Interim Results
Aberdeen Asian Smaller Co's Inv Tst
31 March 2008
ABERDEEN ASIAN SMALLER COMPANIES INVESTMENT TRUST PLC
ANNOUNCEMENT OF UNAUDITED HALF YEARLY RESULTS
for the six months ended 31 January 2008
Highlights
• Diluted NAV fell 2.9%
• MSCI AC Asia Pacific Free ex Japan Index fell 2.2%
• MSCI AC Asia Pacific Free ex Japan Small Cap Index fell 13.0%
INTERIM BOARD REPORT
Against the backdrop of the adverse conditions caused by turmoil in global
credit markets, in the six months to 31 January 2008, the Company's diluted net
asset value fell by 2.9% in capital terms. Historically, we have used the MSCI
AC Asia Pacific Free ex. Japan Index, currency adjusted, for performance
comparison purposes and over the period this fell by 2.2% in capital terms.
Shareholders will be aware that, until recently, the Board has been of the
opinion that there was not an appropriate benchmark against which to measure the
Company's performance. On 1 June 2007 MSCI introduced the MSCI AC Asia Pacific
Free ex. Japan Small Cap Index and, since then, we have been monitoring it in
its currency adjusted form. We will continue to do so until our year end on 31
July 2008 when a decision will be made whether or not to adopt it as the
Company's benchmark. However, it should be noted that the possible adoption of
this benchmark would not be expected to change or affect the investment
decisions made by Hugh Young and the investment team in Singapore. During the
six months to 31 January 2008 the MSCI AC Asia Pacific Free ex. Japan Small Cap
Index fell by 13.0% in capital terms.
Overview
Asian economies have been less affected than their western counterparts by the
credit crunch that now dominates the news. The Asian banks have largely avoided
investing in mortgage backed securities thereby avoiding large write offs with
the consequent squeeze on credit. While inflation, as in the rest of the world,
remains a threat, interest rates have remained stable with policymakers
preferring currency appreciation, subsidies and credit measures to control
costs.
However Asian markets faced increasing volatility in the six months under
review. Solid economic growth and robust corporate earnings supported stock
prices at the start of the period, driving most indices to all-time highs. This
soon gave way to a wave of selling across the region, triggered by fears that
tight credit markets would lead to an economic slowdown. Despite aggressive US
interest rate cuts, the correction in Asian markets continued into 2008. The
Company's relative performance was helped by an underweight position in Taiwan
and Korea, which were among the worst hit markets, and our exposure to India,
where equity prices were partially insulated by hopes that the domestic
demand-driven economy would not be affected by a US slowdown. In contrast, the
Company's lack of exposure to Australia had a negative impact upon our relative
performance.
Smaller listed companies, which had lagged their peers during the momentum-based
rally, bore the brunt of the selling pressure. This disproportionate treatment
appears to reflect the perception that the sector is less able to weather a
slowdown in growth because of company size and, perhaps, access to capital.
Share Capital and Gearing
The Company's Ordinary shares have continued to trade at a discount and this
widened from 12.3% to 19.0% over the period, presenting the Company with the
opportunity to purchase, for treasury, 708,205 Ordinary shares at discounts in
excess of 15%. Also during the period 157,000 Warrants were purchased for
cancellation. While the discount remains at these levels, your Board will
continue to purchase shares and warrants as it has both a beneficial effect on
the net asset value per share as well as helping to manage the discount.
During most of the period, the net gearing of the Company has been broadly
neutral. The Board has facilities in place to increase it to approximately 8%.
This will only be used when the Manager feels that the market turbulence is
subsiding and it can be utilised to acquire assets at attractive prices.
Portfolio
During the period, your Manager introduced two new companies into the portfolio:
United Malacca, a Malaysian plantation company with improving yields and a
strong cash position; and Aeon Thana, a Thai consumer finance company that is
set to benefit from the stimulatory policies of the newly elected government.
