Final Results

RNS Number : 3870W

Aberdeen All Asia Inv Tst PLC

10 June 2008

 



ABERDEEN ALL ASIA INVESTMENT TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2008

1.   CHAIRMAN'S STATEMENT

 Performance 

Over the year ended 31 March 2008, the Company achieved a net asset value total return per share of 3.3% compared with the benchmark MSCI AC Asia Pacific (including Japan) Index which fell by 2.8% in Sterling terms. The net asset value per share rose to 247.8p by the end of the year while the share price fell marginally by 0.7% to 214.0p as greater volatility and weaker retail buying led to a widening of the discount.

The principal reason for the outperformance against the benchmark was the underweight position in Japan where the economy suffered from a reliance on imported oil during the global commodity squeeze. Relative return was boosted during the year by the portfolio's overweight allocation to both India and Singapore while the portfolio gained from currency returns.

In the second half of the year, the threat posed by domestic inflation increased throughout the region while political change was witnessed in Australia, South Korea, Taiwan and Thailand as well as in Japan where the full impact remains to be seen.

Portfolio Activity

Your Manager's conservative style and investment process, which puts careful stock selection for long-term investment at the core of its approach, tends to outperform when markets are suffering a period of weakness and volatility. Such conditions usually generate buying opportunities and gearing was increased over the year from 3.7% to 8.6% by 31 March 2008 to take advantage of this.

Further information on the portfolio activity may be found in the Manager's Report below.

Board

The Board has a defined plan for retirement and succession of Directors and, accordingly, Keith Mackrell retired at the Annual General Meeting on 31 July 2007. 

I should like to welcome Kevin Pakenham who joined the Board in August 2007. Kevin has many years' experience in the management of investment trusts. I am also pleased to report that Sir Andrew Burns agreed to join the Board in February 2008; Sir Andrew was formerly British Consul-General in Hong-Kong and Macau between 1997 and 2000 and brings extensive experience of Asia and the Indian sub-continent.  

Kevin Pakenham and Sir Andrew Burns are required by the Company's Articles of Association to retire as directors and seek election by shareholders at their first AGM. In accordance with the Combined Code, both the Chairman, David Price, and I, are required to stand for re-election. Led by me as Senior Independent Director, the Board has reviewed the other commitments, skills and experience of the Chairman, David Price, and recommends to shareholders his re-election. For his part, the Chairman has reviewed the other commitments, skills and experience of Kevin Pakenham, Sir Andrew Burns and myself. He recommends to shareholders the elections of Kevin Pakenham and Sir Andrew Burns, respectively, and my own re-election.

Investment Manager

The Board has undertaken a detailed review of the performance of the Manager during the current year. Given the good performance and the strengths of the Manager's investment team in the region, the Board believes that the continuing appointment of AAM Asia as Manager is in the interests of shareholders as a whole.

Share Capital

During the period under review the Company bought in for cancellation 413,400 Ordinary shares at a weighted-average discount of 11.5% which leaves 16,273,367 shares remaining in issue as at 31 March 2008. Such buy backs provide necessary liquidity to the market during difficult trading periods and enhance the net asset value for continuing shareholders. Between 1 April 2008 and the date of this Report, an additional 99,000 shares were bought in for cancellation which results in 16,174,367 shares in issue.

Outlook

The Asia-Pacific region, while growing strongly, is not immune from wider global concerns. As a net exporter of goods and services, the Asia-Pacific region is dominated by the out-turn for the US economy. A continuation of rising prices for food and fuel can only exacerbate social pressures.  

The outlook for Japan remains uncertain. Elsewhere in the Asia-Pacific region, the underlying fundamentals point to positive returns from investment over the longer term.

The Manager highlights strong balance sheets, good management and profit margins increasing in line with revenues as key features of the portfolio's underlying investments. Accordingly the Board believes that the Company is well-positioned to benefit when global economic conditions improve.

Sir Robin McLaren

Senior Independent Director and Acting Chairman *

10 June 2008

* Sir Robin McLaren is acting as Chairman in the absence, due to illness, of the Chairman, David Price.

2.     MANAGER'S REPORT

Overview

Asian equities faced one of the most volatile periods since 2001, as initial bullish sentiment dissipated in the face of the imploding US sub-prime market and the credit crunch that followed. Heightened risk aversion led leading central banks to cut interest rates and boost liquidity to shore up confidence, but the ensuing relief rallies proved short-lived. By the end of the period, the benchmark MSCI AC Asia Pacific (including Japan) Index had posted a decline of 2.8% in Sterling terms against a gain by your portfolio of 3.3% (all total returns).

On the macroeconomic front, the region's growth story remained largely intact. Backward-looking indicators were

positive with healthy GDP figures for most countries. Malaysia benefited from strong domestic consumption and high

commodity prices, while exports and investment underpinned economic expansion in Hong Kong, Taiwan, South

Korea and Thailand. Asia's main engines of growth, China and India, continued to surpass

expectations. Singapore maintained its steady pace on strong manufacturing activity. 

The exception was Japan. Its six-year expansion lost steam due to rising oil and commodity prices, which pushed inflation

to a 10-year high - albeit not enough to raise interest rates. Domestic demand remained weak due to stagnating wage

growth, while the strengthening yen hurt exporters. Political gridlock compounded the uncertainty as the government's ability to implement policy was severely impeded with the opposition in charge of the upper house. Reflecting these

concerns, the stock market was the worst regional performer over the period.

