Annual Financial Report

RNS Number : 5781O

Aberdeen Asian Smaller Co's Inv Tst

20 September 2011

 



ABERDEEN ASIAN SMALLER COMPANIES INVESTMENT TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JULY 2011

1.  CHAIRMAN'S STATEMENT

Results

Despite continuing concerns over the financial state of Europe and the US, I am pleased to report that your Company enjoyed another good year, comfortably outpacing the broader stock market indices. The net asset value and share price returned 23.9% and 38.3% respectively (including the reinvestment of dividends); by comparison, the MSCI AC Asia Pacific ex Japan Small Cap Index and MSCI AC Asia Pacific ex Japan Index (both currency adjusted) returned 17.5% and 15.7%. This is a testament to your Manager's philosophy of investing only in high quality companies with healthy growth prospects, solid balance sheets and good management that helps them to survive and expand during challenging times.

It is important to note that the net asset value and share price as at close of business on 16 September 2011 have fallen to 658.3p and 656.5p respectively, down 4.1% and 2.5% from where they were at the Company's year-end, whilst the two indices referred to above have fallen by 11.7% and 9.8% respectively.

Dividend

During the year, the trend towards companies increasing their payouts, that I referred to in my statement last year, continued.

Your Company has always aimed to maintain or increase the Ordinary dividend where possible so that shareholders can rely on a consistent stream of income. Since the Company's formation in 1995, there has been just one year when this was not possible and that was during the Asian financial crisis in 1998. In some years, when the Company has been in receipt of special dividends, we have passed these on through the declaration of a special dividend. Therefore, we are very pleased to recommend, for this year, the payment of a final dividend of 9.5p per Ordinary share (2010 - 8.2p) representing an increase of 15.9% on last year's Ordinary dividend and the payment of a special dividend of 2.8p (2010 - 1.9p) to reflect the special dividends received during the year. If approved by shareholders at the Annual General Meeting of the Company on 29 November 2011, the final and special dividends will both be paid on 2 December 2011 to shareholders on the register on 28 October 2011.

Overview

During the year, the regional economies of Far East Asia continued to post respectable growth, especially if compared with the uncertainties that abound in most developed countries. The corollary to this was escalating inflationary pressures, compounded by abundant capital inflows as investors moved away from Western financial assets. In response, Asian policymakers undertook various tightening measures, primarily raising interest rates but also allowing currencies to appreciate. In China, Hong Kong and Singapore, specific measures were taken to reduce asset inflation in the property sectors.

The macroeconomic backdrop has been both a boon and a bane for your Company. On the one hand, several holdings in the retail space were beneficiaries of the buoyant conditions. On the other, a number of holdings were hurt; in the case of some producers of consumer goods by rising cost pressures or in the case of companies in real estate by financial tightening. Overall though, the positives comfortably outweighed the negatives. A detailed discussion follows in the Manager's Review.

Since the year end, sentiment has turned more cautious. A grim mixture of political turbulence in the Arab world, Japan's disasters and the unravelling sovereign debt crises in Europe and the US, have dented global recovery prospects. Nevertheless, Asia's growth trajectory remains firmly on track and continues to outpace developed economies by a wide margin, even if the momentum has moderated.

Why Invest in Smaller Companies?

Small companies have continued to outperform the large ones but I would like to highlight, once again, why this Company deserves your continued support. Small caps, because of their size, have more potential to grow than their mainstream counterparts. Conversely, traditionally small caps are regarded as being more vulnerable in tougher times given their size however your Manager tries to reduce this risk by investing in companies that are leaders in their respective fields and often backed by a multinational or strong family ownership. A common characteristic is conservatism and prudence, exemplified by low debt levels. Over the long term, this has translated into solid returns on equity and assets.

If we believe that share prices ultimately reflect a company's underlying business fundamentals, then choosing the right ones becomes paramount. Here, your Manager has a proven successful track record. Its commitment to in-depth research and regular management visits to assess quality and valuations has underpinned the successful investment performance of your Company. There is a dearth of research in small caps - almost half receive little or no coverage at all - which means gems can be uncovered for the investor willing to make the effort to sift out the good from the bad.

To summarise, the future of smaller companies in Asia is bright given that they are more leveraged to domestic demand than the large caps and as most Asian economies are still at the early stages of development, this will continue. Unlike elsewhere in the emerging universe, Asia is characterised by high savings rates and low debt levels at the government, corporate and household levels, which should feed into greater consumption once recovery regains momentum. Since 2008, when the credit crisis first surfaced, Asia has been looking to become more self-reliant and it has been making efforts to boost internal demand to cushion against faltering Western consumption. This process of rebalancing will continue. While some countries are still dependent on exports to the West, future growth is expected to become increasingly self-sustaining.

Share Capital and Gearing

In December 2010, 3,823,595 new Ordinary shares were issued following the final exercise of Warrants to subscribe for Ordinary shares.

The Company remained geared throughout the year with net gearing of approximately 0.7% at the year end. The Board monitors the Company's gearing on a regular basis under advice from the Manager and on 12 September 2011 a further USD8 million was drawn down under the facility with The Royal Bank of Scotland.  These new funds will be used to take advantage of opportunities arising from weakness in the markets.

Annual General Meeting

The Annual General Meeting is scheduled to be held on 29 November 2011 at 11.30 a.m. In addition to the usual ordinary business, as special business the Board is seeking to renew its existing authority to issue new shares for cash without pre-emption rules applying and to renew its authority to buy back shares and either hold them in treasury for future resale (at asset value or above) or cancel them. At the conclusion of the AGM there will be an opportunity for shareholders to meet the Board and the Manager over a buffet lunch and your Board looks forward to seeing as many shareholders as possible.

Outlook

The recent market correction is a reflection of growing fears over the sustainability of the economic recovery, both within Asia and globally. The nature of globalisation is such that Asia will not be able to avoid a slowdown or a double dip in the West, which looks increasingly likely given the unresolved sovereign debt problems in Europe and America, exacerbated by their moribund housing markets, still-high unemployment and ongoing deleveraging among Western consumers. Asian companies dependent on demand from outside the region will understandably have a tougher time should conditions in the West deteriorate further but as we constantly state, the nature of the company's investment philosophy should shield them from the worst of these uncertainties and leave them in an excellent position to benefit once global economic conditions improve.

Internally, many Asian countries are still grappling with inflation even though this has eased somewhat in recent months. Costs are higher than a year ago. Shrinking margins and a more modest earnings outlook for the year ahead are to be expected. But the companies with which this Company is invested with their strong balance sheets and good management should ride out these uncertainties to emerge stronger in the medium term.

