Annual Financial Report
Invesco Asia Trust plc
Annual Financial Report Announcement
for the Financial Year Ended 30 April 2012
FINANCIAL INFORMATION AND PERFORMANCE STATISTICS
The benchmark index of the Company is the MSCI All Countries Asia Pacific ex
Japan Index (in sterling terms)
Performance Statistics
AT AT
30 APRIL 30 APRIL %
2012 2011 CHANGE
Total Returns(i) :
  - Diluted NAV -3.8
  - Benchmark Index -7.7
Net assets (£'000) 164,741 176,856 -6.9
Gearing:
  - gross 3.8% 4.1%
  - net 3.6% 3.9%
Net asset value (`NAV') per ordinary share:
  - basic 176.6p 187.7p -5.9
  - diluted 168.6p 177.6p -5.1
Benchmark Index(i) - capital return 271.7 303.5 -10.5
Mid-market price per:
  - ordinary share 149.4p 166.1p -10.1
  - subscription share 21.5p 41.1p -47.7
Discount per ordinary share on diluted NAV
  - cum income 11.4% 6.5%
  - ex income 9.7% 4.9%
(i) Source: Thomson Reuters Datastream.
Revenue
YEAR YEAR
ENDED ENDED
30 APRIL 30 APRIL %
2012 2011 CHANGE
Gross Income (£'000) 4,738 4,104 +15.4
Net revenue available for ordinary shares (£'000) 3,593 2,983 +20.4
Dividend per share 3.2p 2.9p +10.3
Ongoing charges ratio 1.05% 1.08%
Revenue return per ordinary share - diluted 3.8p 3.1p
.
CHAIRMAN'S STATEMENT
Performance and prospects
Over the last twelve months economic growth in Asia has slowed and fiscal and
monetary policy in China and India, in particular, has remained tight as the
authorities have sought to dampen inflationary pressures. However, Asian equity
markets have also been influenced by external developments and have struggled
to perform in times of heightened risk-aversion. The general tone of the period
has been one of uncertainty in outlook, with doubts over European policymakers'
ability to resolve the debt crisis. Against this backdrop, the value of the
portfolio has declined. However, it is pleasing to note that the Company's
strategy has again delivered solid outperformance of the benchmark, underlining
the importance of taking a long-term perspective and maintaining a focus on
valuations. Over the period, the diluted net asset value per ordinary share
fell by 3.8% (total return), compared to the benchmark index, the MSCI All
Countries Asia Pacific ex Japan Index, which fell by 7.7% (total return) in
sterling terms. The Company's share price fell from 166.1p to 149.4p, while the
ex-income discount to net asset value at which the shares trade ended the year
at 9.7%.
Dividend
The Company has declared an interim dividend of 3.2p per ordinary share payable
on 1 August 2012 to shareholders on the register on 6 July 2012. Shares will go
ex-dividend on 4 July 2012. An interim dividend, as opposed to a final, has
been declared to enable it to be paid slightly earlier this year. This was at
the request of the Manager, arising from the outsourcing of the administration
of the ISA and Savings Schemes. It is expected that the Company will revert
back to a final dividend next year.
Discount Control
In the Company's 2011 Annual Financial Report, the Board stated that it had
decided to propose a tender offer at the end of the Company's 2011-2012
financial year (subject to necessary shareholder approval) for up to 15% of the
Company's issued share capital at a 2% discount to NAV less the costs of the
tender, if the Company's shares had traded over the year to 30 April 2012 at an
average discount of more than 10% to NAV (fully diluted, ex income).
The Board confirms that because the Company's average discount in the year was
less than 10%, a tender offer will not now be triggered. The Board has
concluded that it would be in shareholders' interests to extend the discount
control arrangements to the financial year ending 30 April 2013.
During the year the Company repurchased 1,791,000 shares at 139.50p, a discount
of 10.1% to net asset value and an enhancement of 0.2% to net asset value per
share.
Subscription Shares
Subscription shareholders are reminded that on 31 August 2012 they have the
final right to exercise their right to subscribe for fully paid ordinary shares
on the basis of one ordinary share for every subscription share at a price of
125p per share. The market price of the ordinary shares at the latest practical
date prior to publication was 137p and, as this is the final exercise
opportunity, the Board recommends that shareholders take appropriate advice, if
necessary. Subscription shareholders will shortly receive notification with
details of the prevailing price of the Company's ordinary shares. Those
subscription shareholders that do not exercise their rights will automatically
receive any value for their subscription rights in cash. This is explained in
greater detail on page 17 in the annual financial report.
Outlook
Although Asian economic growth is slowing, it compares favourably with that
generated by developed markets. Furthermore, government, corporate and
household balance sheets are in good shape generally with low levels of debt,
allowing room for manoeuvre should the need to support economies arise.
However, in the near-term global events can be expected to continue influencing
the direction of Asian equity markets, with significant challenges remaining
for Eurozone policymakers.
Over the past twelve months, Asian governments and central banks have been keen
on dampening inflation caused by a strong economic recovery following China's
massive stimulus programme of 2009. Inflationary pressures have generally now
moderated to manageable levels and expectations across the region are for
gradual policy easing in an attempt to stabilise the deceleration in growth.