Inflation was also the top domestic risk elsewhere in the region. Consumer prices hit multi-year highs as oil and food prices rose to record levels. Policymakers in China and India responded by tightening monetary policy, while Malaysia relied on subsidies and price controls. Singapore, on the other hand, allowed its currency to rise further to counteract price rises. Accelerating inflation, coupled with falling global demand that has already hurt exports, led most governments to lower their growth forecasts, albeit modestly.

Mindful of a slowing world economy, budgets for 2008 focused on boosting consumption. Hong Kong reduced both personal and corporate tax rates and offered a one-off tax rebate, while Singapore left its tax rates unchanged but offered broad measures to help lower-income families. In India, support for the agricultural sector included farm debt waivers. 

Meanwhile, there was a heightening of political risk, with the changing of the guard in some countries and parliamentary setbacks to incumbents in others. Australian prime minister John Howard's 11-year tenure was brought to an end, Thailand's pro-Thaksin People Power Party formed a coalition government, and Taiwan's opposition candidate Ma Ying-jeou and South Korea's conservative candidate Lee Myung-Bak won landslide victories at the polls. In Japan, LDP stalwart Yasuo Fukuda was elected as prime minister after Shinzo Abe resigned following the ruling party's embarrassing upper house defeat. Malaysia's Umno party, meanwhile, suffered the shock loss of its two-third parliamentary majority at the general election. 

Portfolio Activity

The portfolio outperformed the benchmark, returning 3.3% in Sterling terms, compared with the Index's decline of 2.8%. Our underweight exposure to Japan and our overweight positions in India and Singapore boosted relative return. Japanese equities laboured under the weight of domestic concerns, while the Indian market was buoyed by energy and industrial stocks. The defensive nature of Singapore equities stood us in good stead. In contrast, our underweight to Australia and lack of exposure to Indonesia cost the fund, as the two markets benefited from the commodity boom. 

We initiated positions in Japanese carmaker Toyota Motor, which has a strong product range and a different geographic

emphasis from rival Honda, which we also hold; and Singapore's Fraser & Neave, a regional food and beverages

company with interests in property and publishing. 

We topped up our Japanese holdings mainly on valuation grounds, including Canon, Mitsubishi Estate, Sapporo Hokuyo,

Shin-Etsu and Yamaha. Elsewhere, we added to Oversea-Chinese Banking Corporation and City Developments in Singapore, Bumiputra Commerce in Malaysia and QBE Insurance in Australia.

Against this, we top-sliced Zhejiang Expressway, China Mobile and PetroChina taking advantage of the strong run-up in

China's mainland stock market and pared Thailand's PTTEP, Australia's Leighton and Hong Kong's Hang Lung

Properties, following increases in their share prices. We also sold part of our holdings in Australia's Rio Tinto at a

substantial premium over the prevailing market price on a 'dawn raid' by Chinalco and Alcoa. In addition, we continued to trim Japan's Kaneka on concerns over its business prospects.

Outlook

Some caution is warranted in the short term, given that sentiment has been driven more by credit markets and the US economy, rather than local news flow. US economic data remains weak, increasing the likelihood of a recession. 

This would hurt Asian exports, and the jury is out on whether shipments to Europe and other markets will be able to offset falling US demand. The fallout from the credit crunch is still being felt, with more write-downs posted in the first quarter of 2008, and more on the way likely as financial de-leveraging continues. 

On the domestic front, inflation continues to muddy the waters when it comes to policymaking. Governments face the difficult challenge of not only managing slowing economic growth but also mitigating the cost of rising food and energy prices, which falls disproportionately on the poor. 

Despite external and domestic risks, the region's macroeconomic fundamentals remain sound. Following the Asian crisis of 1997/98, the quality of balance sheets in general has improved with companies more attuned to shareholder interests and the prudent use of capital. Companies continue to generate decent returns and earnings have kept pace with revenue growth. On the policy side, governments have the option of pump priming given the huge foreign exchange reserves built up over the years. The exception is Japan, due to its huge fiscal deficit. However, recent data suggests that inflation has turned positive, which may be a catalyst for long-overdue spending in an environment of negative real interest rates.  

In the first quarter of 2008 stock markets fell sharply, led by China and India. We estimate our portfolio of stocks to be trading on a prospective price/earnings multiple of 15.1 times for calendar 2008 and, importantly, the weighted average debt/equity ratio (ex financials) is just 20%, showing the strength of underlying balance sheets. We are therefore confident that our holdings, comprising companies with good management and attractive long-term prospects, will hold up well under the current volatile conditions and provide much scope for growth in an improving environment. 