Nigel Cayzer

Chairman

20 September 2011

2.  MANAGER'S REPORT

Overview

Asian equity markets rose in the year under review, with gains in the first six months masking an increasingly turbulent second half. Robust economic growth, improved corporate profitability and an influx of liquidity supported early gains. The rally remained largely uninterrupted until the start of calendar 2011. Investor sentiment then turned cautious as successive monetary tightening dampened the region's growth prospects. A wave of regime-changing protests across the Arab world which drove oil prices to fresh highs exacerbated inflationary fears. The global supply chain disruption caused by Japan's disasters also spooked markets but expectations that the economic impact would be limited helped equities bounce back quickly. Resilient corporate earnings and the realisation that the West was unlikely to make any meaningful headway saw investors return to Asia. Towards the period-end, however, markets suffered a widespread retreat as economic growth moderated and the fiscal crises in Europe and the US deepened. European leaders eventually agreed on a second bailout for Greece, while the US faced the prospect of a default before reaching a deal to raise the debt ceiling in early August.

The region's economy grew steadily for most of the period, although the pace of expansion subsequently slowed as exports declined and inflation accelerated. Monetary policies were repeatedly tightened across the region to curb inflationary pressures fuelled by higher food prices. In China and India concerns of overheating elicited a more aggressive response from both central banks. Besides increasing banks' reserve requirements, the mainland authorities implemented cooling measures for property, while India raised electricity and diesel prices to ease its subsidy burden.

Portfolio Review

Good stock selection helped the Company produce another year of double-digit returns. The outperformance attests to the quality of our small cap holdings as their robust fundamentals have helped them weather the market gyrations and maintain their resilience against rising cost pressures. Consumer-related stocks were among our best performers across the board. These included Indonesian brewer Multi Bintang; Thai discount store chain operator Siam Makro; Indian soap and hair-dye maker Godrej Consumer Products; and in Hong Kong, clothing retailer Giordano Holdings, Aeon Stores, Convenience Retail Asia and Hong Kong Economic Times.

Multi Bintang and Siam Makro's share prices more than doubled in sterling terms over the review period, as improving profit margins boosted their results. Better-than-expected profits underpinned Godrej; the ability to cross-sell its products across emerging markets lifted earnings substantially. The dominant soap and hair-dye company has made a string of household and personal care acquisitions in South America and Indonesia over the past year as part of its global expansion strategy. More recently, it bought a 51% stake in Darling Group, a leader in hair extensions across 14 African markets. The earnings-accretive acquisition will enhance its presence in the continent significantly. Giordano rose on the back of higher-than-expected first-quarter profits as operating margins improved significantly. News that a local tycoon was steadily accumulating a substantial stake in the company also bolstered its share price. Aeon Stores, Convenience Retail Asia and Hong Kong Economic Times were also supported by healthy earnings results.

It was a similar picture in Malaysia where the fund's defensive holdings held up better than the cyclicals. Superstore chain operator Aeon Co, brewer Guinness Anchor and palm oil producer United Plantations were among the best performers. Aeon reported steady quarterly results that were driven by healthy same store sales. We are comfortable with this holding and believe that it offers an exposure to the Malaysian consumer, through a conservatively managed company that is backed by strength in both its balance sheet and the Jusco brand. Guinness performed strongly on the back of robust full-year results that were aided by increased sales and improved efficiency. Higher crude palm oil prices and increased production volumes supported United Plantations; its solid results allowed the company to declare a special dividend.

Among the disappointing performers were some of our Singapore holdings. Property stocks such as Bukit Sembawang and Wheelock Properties were depressed by the government's measures to cool the overheating residential sector. WBL Corp also underperformed as shares of the Singapore-based conglomerate with principal activities in technology, automotive distribution and property, was pulled lower by the slowdown in developed markets. Nevertheless the three companies remain in our favour. We like Bukit Sembawang for its low-cost landbank; Wheelock continues to generate substantial profits on their core residential projects; while WBL's management has actively restructured its assets to unlock hidden value, particularly from its landbank in China.

Portfolio Activity

We introduced three new holdings to the portfolio during the year under review. Among them is Aeon Thana Sinsap, an attractively-valued Thai consumer finance company that offers a decent dividend yield. Another is CMC, the Indian subsidiary of Tata Consultancy Services. The company is benefiting from its move to provide more value-added solutions instead of low-margin integration services. It is also on a firmer footing given a more balanced product mix and geographic exposure between its domestic and international markets.  The final initiation was the Malaysian cement operator Tasek in the first half of the period.

Outlook

While a double-dip recession in the developed world looks increasingly likely with the West's stimulation measures having apparently failed and its financial situation now worse than ever, it is hard not to be optimistic about the future of Asia and its smaller companies. That does not mean to say share prices will not fall or be volatile but we do think the businesses will continue to grow both in terms of size and profits, which over time will be reflected in share prices (as indeed has been the case since the Company's inception).

At the corporate level, valuations have become more attractive following the recent correction. But with a slowdown in global economic growth rates, we are not expecting strong earnings growth. That said, the portfolio's holdings are in good health, they are well managed and financially sound.

Aberdeen Asset Management Asia Limited

20 September 2011

3.  RESULTS

	31 July 2011	31 July 2010	% change
Total assets	£245,326,000	£198,678,000	+23.5
Total equity shareholders' funds (net assets)	£239,965,000	£192,851,000	+24.4
Share price (mid market)	673.25p	495.00p	+36.0
Warrant price (mid market)	n/a	395.25p
Net Asset Value per share{A}	686.39p	562.57p	+22.0
Discount to Net Asset Value	1.9%	12.0%
MSCI AC Asia Pacific ex Japan Index (currency adjusted, capital gains basis)	548.75	488.72	+12.3
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted, capital gains basis)	1272.19	1111.62	+14.4
Actual gearing	0.7%	0.1%
Potential gearing	2.2%	2.9%
Dividends and earnings
Total return per share (basic){B}	137.91p	236.82p
Revenue return per share (basic)	15.42p	12.85p	+20.0
Dividends per share{C}	12.30p	10.10p	+21.8
Dividend cover	1.25	1.27	-1.6
Revenue reserves{D}	£8,206,000	£6,159,000	+33.2
Operating costs
Total expense ratio{E}	1.27%	1.40%
{A}    Due to all outstanding warrants being exercised in the latest period the basic net asset value disclosed at 31 July 2010 is the diluted asset value. This has been done to ensure the true uplift in the period is reflected.
{B}    Measures the total earnings for the year divided by the weighted average number of Ordinary shares in issue (see note 8).
{C}    The figures for dividends per share reflect the dividends for the year in which they were earned.
{D}    Prior to payment of final and special dividends.
{E}    Management fees are charged on the basis of the average net asset value of the Company over a rolling 24 month period

Performance (total return)

	1 year	3 year	5 year	Since
	% return	% return	% return	inception
Share price	+38.3	+166.0	+179.6	+823.0
Net Asset Value per Ordinary share	+23.9	+127.3	+170.1	+765.7
MSCI AC Asia Pacific ex Japan Index (currency adjusted)	+15.7	+53.1	+94.4	+171.9
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted)	+17.5	+68.8	+108.8	N/A
Source: Aberdeen Asset Management PLC, Fundamental Data, Factset & Russell Mellon

Dividends

	Rate	xd date	Record date	Payment date
Proposed final 2011	9.50p	26 October 2011	28 October 2011	2 December 2011
Proposed special 2011	2.80p	26 October 2011	28 October 2011	2 December 2011
	12.30p
Final 2010	8.20p	20 October 2010	22 October 2010	2 December 2010
Special 2010	1.90p	20 October 2010	22 October 2010	2 December 2010
	10.10p

4.  BUSINESS REVIEW

The business of the Company is that of an investment trust investing in the economies of Asia and Australasia excluding Japan.