However, while policy has been selectively eased in China, it remains
relatively tight and we would not expect a repeat of the massive policy
response seen in 2008/09, which is now acknowledged to have been
disproportionate. Rather, subject to any policy changes decided upon by the new
leaders of China whose appointments are expected to be confirmed by the
National Congress later this year, future policy easing is expected to be
gradual, although policymakers have the ability to respond swiftly if the
global situation were to deteriorate further.
Despite the current uncertainty in the global macroeconomic outlook, Asian
corporates remain well placed to deliver attractive earnings growth over the
medium-term. Current valuations are now approaching trough levels, discounting
much bad news while the region's strong fundamentals - premium growth rates and
low leverage - suggest to us potential for good investment returns over the
medium term. Asia's contribution to global growth can be expected to continue
growing, providing a number of interesting opportunities for investors.
Annual General Meeting (`AGM')
The Special Business in the Company's Notice of Meeting includes a special
resolution to adopt new Articles of Association (`Articles'). The update of the
Company's Articles has been prompted by the introduction of new investment
trust tax rules which no longer prohibit investment trust companies from
distributing capital profits by way of dividend and to reflect current law and
best practice. The proposed changes to the Articles will enable the Company to
take advantage of the added flexibility allowed by the new tax rules. However,
at present, the Directors have no intention of distributing capital profits as
dividends.
The Company's AGM will be held at 12 noon on 9 August 2012 at 30 Finsbury
Square, London EC2A 1AG. The Directors and the Investment Managers, Stuart
Parks and Ian Hargreaves, will be available at the meeting to answer
shareholder questions. The Directors have considered all the resolutions
proposed in the Notice of AGM and, in their opinion, consider them all to be in
the interests of shareholders as a whole. The Directors therefore recommend
that shareholders vote in favour of each resolution.
David Hinde
Chairman
3 July 2012
.
INVESTMENT MANAGER'S REPORT
Market & Economic Review
The past twelve months have been mixed for Asian equity markets, with investor
sentiment being largely influenced by external developments surrounding a
protracted Eurozone sovereign debt crisis and mixed signals for the global
economic outlook. This reflects Asia's deep trading linkages with the Eurozone
and the fact that any cyclical slowdown in Europe or the US can be expected to
affect exports. As a result, more open economies such as Taiwan suffered, as
did Korea and to a lesser extent Singapore. However, the relative poor
performance of China and India was predominantly due to a significant
tightening of both monetary and fiscal policy throughout 2011 as the
authorities attempted to dampen inflation. Some Asian countries performed well
throughout the period, including the ASEAN economies of the Philippines,
Thailand and Indonesia, where trade flows are less exposed to developed market
demand and inflation concerns were less pressing than in some of the larger
emerging markets.
China ended the period with the announcement of a lower economic growth target
for 2012 (7.5% vs. the 8% target of recent years), while first quarter GDP in
2012 grew 8.1% year-on-year (y-o-y) which was weaker than the expected rate of
8.4% and lower than the previous quarter's 8.9%. However, while economic growth
is slowing, it remains relatively robust; although some areas are showing signs
that tight monetary policy over the past two years is having an effect, CPI
inflation for April 2012 was a manageable 3.4% y-o-y which has allowed the
authorities to begin to ease policy selectively, with the reserve requirements
for banks having been reduced by 50 basis points on three separate occasions
since November.
In India, economic growth slowed to 6.1% y-o-y in the fourth quarter of 2011,
the lowest since 2009 with growing fears over slowing investment. Inflationary
pressures have eased from their elevated levels, but remain an area of concern,
especially as interest rates have been cut to try and stimulate the economy.
Elsewhere, inflationary pressures have continued to moderate and central banks
outside China have begun to ease monetary policy in support of their economies.
In corporate news, earnings forecasts were generally revised down as
expectations for global economic growth declined. However, the results of some
companies remain firm with both Samsung Electronics and Taiwan Semiconductor
Manufacturing reporting results in line with expectations, with positive
guidance given by both. Conglomerates Jardine Matheson and Hutchison Whampoa
reported resilient earnings, with the outlook for operating divisions exposed
to Asia's structural trends of rising incomes and domestic consumption
remaining positive. Finally, Keppel reported strong full year profit growth on
a record level of orders for high specification oil rigs.
Company Performance
In the twelve months to the end of April 2012, the Company's net asset value
return was -3.8% (total return, in sterling terms), which was ahead of the
benchmark, the MSCI All Countries Asia Pacific ex Japan Index, which returned
-7.7% (total return, in sterling terms).
Over the period the Company benefited from strong stock selection, particularly
in the consumer discretionary and technology sectors. The single largest
contributor to operating performance was our holding in footwear retailer
Daphne International, which has enjoyed strong sales while improving operating
margins. In the tech sector our exposure to Samsung Electronics and Taiwan
Semiconductor Manufacturing benefited from stronger than expected demand for
smartphones and tablets, while stock selection in electronic appliance
manufacturers was also positive. Holdings in industrial conglomerates have
again added value, with our holding in Jardine Matheson making a notable
contribution.