Aberdeen Asset Management Asia Limited

Manager

10 June 2008

3.    RESULTS

Financial Highlights

	31 March 2008	31 March 2007	%  change
Total Assets	£44,181,000	£41,707,000	5.9
Total Equity Shareholders' funds (Net Assets)	£40,329,000	£40,026,000	0.8
Share price (mid market)	214.00p	215.50p	(0.7)
Net Asset Value per share	247.82p	239.87p	3.3
Discount to Net Asset Value	13.6%	10.2%
MSCI AC Asia Pacific (cum Japan) Index  (in sterling terms) *	70.11	73.75	(4.9)
Actual gearing	8.6%	3.7%
Potential gearing	19.1%	8.4%
Total expense ratio	1.22%	1.36%
Earnings
Total return per share	7.49p	(18.89p)
Revenue return per share	3.04p	0.47p
Revenue reserves	(£15,000)	(£519,000)
* Index figure stated on a capital only basis

Performance (total return)

	1 year  % return	3 year  % return	5 year  % return
Share price	-0.70	36.52	125.26
Net Asset Value	3.32	46.93	126.90
MSCI AC Asia Pacific (cum Japan) Index  (in sterling terms)	-2.76	41.35	108.74

Proposed final dividend

No dividend is proposed for the year.

4.     BUSINESS REVIEW

A review of the Company's activities is given in the Chairman's Statement in Section 1 and the Manager's Report in Section 2. This includes a review of the business of the Company and its principal activities, recommended dividends and likely future developments of the business. The major risks associated with the Company are detailed in the section on "Principal Risks and Uncertainties".

Monitoring Performance - Key Performance Indicators

An outline of the performance, market background, investment activity and portfolio strategy during the period under review, as well as the market outlook, is provided in the Chairman's Statement and Manager's Report.

The Key Performance Indicators for the Company, NAV performance (total return), discount of share price to net asset value and share price performance, are detailed in "Results".

Principal Activity

The business of the Company is that of an investment trust investing in the Asia-Pacific region including Japan.

Status

The Company is registered as a public limited company. The Company is an investment company as defined by Section 833 of the Companies Act 2006 and is a member of the Association of Investment Companies.

The Company has been approved by the Inland Revenue as an investment trust for the purposes of Section 842 of the Income and Corporation Taxes Act 1988 for the year ended 31 March 2007. The Directors are of the opinion, under advice, that the Company has conducted its affairs for the year ended 31 March 2008 so as to be able to continue to obtain approval as an investment trust under Section 842 of the Income and Corporation Taxes Act 1988 for that year.

The Company intends to manage its affairs so as to be a qualifying investment for inclusion in the stocks and shares component of an Individual Savings Account and it is the Directors' intention that the Company should continue to qualify.

Investment Objective and Investment Policy

The Board's objective is to generate capital growth through investment in a focused portfolio of companies in the

Asia-Pacific region, including Japan. The securities which make up the portfolio are selected from companies that

have quality management and whose securities are considered to be under-priced, either in light of their foreseeable

growth or their current comparable value. The exposure to Japan offers a number of

unique investment opportunities for the Company.  

The Board regularly reviews gearing, which has increased from 3.7% at the previous year end to 8.6% at 31 March 2008.

Investments are not limited as to market capitalisation, sector or country weightings within the region. It is the Company's policy to have a focused portfolio and there were 56 holdings at 31 March 2008.

Principal Risks and Uncertainties

The Board regularly reviews major strategic risks and sets out the delegated controls designed to manage those risks.  

Aside from the risks associated with investment in Asia, the key risks related to investment strategy, including inappropriate asset allocation or gearing, are managed through a defined investment policy, specific guidelines and restrictions and by the process of oversight at each board meeting as outlined above. Further detail on the Company's Investment Policy, including gearing and the approach to risk diversification, may be found under the paragraph "Investment Objective and Policy", above. Operational disruption, accounting and legal risks are also covered at least annually and regulatory compliance is reviewed at each board meeting.

The major risks associated with the Company are:

• Resource risk: like most other investment trusts, the Company has no employees. The Company therefore relies on services provided by third parties, including, in particular, the Manager, to whom responsibility for the management of the Company's portfolio has been delegated under an investment management agreement (the "Agreement"). The terms of the management agreement cover the necessary duties and conditions expected of the Manager. The Board reviews the performance of the Manager on a regular basis, and their compliance with the Agreement formally on an annual basis.

• Investment and market risk: the Board continually monitors the investment policy of the Company, taking account of stockmarket factors, and reviews the Company's performance compared to its benchmark index. Further details on other risks relating to the Company's investment activities, including market price, interest rate, liquidity and foreign currency risks, are disclosed in Note 17 to the Financial Statements. 

The particular risks of investment in Asia are : 

• greater risk of expropriation, confiscation, taxation, nationalisation and social, political and economic instability; the small current size of the markets for securities of emerging markets issuers and low volumes of trading, resulting in lack of liquidity and in price volatility;

• certain national policies which may restrict the investment opportunities available in respect of a fund, including restrictions on investing in issuers or industries deemed sensitive to national interests; changes in taxation laws and/or rates which may affect the value of the Company's investments;  

• the absence in some markets of developed legal structures governing private or foreign investment and private property leading to supervision and regulation; and changes in government which may have an adverse effect on economic reform. Companies in the Asia Pacific region are not, in all cases, subject to the equivalent accounting, auditing and financial standards of those in the United Kingdom; and

• currency fluctuations which may affect the value of the Company's investments and the income derived therefrom.

• Gearing risk: the Company currently uses gearing in the form of bank loans of US$5,700,000 (equivalent to approximately £2,868,000) and JPY 194,700,000 (equivalent to approximately £984,000) under its loan facility of £7,000,000 (see Note 10 to the Financial Statements).

