Half Yearly Financial Report

RNS Number : 4844S

Aberdeen All Asia Inv Tst PLC

21 November 2011

 



ABERDEEN ALL ASIA INVESTMENT TRUST PLC

HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011

Chairman's Statement

Performance

Your Company has performed well amid what has been one of the most volatile periods since the height of the global financial crisis. Asset markets fell as Europe's sovereign debt crisis deepened and global growth prospects deteriorated. Asian equities were affected despite the region's relative strength. The quickening pace of globalisation has meant that Asia could not decouple itself from the rest of the world.

Against this backdrop the Company's net asset value fell by 10.3% in Sterling terms during the six months to 30 September 2011, which was better than the benchmark, the MSCI All Countries Asia Pacific (including Japan) Index, which fell 12.7% on the same total return basis. The share price declined 13.4% to end the period at 260.5p as the discount widened. Although the markets were volatile, the Manager raised the level of borrowing near the end of the period, as valuations became more attractive.

On 29 July 2011, a final dividend of 3.25p per Ordinary share was paid in respect of the year ended 31 March 2011.

A detailed performance analysis is covered in the Manager's Review.

Outlook

Financial markets worldwide are expected to face a challenging time in the coming months. The Eurozone crisis has tested market confidence, and the threat of recession in Europe lingers. The debt crisis has spurred austerity that will continue for some time; further fiscal retrenchment could delay recovery. In the US, growth prospects are increasingly bleak. Private consumption could remain depressed given soft employment and consumer pessimism.

Asia will not be immune to swings in the global markets should conditions in the developed world deteriorate further. Recent falls in developing stockmarkets and currencies show the world is still interconnected. China is already seeing growth slow because of domestic credit tightening and moves to cool the property sector. Elsewhere in the region, softer Western demand is weighing on export-oriented economies such as Korea and Singapore. In Japan, the yen's strength is compounding concerns over persistent deflation and anaemic growth.

That said, your Board believes that Asia still offers good investment potential over the long term. Better fiscal management by governments has produced large foreign exchange reserves which may be deployed against external shocks.  Growth continues to outpace the advanced economies, although momentum has eased. Companies are also in good shape in terms of balance sheet strength. Against this background, your Manager's disciplined style of investing in good, financially sound companies should stand the Company in good stead.

Principal Risks and Uncertainties

The principal risks facing the Company relate to its investment activities, and are, therefore, market-related and regulatory. Market risk comprises market price risk, security price risk, foreign currency risk, interest rate risk, liquidity risk and credit risk. Regulatory risk includes the potential loss of investment trust status or a breach of applicable legal and regulatory requirements, which could have adverse financial consequences and cause reputational damage. The Audit Committee monitors compliance with regulations by reviewing internal controls reports from the Manager.

Aside from the market risks associated with investment, the key risks relate to the investment strategy of a focused portfolio of Asian stocks. Strategy, asset allocation and stock selection, while responsible for the good performance of the portfolio, might also lead to underperformance of the benchmark index. These risks are managed through a defined investment policy, specific guidelines and restrictions and by the process of oversight at each Board meeting. The Board regularly reviews major strategic risks and sets out delegated controls designed to manage those risks.

The Company currently utilises gearing in the form of bank borrowings (see Note 7 to the Financial Statements). Gearing magnifies the effect of market movements on the net asset value of the Company.

Further details in respect of the risks associated with investment in the Company are detailed in the Directors' Report and in note 18 to the financial statements in the Annual Report and Accounts for the year ended 31 March 2011 (at pages 19 to 20 and 43 to 45 respectively), a copy of which is available on the Company's website.

Related Party Transactions

Aberdeen Asset Management Asia Ltd acts as Manager to the Company and, through its parent company, Aberdeen Asset Management PLC, provides company secretarial, accounting and administrative services. Details of the service and fee arrangements can be found in the Annual Report and Accounts for the year ended 31 March 2011.

Directors' Responsibility Statement

The Directors are responsible for preparing the 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 have been prepared in accordance with the UK Accounting Standards Board's statement "Half-Yearly Financial Reports"; and

-       the Interim Management Report includes a fair review of the information required by rules 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).

The Half-Yearly Financial Report for the six months ended 30 September 2011 comprises an Interim Management Report in the form of the Chairman's Statement, the Directors' Responsibility Statement and a condensed set of Financial Statements, and has not been audited or reviewed by the auditors pursuant to the APB guidance on Review of Interim Financial Information.