On the other hand, stock selection in India detracted from operating
performance, with our holding in United Phosphorus impacted by concerns over
its acquisitions in Brazil and downward revisions to earnings, while Jain
Irrigation disappointed as earnings expectations were negatively impacted by
sensitivity to rupee depreciation versus the dollar and a short term increase
in working capital needs. The Company's holdings in the real estate sector also
underperformed, particularly those with exposure to the Chinese property
market, as policy towards the sector remained tight putting downward pressure
on sales volumes throughout the year. This negatively impacted earnings at Hong
Kong based developers HKR International, SPG Land and real estate services
company E-House. The holding in West China Cement also lost money after
competition intensified in its core market. Finally, our limited exposure to
more defensive sectors such as telecom services and utilities was a drag on
performance, as they outperformed in a weak market although this was offset by
an underweight position in the more cyclical materials sector.
Outlook for Asian Economies and Markets
Uncertainties remain around the degree to which China's economic growth is
decelerating. The economic slowdown has been purposely engineered by the
Chinese government and increasingly the focus is on the quality rather than
quantity of growth. This may negatively affect capital intensive sectors as the
authorities effectively seek to rebalance the economy towards domestic
consumption and away from investment. However, we believe that some companies
can continue to grow their earnings significantly over time. Economic growth is
also decelerating elsewhere in Asia, although, as with China, it continues to
compare favourably with that generated by developed economies. Inflationary
pressures continue to ease, increasing the potential for policy easing, a
possible tailwind for Asian equity valuation. Furthermore, government,
corporate and household balance sheets are in good shape generally with low
levels of debt.
Asian equity markets performed strongly in the early part of 2012, supported by
an increase in investor risk appetite as the global macroeconomic outlook
appeared to improve and as policymakers appeared to have contained the Eurozone
sovereign debt crisis. However, significant external challenges remain and
although the outlook for Asian equity markets is positive, in our view,
near-term performance is likely to continue to be influenced by global events.
We believe the current valuation level of Asia ex Japan equities, at around
11.1 times 2012 earnings, is discounting much of the bad news and the region's
strong fundamentals - premium growth rates and low leverage - suggest to us
potential for good investment returns in the medium term.
Strategy
The Company continues to offer diversified exposure to the Asia Pacific ex
Japan region, investing in companies that we believe offer upside potential for
share prices over the medium-to-long term, regardless of market conditions. The
portfolio is well-balanced with exposure to a variety of businesses possessing
what we consider to be strong competitive advantages and undervalued earnings
growth prospects. We continue to have significant exposure in the technology
sector, maintaining a relatively high weighting in holdings such as Samsung
Electronics and Taiwan Semiconductor Manufacturing, industry leaders with
significant market share that remain attractively valued in our opinion. We
have also added exposure in Chinese internet companies, which have what we
consider to be undervalued growth prospects.
Our main overweight position relative to the benchmark remains Hong Kong &
China where we favour franchises with undervalued exposure to consumer demand
growth, including Hong Kong-listed conglomerates as well as new additions to
the portfolio with more direct exposure to consumption growth such as China
Lilang and China Resources Enterprise. However, we have relatively low exposure
in Chinese financial stocks where earnings may disappoint. We still have
significant exposure in financials across Asia, but have reduced our overweight
position in the sector by trimming our exposure to Chinese banks and real
estate holdings. Monetary and fiscal policy covering these areas of the market
has remained tight in China and we remain cautious due to potentially higher
credit costs. We prefer to hold high quality, but undervalued, banks in Korea,
and banks that are well placed to grow their loan books profitably, such as
those in Thailand and the Philippines where credit penetration is low.
We remain underweight in Australia as we believe it is at a later stage in the
credit cycle and has a lower growth profile compared to other economies in the
region, while we are also concerned about the high valuation of the Australian
dollar. Finally, the portfolio continues to have exposure to a number of
smaller companies (with market cap of less than US$1 billion), which offer the
opportunity to deliver superior returns.
Stuart Parks
Ian Hargreaves
Investment Managers
3 July 2012
.
INVESTMENTS IN ORDER OF VALUATION
AT 30 APRIL 2012
Ordinary shares unless stated otherwise
† MSCI and Standard & Poor's Global Industry Classification Standard.