Principal Risk Factors

Investment in Far East equities or those of companies that derive significant revenue or profit from the Far East involves a greater degree of risk than that usually associated with investment in the securities in major securities markets. The securities that the Company owns may be considered speculative because of this higher degree of risk. Further details of the risks attaching to the Company's shares are provided in note 19 to the financial statements. These risks include:

Ordinary Shares

The market price and the realisable value of the Ordinary shares, as well as being affected by their underlying net asset value, also take into account supply and demand, market conditions and general investor sentiment. As such, the market value and the realisable value of the Ordinary shares may fluctuate and vary considerably from their net asset value and investors may not be able to realise the full value of their original investment.

Dividends

The Company will only pay dividends on the Ordinary shares to the extent that it has profits available for that purpose. The ability of the Company to pay any dividends in respect of the Ordinary shares will depend primarily on the level of income received from its investments. Accordingly, the amount of the dividends paid to shareholders may fluctuate.

Borrowings

Whilst the use of borrowings should enhance the total return on the Ordinary shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is less than the cost of borrowing, further reducing the total return on the Ordinary shares. The Company currently utilises gearing in the form of bank borrowings (see 'Capital Structure' above and note 11 to the financial statements).

Market Risks

The Company's investments are subject to normal market fluctuations and the risks inherent in the purchase, holding or selling of securities, and there can be no assurance that appreciation in the value of those investments will occur. Investment in emerging securities markets in the Asia Pacific region involves a greater degree of risk than that usually associated with investment in more developed securities markets including the risk of social, economic and political instability which may have an adverse effect on economic reforms or restrict investment opportunities.

Foreign Exchange Risks

The Company accounts for its activities and reports its results in sterling while investments are made and realised in other currencies. It is not the Company's present intention to engage in currency hedging, although it reserves the right to do so. 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 as well as favourable, on the returns otherwise experienced on the investments made by the Company.

Taxation and Exchange Controls

Any change in the Company's tax status or in taxation legislation (including the tax treatment of dividends or other investment income received by the Company) or failure to satisfy the conditions of Section 1158 of the Corporation Tax Act 2010 (formerly Section 842 of the Income and Corporation Tax Act 1988) could affect the value of the investments held by the Company, affect the Company's ability to provide returns to shareholders or alter the post-tax returns to shareholders.

The Company may purchase investments that may be subject to exchange controls or withholding taxes in various jurisdictions. In the event that exchange controls or withholding taxes are imposed with respect to any of the Company's investments, the effect will generally be to reduce the income received by the Company on its investments and the capital value of the affected investments.

5.  STATEMENT OF DIRCTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and 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 the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

Under Company law the directors must not approve the financial statements 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; and,

-      state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and which 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 2006. They are also responsible 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, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.

The financial statements are published on www.asian-smaller.co.uk which is a website maintained by the Company's Manager. 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.

We confirm that to the best of our knowledge:

-    the financial statements, prepared in accordance with the applicable UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

-    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 Aberdeen Asian Smaller Companies Investment Trust PLC

Nigel Cayzer

Chairman

20 September 2011

6. INVESTMENT PORTFOLIO

Ten Largest Investments

As at 31 July 2011

			Valuation	Total	Valuation
			2011	assets	2010
Company	Sector	Country	£'000	%	£'000
Multi Bintang Indonesia
A subsidiary of Asia Pacific Breweries and an affiliate of Heineken in Indonesia.	Beverages	Indonesia	11,362	4.6	5,496
Siam Makro
A subsidiary of SHV Netherlands, a cash and carry wholesaler with a network of outlets in Thailand.	Food & Staples Retailing	Thailand	10,090	4.1	4,844
LPI Capital
Malaysia-based insurance company involved in underwriting fire, motor, marine, aviation, transit and miscellaneous insurance.	Insurance	Malaysia	8,946	3.6	7,138
Bank OCBC NISP
Majority owned by Singapore's OCBC, it specialises in lending to the small and medium-sized business segment.	Commercial Banks	Indonesia	8,440	3.4	8,114
Bukit Sembawang Estates
Singapore-based residential property developer with a large land bank.	Real Estate Management & Development	Singapore	8,389	3.4	8,445
AEON Co (M)
Operator of general merchandise stores, supermarkets and convenience stores.	Multiline Retail	Malaysia	8,366	3.4	4,866
Giordano International
A Hong Kong based fashion and clothing retailer with a presence across Asia.	Specialty Retail	Hong Kong	8,008	3.3	5,688
Godrej Consumer Products
A leading FMCG company in India with strong market-leading brands in soaps and hair colour.	Personal Products	India	7,253	3.0	5,657
United Plantations
With plantations in Malaysia and Indonesia, the company is in the cultivation and processing of palm oil business.	Food Products	Malaysia	6,360	2.6	4,374
Gujarat Gas
Subsidiary of British Gas, the company is a distributor of natural gas in India.	Gas Utilities	India	6,141	2.5	4,484
Top ten investments			83,355	33.9