• Regulatory risk:    the Company operates in a complex regulatory environment and faces a number of regulatory risks. Serious breaches of applicable regulations could lead to a number of detrimental outcomes and reputational damage. The Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager.

5.    STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently; 
• make judgments and estimates that are reasonable and prudent;  
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and  
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.  

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations.  

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

  The Directors confirm to the best of their knowledge, that:

• the Financial Statements have been prepared in accordance with UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit; and that

• the Directors' Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces.

For and on behalf of the Board of Aberdeen All Asia Investment Trust PLC

Sir Robin McLaren

Senior Independent Director and Acting Chairman

10 June 2008

  INCOME STATEMENT 

for the year ended 31 March 2008 (audited) 

		Year ended 31 March 2008			Year ended 31 March 2007
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments	8	-	834	834	-	(3,407)	(3,407)
Income	2	1,202	-	1,202	747	-	747
Exchange (losses)/gains		-	(77)	(77)	-	328	328
Investment management fee	3	(305)	-	(305)	(295)	-	(295)
Performance fee	3	-	-	-	-	9	9
Administration expenses	4	(218)	(19)	(237)	(232)	(161)	(393)
		_______	_______	_______	_______	_______	_______
Net return before finance costs and taxation		679	738	1,417	220	(3,231)	(3,011)
Finance costs	5	(120)	-	(120)	(90)	-	(90)
		_______	_______	_______	_______	_______	_______
Net return on ordinary activities before taxation		559	738	1,297	130	(3,231)	(3,101)
Tax on ordinary activities	6	(55)	-	(55)	(52)	-	(52)
		_______	_______	_______	_______	_______	_______
Net return on ordinary activities after taxation		504	738	1,242	78	(3,231)	(3,153)
		_______	_______	_______	_______	_______	_______
Return per Ordinary share (pence):	7	3.04	4.45	7.49	0.47	(19.36)	(18.89)
		_______	_______	_______	_______	_______	_______

The total column of this statement represents the profit and loss account of the Company. 

No Statement of Total Recognised Gains and Losses has been prepared as all gains and losses have been reflected in the Income Statement.

All revenue and capital items in the above statement derive from continuing operations. 

The accompanying notes are an integral part of the financial statements. 

  BALANCE SHEET

as at 31 March 2008 (audited)

		As at	As at
		31 March 2008	31 March 2007
	Notes	£'000	£'000
Fixed assets
Investments at fair value through profit or loss	8	43,583	41,407
		__________	__________
Current assets
Debtors	9	320	187
Cash at bank and in hand		381	213
		__________	__________
		701	400
		__________	__________
Creditors: amounts falling due within one year
Foreign currency loans	10	(3,852)	(1,681)
Other creditors	10	(103)	(100)
		__________	__________
		(3,955)	(1,781)
		__________	__________
Net current liabilities		(3,254)	(1,381)
		__________	__________
Net assets		40,329	40,026
		__________	__________
Share capital and reserves
Called-up share capital	11	1,627	1,669
Special reserve		2,022	2,961
Capital redemption reserve		2,105	2,063
Capital reserve - realised	12	34,590	32,471
Capital reserve - unrealised	12	-	1,381
Revenue reserve		(15)	(519)
		__________	__________
Equity Shareholders' funds		40,329	40,026
		__________	__________
Net asset value per Ordinary share (pence):	13	247.82	239.87
		__________	__________

  Reconciliation of Movements in Shareholders' Funds

For the year ended 31 March 2008
			Capital	Capital	Capital
	Share	Special	redemption	reserve -	reserve -	Revenue
	capital	reserve	reserve	realised	unrealised	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2007	1,669	2,961	2,063	32,471	1,381	(519)	40,026
Reclassification of reserves	-	-	-	1,381	(1,381)	-	-
Purchase of own shares for cancellation	(42)	(939)	42	-	-	-	(939)
Return on ordinary activities after taxation	-	-	-	738	-	504	1,242
	______	_______	_________	_______	________	________	_______
Balance at 31 March 2008	1,627	2,022	2,105	34,590	-	(15)	40,329
	______	_______	_________	_______	________	________	_______
For the year ended 31 March 2007
			Capital	Capital	Capital
	Share	Special	redemption	reserve -	reserve -	Revenue
	capital	reserve	reserve	realised	unrealised	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2006	1,669	2,961	2,063	32,219	4,864	(597)	43,179
Return on ordinary activities after taxation	-	-	-	252	(3,483)	78	(3,153)
	______	_______	_________	_______	________	________	_______
Balance at 31 March 2007	1,669	2,961	2,063	32,471	1,381	(519)	40,026
	______	_______	_________	_______	________	________	_______

The accompanying notes are an integral part of the financial statements.