AT MARKET % OF
VALUE PORT-
COMPANY INDUSTRY GROUP†COUNTRY £'000 FOLIO
Samsung Electronics Semiconductors South Korea 11,864 6.9
Jardine Matheson Capital Goods Hong Kong 6,896 4.1
Daphne International Consumer Durables and Hong Kong 5,486 3.2
Apparel
Taiwan Semiconductor Semiconductors Taiwan 4,835 2.8
Manufacturing
China MobileR Telecommunication China 4,654 2.7
Services
Hutchison Whampoa Capital Goods Hong Kong 4,293 2.5
Hon Hai Precision Technology Hardware & Taiwan 4,048 2.4
Equipment
Digital China Technology Hardware & China 3,886 2.3
Equipment
CNOOCR Energy China 3,586 2.1
China Taiping InsuranceR Insurance China 3,532 2.1
Top Ten Holdings 53,080 31.1
HSBC Banking UK 3,509 2.1
Shinhan Financial Banking South Korea 3,410 2.0
Hyundai Mobis Automobiles & Components South Korea 3,314 2.0
Hyundai Motor Automobiles & Components South Korea 3,275 1.9
United Phosphorus Materials India 3,075 1.8
DGB Financial Banking South Korea 3,015 1.8
Wumart StoresH Food & Staples Retailing China 3,001 1.8
Industrial & Commercial Banking China 2,718 1.6
Bank of ChinaH
Housing Development Banking India 2,666 1.6
Finance
Filinvest Land Real Estate Philippines 2,538 1.5
Top Twenty Holdings 83,601 49.2
Metro Bank & Trust Banking Philippines 2,506 1.5
Charm Communications Media Hong Kong 2,483 1.5
BHP Billiton Materials Australia 2,473 1.4
Cheung Kong Real Estate Hong Kong 2,451 1.4
China Shenhua EnergyH Energy China 2,446 1.4
Sohu.com Software & Services China 2,418 1.4
Posco Materials South Korea 2,415 1.4
Hyundai Home Retailing South Korea 2,380 1.4
LG Fashion Consumer Durables and South Korea 2,341 1.4
Apparel
Korean Reinsurance Insurance South Korea 2,313 1.4
Top Thirty Holdings 107,827 63.4
Standard Chartered Banking UK 2,309 1.3
China Construction BankH Banking China 2,289 1.3
Goodpack Transportation Singapore 2,271 1.3
China Resources Food & Staples Retailing China 2,236 1.3
EnterpriseR
Qingling MotorsH Automobiles & Components China 2,163 1.3
Australia & New Zealand Banking Australia 2,146 1.3
Bank
Zhejiang ExpresswayH Transportation China 2,100 1.2
Infosys Software & Services India 2,030 1.2
E.Sun Financial Banking Taiwan 1,988 1.2
Newcrest Mining Materials Australia 1,982 1.2
Top Forty Holdings 129,341 76.0
Kasikornbank Banking Thailand 1,976 1.2
Metro Pacific Investments Diversified Financials Philippines 1,966 1.1
Westpac Bank Banking Australia 1,957 1.1
AIA Insurance Hong Kong 1,934 1.1
HKT Telecommunication Hong Kong 1,893 1.1
Services
E-Mart Food & Staples Retailing South Korea 1,788 1.0
Bank Rakyat Banking Indonesia 1,769 1.0
HKR International Real Estate Hong Kong 1,758 1.0
SAI Global Commercial & Australia 1,758 1.0
Professional Services
Iluka Resources Materials Australia 1,729 1.0
Top Fifty Holdings 147,869 86.6
Wharf Real Estate Hong Kong 1,716 1.0
Keppel Energy Singapore 1,699 1.0
Baidu.com Software & Services China 1,577 0.9
Jain Irrigation Capital Goods India
  - Ordinary shares 1,541 0.9
  - Differential voting 22 -
right shares
Korea Investment Diversified Financials South Korea 1,420 0.8
Delta Electronics Technology Hardware & Taiwan 1,405 0.8
Equipment
China Life Insurance Insurance Taiwan 1,391 0.8
Venture Technology Hardware & Singapore 1,337 0.8
Equipment
QBE Insurance Insurance Australia 1,299 0.8
China Lilang Consumer Durables and China 1,251 0.7
Apparel
Top Sixty Holdings 162,527 95.1
Yageo Technology Hardware & Taiwan 1,113 0.7
Equipment
E-House China Real Estate China 1,102 0.7
Pacific Basin Shipping Transportation Hong Kong 1,072 0.6
Lumax International Technology Hardware & Taiwan 968 0.6
Equipment
KWG Property Real Estate Hong Kong 816 0.5
Noble Capital Goods Singapore 776 0.4
Treasury China Trust Real Estate Singapore 620 0.4
Treasury Wine Estates Food, Beverage & Tobacco Australia 515 0.3
Media Nusantara Citra Media Indonesia 362 0.2
Dart Energy Energy Australia 358 0.2
Top Seventy Holdings 170,229 99.7
Sakari Resources Energy Singapore 292 0.2
West China Cement Materials Hong Kong 223 0.1
Total 170,744 100.0
H: H-Shares - Shares issued by companies incorporated in the People's Republic
of China (`PRC') and listed on the Hong Kong Stock Exchange.
R: Red Chip Holdings - Holdings in companies incorporated outside the PRC and
listed on the Hong Kong Stock Exchange, and controlled by PRC entities, by way
of direct or indirect shareholding and/or representation on the board of
directors.
.