Investment Portfolio - Other Investments

As at 31 July 2011

			Valuation	Total	Valuation
			2011	assets	2010
Company	Sector	Country	£'000	%	£'000
Asian Terminals	Transportation Infrastructure	Philippines	6,081	2.5	3,876
Castrol India	Chemicals	India	5,983	2.4	5,090
Hana Microelectronics	Electronic Equipment, Instruments & Components	Thailand	5,775	2.4	5,373
WBL Corporation	Electronic Equipment, Instruments & Components	Singapore	4,986	2.0	4,681
AEON Stores Hong Kong	Multiline Retail	Hong Kong	4,865	2.0	3,168
Guinness Anchor	Beverages	Malaysia	4,849	2.0	3,649
Tisco Financial Group	Commercial Banks	Thailand	4,755	2.0	3,339
M.P. Evans Group	Food Products	Other Asia	4,732	1.9	4,020
Wheelock Properties	Real Estate Management & Development	Singapore	4,707	1.9	4,415
Hong Kong Economic Times	Media	Hong Kong	4,693	1.9	3,421
Top twenty investments			134,781	54.9
Commercial Bank of Ceylon	Commercial Banks	Sri Lanka	4,110	1.7	3,199
Jammu & Kashmir Bank	Commercial Banks	India	4,054	1.7	3,605
Shangri-La Hotels Malaysia	Hotels, Restaurants & Leisure	Malaysia	4,018	1.6	3,638
Holcim Indonesia	Construction Materials	Indonesia	3,966	1.6	4,528
Kansai Nerolac Paints	Chemicals	India	3,938	1.6	3,599
United Malacca	Food Products	Malaysia	3,896	1.6	3,559
Jollibee Foods	Hotels, Restaurants & Leisure	Philippines	3,771	1.5	3,247
Eastern Water Resources	Water Utilities	Thailand	3,656	1.5	2,867
Pos Malaysia	Air Freight & Logistics	Malaysia	3,590	1.5	3,400
ARB Corp	Specialty Retail	Australia	3,581	1.5	1,966
Top thirty investments			173,361	70.7
Aventis Pharmaceuticals	Pharmaceuticals	India	3,536	1.4	3,164
The Hong Kong & Shanghai Hotels	Hotels, Restaurants & Leisure	Hong Kong	3,436	1.4	3,593
Unilever Pakistan	Food Products	Pakistan	3,415	1.4	2,503
Asia Satellite Communications	Telecommunications	Hong Kong	3,280	1.3	2,072
Convenience Retail Asia	Food & Staples	Hong Kong	3,243	1.3	-
Cebu Holdings	Real Estate Management & Development	Philippines	3,213	1.3	2,526
John Keells Holdings	Industrial Conglomerates	Sri Lanka	3,151	1.3	3,181
Chevron Lubricants Lanka	Oil, Gas & Consumable Fuels	Sri Lanka	3,109	1.3	3,360
Public Financial Holdings	Consumer Finance	Hong Kong	3,007	1.2	3,015
DGB Financial Group	Commercial Banks	South Korea	2,878	1.2	2,469
Top forty investments			205,629	83.8
CDL Hospitality Trusts	Real Estate Investment Trusts	Singapore	2,579	1.1	2,301
CMC	IT Services	India	2,546	1.0	-
Millennium & Copthorne Hotels New Zealand	Hotels, Restaurants & Leisure	New Zealand	2,436	1.0	1,920
Hong Leong Finance	Consumer Finance	Singapore	2,321	0.9	2,356
AEON Thana Sinsap	Consumer Finance	Thailand	2,134	0.9	-
SBS Transit	Road & Rail	Singapore	2,042	0.8	1,854
Cafe de Coral	Hotels, Restaurants & Leisure	Hong Kong	1,993	0.8	1,995
AEON Credit Service (Asia)	Consumer Finance	Hong Kong	1,964	0.8	2,193
FJ Benjamin	Specialty Retail	Singapore	1,873	0.8	1,644
Goodyear (Thailand)	Auto Components	Thailand	1,790	0.7	2,065
Top fifty investments			227,307	92.6
Other investments (14)			14,195	5.8
Total investments			241,502	98.4
Net current assets{A}			3,824	1.6
Total assets			245,326	100.0
{A} excludes bank loans of £5,361,000.
All investments are in equities or warrants to convert to equities. For a full portfolio listing for Aberdeen Asian Smaller Companies Investment Trust PLC, please go to www.asian-smaller.co.uk.

7.   INCOME STATEMENT

		Year ended 31 July 2011			Year ended 31 July 2010
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	9	-	41,022	41,022	-	71,158	71,158
Income	2	8,380	-	8,380	6,103	-	6,103
Exchange gains/(losses)		-	260	260	-	(365)	(365)
Investment management fees	3	(2,065)	-	(2,065)	(1,521)	-	(1,521)
Administrative expenses	4	(790)	-	(790)	(726)	-	(726)
		_______	_______	_______	_______	_______	_______
Net return on ordinary activities before finance costs and taxation		5,525	41,282	46,807	3,856	70,793	74,649
Finance costs	5	(71)	-	(71)	(54)	-	(54)
		_______	_______	_______	_______	_______	_______
Return on ordinary activities before taxation		5,454	41,282	46,736	3,802	70,793	74,595
Taxation	6	(262)	(39)	(301)	214	(793)	(579)
		_______	_______	_______	_______	_______	_______
Return on ordinary activities after taxation		5,192	41,243	46,435	4,016	70,000	74,016
		_______	_______	_______	_______	_______	_______
Return per share (pence):	8
Basic		15.42	122.49	137.91	12.85	223.97	236.82
		_______	_______	_______	_______	_______	_______
Diluted		n/a	n/a	n/a	11.73	204.50	216.23
		_______	_______	_______	_______	_______	_______
The total column of this statement represents the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.
The accompanying notes are an integral part of the financial statements.

8.  BALANCE SHEET

		As at	As at
		31 July 2011	31 July 2010
	Notes	£'000	£'000
Non current assets
Investments at fair value through profit or loss	9	241,502	193,050
		__________	__________
Current assets
Debtors and prepayments	10	641	639
Cash and short term deposits		3,580	5,367
		__________	__________
		4,221	6,006
		__________	__________
Creditors: amounts falling due within one year	11
Bank loan		(5,361)	(5,619)
Other creditors		(397)	(378)
		__________	__________
		(5,758)	(5,997)
		__________	__________
Net current (liabilities)/assets		(1,537)	9
		__________	__________
Total assets less current liabilities		239,965	193,059
Provisions for liabilities and charges	12	-	(208)
		__________	__________
Net assets		239,965	192,851
		__________	__________
Capital and reserves
Called-up share capital	13	9,287	8,331
Capital redemption reserve		2,062	2,062
Share premium account		14,512	11,644
Special reserve		8,372	8,372
Warrant reserve		-	1,243
Capital reserve	14	197,526	155,040
Revenue reserve	14	8,206	6,159
		__________	__________
Equity shareholders' funds		239,965	192,851
		__________	__________
Net asset value per share (pence):	15
Basic		686.39	619.37
		__________	__________
Diluted		n/a	562.57
		__________	__________

9.   RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 July 2011
			Capital	Share
		Share	redemption	premium	Special	Warrant	Capital	Revenue
		capital	reserve	account	reserve	reserve	reserve	reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 July 2010		8,331	2,062	11,644	8,372	1,243	155,040	6,159	192,851
Exercise of warrants		956	-	2,868	-	(1,243)	1,243	-	3,824
Return on ordinary activities after taxation		-	-	-	-	-	41,243	5,192	46,435
Dividends paid	7	-	-	-	-	-	-	(3,145)	(3,145)
		_______	_________	_______	_______	_______	_______	_______	_______
Balance at 31 July 2011		9,287	2,062	14,512	8,372	-	197,526	8,206	239,965
		_______	_________	_______	_______	_______	_______	_______	_______
For the year ended 31 July 2010
			Capital	Share
		Share	redemption	premium	Special	Warrant	Capital	Revenue
		capital	reserve	account	reserve	reserve	reserve	reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 July 2009		8,220	2,062	11,312	10,386	1,387	84,896	3,700	121,963
Purchase of own shares		-	-	-	(2,014)	-	-	-	(2,014)
Exercise of warrants		111	-	332	-	(144)	144	-	443
Return on ordinary activities after taxation		-	-	-	-	-	70,000	4,016	74,016
Dividends paid	7	-	-	-	-	-	-	(1,557)	(1,557)
		_______	_________	_______	_______	_______	_______	_______	_______
Balance at 31 July 2010		8,331	2,062	11,644	8,372	1,243	155,040	6,159	192,851
		_______	_________	_______	_______	_______	_______	_______	_______
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.
The accompanying notes are an integral part of the financial statements.