  CASHFLOW STATEMENT

Year ended 31 March 2008 (audited)

		Year ended		Year ended
		31 March 2008		31 March 2007
	Notes	£'000	£'000	£'000	£'000
Net cash inflow/(outflow) from operating activities	14		579		(197)
Servicing of finance
Bank and loan interest paid			(121)		(85)
Financial investment
Purchases of investments		(7,542)		(79,603)
Sales of investments		6,102		83,724
Expenses allocated to capital		(5)		(22)
		_______		_______
Net cash (outflow)/inflow from financial investment			(1,445)		4,099
			_______		_______
Net cash (outflow)/inflow before financing			(987)		3,817
Financing
Purchase of ordinary share capital		(939)		-
Loan drawndown/(repaid)		2,076		(4,041)
		_______		_______
Net cash inflow/(outflow) from financing			1,137		(4,041)
			_______		_______
Increase/(decrease) in cash	15		150		(224)
			_______		_______
Reconciliation of net cash flow to movements in net debt
Increase/(decrease) in cash as above			150		(224)
(Increase)/decrease in borrowings			(2,076)		4,041
			_______		_______
Change in net debt resulting from cash flows			(1,926)		3,817
Exchange movements			(77)		328
			_______		_______
Movement in net debt in the year			(2,003)		4,145
Opening net debt			(1,468)		(5,613)
			_______		_______
Closing net debt	15		(3,471)		(1,468)
			_______		_______

  NOTES :

1.    Accounting policies

(a)    Basis of accounting and going concern

The financial statements have been prepared under the historic cost convention, except for the measurement of fair value of investments and derivative instruments, and in accordance with applicable UK Accounting Standards, with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (issued January 2003 and revised in December 2005) and on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. 

(b)    Valuation of investments

The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Company's Board of Directors. Accordingly, upon initial recognition the Company designates the investments 'at fair value through profit or loss'. Fair value is taken to be the investments cost at the trade date (excluding expenses incidental to the acquisition which are written off in the Income Statement, and allocated to 'capital' at the time of acquisition.

Subsequent to initial recognition, investments continue to be designated at fair value through profit or loss, which is deemed to be bid prices, where the bid price is available, or otherwise at fair value based on published price quotations.

(c)    Income 

Dividends (other than special dividends), including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares are recognised on a time apportioned basis so as to reflect the effective yield on shares. Other returns on non-equity shares are recognised when the right to return is established. The fixed return on a debt security, if material, is recognised on a time apportioned basis so as to reflect the effective yield on each security. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is dealt with on an accruals basis.

Where applicable the dividend income is disclosed net of irrecoverable Malaysian and Singaporean taxes deducted at source. 

(d)    Expenses

All expenses are accounted for on an accruals basis. Expenses are allocated to revenue in the Income Statement except as follows:

-     expenses which are incidental to the acquisition or disposal of an investment are allocated to capital of the Income Statement and separately identified and disclosed in note 8; and

-     expenses are allocated and borne by realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect performance fees are charged 100% to realised capital reserves.

(e)    Taxation

The charge for taxation is based on the revenue return for the financial period.

Deferred taxation

Deferred taxation is provided on all timing differences, that have originated but not reversed at the Balance Sheet date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Balance Sheet date, measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

(f)    Capital reserve

Gains and losses on realisation of investments and changes in fair values of investments which are readily convertible to cash, without accepting adverse terms, are transferred to the realised capital reserve.

(g)    Foreign currencies

Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction.

Translation of all other foreign currency balances including foreign assets and foreign liabilities is at the middle rates of exchange at the year end. Differences arising from translation are treated as capital gain or loss to capital or revenue within the Income Statement depending upon the nature of the gain or loss.

		2008	2007
2.	Income	£'000	£'000
	Income from investments
	UK dividend income	37	19
	Overseas dividends	1,156	703
	Stock dividends	1	-
		_______	_______
		1,194	722
		_______	_______
	Other income
	Deposit interest	8	25
		_______	_______
	Total income	1,202	747
		_______	_______

		2008			2007
		Revenue	Capital	Total	Revenue	Capital	Total
3.	Investment management fee	£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fee	305	-	305	295	-	295
	Performance fee	-	-	-	-	(9)	(9)
		_______	_______	_______	_______	_______	_______
		305	-	305	295	(9)	286
		_______	_______	_______	_______	_______	_______

The Company had an agreement with Gartmore Investment Limited ('Gartmore') for the provision of management services. On 10 November 2006 Aberdeen Asset Management Asia Limited ('AAM Asia') was appointed Manager.

During the year the management fee was payable monthly in arrears and was based on an annual amount of 0.75% of total assets less current liabilities of the Company valued monthly. The agreement is terminable on six months notice. The balance due to AAM Asia at the year end was £50,000 (2007 - £24,000). The Company's investment in Aberdeen Global - India Opportunities Fund is excluded from the calculation of the investment management fee.

The total value of commonly managed funds, on a bid basis (basis on which management fee is calculated), at the year end was £4,110,000 (2007 - £3,789,000).

In addition, AAM Asia is entitled to a performance related fee of up to 15% of the portfolio's outperformance of the MSCI AC Asia Pacific (cum Japan) Index (in Sterling terms).

In the event that the Company outperforms this benchmark but the year end net asset value per Ordinary share is less than at the previous year end, the performance fee is capped at 0.25% of year end net asset value. The performance fee is only payable where the final net asset value on which the fee is calculated exceeds the net asset value on which any performance fee was paid in the previous three years.

There was no performance fee due to AAM Asia for the year ended 31 March 2008 (2007 - £nil). The £9,000 shown under performance fee for 2007 is in relation to an over-provision made in the previous period. This movement had arisen due to the change in irrecoverable VAT rates. 