CLASSIFICATION OF INVESTMENTS BY COUNTRY/SECTOR
AT 30 APRIL
2012 2011
AT % OF AT % OF
VALUATION PORTFOLIO VALUATION PORTFOLIO
£'000 £'000
Australia
Energy 358 0.2 586 0.3
Consumer Staples 515 0.3 2,059 1.1
Materials 6,184 3.6 8,704 4.7
Industrials 1,758 1.0 - -
Financials 5,402 3.2 7,306 4.0
14,217 8.3 18,655 10.1
China
Energy 6,032 3.5 5,893 3.2
Consumer Staples 5,237 3.1 1,942 1.1
Materials - - 1,162 0.6
Industrials 4,263 2.5 1,705 0.9
Consumer Discretionary 1,251 0.7 - -
Financials 9,641 5.7 10,360 5.6
Information Technology 7,881 4.6 - -
Telecommunication Services 4,654 2.7 3,094 1.7
38,959 22.8 24,156 13.1
Hong Kong
Materials 223 0.1 2,301 1.3
Industrials 12,261 7.2 14,258 7.8
Consumer Discretionary 7,969 4.7 5,296 2.9
Financials 8,675 5.1 12,576 6.9
Information Technology - - 1,983 1.1
Telecommunication Services 1,893 1.1 - -
31,021 18.2 36,414 20.0
India
Consumer Staples - - 373 0.2
Materials 3,075 1.8 4,141 2.3
Industrials 1,563 0.9 37 -
Financials 2,666 1.5 3,970 2.2
Information Technology 2,030 1.2 2,773 1.5
9,334 5.4 11,294 6.2
Indonesia
Consumer Discretionary 362 0.2 - -
Financials 1,769 1.0 2,559 1.4
Utilities - - 1,900 1.0
2,131 1.2 4,459 2.4
Malaysia
Materials - - 2,413 1.3
Financials - - 2,208 1.2
- - 4,621 2.5
Philippines
Financials 7,010 4.1 6,182 3.4
7,010 4.1 6,182 3.4
Singapore
Energy 1,991 1.2 - -
Consumer Staples - - 624 0.3
Industrials 3,047 1.7 1,413 0.8
Financials 620 0.4 - -
Information Technology 1,337 0.8 2,028 1.1
6,995 4.1 4,065 2.2
South Korea
Consumer Staples 1,788 1.0 1,375 0.7
Materials 2,415 1.4 3,082 1.7
Industrials - - 4,945 2.7
Consumer Discretionary 11,310 6.7 8,971 4.9
Financials 10,158 6.0 12,962 7.1
Information Technology 11,864 6.9 9,234 5.0
37,535 22.0 40,569 22.1
Taiwan
Financials 3,379 2.0 5,214 2.8
Information Technology 12,369 7.3 16,546 9.0
15,748 9.3 21,760 11.8
Thailand
Energy - - 1,548 0.8
Financials 1,976 1.2 2,172 1.2
1,976 1.2 3,720 2.0
Other
Financials 5,818 3.4 7,669 4.2
Total 170,744 100.0 183,564 100.0
.
Principal Risks and Uncertainties
Investment Objective
There can be no guarantee that the Company will meet its investment objective.
Investment Process
At the core of the Manager's philosophy is a belief in active investment
management. Fundamental principles drive a genuinely unconstrained investment
approach, which aims to deliver attractive total returns over the long term.
The investment process emphasises pragmatism and flexibility, active
management, a focus on valuation and the combination of top-down and bottom-up
fundamental analysis. Bottom-up analysis forms the basis of the investment
process. It is the key driver of stock selection and is expected to be the main
contributor to alpha generation within the portfolio. Portfolio construction at
sector level is largely determined by this bottom-up process but is also
influenced by top-down macro economic views.
Research is structured to provide a detailed understanding of a company's key
historical and future business drivers, such as demand for its products,
pricing power, market share trends, cash flow and management strategy. This
allows the Manager to form an opinion on a company's competitive position, its
strategic advantages/disadvantages and the quality of its management. Each
member of the investment management team travels to the region between three
and four times per year. In total the team has contact with around 700
companies a year. The Manager will also use valuation models selectively in
order to understand the assumptions that brokers/analysts have incorporated
into their valuation conclusions and as a structure into which the Manager can
input its own scenarios.
Risk management is an integral part of the investment management process. Core
to the process is that risks taken are not incidental but are understood and
taken with conviction. The Manager controls stock-specific risk effectively by
ensuring that the portfolio is always appropriately diversified.
Also, in-depth and constant fundamental analysis of the portfolio's holdings
provide the Manager with a thorough understanding of the individual stock risk
taken. The internal Performance & Risk Team, an independent team, ensures that
the Manager adheres to the portfolio's investment objectives, guidelines and
parameters. There is also a culture of challenge and debate between the
investment managers regarding portfolio construction and risk.
Portfolio performance is substantially dependent on the performance of Asian
and Australasian equities. Stocks are influenced by the general health of the
economies in the Far Eastern region.
Market Risk
The Company's investments are traded on the Far Eastern, Indian and
Australasian stockmarkets as well as the UK. The principal risk for investors
in the Company is of a significant fall and/or a prolonged period of decline in
the markets. This could be triggered by unfavourable developments within the
region or events outside it.
The value of investments held within the portfolio is influenced by many
factors including the general health of the world economy, interest rates,
inflation, government policies, industry conditions, political and diplomatic
events, tax laws, environmental laws, and by changing investor demand. Such
factors are outside the control of the Board and the Manager and may give rise
to high levels of volatility in the prices of investments held by the Company.
Investment Risk
Bad performance of individual portfolio investments is mitigated as the Board
has established guidelines to ensure that the investment policy of the Company
is pursued by the investment managers who undertake continual analysis of the
fundamentals of all holdings and ensures that the Company's portfolio of
investments is appropriately diversified. The performance of the investment
managers is carefully monitored by the Board and the continuation of the
management contract is reviewed each year. Past performance of the Company is
not necessarily indicative of future performance.
A fuller discussion of the economic and market conditions facing the Company
and the current and future performance of the portfolio of the Company are
included in the Investment Managers' Report on pages 6 to 9.
Foreign Exchange Risks
The Company will account for its activities and report its results in sterling,
while investments will be made and realised in other currencies. The NAV of the
Company will be reported in sterling. It is not generally the Company's policy
to engage in currency hedging. Accordingly, the movement of exchange rates
between sterling and the other currencies in which the Company's investments
are denominated or its borrowings are drawn down may have a material effect,
unfavourable or favourable, on the returns otherwise experienced on the
investments made by the Company.