10.   CASH FLOW STATEMENT

		Year ended		Year ended
		31 July 2011		31 July 2010
	Notes	£'000	£'000	£'000	£'000
Net cash inflow from operating activities	16		5,016		3,217
Servicing of finance
Bank and loan interest paid			(76)		(55)
Taxation
Net taxation paid			-		(177)
Financial investment
Purchases of investments		(13,935)		(8,171)
Sales of investments		6,527		13,928
		_______		_______
Net cash (outflow)/inflow from financial investment			(7,408)		5,757
Equity dividends paid	7		(3,145)		(1,557)
			_______		_______
Net cash (outflow)/inflow before financing			(5,613)		7,185
Financing
Purchase of own shares		-		(2,014)
Exercise of warrants	13	3,824		443
Repayment of loan		-		(1,903)
		_______		_______
Net cash inflow/(outflow) from financing activities			3,824		(3,474)
			_______		_______
(Decrease)/increase in cash			(1,789)		3,711
			_______		_______
Reconciliation of net cash flow to movements in net debt
(Decrease)/increase in cash as above			(1,789)		3,711
Repayment of loan			-		1,903
Exchange movements			260		(365)
			_______		_______
Movement in net debt in the year			(1,529)		5,249
Net debt at 1 August			(252)		(5,501)
			_______		_______
Net debt at 31 July	17		(1,781)		(252)
			_______		_______

11.   NOTES TO THE FINANCIAL STATEMENTS

For the Year Ended 31 July 2011

1.	Accounting policies
	(a)	Basis of preparation and going concern
		The financial statements have been prepared in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'.
		The financial statements have also been prepared 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. The Directors believe this is appropriate for the reasons outlined in the Directors' Report section of the Annual Report and Accounts.
		The financial statements, and the net asset value per share figures, have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP).
	(b)	Valuation of investments
		Listed investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured at cost. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices. Gains and losses arising from changes in fair value and disposals are included in net profit or loss for the period as a capital item in the Income Statement and are ultimately recognised in the capital reserve.
	(c)	Borrowings
		Interest-bearing bank loans and overdrafts are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses. Finance charges are accounted for on an accruals basis using the effective interest rate method and are charged 100% to revenue.
	(d)	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.
	(e)	Expenses
		All expenses are accounted for on an accruals basis. Expenses, including management fees and finance costs, are charged 100% through the revenue column of the Income Statement with the exception of transaction costs incurred on the purchase and disposal of investments which are charged to the capital column of the Income Statement and are separately identified and disclosed in note 9 within gains on investments.
	(f)	Taxation
		The charge for taxation is based on the profit for the year.
		Deferred tax
		The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred taxation is provided using the liability method on all timing differences, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in future against which the deferred tax asset can be offset.
	(g)	Capital reserve
		The capital reserve reflects the following:
		- gains and losses on the sale of investments and changes in fair values of investments held are transferred to the capital reserve;
		- transfers from the warrant reserve on the exercise of warrants; and
		- applicable capital tax charges.
	(h)	Foreign currency
		Overseas monetary assets are converted into Sterling at the rate of exchange ruling at the Balance Sheet date. Transactions during the year involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or in the revenue account depending on whether the gain or loss is of a capital or revenue nature respectively.

		2011	2010
2.	Income	£'000	£'000
	Income from investments
	UK dividend income	83	54
	Overseas dividends	8,272	5,966
	Stock dividends	22	37
	Fixed interest	(3)	21
		__________	__________
		8,374	6,078
		__________	__________
	Other income
	Deposit interest	6	15
	Underwriting commission	-	10
		__________	__________
		6	25
		__________	__________
	Total income	8,380	6,103
		__________	__________

		2011			2010
		Revenue	Capital	Total	Revenue	Capital	Total
3.	Investment management fees	£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fees	2,065	-	2,065	1,521	-	1,521
		______	_____	______	______	______	______
	The Company has an agreement with Aberdeen Asset Management Asia Limited ('AAM Asia') for the provision of management services.
	During the period the management fee was payable monthly in arrears and is based on an annual amount of 1.2%, calculated on the average net asset value of the Company over a 24 month period, valued monthly. The agreement is terminable on one year's notice. The balance due to AAM Asia at the year end was £200,000 (2010 - £275,000).

		2011			2010
		Revenue	Capital	Total	Revenue	Capital	Total
4.	Administrative expenses	£'000	£'000	£'000	£'000	£'000	£'000
	Administration fees	75	-	75	73	-	73
	Directors' fees	108	-	108	108	-	108
	Share Plan marketing contribution	149	-	149	95	-	95
	Auditor's remuneration:
	- fees payable to the auditors for the audit of the annual accounts	23	-	23	23	-	23
	- fees payable to the auditors and its associates for other services:
	- interim review	6	-	6	6	-	6
	Custodian charges	201	-	201	265	-	265
	Other expenses	228	-	228	156	-	156
		______	_____	______	______	______	______
		790	-	790	726	-	726
		______	_____	______	______	______	______
	The Company has an agreement with Aberdeen Asset Managers Limited ("AAM") for the provision of administration services. The administration fee is payable quarterly in advance and based on an index-linked annual amount of £75,000 (2010 - £73,000) and there was a prepayment of £19,000 (2010 - £18,000) at the year end.  The agreement is terminable on six months' notice.
	The Company also has an agreement with 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 fee paid and payable under the agreement was £149,000 (2010 - £95,000) and there was a £55,000 (2010- £22,000) balance due to AAM the year end.
	No pension contributions were made in respect of any of the Directors.