Neil Gaskell

Chairman

21 November 2011

Manager's Report

Overview

Over the half year ended 30 September 2011, the portfolio's net asset value per share fell by 10.3% in Sterling terms compared with a decline in the benchmark, the MSCI AC Asia Pacific (including Japan) Index, of 12.7%. Initially, Asian equities were supported by resilient corporate earnings and Japan's faster-than-expected recovery from its catastrophes. Greece's debt problems weighed on markets but the passing of new austerity measures which freed up more EU funding, led to a sharp rally in June. This was short-lived, however. Sentiment worsened drastically in August as America suffered its first ever sovereign debt rating downgrade and China's tightening measures deepened concerns of a hard landing for its economy. This was despite the Federal Reserve's renewed commitment to hold US interest rates near zero. Europe's debt crisis also escalated with Greece at risk of a default, amid stalling growth in the West. Hence, markets were volatile over the rest of the period.

While underlying fundamentals remained healthy in Asia, there were signs of decelerating growth. Hong Kong and Singapore suffered quarter-on-quarter GDP contractions as weak external demand hurt exports. India trimmed its fiscal-year growth forecast, although consumption and investment trends stayed firm. Its central bank hiked interest rates, as did China, Taiwan and Thailand, given persistent inflationary pressures. Beijing also tightened credit and intensified efforts to cool the housing sector. Malaysia and the Philippines imposed higher reserve requirements on lenders, while Indonesia and Singapore allowed their currencies to appreciate. Towards the period end, however, slowing economic activity saw consumer prices retreat across the region except in China and India.

Japan's economy sank into recession but recent data, including a rebound in exports, indicated that it was recovering post-earthquake. Meanwhile, the yen rose sharply against sterling and the US dollar. The central bank intervened to stem its appreciation, while the government took steps to help companies cope with the yen's strength. On the political front, Yoshihiko Noda became the sixth leader in five years replacing Naoto Kan who resigned as prime minister. The change further underscored a longstanding weakness: the political establishment's inability to produce an effective leader capable of gaining the public's trust.   

Elsewhere, Thai voters put their faith in Yingluck Shinawatra (the sister of ousted leader Thaksin), who became the country's first female prime minister. Her Pheu Thai party won the July elections comfortably on the back of populist promises including a higher minimum wage and a price guarantee scheme for rice producers.

Portfolio

The portfolio outperformed the benchmark, driven by good stock selection. Asset allocation was mildly positive, whereas the currency effect was negative because we were underweight to Japan, which saw the yen strengthen significantly during the period  amid the flight to safety.

Outperformance was largely the result of the quality of the stocks we hold in North Asia. In Japan, our stock selection bolstered relative return. This more than offset the impact on performance from our underweight position, as the stockmarket fell by much less than the regional benchmark. Five of the top 10 contributors to the portfolio were Japanese holdings. Post-earthquake, we have held on to our investments because we are confident of their management. We have also found that their basic underlying fundamentals remain solid. Our preference for financially robust companies with conservative management proved positive for performance during the turbulent period as investors focused on dividend yield, cash flow and balance sheets. In the more defensive consumer-related sectors, personal goods producer Unicharm and convenience store operator Seven & I were boosted by resilient demand. Both Canon and Shin-Etsu Chemical resumed production much earlier than expected after suffering disruptions from the March earthquake. Another solid performer was Takeda Pharmaceutical, which held up well over the six months.

The portfolio's underweight exposure to China also contributed positively. The Chinese stock market was the worst regional performer, led by the financial sector, as it lost close to a quarter of its value over the period. Sentiment was hurt by concerns over the increasingly tight credit environment and slowing economic growth. In China, we have found the majority of companies weak in corporate governance and protection of minority shareholder interests. We prefer to gain exposure to China's growth through Hong Kong-listed firms that do business on the mainland. These companies tend to be of higher quality, are well managed and have good track records.

Our holdings on the mainland and in Hong Kong aided performance. China Mobile's share price bucked the downtrend, given its healthy balance sheet and ability to generate steady cash flows, while PetroChina fared better than the broader market as it benefited from an increase in oil prices. Hong Kong-based conglomerate Jardine Strategic was bolstered by its underlying businesses; in particular, its Indonesian subsidiary Astra posted robust results driven by growth in the auto business and related financing arm. 

The stocks that we hold in India, Korea, Taiwan and Singapore were also key contributors. Indian motorcycle maker and distributor Hero MotoCorp's share price rose sharply after the Munjal family's Hero Investments completed the acquisition of Honda Motor's 26% stake. This removed the uncertainty over the company's future following the termination of its partnership with Honda. Its stock was further supported by healthy domestic demand. In Korea, discount retailer E-Mart was boosted by improving profitability and the defensive nature of its business. Elsewhere, Singapore Telecom and Taiwan Mobile were resilient as investors were drawn to their solid cash flows and attractive dividend yields.