Ordinary Shares
The market value of the ordinary shares in the Company may not reflect their
underlying NAV and may trade at a discount to it. The Board and the Manager
maintain an active dialogue with the aim of ensuring that the market rating of
the Company's shares reflects the underlying NAV and there are in place share
repurchase and issuance facilities, and a declared discount monitoring
mechanism to help the management of this process.
The value of an investment in the Company and the income derived from that
investment may go down as well as up and an investor may not get back the
amount invested.
Any tender offer would result in a decrease in the size of the Company which
could potentially affect both the liquidity of the Company's shares as well as
requiring the disposal of assets to fund the tender.
Gearing
Whilst the use of borrowings by the Company should enhance the total return on
the shares where the return on the Company's underlying securities is rising
and exceeds the cost of borrowings, it will have the opposite effect where the
underlying return is falling, further reducing the total return on the shares.
Derivatives
The Company may enter into derivative transactions approved by the Board for
efficient portfolio management. Derivative instruments can be highly volatile
and expose investors to a high risk of loss. There is a risk that the returns
on the derivative do not exactly correlate to the returns on the underlying
investment, obligation or market sector being hedged against. If there is
imperfect correlation, the Company may be exposed to greater loss than if the
derivative had not been entered into.
Reliance on Third Party Service Providers
The Company has no employees and the Directors have all been appointed on a
non-executive basis. The Company is reliant upon the performance of third party
service providers for its executive function. The Company's most significant
contract is with the Manager, to whom responsibility both for the Company's
portfolio and for the provision of company secretarial and administrative
services are delegated. The Company has other contractual arrangements with
third parties to act as auditor, registrar, custodian and broker. Failure by
any service provider to carry out its obligations to the Company in accordance
with the terms of its appointment could have a materially detrimental impact on
the operation of the Company and could affect the ability of the Company to
successfully pursue its investment policy and expose the Company to
reputational risk.
In particular, the Manager performs services which are integral to the
operation of the Company. The Manager may be exposed to the risk that
litigation, misconduct, operational failures, negative publicity and press
speculation, whether or not it is valid, will harm its reputation. Any damage
to the reputation of the Manager could result in counterparties and third
parties being unwilling to deal with the Manager and by extension the Company.
This could have an adverse impact on the ability of the Company to pursue its
investment policy.
The Board seeks to manage these risks in a number of ways:
• The Manager monitors the performance of all third party providers in relation
to agreed service standards on a regular basis, and any issues and concerns are
dealt with promptly and reported to the Board. The Manager formally reviews the
performance of all third party providers and reports to the Board on an annual
basis.
• The Board reviews the performance of the Manager at every board meeting and
otherwise as appropriate. The Board has the power to replace the Manager and
reviews the management contract formally once a year.
• The day-to-day management of the portfolio is the responsibility of Stuart
Parks and Ian Hargreaves, who are part of the Invesco Perpetual Asian Equities
team, who have worked in equity markets for 27 years and 18 years, respectively
and have been the investment managers of the Company since 2004. The Board has
adopted guidelines within which the investment managers are permitted wide
discretion. Any proposed variation outside these guidelines is referred to the
Board and the guidelines themselves are reviewed at every board meeting.
• The risk that the investment managers might be incapacitated or otherwise
unavailable is mitigated by the fact that they work closely with each other and
they also work within, and are supported by, the wider Invesco Perpetual Asian
Equities team.
Regulatory
The Company is subject to various laws and regulations by virtue of its status
as a public limited company, its status as an investment trust and its listing
on the Official List of the UK Listing Authority.
Loss of investment trust status for tax purposes could lead to the Company
being subject to tax on any realised capital profits on the sale of its
investments. A serious breach of other regulatory rules could lead to
suspension from the Official List, a fine or a qualified audit report. Other
control failures, either by the Manager or any other of the Company's service
providers, could result in operational or reputational problems, erroneous
disclosures or loss of assets through fraud, as well as breaches of
regulations.
The Manager reviews compliance with tax and other financial regulatory
requirements on a daily basis. All transactions, income and expenditure are
reported to the Board. The Board regularly considers all perceived risks and
the measures in place to control them. The Board ensures that satisfactory
assurances are received from service providers. The Manager's Compliance and
Internal Audit Officers produce reports regularly for review by the Company's
Audit Committee.
DIRECTORS' RESPONSIBILITY STATEMENT
IN RESPECT OF THE PREPARATION OF THE ANNUAL FINANCIAL REPORT
The Directors are responsible for preparing the annual financial report in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under the law the Directors have elected to prepare financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice. Under company law, the Directors must not approve the accounts unless
they are satisfied that they 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 accounting standards have been followed; 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 adequate accounting records which are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and which
enable them to ensure that the financial statements comply with the Companies
Act 2006 (`CA 2006'). 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.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report, a Directors' Remuneration Report and a Corporate
Governance Statement that comply with that law and those regulations.
In so far as each of the Directors is aware:
• there is no relevant audit information of which the Company's Auditor is
unaware; and
• the Directors have taken all steps that they ought to have taken to make
themselves aware of any relevant audit information and to establish that the
Auditor is aware of that information.
This information is given and should be interpreted in accordance with
provision s418 of CA 2006.
The Directors of the Company each confirm to the best of their knowledge that:
• the financial statements, prepared in accordance with UK Generally Accepted
Accounting Practice, give a true and fair view of the assets, liabilities,
financial position and net return of the Company; and
• this annual financial 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 it faces.