		2011			2010
		Revenue	Capital	Total	Revenue	Capital	Total
5.	Finance costs	£'000	£'000	£'000	£'000	£'000	£'000
	On bank loans and overdrafts	71	-	71	54	-	54
		______	_____	______	______	______	______

			2011				2010
			Revenue	Capital	Total		Revenue	Capital	Total
6.	Taxation		£'000	£'000	£'000		£'000	£'000	£'000
	(a)	Analysis of charge for the year
		Overseas taxation	509	-	509		371	-	371
		Tax relief to revenue	-	-	-		(348)	348	-
			______	_____	______		______	______	______
		Current taxation	509	-	509		23	348	371
		Movement on deferred taxation	237	(445)	(208)		-	-	-
		Deferred taxation	(484)	484	-		(237)	445	208
			______	_____	______		______	______	______
		Total tax	262	39	301		(214)	793	579
			______	_____	______		______	______	______
		As at 31 July 2010 the Company had a potential deferred tax liability of £208,000 in respect of its holdings in CDL Hospitality Trust. A deferred tax liability was recognised at that time as CDL is a Singapore based real estate investment trust without distributor or reporting fund status and therefore the realised gains on disposal of its units are subject to corporation tax in the hands of this Company. As at 31 July 2010, the Company did not have sufficient excess expenses to cover the potential liability should all the units be sold at that date and therefore a deferred tax liability was recognised in this period. However, during the year ended 31 July 2011, the Company has incurred additional excess expenses, such that there are sufficient losses to cover the potential corporation tax due on disposal of the units and therefore the deferred tax liability has been written back in this period.
	(b)	Factors affecting the tax charge for the year
		The tax assessed for the year is lower than the effective rate of corporation tax in the UK for a large company of 27.33% (2010 - 28%). The differences are explained below:
			2011				2010
			Revenue	Capital		Total	Revenue	Capital	Total
			£'000	£'000		£'000	£'000	£'000	£'000
		Return on ordinary activities before taxation	5,454	41,282		46,736	3,802	70,793	74,595
			______	_____		_____	______	______	______
		Return on ordinary activities multiplied by the effective UK standard tax rate of corporation tax of 27.33% (2010 - 28%)	1,491	11,282		12,773	1,065	19,822	20,887
		Effects of:
		Gains on investments not taxable	-	(11,211)		(11,211)	-	(19,924)	(19,924)
		Offshore income gains realised	-	-		-	-	348	348
		Exchange (gains)/losses	-	(71)		(71)	-	102	102
		Franked dividend receipts not chargeable to corporation tax	(23)	-		(23)	(15)	-	(15)
		Overseas tax	509	-		509	371	-	371
		Movement on taxable accrued income	13	-		13	-	-	-
		Non-taxable dividend income	(2,248)	-		(2,248)	(1,623)	-	(1,623)
		Non-taxable stock dividends	-	-		-	(10)	-	(10)
		Movement in unutilised management expenses	748	-		748	230	-	230
		Movement in unutilised loan relationship deficits	19	-		19	5	-	5
			______	_____		_____	______	______	______
		Current tax charge for the year	509	-		509	23	348	371
			______	_____		_____	______	______	______

		2011	2010
7.	Dividends	£'000	£'000
	Final dividend for 2010 - 8.20p (2009 - 5.00p)	2,553	1,557
	Special dividend for 2010 - 1.90p (2009 - nil)	592	-
		__________	__________
		3,145	1,557
		__________	__________
	Proposed final and special dividends are subject to approval by shareholders at the Annual General Meeting and are not included as a liability in the financial statements.
	We set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158 - 1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the current year is £5,192,000 (2010 - £4,016,000).
		2011	2010
		£'000	£'000
	Proposed final dividend for 2011 - 9.50p (2010 - 8.20p)	3,321	2,553
	Proposed special dividend for 2011 - 2.80p (2010 - 1.90p)	979	592
		__________	__________
	Total	4,300	3,145
		__________	__________

		2011			2010
8.	Return per Ordinary share	Revenue	Capital	Total	Revenue	Capital	Total
	Basic
	Return on ordinary activities after taxation (£'000)	5,192	41,243	46,435	4,016	70,000	74,016
	Weighted average number of shares in issue (excluding shares held in treasury)			33,671,711			31,254,783
	Basic return per Ordinary share (p)	15.42	122.49	137.91	12.85	223.97	236.82
		______	_____	_____	______	______	______
		2011			2010
		Revenue	Capital	Total	Revenue	Capital	Total
	Diluted
	Number of dilutive shares			n/a			2,975,169
	Diluted number of shares in issue (excluding shares held in treasury)			n/a			34,229,952
	Diluted return per Ordinary share (p)	n/a	n/a	n/a	11.73	204.50	216.23
		______	_____	_____	______	______	______
	The calculation of the diluted total, revenue and capital returns per Ordinary share are carried out in accordance with Financial Reporting Standard No. 22, "Earnings per Share". For the purposes of calculating diluted total, revenue and capital returns per Ordinary share, the number of Ordinary shares is the weighted average used in the basic calculation plus the number of Ordinary shares deemed to be issued for no consideration on exercise of all Warrants by reference to the average share price of the Ordinary shares during the year.

		Listed	Listed
		in UK	overseas		Total
9.	Investments	£'000	£'000		£'000
	Fair value through profit or loss:
	Opening book cost	2,289	91,379		93,668
	Opening fair value gains on investments held	1,731	97,651		99,382
		__________	__________		__________
	Opening fair value	4,020	189,030		193,050
	Movements in year:
	Purchases at cost	-	13,957		13,957
	Sales - proceeds	-	(6,527)		(6,527)
	Sales - gains on sales	-	3,596		3,596
	Movement in fair value gains on investments held	712	36,714		37,426
		__________	__________		__________
	Closing fair value	4,732	236,770		241,502
		__________	__________		__________
		Listed	Listed
		in UK	overseas		Total
		£'000	£'000		£'000
	Closing book cost	2,289	102,405		104,694
	Closing fair value gains on investments held	2,443	134,365		136,808
		__________	__________		__________
		4,732	236,770		241,502
		__________	__________		__________
		Listed	Listed
		in UK	overseas		Total
	Gains on investments	£'000	£'000		£'000
	Gains on sales	-	3,596		3,596
	Movement in fair value gains on investments held	712	36,714		37,426
		__________	__________		__________
		712	40,310		41,022
		__________	__________		__________
	Transaction costs
	During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement.  The total costs were as follows:
			2011	2010
			£'000	£'000
	Purchases		28	27
	Sales		18	55
			__________	__________
			46	82
			__________	__________

		2011	2010
10.	Debtors: amounts falling due within one year	£'000	£'000
	Other debtors	12	14
	Prepayments and accrued income	629	625
		__________	__________
		641	639
		__________	__________