Among disposals, Malaysian stock exchange operator Bursa Malaysia was sold after
a strong run-up in its share price. Other less prominent transactions included
the topping up of Pos Malaysia, Unilever Pakistan, Asian Terminals, FJ Benjamin,
Siam Makro and property developer Cebu, and taking partial profits in dry bulk
shipper Pacific Basin, whose shares had become over-extended, Korean
Reinsurance, plantations company MP Evans, and Distilleries of Sri Lanka.
Aeon Stores and Hong Kong Economic Times in Hong Kong were among the stronger
performers during the period on the back of good results. Robinson & Co in
Singapore returned over 40% on the back of a bid for the company. The Company's
holdings in Thailand were weak during the period with Hana Microelectronics and
Regional Container Lines posting declines of over 20% on the back of the weaker
technology sector and lower freight rates respectively. In Singapore, Bukit
Sembawang corrected sharply as sentiment in the Singapore property sector turned
negative following its previous strong run. Finally, Pos Malaysia performed
poorly on lacklustre results and write offs relating to its investment in
Transmile.
Outlook
In October, we said that the effects of the credit crisis could spread to Asian
markets. This has happened with stock markets in Asia facing unusual volatility
and nervous investor sentiment. Asian fundamentals - of countries, companies
and households - are indisputably better than in previous cycles but despite
talk of decoupling from the world economy, this is unlikely to be reflected in
reality. As our portfolio has a bias towards companies with a domestic focus, it
may be partially protected from a world economic slowdown and could benefit from
counter-cyclical measures from local governments.
The portfolio is trading on an estimated price-earnings multiple of 15.2 times
projected 2007 earnings and 14.6 times projected 2008 earnings, with strong
balance sheets and a healthy dividend yield. While the valuation discount of
smaller companies has narrowed substantially over the past few years, companies
in this sector remain reasonably valued on a relative basis.
With the rigorous research undertaken by your Manager to ensure that the
portfolio only consists of companies that are well managed, have good prospects
and robust balance sheets, your Board believes your Company is in a good
position to weather the current uncertainty and take advantage of more realistic
asset prices when economic and market conditions improve.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company fall into six broad
categories: (i) Ordinary share market risk, (ii) Dividends, (iii) Borrowings,
(iv) Market risk, (v) Foreign exchange risk, and (vi) taxation and exchange
controls. Information on each of these areas is given in the Directors' Report
within the Annual Report and Accounts for the year ended 31 July 2007.
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 interim financial statements contained within the half
yearly financial report have been prepared in accordance with the Accounting
Standards Board's statement "Half-Yearly Financial Reports"; and,
• the Interim Board Report includes a fair review of the information required
by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.
The half yearly report includes a fair review of the information required on
material transactions with related parties and changes since the Annual Report.
For and on behalf of the Board of Aberdeen Asian Smaller Companies Investment
Trust PLC
Nigel Cayzer
Chairman
31 March 2008
Aberdeen Asian Smaller Companies Investment Trust PLC
Income Statement (unaudited)
Six months ended Six months ended
31 January 2008 31 January 2007
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (2,802) (2,802) - 18,379 18,379
Income 2,024 - 2,024 2,643 - 2,643
Investment management fees (730) - (730) (581) - (581)
Administrative expenses (316) - (316) (308) - (308)
Exchange gains/(losses) - 73 73 (19) 384 365
Net return on ordinary activities before 978 (2,729) (1,751) 1,735 18,763 20,498
finance costs and taxation
Finance costs (172) - (172) (227) - (227)
Net return on ordinary activities before 806 (2,729) (1,923) 1,508 18,763 20,271
taxation
Taxation (227) (271) (498) (428) - (428)
Net return on ordinary activities after 579 (3,000) (2,421) 1,080 18,763 19,843
taxation
Return per Ordinary share (pence):
Basic 1.79 (9.26) (7.47) 3.34 58.10 61.44
Diluted 1.63 (8.43) (6.80) 3.01 52.31 55.32
Aberdeen Asian Smaller Companies Investment Trust PLC
Income Statement (audited)
Year ended 31 July 2007
Revenue Capital Total
£'000 £'000 £'000
(Losses)/gains on investments - 32,355 32,355
Income 5,485 - 5,485
Investment management fees (1,243) - (1,243)
Administrative expenses (612) - (612)
Exchange gains/(losses) - 536 536
Net return on ordinary activities before finance 3,630 32,891 36,521
costs and taxation
Finance costs (448) - (448)
Net return on ordinary activities before taxation 3,182 32,891 36,073
Taxation (919) - (919)
Net return on ordinary activities after taxation 2,263 32,891 35,154
Return per Ordinary share (pence):
Basic 6.98 101.40 108.38
Diluted 6.34 92.13 98.47
The total column of this statement represents 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 Income Statement.
