAN economies is subdued as compared to earlier years but remained stable at 4.7 %. India saw growth in 2015 of 7% and while China has slowed, it is still projecting growth of 6.5-7% in the current year. This growth in GDP will feed into domestic consumption on which the fortunes of smaller companies largely depends and this is the area in which this company has the greatest exposure.

In reviewing the portfolio, it is interesting to see that some of our best performing investments are companies facing weaker domestic economies where equity markets have fallen the most over the last six months. Despite these challenging conditions, companies such as Multi Bintang in Indonesia and Jollibee in the Philippines have been resilient as consumers choose to buy their products and the number of consumers continues to grow. Moreover, the strength of their brands allows them to adjust their pricing strategy to account for local inflationary pressures on wages. Jollibee has seen its market capitalisation increase three-fold over the past five years to become one of the largest stocks held in the portfolio. It has a nationwide franchise of almost 1,000 stores, successfully maintaining its market-leading position over McDonald's and KFC as the favourite fast-food restaurant of a 100 million-strong population. Similarly, Multi Bintang serves a growing population of 250 million consumers, boasting a portfolio of market-leading beer brands, both domestic and international, that captures consumers at numerous points across the price spectrum. While Multi Bintang's share price has been on an overall uptrend, it is inherently more volatile than Jollibee, given that taxes and regulations on alcohol are frequently used for political purposes.

The attractive demographic trends seen in the emerging Asian markets are not only supportive of consumer businesses but also other sectors where disposal incomes can be captured. One of the biggest weightings is the Malaysian general insurance company LPI Capital, which has benefited over the years by maintaining its market strength against a backdrop of a growing population and increasing wealth. Ahead of upcoming market liberalisation, LPI has been strengthening its distribution channels, improving its service quality and maintaining its combined ratio through its experience in managing claims. Elsewhere, the portfolio contains companies that are just very good at what they do. Shoe-maker Kingmaker Footwear Holdings has proven its excellence in cost management and balance sheet prudence. Over the past few years, it has been moving its production facilities out of China to Vietnam and Cambodia to ensure it remains cost-competitive, while adding new customer relationships and expanding into the manufacturing of athletic shoes.

Over the period under review, performance weakness was down to positioning within two countries. The companies in which we are invested in Sri Lanka have been penalised for being among the most profitable domestic companies. A one-off retrospective super gains tax was imposed as part of the government's measures to reduce the widening budget deficit and combat slower growth. The Trust's underweight to Taiwan was a further drag on performance, given that the market outperformed the wider region. The small-cap companies in this market are largely manufacturers, supplying to the technology and automotive industries globally. Not only is competition fierce but they are mostly beholden to the large original equipment manufacturers at the top of the supply chain that ultimately have pricing power. The order intake of these supplier companies can drive large swings in their quarterly cashflows, which are not complementary to your Manager's investment process. The volatile nature of Taiwan's small-cap segment can be seen in the Trust's attributions over the past several years. While Taiwan was a negative contributor over this interim period, the Trust's underweight has contributed positively to performance on periods covering one year and five years.

In portfolio activity, your Manager used the uncertain environment to initiate companies at attractive valuations. Malaysia-based Oriental Holdings is a regional conglomerate operating in Malaysia, Indonesia and Singapore, with diverse interests spanning plantations to automobiles to property to health care. It runs a net-cash balance sheet and has substantial asset backing from owning the car dealership and real estate. Oriental Holdings was introduced to the Trust at a discount to book value. Another new addition was City Union Bank, a conservatively run regional bank with good asset quality operating in the southern Indian state of Tamil Nadu. With a focus on small and medium-sized enterprises, where City Union Bank is the sole banker to 90% of its customer base, future growth will come from an under-penetrated market and the opportunity to capture market share from the weaker state-owned banks that currently dominate the region. Against this, Malaysian plantation group Riverview Rubber Estates was sold following a change in management, which brought with it a more acquisitive growth strategy that was at odds with your Manager's original investment premise. Elsewhere, Indian IT services company CMC was merged with its listed parent company TCS via a share swap arrangement. The Trust therefore became a shareholder of one of India's largest companies by market capitalisation and subsequently exited this holding in TCS.

Share Capital Management and Gearing

In order to manage the discount, 1.3 million 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 612,500 Ordinary shares have been purchased into treasury.  Your Board uses 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 2016 was 13.8%. The majority of the gearing is provided by the Convertible Unsecured Loan Stock redeemable in 2019 of which approximately £33 million remains outstanding.  The Company also has a £20 million multi currency loan facility with State Street and £11.4 million (£5.0 million 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.