		2008			2007
		Revenue	Capital	Total	Revenue	Capital	Total
4.	Administrative expenses	£'000	£'000	£'000	£'000	£'000	£'000
	Investor relations/Marketing initiative	31	-	31	11	-	11
	Directors' fees	61	-	61	60	-	60
	Safe custody fees	18	5	23	25	21	46
	Transaction costs on investment purchases	-	14	14	-	140	140
	Auditors' remuneration:
	- audit of the financial statements *	19	-	19	18	-	18
	- other services pursuant to legislation	1	-	1	-	-	-
	- other services relating to taxation	1	-	1	1	-	1
	Other	87	-	87	117	-	117
		______	______	______	______	______	______
		218	19	237	232	161	393
		______	______	______	______	______	______

* Includes work carried out on the Directors' Remuneration Report, Corporate Governance Statement and Directors' Report.

The Company has an agreement with Aberdeen Asset Managers Limited ("AAM") for the provision of marketing services in relation to the Company's participation in the Aberdeen Investment Trust Share Plan and ISA. The total fees paid and payable under the agreement were £31,000 (2007 - £11,000) and the accrual to AAM at the year end was £nil (2007 - £nil).

No pension contributions were made in respect of any of the Directors.

The Company does not have any employees.

		2008			2007
		Revenue	Capital	Total	Revenue	Capital	Total
5.	Finance costs	£'000	£'000	£'000	£'000	£'000	£'000
	Interest on bank loans and overdrafts	120	-	120	90	-	90
		_______	_______	_______	_______	_______	_______

			2008			2007
			Revenue	Capital	Total	Revenue	Capital	Total
6.	Tax on ordinary activities		£'000	£'000	£'000	£'000	£'000	£'000
	(a)	Analysis of charge for the year
		Corporation tax	22	-	22	42	-	42
		Irrecoverable overseas taxation	55	-	55	52	-	52
			_______	_______	_______	_______	_______	_______
			77	-	77	94	-	94
		Relief for overseas taxation	(22)	-	(22)	(42)	-	(42)
			_______	_______	_______	_______	_______	_______
		Current taxation	55	-	55	52	-	52
			_______	_______	_______	_______	_______	_______

(b)    Factors affecting current tax charge for the year 

The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The differences can be explained below:

		2008	2007
		£'000	£'000
	Revenue on ordinary activities before taxation	559	130
		_______	_______
	Revenue on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2007 - 19%)	106	25
	Effects of:
	UK dividend income	(7)	(4)
	Irrecoverable overseas withholding tax suffered	55	52
	Relief for overseas taxation	(22)	(42)
	Timing differences on taxation of income	(15)	19
	Excess management expenses used in period	(62)	-
	Tax effect of expenses charged to capital	-	2
		_______	_______
	Current tax charge for the year	55	52

		2008	2008	2007	2007
7.	Return per Ordinary share	p	£'000	p	£'000
	The return per Ordinary share is based on the following figures:
	Revenue return	3.04	504	0.47	78
	Capital return	4.45	738	(19.36)	(3,231)
		_____	_______	_____	________
	Total return	7.49	1,242	(18.89)	(3,153)
		_____	_______	_____	________
	Weighted average Ordinary shares in issue		16,591,260		16,686,767

			Listed	Listed
			overseas	in UK	Total
8.	Investments held at fair value through profit or loss		£'000	£'000	£'000
	Opening book cost		38,629	1,397	40,026
	Opening unrealised appreciation		1,338	43	1,381
			________	________	________
	Opening fair value		39,967	1,440	41,407
	Movements in the year:
	Purchases at cost (excluding transaction costs)		7,350	178	7,528
	Sales	- Proceeds (net of transaction costs)	(5,784)	(402)	(6,186)
		- realised gains on sales	482	200	682
	(Decrease)/increase in unrealised appreciation		(578)	730	152
			________	________	________
	Closing fair value		41,437	2,146	43,583
			________	________	________
			Listed	Listed
			overseas	in UK	Total
			£'000	£'000	£'000
	Closing book cost		40,677	1,373	42,050
	Closing unrealised appreciation		760	773	1,533
			________	________	________
			41,437	2,146	43,583
			________	________	________
				2008	2007
				£'000	£'000
	Investments listed on a recognised investment exchange			43,583	41,407
				________	________
				2008	2007
	Gains/(losses) on investments			£'000	£'000
	Realised gains on sales			682	76
	Increase/(decrease) in unrealised appreciation			152	(3,483)
				________	________
				834	(3,407)
				________	________

Transaction costs 

During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. Expenses incurred in acquiring investments have been expensed through capital and are included within administration expenses in the Income Statement, whilst expenses incurred in disposing of investments have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:

		2008	2007
		£'000	£'000
	Purchases	14	140
	Sales	10	145
		________	________
		24	285
		________	________

		2008	2007
9.	Debtors	£'000	£'000
	Amounts due from brokers	84	-
	Prepayments and accrued income	234	185
	Other loans and receivables	2	2
		________	________
		320	187
		________	________

			2008	2007
10.	Creditors: amounts falling due within one year		£'000	£'000
	(a)	Foreign currency loans	3,852	1,681
			________	________

Bank loans of US$5,700,000 (2007 - US$2,450,000), equivalent to £2,868,000 (2007 - £1,249,000) at an interest rate of 3.30% (2007 - 6.03%) and JPY194,700,000 (2007 - JPY100,000,000), equivalent to £984,000 (2007 - £432,000) at an interest rate of 1.67% (2007 - 1.42%) are drawn down from the £7,000,000 facility with ING Bank N.V. The bank loans have been rolled over to 2 July 2008.