In contrast, our Australian holdings lagged. Mining group Rio Tinto's share price fell sharply on the back of a correction in commodity prices. General insurer QBE was hurt by concerns over record catastrophe claims and low investment yields. We remain comfortable with the two companies, which have global diversified businesses and competent management.

During the period, we took advantage of share price weakness to add to our financial holdings, QBE and Standard Chartered, while we continued to build our position in HSBC. Both HSBC and Stanchart are well positioned in Asia and emerging markets, while QBE is one of Australia's leading general insurance and reinsurance groups. Against this, we sold Hindustan Unilever, which enjoys a leading position in the fast moving consumer goods segment in India. Although it continues to do well, growing sales and earnings, the stock's valuation appeared relatively expensive after it rallied. We also took some profits from Singapore Telecom, Fanuc and Public Bank during the period. Both Singapore Telecom and Fanuc were strong performers during the period while Public Bank's strong profit growth and asset quality have already been reflected in its current valuations.

Outlook

A more difficult year lies ahead. Fiscal and economic woes in the West are likely to persist for some time. Risk appetite and investor confidence remain fragile. This will cloud prospects in Asia, although the region's fundamentals are intact and policymakers have significantly more scope to loosen monetary policy. On the positive side, we expect commodity prices to ease on the back of slowing global growth. This should help alleviate inflationary pressures, which have been a major cost concern for companies. But we anticipate that earnings and GDP growth will decelerate. That said, we are sanguine about the longer-term outlook for our holdings. Their balance sheet strength will give them the flexibility to invest and grow their businesses even in the more challenging times ahead. Valuations of the companies in the region are looking increasingly attractive following the recent market sell-off. This provides opportunities for us to add to quality names at reasonable prices.

INCOME STATEMENT

	Six months ended
	30 September 2011
	(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
(Losses)/gains on investments	-	(6,016)	(6,016)
Income (note 2)	1,249	-	1,249
Investment management fee	(220)	-	(220)
Performance fee	-	-	-
Administration expenses	(124)	(10)	(134)
Exchange (losses)/gains	-	(281)	(281)
	_________	_________	_________
Net return before finance costs and taxation	905	(6,307)	(5,402)
Finance costs	(42)	-	(42)
	_________	_________	_________
Net return on ordinary activities before taxation	863	(6,307)	(5,444)
Taxation on ordinary activities (note 3)	(52)	-	(52)
	_________	_________	_________
Net return on ordinary activities after taxation	811	(6,307)	(5,496)
	_________	_________	_________
Return per Ordinary share (pence)(note 5)	5.23	(40.71)	(35.48)
	_________	_________	_________

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 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.

INCOME STATEMENT

	Six months ended
	30 September 2010
	(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
(Losses)/gains on investments	-	3,213	3,213
Income (note 2)	985	-	985
Investment management fee	(192)	-	(192)
Performance fee	-	(175)	(175)
Administration expenses	(111)	(9)	(120)
Exchange (losses)/gains	-	(28)	(28)
	_________	_________	_________
Net return before finance costs and taxation	682	3,001	3,683
Finance costs	(15)	-	(15)
	_________	_________	_________
Net return on ordinary activities before taxation	667	3,001	3,668
Taxation on ordinary activities (note 3)	(48)	-	(48)
	_________	_________	_________
Net return on ordinary activities after taxation	619	3,001	3,620
	_________	_________	_________
Return per Ordinary share (pence)(note 5)	4.00	19.37	23.37
	_________	_________	_________

INCOME STATEMENT

	Year ended
	31 March 2011
	(audited)
	Revenue	Capital	Total
	£'000	£'000	£'000
(Losses)/gains on investments	-	4,729	4,729
Income (note 2)	1,525	-	1,525
Investment management fee	(408)	-	(408)
Performance fee	-	(422)	(422)
Administration expenses	(238)	(23)	(261)
Exchange (losses)/gains	-	51	51
	_________	_________	_________
Net return before finance costs and taxation	879	4,335	5,214
Finance costs	(88)	-	(88)
	_________	_________	_________
Net return on ordinary activities before taxation	791	4,335	5,126
Taxation on ordinary activities (note 3)	(70)	(28)	(98)
	_________	_________	_________
Net return on ordinary activities after taxation	721	4,307	5,028
	_________	_________	_________
Return per Ordinary share (pence)(note 5)	4.65	27.81	32.46
	_________	_________	_________