		2011	2010
11.	Creditors: amounts falling due within one year	£'000	£'000
	Bank loans	5,361	5,619
	Other creditors	397	378
		__________	__________
		5,758	5,997
		__________	__________
	At the year end the Company had drawn down a US$8,800,000 loan from Royal Bank of Scotland at a rate of 1.60288% with repayment or rollover terms to 6 September 2011, on which date the loan was rolled on for a further three months to 6 December 2011 at a rate of 1.68056%.
	On 12 September 2011 a further drawdown of US$8,000,000 was made under the RBS facility at an annualised all-in rate of 1.1% for the period to 6 December 2011.  A total of US$16,800,000 has now been drawn under the Royal Bank of Scotland facility.
	The new £20 million three year multi currency revolving advance loan facility with Royal Bank of Scotland dated 27 May 2011, contains covenants requiring that the on-going gearing ratio (Gross Borrowings divided by Adjusted Assets) shall not exceed 25%. Gross Borrowings are calculated by deducting from the Company's assets (Portfolio Value plus cash) (1) the value of any unquoted investments; (2) the value of any bonds rated below investment grade or which are unrated; (3) the extent to which the value of any single security or asset exceeds 5% of Investment Portfolio Value; (4) the extent to which the aggregate value of the 20 largest securities or assets exceeds 65% of Investment Portfolio Value; (5) the extent to which the aggregate value of securities or assets in any one country exceeds 25% of Investment Portfolio Value; (6) the extent to which the aggregate value of securities or assets in countries with a S&P foreign sovereign debt rating lower than BBB- exceeds 30% of Investment Portfolio Value. The Company met these covenants throughout the year and up to the date that this report was signed.

		2011	2010
12.	Provisions for liabilities and charges	£'000	£'000
	Deferred tax on gains on offshore funds held:
	At 1 August	208	-
	Deferred tax (credited)/charged to the Income Statement in the year	(208)	208
		__________	__________
	At 31 July	-	208
		__________	__________

		2011	2010
13.	Called up share capital	£'000	£'000
	Authorised
	42,000,000 (2010 - 42,000,000) Ordinary shares of 25p	10,500	10,500
		__________	__________
	Called-up, allotted and fully paid
	37,146,500 (2010 - 33,322,905) Ordinary shares of 25p	9,287	8,331
		__________	__________
	During the year no Ordinary shares of 25p were repurchased by the Company (2010 - 502,069) at a total cost of £nil (2010 - £2,014,000). At the year end 2,186,290 (2010 - 2,186,290) shares were held in treasury, which represents 5.89% (2010 - 6.56%) of the Company's total issued share capital at 31 July 2011.
	During the year an additional 3,823,595 (2010 - 442,698) Ordinary shares of 25p were issued after the remaining 3,823,595 Warrants were exercised at 100p each. The total consideration received was £3,823,595 (2010 - £442,698).
	At 31 July 2011 there were no Warrants in issue (2010 - 3,823,595).
	The investment objective of the Company is to maximise total return to shareholders over the long term from a portfolio of smaller quoted companies (with a market capitalisation of up to approximately US$750m at the time of investment) in the economies of Asia and Australasia, excluding Japan.
	The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
	The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. The review includes:
	- the planned level of gearing which takes account of the Manager's views on the market;
	- the level of equity shares in issue;
	- 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.
	The Company does not have any externally imposed capital requirements.

		2011	2010
14.	Retained earnings	£'000	£'000
	Capital reserve
	At 31 July	155,040	84,896
	Movement in investment holdings fair value	37,426	64,348
	Gains on realisation of investments at fair value	3,596	6,810
	Foreign exchange movement	260	(365)
	Capital tax charge	(39)	(793)
	Transfer from warrant reserve	1,243	144
		__________	__________
	At 31 July	197,526	155,040
		__________	__________
		2011	2010
	Revenue reserve	£'000	£'000
	At 31 July	6,159	3,700
	Revenue	5,192	4,016
	Dividends paid	(3,145)	(1,557)
		__________	__________
	At 31 July	8,206	6,159
		__________	__________

15.	Net asset value per equity share	2011	2010
	Basic
	Net assets attributable	£239,965,000	£192,851,000
	Number of Ordinary shares in issue (excluding shares held in treasury)	34,960,210	31,136,615
	Net asset value per Ordinary share	686.39p	619.37p
	Diluted
	Net assets attributable	n/a	£196,675,000
	Number of Ordinary shares if Warrants converted (excluding shares held in treasury)	n/a	34,960,210
	Net asset value per Ordinary share	n/a	562.57p
	Upon subscription the remaining 3,823,595 Warrants were exercised on 1 December 2010, therefore there is no longer any dilution.
	The comparative diluted net asset value per Ordinary share has been calculated on the assumption that at 31 July 2010 3,823,595 Warrants in issue were exercised on the first day of the financial year at 100p per share, giving a total of 34,960,210 Ordinary shares at 31 July 2010.

16.	Reconciliation of net return before finance costs and	2011	2010
	taxation to net cash inflow from operating activities	£'000	£'000
	Net returns before finance costs and taxation	46,807	74,649
	Adjustments for:
	Gains on investments	(41,022)	(71,158)
	Effect of foreign exchange rate (gains)/losses	(260)	365
	Decrease/(increase) in prepayments and accrued income	12	(259)
	Decrease/(increase) in other debtors	2	(6)
	Increase in other creditors	8	34
	Overseas withholding tax suffered	(509)	(371)
	Stock dividends included in investment income	(22)	(37)
		__________	__________
	Net cash inflow from operating activities	5,016	3,217
		__________	__________

		1 August	Cash	Exchange	31 July
		2010	flow	movements	2011
17.	Analysis of changes in net debt	£'000	£'000	£'000	£'000
	Net cash:
	Cash at bank and overdrafts	5,367	(1,789)	2	3,580
	Debt:
	Debt falling due within one year	(5,619)	-	258	(5,361)
		_________	_________	__________	________
		(252)	(1,789)	260	(1,781)
		_________	_________	__________	________

18.	Related party transactions
	Mr M J Gilbert and his alternate Director, Mr H Young are both directors of AAM Asia, a subsidiary of Aberdeen Asset Management PLC. Mr Gilbert is also a director of AAM.
	AAM Asia has an agreement to provide management services to the Company, the terms of which are outlined in note 3. AAM has an agreement to provide both administration and marketing services to the Company, the terms of which are outlined in note 4.