The loans are secured by a floating charge over all the assets of the Company.

			2008	2007
			£'000	£'000
	(b)	Other creditors	103	100
			________	________

		2008		2007
			Issued and		Issued and
		Authorised	fully paid	Authorised	fully paid
11.	Called-up share capital	£'000	£'000	£'000	£'000
	Ordinary shares of 10p each	60,000	1,627	60,000	1,669
		________	________	________	________

During the year, 413,400 (2007 - nil) Ordinary shares of 10p each (representing 2.5% of the issued Ordinary share capital at 31 March 2008) were bought back for cancellation at a total cost of £939,000 (2007 - £nil) including expenses.

		Capital	Capital	Total
		reserve -	reserve -	capital
		realised	unrealised	reserve
12.	Capital reserve	£'000	£'000	£'000
	Year ended 31 March 2008
	At 31 March 2007	32,471	1,381	33,852
	Reclassification of reserves	1,381	(1,381)	-
	Changes in unrealised fair value gains	152	-	152
	Gains on realisation of investments at fair value	682	-	682
	Exchange losses	(77)	-	(77)
	Administration expenses	(19)	-	(19)
		________	________	________
	At 31 March 2008	34,590	-	34,590
		________	________	________

The above split in capital reserve is shown in accordance with the provisions of the Statement of Recommended Practice "Financial Statements of Investment Trust Companies".

Capital reserves available for repurchasing shares are comprised of gains and losses on realisation of investments included in "capital reserve - realised" together with changes in fair value of investments which are readily convertible to cash, without accepting adverse terms, as included in the "capital reserve - unrealised".

13.    Net asset value per share

The net asset value per share and the net asset values attributable to Ordinary Shareholders at the year end calculated in accordance with the Articles of Association were as follows:

		Net asset value		Net asset values
		per share		attributable
		2008	2007	2008	2007
		p	p	£'000	£'000
	Ordinary shares	247.82	239.87	40,329	40,026
		________	________	________	________
	The movements during the year of the assets attributable to the Ordinary shares were as follows:-
				2008	2007
				£'000	£'000
	Net assets attributable at 1 April			40,026	43,179
	Buyback of ordinary shares (including expenses)			(939)	-
	Capital return for the year			738	(3,231)
	Revenue on ordinary activities after taxation			504	78
				________	________
	Net assets attributable at 31 March			40,329	40,026
				________	________

The net asset value per Ordinary share is based on net assets, and on 16,273,367 (2007 - 16,686,767) Ordinary shares, being the number of Ordinary shares in issue at the year end. 

14.	Reconciliation of net return before finance costs and taxation	2008	2007
	to net cash inflow from operating activities	£'000	£'000
	Return on ordinary activities before finance costs and taxation	1,417	(3,011)
	Adjustments for:
	(Gains)/losses on investments	(834)	3,407
	Expenses taken to capital reserve	19	152
	Foreign exchange movements	77	(328)
		________	________
		679	220
	(Increase)/decrease in accrued income	(80)	80
	Decrease in other debtors	27	58
	Increase/(decrease) in other creditors	3	(494)
	Overseas withholding tax suffered	(50)	(61)
		________	________
	Net cash inflow/(outflow) from operating activities	579	(197)
		________	________

		1 April	Cash	Exchange	31 March
		2007	flow	movements	2008
15.	Analysis of changes in net debt	£'000	£'000	£'000	£'000
	Cash at bank	220	143	18	381
	Bank overdraft	(7)	7	-	-
		________	________	________	________
	Net cash	213	150	18	381
	Debts falling due within one year	(1,681)	(2,076)	(95)	(3,852)
		________	________	________	________
	Net debt	(1,468)	(1,926)	(77)	(3,471)
		________	________	________	________

16.    Related party disclosures

During the course of the year, the Company has held investments in other funds managed by the same manager. These holdings are disclosed in note 3.

  17.    Financial instruments

Risk management 

The Company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. 

The main financial risks that the Company faces from its financial instruments are market price risk, interest rate risk, liquidity risk and credit risk.

The Board has established policies for managing each of these risks and reviews regularly their implementation by the Manager. The Company's policies for managing these risks are summarised below and have been applied throughout the year. 

Market price risk

The fair value of or future cash flows from a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises two elements - security price risk and currency risk.  

Security price risk 

Changes in market prices for the Company's portfolio of securities directly affect their reported value in the Balance Sheet.

It is the Board's investment policy for the Company's assets to be invested in a focused portfolio of securities in quoted companies as explained in the Business Review. The Manager has a dedicated investment management process, which ensures that the risk inherent in this investment policy is controlled. Underlying the process is the belief that risk is not that individual stock prices fluctuate in the short term, or that movement in the value of the portfolio deviates from the benchmark but that risk is investment in poorly managed expensive companies which the Manager does not understand. In depth research and stock selection procedures are in place based on this risk control philosophy. The portfolio is reviewed on a periodic basis by the Manager's Investment Committee and by the Board.

Security price sensitivity

If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary Shareholders for the year ended 31 March 2008 would have increased/(decreased) by £4,358,000 (2007 increased/(decreased) by £4,141,000) and equity reserves would have increased/(decreased) by the same amount. 