Outlook

Market commentators continue to stress the difficulties the world faces across a whole spectrum of economic issues. However, it is the future of the domestic markets in Asia that directly concern us. There are 625 million consumers in the ASEAN markets and they continue to grow more affluent, India has a growing middle class with rising net disposable incomes. The majority of the portfolio is weighted towards the domestic market and as I have stated on many occasions, the investment philosophy of Hugh Young and his team in Singapore is based on fundamental research and investing in companies with good management, strong balance sheets and excellent prospects.

We cannot influence the volatility of the regions stock markets but we can ensure that the quality of the portfolio is maintained by monitoring the performance of our investee companies through regular visits and constant contact.  Quality remains high within the fund with an average return on equity of 16.6% and return on assets of 7.6%, while historic valuations are reasonable at less than 15 times earnings. In an environment of low interest rates, it is also encouraging to see that the underlying holdings are generating an average yield of 3.5%.

Given that the consumer market continues to expand, the companies in the portfolio continue in the main to thrive and as valuations become more compelling, your board remains confident that, in due course, the recent disappointing retreat in underlying values with be reversed. We have seen a slightly brighter start to the year but with the world facing so many worries and uncertainties; it would be rash to make any kind of prediction as to the timing of future performance. We can rely on the fundamental strong investment case and wait for sentiment to change.

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 2015 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

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 2016

Condensed Statement of Comprehensive Income (unaudited)

		Six months ended			Six months ended
		31 January 2016			31 January 2015
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments		-	(20,770)	(20,770)	-	21,025	21,025
Income	2	4,175	-	4,175	5,439	-	5,439
Exchange losses		-	(428)	(428)	-	(11)	(11)
Investment management fees		(2,170)	-	(2,170)	(2,170)	-	(2,170)
Administrative expenses		(709)	-	(709)	(693)	-	(693)
		______	______	______	______	______	______
Net return before finance costs and taxation		1,296	(21,198)	(19,902)	2,576	21,014	23,590
Finance costs		(659)	-	(659)	(640)	-	(640)
		______	______	______	______	______	______
Net return on ordinary activities before taxation		637	(21,198)	(20,561)	1,936	21,014	22,950
Taxation on ordinary activities	3	(174)	-	(174)	(187)	(5)	(192)
		______	______	______	______	______	______
Return attributable to equity shareholders		463	(21,198)	(20,735)	1,749	21,009	22,758
		______	______	______	______	______	______
Return per share (pence)
Basic	4	1.24	(56.77)	(55.53)	4.59	55.15	59.74
		______	______	______	______	______	______
Diluted	4	n/a	n/a	n/a	n/a	49.92	54.91
		______	______	______	______	______	______
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 2016	31 July 2015
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		351,862	374,460
Current assets
Debtors and prepayments		394	1,010
Cash and cash equivalents		2,487	6,678
		______	______
		2,881	7,688
		______	______
Creditors: amounts falling due within one year
Bank loans	6	(11,345)	(5,000)
Other creditors		(1,281)	(1,237)
		______	______
		(12,626)	(6,237)
		______	______
Net current (liabilities)/assets		(9,745)	1,451
		______	______
Total assets less current liabilities		342,117	375,911
Non-current liabilities
3.5% Convertible Unsecured Loan Stock 2019	7	(32,076)	(31,944)
		______	______
Net assets		310,041	343,967
		______	______
Capital and reserves
Called-up share capital	8	9,794	9,794
Capital redemption reserve		2,062	2,062
Share premium account		39,645	39,644
Special reserve		2,987	10,578
Equity component of 3.5% Convertible Unsecured Loan Stock 2019	7	1,361	1,361
Capital reserve	9	248,777	269,975
Revenue reserve		5,415	10,553
		______	______
Equity shareholders' funds		310,041	343,967
		______	______
Net asset value per share (pence)
Basic	10	839.63	906.16
		______	______
Diluted	10	836.34	896.31
		______	______

Condensed Statement of Changes in Equity (unaudited)

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
	______	______	______	______	______	______	______	______
Six months ended 31 January 2015
		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 2014	9,793	2,062	39,611	11,715	1,361	296,008	8,568	369,118
Conversion of 3.5% Convertible Unsecured Loan Stock (note 7)	1	-	28	-	-	-	-	29
Return on ordinary activities after taxation	-	-	-	-	-	21,009	1,749	22,758
Dividends paid (note 5)	-	-	-	-	-	-	(4,953)	(4,953)
	______	______	______	______	______	______	______	______
Balance at 3 1 January 2015	9,794	2,062	39,639	11,715	1,361	317,017	5,364	386,952
	______	______	______	______	______	______	______	______

Condensed Statement of Cash Flows (unaudited)