BALANCE SHEET

		As at	As at	As at
		30 September 2011	30 September 2010	31 March 2011
		(unaudited)	(unaudited)	(audited)
	Note	£'000	£'000	£'000
Fixed assets
Investments at fair value through profit or loss		53,739	54,082	59,038
Current assets
Debtors		354	213	281
Cash at bank and in hand		964	648	776
		_________	_________	_________
		1,318	861	1,057
		_________	_________	_________
Creditors: amounts falling due within one year
Foreign currency bank loans	7	(7,042)	(2,268)	(5,731)
Other creditors		(210)	(278)	(559)
		_________	_________	_________
		(7,252)	(2,546)	(6,290)
		_________	_________	_________
Net current liabilities		(5,934)	(1,685)	(5,233)
		_________	_________	_________
Net assets		47,805	52,397	53,805
		_________	_________	_________
Share capital and reserves
Called-up share capital		1,549	1,549	1,549
Special reserve		398	398	398
Capital redemption reserve		2,183	2,183	2,183
Capital reserve	8	42,356	47,357	48,663
Revenue reserve		1,319	910	1,012
		_________	_________	_________
Equity shareholders' funds		47,805	52,397	53,805
		_________	_________	_________
Net asset value per Ordinary share (pence)	9	308.57	338.21	347.30
		_________	_________	_________

RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS

Six months ended 30 September 2011 (unaudited)
			Capital
	Share	Special	redemption	Capital	Revenue
	capital	reserve	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2011	1,549	398	2,183	48,663	1,012	53,805
Return on ordinary activities after taxation	-	-	-	(6,307)	811	(5,496)
Dividend paid (note 4)	-	-	-	-	(504)	(504)
	________	________	________	________	________	_______
Balance at 30 September 2011	1,549	398	2,183	42,356	1,319	47,805
	________	________	________	________	________	_______
Six months ended 30 September 2010 (unaudited)
			Capital
	Share	Special	redemption	Capital	Revenue
	capital	reserve	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2010	1,549	398	2,183	44,356	523	49,009
Return on ordinary activities after taxation	-	-	-	3,001	619	3,620
Dividend paid (note 4)	-	-	-	-	(232)	(232)
	________	________	________	________	________	_______
Balance at 30 September 2010	1,549	398	2,183	47,357	910	52,397
	________	________	________	________	________	_______
Year ended 31 March 2011 (audited)
			Capital
	Share	Special	redemption	Capital	Revenue
	capital	reserve	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2010	1,549	398	2,183	44,356	523	49,009
Return on ordinary activities after taxation	-	-	-	4,307	721	5,028
Dividend paid (note 4)	-	-	-	-	(232)	(232)
	________	________	________	________	________	_______
Balance at 31 March 2011	1,549	398	2,183	48,663	1,012	53,805
	________	________	________	________	________	_______

CASHFLOW STATEMENT

	Six months ended	Six months ended	Year ended
	30 September 2011	30 September 2010	31 March 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Return on ordinary activities before finance costs and taxation	(5,402)	3,683	5,214
Adjustments for:
Losses/(gains) on investments	6,016	(3,213)	(4,729)
Expenses taken to capital reserve	10	9	23
Foreign exchange movements	281	28	(51)
Decrease/(increase) in accrued income	27	(12)	(79)
Decrease in other debtors	2	7	3
(Decrease)/increase in other creditors	(48)	(10)	14
Decrease in performance fee creditor	(422)	(677)	(431)
Overseas withholding tax suffered	(53)	(50)	(70)
Stock dividends included in investment income	(141)	(107)	(150)
	___________	___________	___________
Net cash inflow/(outflow) from operating activities	270	(342)	(256)
Net cash outflow from servicing of finance	(54)	(18)	(81)
Net cash outflow from taxation	-	-	(28)
Net cash (outflow)/inflow from financial investment	(554)	673	(2,736)
Equity dividends paid	(504)	(232)	(232)
	___________	___________	___________
Net cash (outflow)/inflow before financing	(842)	81	(3,333)
Financing
Loan drawn down	978	-	3,514
	___________	___________	___________
Net cash inflow from financing	978	-	3,514
	___________	___________	___________
Increase in cash	136	81	181
	___________	___________	___________
Reconciliation of net cash flow to movements in net debt
Increase in cash as above	136	81	181
Increase in borrowings	(978)	-	(3,514)
	___________	___________	___________
Change in net debt resulting from cash flows	(842)	81	(3,333)
Foreign exchange movements	(281)	(28)	51
	___________	___________	___________
Movement in net debt in the period	(1,123)	53	(3,282)
Opening net debt	(4,955)	(1,673)	(1,673)
	___________	___________	___________
Closing net debt	(6,078)	(1,620)	(4,955)
	_________	_________	_________
Represented by:
Cash at bank and in hand	964	648	776
Debt falling due within one year	(7,042)	(2,268)	(5,731)
	___________	___________	___________
Closing net debt	(6,078)	(1,620)	(4,955)
	___________	___________	___________