David Hinde
Chairman
Signed on behalf of the Board of Directors
3 July 2012
.
INCOME STATEMENT
FOR THE YEAR ENDED 30 APRIL
2012 2011
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
RETURN RETURN RETURN RETURN RETURN RETURN
NOTES £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on - (10,169) (10,169) - 25,303 25,303
investments
(Losses)/gains on
foreign
  currency - (318) (318) - 368 368
revaluation
Income 2 4,738 - 4,738 4,104 - 4,104
Investment 3 (313) (940) (1,253) (303) (909) (1,212)
management fee
Other expenses (476) (5) (481) (526) (11) (537)
Return before
finance
  costs and taxation 3,949 (11,432) (7,483) 3,275 24,751 28,026
Finance costs 5 (22) (66) (88) (25) (75) (100)
Return on ordinary
  activities before 3,927 (11,498) (7,571) 3,250 24,676 27,926
tax
Tax on ordinary (334) - (334) (267) - (267)
activities
Net return on
ordinary
  activities after
tax for
  the financial year 3,593 (11,498) (7,905) 2,983 24,676 27,659
Return per ordinary
share:
Basic 4 3.8p (12.2)p (8.4)p 3.2p 26.2p 29.4p
Diluted 4 3.8p (12.2)p (8.4)p 3.1p 25.4p 28.5p
The total return column of this statement represents the Company's profit and
loss account prepared in accordance with the accounting polices detailed in
note 1 to the financial statements. The supplementary revenue and capital
columns are prepared in accordance with the Statement of Recommended Practice
issued by the Association of Investment Companies. All items in the above
statement derive from continuing operations and the Company has no other gains
or losses, therefore no statement of total recognised gains and losses is
presented. No operations were acquired or discontinued in the year.
.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 30 APRIL
CAPITAL
SHARE SHARE REDEMPTION SPECIAL CAPITAL REVENUE
CAPITAL PREMIUM RESERVE RESERVE RESERVE RESERVE TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 30 April 2010 9,571 74,159 1,863 11,798 49,957 3,586 150,934
Final dividend - - - - - - (2,111) (2,111)
note 8
Net return for - - - - 24,676 2,983 27,659
the year
Exercise of
subscription
  shares into (3) 3 - - - - -
ordinary shares
Issue of
ordinary shares
on
  conversion of
  subscription 30 344 - - - - 374
shares
At 30 April 2011 9,598 74,506 1,863 11,798 74,633 4,458 176,856
Final dividend - - - - - - (2,724) (2,724)
note 8
Net return for - - - - (11,498) 3,593 (7,905)
the year
Exercise of
subscription
  shares into (8) 8 - - - - -
ordinary shares
Issue of
ordinary shares
on
  conversion of
  subscription 82 943 - - - - 1,025
shares
Cancellation of (179) - 179 (2,511) - - (2,511)
shares
At 30 April 2012 9,493 75,457 2,042 9,287 63,135 5,327 164,741
.
BALANCE SHEET
AT 30 APRIL
2012 2011
NOTES £'000 £'000
Fixed assets
  Investments designated at fair value 170,744 183,564
Current assets
  Debtors 814 837
  Cash at bank 327 370
1,141 1,207
Creditors: amounts falling due within one year (7,144) (7,915)
Net current liabilities (6,003) (6,708)
Total net assets 164,741 176,856
Capital and reserves
Share capital 6 9,493 9,598
Share premium 75,457 74,506
Other reserves:
  Capital redemption reserve 2,042 1,863
  Special reserve 9,287 11,798
  Capital reserve 63,135 74,633
Revenue reserve 5,327 4,458
Total Shareholders' funds 164,741 176,856
Net asset value per ordinary share
Basic 7 176.6p 187.7p
Diluted 7 168.6p 177.6p
These financial statements were approved and authorised for issue by the Board
of Directors on 3 July 2012.
David Hinde
Chairman
Signed on behalf of the Board of Directors
.
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 APRIL
2012 2011
NOTES £'000 £'000
Cash inflow from operating activities 2,268 1,466
Servicing of finance (83) (103)
Taxation - 5
Capital expenditure and financial investment 3,315 (3,176)
Dividends paid 5 (2,724) (2,111)
Net cash inflow/(outflow) before management of
liquid resources and financing 2,776 (3,919)
Financing (1,858) 2,073
Increase/(decrease) in cash in the year 918 (1,846)
.
RECONCILIATION OF CASH FLOW TO MOVEMENT IN NET DEBT
FOR THE YEAR ENDED 30 APRIL
2012 2011
NOTES £'000 £'000
Increase/(decrease) in cash in the year 918 (1,846)
Cash outflow/(inflow) from movement in debt 372 (1,699)
Change in net debt resulting from cash flows 1,290 (3,545)
Exchange differences (318) 368
Movement in net debt in the year 972 (3,177)
Net debt at beginning of year (6,931) (3,754)
Net debt at end of year (5,959) (6,931)
.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2012
1. Accounting Policies
A summary of the principal accounting policies, all of which have been
consistently applied throughout this and the preceding year is set out below:
(a) Basis of Preparation
Accounting Standards Applied
The financial statements have been prepared under the historical cost
convention, except for the measurement at fair value of investments, and in
accordance with applicable United Kingdom Accounting Standards and with the
Statement of Recommended Practice (`SORP') `Financial Statements of Investment
Trust Companies and Venture Capital Trusts' issued by the Association of
Investment Companies in January 2009.