	Six months ended	Six months ended
	31 January 2016	31 January 2015
	£'000	£'000
Operating activities
Net return on ordinary activities before finance costs and taxation	(19,902)	23,590
Adjustments for:
Dividend income	(4,124)	(4,931)
Interest income	(3)	(4)
Dividends received	4,743	4,783
Interest received	4	3
Losses/(gains) on investments	20,770	(21,025)
Increase in prepayments	(12)	(11)
Decrease in other debtors	-	1
Increase in accruals	403	445
Stock dividends included in investment income	(47)	(504)
Interest paid	(655)	(635)
CULS notional interest and amortisation of issue expenses	133	129
Withholding tax suffered	(174)	(192)
	___________	___________
Net cash flow from operating activities	1,136	1,649
Investing activities
Purchases of investments	(12,176)	(7,853)
Sales of investments	13,696	15,409
	___________	___________
Net cash flow from investing activities	1,520	7,556
Financing activities
Purchase of own shares to treasury	(7,591)	-
Drawdown of loan	6,345	-
Equity dividends paid (note 5)	(5,601)	(4,953)
	___________	___________
Net cash flow used in financing activities	(6,847)	(4,953)
	___________	___________
(Decrease)/increase in cash and cash equivalents	(4,191)	4,252
	___________	___________
Analysis of changes in cash and cash equivalents during the period
Opening balance	6,678	5,685
(Decrease)/increase in cash and cash equivalents as above	(4,191)	4,252
	___________	___________
Closing balance	2,487	9,937
	___________	___________

Notes to the Financial Statements

For the period ended 31 January 2016

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.
		These condensed financial statements are the first since FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland) came into effect for accounting periods beginning on or after 1 January 2015. An assessment of the impact of adopting FRS 102 has been carried out and found that no restatement of balances as at the transition date, 1 August 2014, or comparative figures in the Condensed Statement of Financial Position or the Condensed Statement of Comprehensive Income is considered necessary. The Company has early adopted Amendments to FRS 102 - Fair value hierarchy disclosures issued by the Financial Reporting Council in March 2016.
		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 2016	31 January 2015
2.	Income	£'000	£'000
	Income from investments
	Overseas dividends	4,124	4,931
	Stock dividends	48	504
		___________	___________
		4,172	5,435
		___________	___________
	Other income
	Deposit interest	3	4
		___________	___________
	Total income	4,175	5,439
		___________	___________

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

		Six months ended	Six months ended
		31 January 2016	31 January 2015
4.	Return per Ordinary share	p	p
	Basic
	Revenue return	1.24	4.59
	Capital return	(56.77)	55.15
		___________	___________
	Total return	(55.53)	59.74
		___________	___________
	The figures above are based on the following:
		Six months ended	Six months ended
		31 January 2016	31 January 2015
		£'000	£'000
	Revenue return	463	1,749
	Capital return	(21,198)	21,009
		___________	___________
	Total return	(20,735)	22,758
		___________	___________
	Weighted average number of shares in issue{A}	37,338,757	38,097,818
		___________	___________
	Diluted{B}	p	p
	Revenue return	-	-
	Capital return	-	49.92
		___________	___________
	Total return	-	54.91
		___________	___________
	The figures above are based on the following:
		£'000	£'000
	Revenue return	891	2,097
	Capital return	(21,198)	21,009
		___________	___________
	Total return	(20,307)	23,106
		___________	___________
	Number of dilutive shares	3,981,065	3,984,182
		___________	___________
	Diluted shares in issue{A}	41,319,822	42,082,000
		___________	___________
	{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 3,981,065 (31 January 2015 - 3,984,182) to 41,319,822 (31 January 2015 - 42,082,000) Ordinary shares.
	For the period ended 31 January 2016 there was no dilution to the revenue, capital and total return per Ordinary share (31 January 2015 - 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 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 2016	31 January 2015
5.	Dividends	£'000	£'000
	Final dividend for 2015 - 10.50p (2014 - 10.00p)	3,921	3,810
	Special dividend for 2015 - 4.50p (2014 - 3.00p)	1,680	1,143
		___________	___________
		5,601	4,953
		___________	___________

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 2016, £5,000,000 and US$9,000,000 (31 July 2015 - £5,000,000) had been drawn down at a rate of 1.41% and 1.33% respectively (31 July 2015 - 1.40%) both of which matured on 25 February 2016. At the time of writing the £5,000,000 has been rolled over at an interest rate of 1.41% until maturity on 25 April 2016 and the US$9,000,000 has been rolled over at an interest rate of 1.33% until maturity on 25 April 2016.

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	33,043	31,944	1,361
	Conversion of CULS into Ordinary shares	(1)	(1)	-
	Notional interest on CULS transferred to revenue reserve	-	95	-
	Amortisation of discount and issue expenses	-	38	-
		___________	___________	___________
	Balance at end of period	33,042	32,076	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 2016 the holders of £1,153 of CULS exercised their right to convert their holdings into Ordinary shares. Following the receipt of the exercise instructions, the Company converted £1,153 (31 July 2015 - £29,188) nominal amount of CULS into 137 (31 July 2015 - 3,510) Ordinary shares.
	As at 31 January 2016, there was £33,041,990 (31 July 2015 - 33,043,143) nominal amount of CULS in issue.