All revenue and capital items are derived from continuing operations.
Balance Sheet
As at 31 January As at 31 January As at 31 July 2007
2008 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Non-current assets
Investments at fair value through profit or loss 126,662 122,063 133,792
Current assets
Loans and receivables 352 208 432
Cash at bank and in hand 3,110 3,669 5,884
3,462 3,877 6,316
Creditors: amounts falling due within one year
Bank loans (4,132) (7,626) (7,338)
Other creditors (1,092) (826) (979)
(5,224) (8,452) (8,317)
Net current liabilities (1,762) (4,575) (2,001)
Total assets less current liabilities 124,900 117,488 131,791
Provision for liabilities and charges (29) (29) (112)
Net assets 124,871 117,459 131,679
Capital and reserves
Called-up share capital 8,163 8,145 8,145
Share premium account 11,140 11,087 11,087
Special reserve 12,875 14,990 14,990
Warrant reserve 1,502 1,738 1,576
Capital redemption reserve 2,062 2,062 2,062
Capital reserve - realised 42,152 31,151 37,021
Capital reserve - unrealised 45,137 46,204 53,533
Revenue reserve 1,840 2,082 3,265
Equity Shareholders' funds 124,871 117,459 131,679
Net asset value per Ordinary share (pence):
Basic 390.92 360.53 404.18
Diluted 354.16 323.79 364.77
Reconciliation of Movements in Shareholders' Funds
Six months ended 31 January 2008 (unaudited)
Share Capital Capital Capital
Share premium Special Warrant redemption reserve - reserve - Revenue
capital account reserve reserve reserve realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 July 2007 8,145 11,087 14,990 1,576 2,062 37,021 53,533 3,265 131,679
Net return on ordinary - - - - - 5,396 (8,396) 579 (2,421)
activities after taxation
Dividends paid - - - - - - - (2,004) (2,004)
Purchase of own shares - - (2,115) - - - - - (2,115)
Exercise of warrants 18 53 - (23) - 23 - - 71
Buyback of warrants - - - (51) - (288) - - (339)
Balance at 31 January 2008 8,163 11,140 12,875 1,502 2,062 42,152 45,137 1,840 124,871
Six months ended 31 January 2007 (unaudited)
Share Capital Capital Capital
Share premium Special Warrant redemption reserve - reserve - Revenue
capital account reserve reserve reserve realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 July 2006 8,047 10,259 14,990 1,785 2,062 27,211 31,334 2,981 98,669
Net return on ordinary - - - - - 3,893 14,870 1,080 19,843
activities after taxation
Dividends paid - - - - - - - (1,979) (1,979)
Issue of Ordinary shares 62 721 - - - - - - 783
Exercise of Warrants 36 107 - (47) - 47 - - 143
Balance at 31 January 2007 8,145 11,087 14,990 1,738 2,062 31,151 46,204 2,082 117,459
Year ended 31 July 2007
(audited)
Share Capital Capital Capital
Share premium Special Warrant redemption reserve - reserve - Revenue
capital account reserve reserve reserve realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 July 2006 8,047 10,259 14,990 1,785 2,062 27,211 31,334 2,981 98,669
Net return on ordinary - - - - - 10,692 22,199 2,263 35,154
activities after taxation
Dividends paid - - - - - - - (1,979) (1,979)
Issue of shares 62 720 - - - - - - 782
Exercise of warrants 36 108 - (47) - 47 - - 144
Buyback of warrants - - - (162) - (929) - - (1,091)
Balance at 31 July 2007 8,145 11,087 14,990 1,576 2,062 37,021 53,533 3,265 131,679
Cash Flow Statement
Six months ended Six months ended Year ended
31 January 2008 31 January 2007 31 July 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Return on ordinary activities before finance costs (1,751) 20,498 36,521
and taxation
Adjustments for:
Realised gains on investments (5,594) (3,509) (10,156)
Unrealised losses/(gains) on investments 8,396 (14,870) (22,199)