2. Income
2012 2011
£'000 £'000
Income from investments
Overseas dividends 4,132 3,462
Scrip dividends 484 564
UK dividends 120 75
Total dividend income 4,736 4,101
Other income
Interest 2 3
Total income 4,738 4,104
3. Investment management fee
2012 2011
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
Investment management 313 940 1,253 303 909 1,212
fee
Details of the investment management and secretarial agreement are given on
page 29 in the Report of the Directors in the annual financial report. At 30
April 2012, £304,000 was due for payment in respect of the management fee
(2011: £324,000).
4. Return per ordinary share
2012 2011
£'000 £'000
Return per ordinary share is based on the following:
Revenue return 3,593 2,983
Capital return (11,498) 24,676
Total return (7,905) 27,659
2012 2011
Weighted average number of ordinary shares
  in issue during the year:
  - basic 94,419,356 94,025,950
  - diluted 97,481,606 96,912,161
The subscription shares are dilutive when, and only when, their conversion to
ordinary shares would decrease total earnings per ordinary share or increase
total loss per ordinary share. For the year ended 30 April 2012 there was no
dilution to the total return per ordinary share based on the average market
price for the year of 150.77p (2011: dilutive, based on an average market price
of 147.99p).
5. Dividends on ordinary shares
Dividends on shares paid in the year:
2012 2011
PENCE £'000 PENCE £'000
Final dividend in respect of 2.90 2,730 2.25 2,111
previous year
Unclaimed dividends in respect - (6) - -
of prior years
2.90 2,724 2.25 2,111
Dividend on shares payable in respect of the current year:
2012 2011
PENCE £'000 PENCE £'000
Interim/final dividend proposed 3.2 2,981 2.9 2,730
6. Share capital
(a) Allotted, called-up and fully paid
2012 2011
£'000 £'000
93,165,757 (2011: 94,136,605) ordinary shares of 10p 9,317 9,413
each
17,648,153 (2011: 18,468,305) subscription shares of 1p 176 185
each
9,493 9,598
(b) Share movements
2012 2011
ORDINARY SUBSCRIPTION ORDINARY SUBSCRIPTION
NUMBER NUMBER NUMBER NUMBER
Number at start year 94,136,605 18,468,305 93,837,425 18,767,485
Exercise of subscription 820,152 (820,152) 299,180 (299,180)
shares
Shares bought back and (1,791,000) - - -
cancelled
93,165,757 17,648,153 94,136,605 18,468,305
Subscription shares
Each subscription share confers the right to subscribe for one ordinary share
on or around 31 August for each of the years 2010 to 2012 at an exercise price
of 125p per share.
Winding-up provisions
The Directors shall be obliged to convene an Extraordinary General Meeting
(`EGM') to consider a special resolution to wind up the Company every third
year from the date of the AGM at which the Directors were released from such
obligation. As at the AGM in 2010 the Directors were released from their
obligation to convene an EGM; the next date for a resolution to be put to
shareholders to release them from the obligation to convene an EGM will be
2013.
7. Net asset value
The net asset values attributable to each share in accordance with the
Company's Articles are set out below.
2012 2011
Basic:
Ordinary shareholders' funds £164,565,000 £176,671,000
Subscription shareholders' funds of 1p each £176,000 £185,000
Total shareholders' funds £164,741,000 £176,856,000
Number of ordinary shares in issue 93,165,757 94,136,605
Net asset value per ordinary share 176.6p 187.7p
Diluted:
Ordinary shareholders' funds £186,801,000 £199,941,000
Number of ordinary shares in issue 110,813,910 112,604,910
Net asset value per ordinary share 168.6p 177.6p
When the basic NAV is greater than the exercise price of 125p, the subscription
shares are dilutive. However, subscription shareholders are not likely to
exercise their option unless the market price is greater than the exercise
price as this would dilute their holdings.
8. This Annual Financial Report Announcement is not the Company's statutory
accounts. The above results for the year ended 30 April 2012 have been agreed
with the auditors and are an abridged version of the Company's full accounts,
which have been approved and audited with an unqualified report. The 2011 and
2012 statutory accounts received unqualified reports from the Company's
auditors and did not include any reference to matters to which the auditors
drew attention by way of emphasis without qualifying the reports, and did not
contain a statement under s498 of the Companies Act 2006. The financial
information for 2010 is derived from the statutory accounts for 2011 which have
been delivered to the Registrar of Companies. The 2012 accounts will be filed
with the Registrar of Companies in due course.
9. The Audited Annual Financial Report will be posted to shareholders shortly
Copies may be obtained during normal business hours from the Company's
registered office, 30 Finsbury Square, London, EC2A 1AG. A copy of the Annual
Financial Report will be available from Invesco Perpetual on the following
website:
http://itinvestor.invescoperpetual.co.uk/portal/site/ipitinvestor/investmentrange/investmenttrusts/asiatrust/
10. The Annual General Meeting of the Company will be held at 12.00 noon on 9
August 2012 at 30 Finsbury Square, London EC2A 1AG.
By order of the Board
Invesco Asset Management Limited - Company Secretary
3 July 2012
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