Foreign currency risk

All of the Company's investment portfolio is invested in overseas securities and the Balance Sheet, therefore, can be significantly affected by movements in foreign exchange rates. It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. The Company's borrowings, as detailed in note 10, are also in foreign currency. 

The revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk.

Foreign currency risk exposure (excluding short-term debtors and creditors) by currency of denomination:

		31 March 2008			31 March 2007
			Net	Total		Net	Total
		Overseas	monetary	currency	Overseas	monetary	currency
		investments	assets	exposure	investments	assets	exposure
		£'000	£'000	£'000	£'000	£'000	£'000
	Australian Dollar	1,669	-	1,669	2,102	-	2,102
	Hong Kong Dollar	6,168	-	6,168	5,962	-	5,962
	Japanese Yen	10,589	(984)	9,605	9,987	(432)	9,555
	Korean Won	3,895	84	3,979	4,720	-	4,720
	Malaysian Ringgit	2,152	-	2,152	1,798	-	1,798
	Philippine Peso	683	-	683	673	-	673
	Singaporean Dollar	6,944	-	6,944	6,247	-	6,247
	Sterling	6,255	61	6,316	5,230	209	5,439
	Taiwanese Dollar	2,449	302	2,751	2,336	11	2,347
	Thailand Baht	1,512	-	1,512	1,311	-	1,311
	US Dollar	1,267	(2,850)	(1,583)	1,041	(1,256)	(215)
		________	________	________	________	________	________
	Total	43,583	(3,387)	40,196	41,407	(1,468)	39,939
		________	________	________	________	________	________

Foreign currency sensitivity

There is no sensitivity analysis included as the Company's significant foreign currency financial instruments are in the form of equity investments, which have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.

Interest rate risk

Interest rate movements may affect:

-     the level of income receivable on cash deposits; and

-     interest payable on the Company's variable rate borrowings.

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.

Interest rate sensitivity

Movements in interest rates would not significantly affect net assets attributable to the Company's Shareholders and total profit.

Liquidity risk 

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not considered to be significant as the Company's assets mainly comprise readily realisable securities which can be sold to meet funding requirements if necessary and short-term flexibility is achieved through the use of loan facilities, details of which may be found in note 10.

Liquidity risk exposure

At 31 March 2008 and 31 March 2007 the Company's bank loans, amounting to £3,852,000 and £1,681,000, respectively, were both due for repayment or roll-over within six months.

  Credit risk

This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.

 

The risk is not significant, and is managed as follows:

-      of the relatively small amounts involved; and

-      investment transactions are carried out with a large number of brokers of good quality credit standing; and

-      cash is held only with reputable banks with high quality external credit enhancements.

None of the Company's financial assets is secured by collateral or other credit enhancements and none are past due or impaired.

Credit risk exposure

The amount of cash at bank and in hand of £381,000 (2007 - £213,000) and debtors of £320,000 (£187,000) in the Balance Sheet represent the maximum exposure to credit risk at 31 March.

18.    Capital management policies and procedures

The Company's capital management objectives are:

-     to ensure that the Company will be able to continue as a going concern, and

-     to maximise the income and capital return to its equity shareholders through an appropriate balance of

      equity capital and debt. The Board normally seeks to limit gearing to 15% of net assets.

The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Manager's views on the market and the extent to which revenue in excess of that which is required to be distributed should be retained.

The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.

19.    Contingent liabilities

Cash balances held in India amounting to the equivalent of £373,000 (2007 - £349,000) are currently blocked pending resolution of an action by an agency of the Indian Government in relation to a closed investment transaction. Additionally, as an extension of this action, regulatory action in India may be initiated against various parties including the Company which, inter alia, may seek to repatriate investment proceeds from the UK. These issues affect some 20 foreign institutional investors. The Company has ceased to recognise any value in these balances for the purpose of these accounts.

The Company is defending itself strenuously against this potential action. The Company has commenced proceedings in the Indian High Court seeking an order lifting the blocking order imposed on the Company's bank account and, as an interim protective measure, a direction that the blocked funds should not be taken arbitrarily. These proceedings are continuing.

The Company had no other contingent liabilities at 31 March 2008. 

20.    Subsidiary undertaking

Mountain View Securities Limited

At 31 March 2008 the share capital and net asset value of Mountain View Securities was £1 (2007 - £1).

In the opinion of the Directors, this wholly owned subsidiary, which has not traded in the year, is immaterial, hence consolidated accounts have not been prepared.

  Additional notes for Annual Financial Report:

This Annual Financial Report announcement is not the Company's statutory accounts. The statutory accounts for the year ended 31 March 2007 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 March 2007 and 31 March 2008 received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not include a statement under either section 237(2) or 237(3) of the Companies Act 1985. The statutory accounts for the financial year ended 31 March 2008 have been approved and audited but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which will be held at 11.00am on Tuesday 29 July 2008 at One Bow Churchyard, Cheapside, London EC4M 9HH.

The Annual Report will be posted to shareholders in June 2008 and copies will be available from Manager or from the Company's website (www.all-asia.co.uk).

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.

For Aberdeen All Asia Investment Trust PLC

Aberdeen Asset Management PLC, Secretaries

END

 

END

 

 

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