Effect of foreign exchange rate movements (73) (384) (536)
Decrease/(increase) in accrued income 179 16 (205)
Increase in other debtors (41) (56) (3)
(Decrease)/increase in other creditors (145) 21 236
Overseas withholding tax suffered (4) (2) (215)
Stock dividend included in investment income - - (66)
Net cash inflow from operating activities 967 1,714 3,377
Net cash outflow from servicing of finance (269) (108) (332)
Net tax paid (334) (433) (728)
Net cash inflow/(outflow) from financial investment 4,382 (419) 1,879
Equity dividends paid (2,004) (1,979) (1,979)
Net cash inflow/(outflow) before financing 2,742 (1,225) 2,217
Financing
Purchase of own shares (2,115) - -
Issue of shares - 782 782
Exercise of warrants 71 144 144
Buyback of warrants (339) - (1,091)
Repayment of loan (3,206) - -
Net cash (outflow)/inflow from financing activities (5,589) 926 (165)
(Decrease)/increase in cash (2,847) (299) 2,052
Reconciliation of net cash flow to movements in net debt
(Decrease)/increase in cash (2,847) (299) 2,052
Effect of foreign exchange rate movements 73 384 536
Repayment of loan 3,206 - -
Movement in net debt in the period 432 85 2,588
Net debt at start of period (1,454) (4,042) (4,042)
Net debt at end of period (1,022) (3,957) (1,454)
Represented by:
Cash 3,110 3,669 5,884
Debt due within one year (4,132) (7,626) (7,338)
(1,022) (3,957) (1,454)
Notes to the Financial Statements
1. Accounting policies
The accounts have been prepared in accordance with applicable UK Accounting
Standards, with pronouncements on half-yearly reporting issued by the Accounting
Standards Board and with the Statement of Recommended Practice for 'Financial
Statements of Investments Trust Companies' (December 2005). They have also been
prepared on the assumption that approval as an investment trust will continue to
be granted.
The financial statements and the net asset value per share figures have been
prepared in accordance with UK Generally Accepted Accounting Practice ('UK
GAAP').
The same accounting policies used for the year ended 31 July 2007 have been
applied.
Six months ended Six months ended Year
31 January 2008 31 January 2007 ended
31 July 2007
£'000 £'000 £'000
2. Dividends
Final dividend for 2007 - 3.45p (2006 - 3.45p) 1,124 1,110 1,110
Special dividend for 2007 - 2.70p (2006 - 2.70p) 880 869 869
2,004 1,979 1,979
Six months ended Six months ended Year
31 January 2008 31 January 2007 ended
31 July 2007
3. Income £'000 £'000 £'000
Income from investments
UK dividend income 16 34 73
Overseas dividends 1,851 2,538 5,194
Stock dividend - - 66
1,867 2,572 5,333
Other income
Deposit interest 157 71 152
Total income 2,024 2,643 5,485
4. The taxation charge for the period has been calculated at an expected
effective annual tax rate of 29.3%. This is below the corporation tax rate of
30% due to the change in the corporation tax rate from 30% to 28% on 31 March
2008.
Six months ended Six months ended Year ended
31 January 2008 31 January 2007 31 July 2007
5. Return per Ordinary share p p p
Basic
Revenue return 1.79 3.34 6.98
Capital return (9.26) 58.10 101.40
Total return (7.47) 61.44 108.38
The figures above are based on the following:
£'000 £'000 £'000
Revenue return 579 1,080 2,263
Capital return (3,000) 18,763 32,891
Total return (2,421) 19,843 35,154
Weighted average number of shares in issue* 32,410,446 32,293,727 32,435,487
Diluted p p p
Revenue return 1.63 3.01 6.34
Capital return (8.43) 52.31 92.13
Total return (6.80) 55.32 98.47
Number of dilutive shares* 3,194,608 3,575,507 3,264,294
Diluted shares in issue* 35,605,054 35,869,234 35,699,781
* Calculated excluding shares held in treasury.