8.	Called-up share capital
	During the six months ended 31 January 2016 an additional 137 (31 July 2015 - 3,510) Ordinary shares were issued after £1,153 (31 July 2015 - £29,188) nominal amount of 3.5% Convertible Unsecured Loan Stock 2019 were converted at 830.0p each. The total consideration received was £nil (31 July 2015 - £nil).
	At the end of the period there were 39,177,317 (31 July 2015 - 39,177,180) Ordinary shares in issue, of which 2,251,624 (31 July 2015 - 1,218,290) were held in treasury.

9.	Capital reserve
	The capital reserve reflected in the Condensed Statement of Financial Position at 31 January 2016 includes gains of £113,334,000 (31 July 2015 - gains £138,817,000), which relate to the revaluation of investments held at the reporting date.

		As at	As at
10.	Net asset value per Ordinary share	31 January 2016	31 July 2015
	Basic
	Net assets attributable	£310,041,000	£343,967,000
	Number of Ordinary shares in issue{A}	36,925,693	37,958,890
	Net asset value per Ordinary share	839.63p	906.16p
		___________	___________
	Diluted{B}
	Net assets attributable	£342,117,000	£375,911,000
	Number of Ordinary shares	40,906,656	41,939,992
	Net asset value per Ordinary share	836.34p	896.31p
		___________	___________
	{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 £33,041,990 3.5% (31 July 2015 - £33,043,143) Convertible Unsecured Loan Stock 2019 ("CULS") are converted at 830.0p per share, giving a total of 40,906,656 (31 July 2015 - 41,939,992) 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 2016 the cum income NAV was 839.63p and thus the CULS were 'in the money' (31 July 2015 - 906.16p, '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 2016	31 January 2015
		£'000	£'000
	Purchases	32	13
	Sales	58	67
		___________	___________
		90	80
		___________	___________

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 Company has early adopted Amendments to FRS 102 - Fair value hierarchy disclosures issued by issued by the Financial Reporting Council in March 2016. The fair value hierarchy shall have 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 2016	£'000	£'000	£'000	£'000
	Financial assets/(liabilities) at fair value through profit or loss
	Quoted equities	351,862	-	-	351,862
	CULS	(33,785)	-	-	(33,785)
		__________	__________	__________	__________
	Net fair value	318,077	-	-	318,077
		__________	__________	__________	__________
		Level 1	Level 2	Level 3	Total
	As at 31 July 2015	£'000	£'000	£'000	£'000
	Financial assets/(liabilities) at fair value through profit or loss
	Quoted equities	365,374	-	-	365,374
	Unquoted equities	-	9,086	-	9,086
	CULS	(37,174)	-	-	(37,174)
		__________	__________	__________	__________
	Net fair value	328,200	9,086	-	337,286
		__________	__________	__________	__________
	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 Class A are actively traded on recognised stock exchanges.
	During the period ended 31 January 2016 the holding in Gujarat Gas was reclassified as Level 1.

13.	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 1.2% 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 £2,170,000 (31 January 2015 - £2,170,000) of investment management fees were charged, with a balance of £720,000 (31 January 2015 - £737,000) 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 2015 - £87,000). During the period £43,000 (31 January 2015 - £43,000) of fees were charged, with a balance of £22,000 (31 January 2015 - £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 2015 - £220,000), payable quarterly in arrears. During the period £125,000 (31 January 2015 - £110,000) of fees were charged, with a balance of £83,000 (31 January 2015 - £73,000) being payable to AAML at the period end.

14.	Related party disclosures
	There were no related party transactions during the period.

15.	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.

16.	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 2015 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 2016 pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

17.        This Half-Yearly Report was approved by the Board and authorised for issue on 21 April 2016.

Copies of the Company's Half Yearly Report for the six months ended 31 January 2016 will be posted to shareholders in April 2016 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 2016

Independent Review Report to Aberdeen Asian Smaller Companies Investment Trust PLC

Introduction

We have been engaged by Aberdeen Asian Smaller Companies Investment Trust PLC ("the Company") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2016 which comprises the Condensed Statement of Comprehensive Income, Condensed Statement of Financial Position, Condensed Statement of Changes in Equity and Condensed Statement of Cash Flows and the related notes 1 to 17. 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 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 FRS 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 2016 is not prepared, in all material respects, in accordance with FRS 104 Interim Financial Reporting and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

Edinburgh

21 April 2016

 

END

 

 

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