NOTES TO THE ACCOUNTS

1.	Accounting policies
	Basis of accounting
	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 Investment Trust Companies and Venture Capital Trusts' (issued in January 2009). 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 half-yearly financial statements have been prepared using the same accounting policies as the preceding annual accounts.

		Six months ended	Six months ended	Year ended
		30 September 2011	30 September 2010	31 March 2011
2.	Income	£'000	£'000	£'000
	Income from investments
	UK dividend income	56	42	105
	Overseas dividends	1,052	836	1,268
	Stock dividends	141	107	150
		1,249	985	1,523
	Other income
	Underwriting commission	-	-	2
		___________	___________	___________
	Total income	1,249	985	1,525
		___________	___________	___________

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

		Six months ended	Six months ended	Year ended
		30 September 2011	30 September 2010	31 March 2011
4.	Dividends	£'000	£'000	£'000
	2010 final dividend - 1.50p	-	232	232
	2011 final dividend - 3.25p	504	-	-
		___________	___________	___________
		504	232	232
		___________	___________	___________

		Six months ended	Six months ended	Year ended
		30 September 2011	30 September 2010	31 March 2011
5.	Return per Ordinary share	£'000	£'000	£'000
	Based on the following figures:
	Revenue return	811	619	721
	Capital return	(6,307)	3,001	4,307
		___________	___________	___________
	Total return	(5,496)	3,620	5,028
		___________	___________	___________
	Weighted average number of Ordinary shares in issue	15,492,367	15,492,367	15,492,367
		___________	___________	___________

6.	Transaction costs
	During the period 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 (losses)/gains on investments in the Income Statement. The total costs were as follows:
		Six months ended	Six months ended	Year ended
		30 September 2011	30 September 2010	31 March 2011
		£'000	£'000	£'000
	Purchases	7	7	20
	Sales	3	8	11
		___________	___________	___________
		10	15	31
		___________	___________	___________

		As at	As at	As at
		30 September 2011	30 September 2010	31 March 2011
7.	Foreign currency bank loans	£'000	£'000	£'000
	Foreign currency bank loans	7,042	2,268	5,731
		___________	___________	___________
	At 30 September 2011, US$8,174,000 equivalent to £5,247,000 at an interest rate of 1.74% and JPY215,500,000 equivalent to £1,795,000 at an interest rate of 1.48% are drawn down from the £10,000,000 facility with Standard Chartered Bank. These loans are due to mature on 28 March 2012.
	At 30 September 2010, US$2,750,000 equivalent to £1,745,000 and JPY68,800,000 equivalent to £523,000 had been drawn down from the £7,000,000 facility with Standard Chartered Bank.
	At 31 March 2011, US$6,960,000 equivalent to £4,342,000 and JPY184,500,000 equivalent to £1,389,000 had been drawn down from the £10,000,000 facility with Standard Chartered Bank.

8.	Capital reserve
	The capital reserve figure reflected in the Balance Sheet includes investment holdings gains of £9,849,000 (30 September 2010 - £15,605,000; 31 March 2011 - £16,543,000).

		As at	As at	As at
9.	Net asset value per Ordinary share	30 September 2011	30 September 2010	31 March 2011
	Attributable net assets (£'000)	47,805	52,397	53,805
	Number of Ordinary shares in issue	15,492,367	15,492,367	15,492,367
	Net asset value per Ordinary share (p)	308.57	338.21	347.30

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

11.	The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 September 2011 and 30 September 2010 have not been audited.
	The information for the year ended 31 March 2011 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.
	This report has not been reviewed or audited by the Company's auditors.

12.	This Half-Yearly Report was approved by the Board on 21 November 2011.

13.	The Half-yearly Report will shortly be available from the Company's website (www.all-asia.co.uk) and will be posted to shareholders in December 2011.

For Aberdeen All Asia Investment Trust plc

Aberdeen Asset Management PLC, Secretary

END

 

END

 

 

IR PGGAGGUPGGQG