The calculation of the diluted total, revenue and capital returns per Ordinary
share are carried out in accordance with Financial Reporting Standard No. 22,
"Earnings per Share". For the purposes of calculating diluted total, revenue
and capital returns per Ordinary share, the number of Ordinary shares is the
weighted average used in the basic calculation plus the number of Ordinary
shares deemed to be issued for no consideration on exercise of all Warrants by
reference to the average share price of the Ordinary shares during the period.
The calculations indicate that the exercise of Warrants would result in an
increase in the weighted average number of Ordinary shares of 3,194,608 (31
January 2007 - 3,575,507; 31 July 2007 - 3,264,294) to 35,605,054 (31 January
2007 - 35,869,234; 31 July 2007 - 35,699,781) Ordinary shares.
As at As at As at
6. Net asset value 31 January 2008 31 January 2007 31 July
2007
Attributable net assets (£'000) 124,871 117,459 131,679
Number of Ordinary shares in issue* 31,942,939 32,579,597 32,579,597
Net asset value per Ordinary share (p):
Basic 390.92 360.53 404.18
Diluted 354.16 323.79 364.77
* Excludes shares in issue held in treasury.
The diluted net asset value per Ordinary share has been calculated on the
assumption that 4,620,356 (31 January 2007 - 5,348,903 and 31 July 2007 -
4,848,903) Warrants in issue were exercised on the first day of the financial
year at 100p per share, giving a total of 36,563,295 (31 January 2007 -
37,928,500; 31 July 2007 - 37,428,500) Ordinary shares.
7. 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 (losses)/gains on investments
in the Income Statement. The total costs were as follows:
Six months ended Six months ended Year ended
31 January 2008 31 January 2007 31 July 2007
£'000 £'000 £'000
Purchases 13 21 48
Sales 24 27 58
37 48 106
8. Related party transactions
Mr M J Gilbert is a director of Aberdeen Asset Management PLC and its
subsidiary Aberdeen Asset Management (Asia) Ltd. Mr Gilbert is also a director
of Aberdeen Asset Managers Ltd. AAM Asia has an agreement to provide management
services to the Company and AAM has an agreement to provide both administration
and marketing services to the Company.
The 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. During the period £730,000 (2007 - £581,000) of
management fees were paid and payable, with a balance of £249,000 (2007 -
£203,000) being payable to AAM Asia at the period end.
The investment management fees are charged 100% to revenue.
The marketing fee is based on a current annual amount of £90,000,
payable quarterly in arrears. During the period £45,000 (2007 - £39,000) of fees
were paid and payable, with a balance of £8,000 (2006 - £7,000) being payable to
AAM at the period end.
9. The financial information for the six months ended 31 January 2008 and 31
January 2007 comprises non-statutory accounts within the meaning of Section 240
of the Companies Act 1985. The financial information for the year ended 31 July
2007 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 did not contain a Statement under either Section 237(2) or 237(3) of the
Companies Act 1985.
The auditors have reviewed the financial information for the six months
ended 31 January 2008 pursuant to the Auditing Practices Board guidance on
Review of Financial Information. The report of the auditors is contained within
this announcement.
Copies of the Interim Report will be posted to Shareholders in April and further
copies will be available from the registered Office of the Company, One Bow
Churchyard, Cheapside, London EC4M 9HH
Aberdeen Asset Management PLC
Secretaries
31 March 2008
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 2008 which comprises the Income Statement, Balance Sheet, Reconciliation
of Movements in Shareholders Funds, Cash Flow Statement and the related notes 1
to 9. 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 ISRE 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 Services 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 the Accounting Standards
Board Statement "Half-Yearly Financial Reports".
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 2008 is not prepared, in all material
respects, in accordance with the Accounting Standards Board Statement "
Half-Yearly Financial Reports" and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Ernst & Young LLP
London
31 March 2008
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