19.	Financial instruments
	Risk management
	The Company's financial instruments comprise equities 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 Manager has a dedicated investment management process, which ensures that the investment policy is followed. Stock selection procedures are in place based on the active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a senior investment manager and also by the Manager's investment committee.
	The Company's Manager has an independent investment risk department for reviewing the investment risk parameters of the Company's portfolio on a regular basis. The department reports to the Manager's performance review committee which is chaired by the Manager's chief investment officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk and style characteristics using best practice, industry standard multi-factor models.
	Additionally, the Manager's compliance department continually monitors the Company's investment and borrowing powers and reports to the Manager's risk management committee.
	The main financial risks that the Company faces from its financial instruments are market price risk (comprising interest rate risk, currency risk and other price risk), liquidity risk and credit risk.
	The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors.
	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 three elements - interest rate risk, currency risk and other price risk.
	Interest rate risk
	Interest rate movements may affect:
	- the level of income receivable on cash deposits;
	- interest payable on the Company's variable rate borrowings;
	- valuation of debt securities in the portfolio.
	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 risk profile
	The interest rate risk profile of the Company's financial assets and liabilities, excluding equity holdings which are all non-interest bearing, at the Balance Sheet date was as follows:
					Weighted average				Weighted
					period for which				average			Fixed		Floating
					rate is fixed				interest rate			rate		rate
	At 31 July 2011				Years				%			£'000		£'000
	Assets
	Sterling				-				-			-		3,580
					_______				_______			_______		_______
					n/a				n/a			-		3,580
					_______				_______			_______		_______
	Liabilities
	Bank loan - US Dollar				0.25				1.60			(5,361)		-
					_______				_______			_______		_______
					Weighted average				Weighted
					period for which				average			Fixed		Floating
					rate is fixed				interest rate			rate		rate
	At 31 July 2010				Years				%			£'000		£'000
	Assets
	Singapore Dollar				3.42				2.50			1,681		-
	Sterling				-				-			-		5,366
	Thailand Baht				-				-			-		1
					_______				_______			_______		_______
					n/a				n/a			1,681		5,367
					_______				_______			_______		_______
	Liabilities
	Bank loan - US Dollar				0.04				0.77			(5,619)		-
					_______				_______			_______		_______
	The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on interest payable, weighted by the value of the loan. The maturity date of the Company's loan is shown in note 11 to the financial statements.
	The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.
	The Company's equity portfolio and short term debtors and creditors (excluding bank loans) have been excluded from the above tables.
	Maturity profile
	The maturity profile of the Company's financial assets and liabilities at 31 July was as follows:
												Within		Within
												1 year		1 year
												2011		2010
	Assets											£'000		£'000
	Floating rate
	Cash											3,580		5,367
												_______		_______
												Within		Within
												1 year		1 year
												2011		2010
	Liabilities											£'000		£'000
	Fixed rate
	Bank loans - US Dollar											5,361		5,619
												_______		_______
	All the other financial assets and liabilities do not have a maturity date.
	Interest rate sensitivity
	Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit.
	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 11, 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 by currency of denomination:
			31 July 2011							31 July 2010
				Net monetary			Total					Net monetary		Total
			Overseas investments	assets/ (liabilities)			currency exposure			Overseas Investments		assets/ (liabilities)		currency exposure
			£'000	£'000			£'000			£'000		£'000		£'000
	Australia		3,580	-			3,580			1,966		-		1,966
	Hong Kong Dollar		38,552	-			38,552			32,117		-		32,117
	Indian Rupee		33,451	-			33,451			25,600		-		25,600
	Indonesian Rupiah		24,560	-			24,560			18,719		-		18,719
	Korean Won		2,878	-			2,878			2,469		-		2,469
	Malaysian Ringgit		43,406	-			43,406			32,080		-		32,080
	New Zealand Dollar		2,436	-			2,436			1,920		-		1,920
	Pakistan Rupee		3,584	-			3,584			2,658		-		2,658
	Philippine Peso		14,532	-			14,532			11,148		-		11,148
	Singapore Dollar		26,896	-			26,896			27,377		-		27,377
	Sri Lankan Rupee		12,345	-			12,345			11,563		-		11,563
	Thailand Baht		30,550	-			30,550			21,413		1		21,414
	US Dollar		-	(5,361)			(5,361)			-		(5,619)		(5,619)
			_______	_______			_______			_______		_______		_______
			236,770	(5,361)			231,409			189,030		(5,618)		183,412
	Sterling		4,732	3,580			8,312			4,020		5,366		9,386
			_______	_______			_______			_______		_______		_______
	Total		241,502	(1,781)			239,721			193,050		(252)		192,798
			_______	_______			_______			_______		_______		_______
	Foreign currency sensitivity
	The following table details the Company's sensitivity to a 10% increase and decrease in sterling against the foreign currencies in which the Company has exposure via foreign currency denominated monetary items. The sensitivity analysis adjusts their translation at the period end for a 10% change in foreign currency rates.
											2011		2010
											£'000		£'000
	US Dollar										536		562
											_______		_______
	There is no sensitivity analysis included for the foreign currency equity investments, which have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.
	Other price risk
	Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.
	Investment in Far East equities or those of companies that derive significant revenue or profit from the Far East involves a greater degree of risk than that usually associated with investment in the securities in major securities markets. The securities that the Company owns may be considered speculative because of this higher degree of risk. It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. Both the allocation of assets and the stock selection process, as detailed in the annual Report and Accounts, act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on various stock exchanges worldwide.
	Other price risk sensitivity
	If market prices at the Balance Sheet date had been 10% (2010 - 10%) higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 July 2011 would have increased/(decreased) by £24,150,000 (2010 - increased/(decreased) by £19,305,000)) and equity reserves would have increased/(decreased) by the same amount.
	Liquidity risk
	This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
	The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise a revolving multi-currency credit facility. The Board has imposed a maximum gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of 25%. Details of borrowings at the 31 July 2011 are shown in note 11.
	Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of a loan facility, details of which can be found in note 11. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis. Details of the Board's policy on gearing are shown in the interest rate risk section of this note.
	Liquidity risk exposure
	At 31 July 2011 the Company's bank loan, amounting to £5,361,000 (2010 - £5,619,000), was due for repayment or roll-over within 2 months (2010 - 1 month). The maximum exposure during the year was £5,725,000 and the minimum exposure during the year was £5,346,000.
	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 considered to be significant, and is managed as follows:
	-	investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker;
	-	the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a monthly basis. In addition, the third party administrators' carries out a stock reconciliation to Custodian records on a monthly basis to ensure discrepancies are picked up on a timely basis. The Manager's compliance department carries out periodic reviews of the Custodian's operations and reports its finding to the Manager's risk management committee. This review will also include checks on the maintenance and security of investments held; 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.
	Credit risk exposure
	In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 July was as follows:
						2011						2010
						Balance		Maximum				Balance		Maximum
						Sheet		exposure				Sheet		exposure
	Current assets					£'000		£'000				£'000		£'000
	Debtors					588		588				599		599
	Cash and short term deposits					3,580		3,580				5,367		5,367
						_______		_______				_______		_______
						4,168		4,168				5,966		5,966
						_______		_______				_______		_______
	None of the Company's financial assets is past due or impaired.
	Fair values of financial assets and financial liabilities
	For the US Dollar loan, the fair value of borrowings has been calculated at £5,363,000 as at 31 July 2011 (2010 - £5,620,000) compared to an accounts value in the financial statements of £5,361,000 (2010 - £5,619,000) (note 11). The fair value of each loan is determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency. All other assets and liabilities of the Company are included in the Balance Sheet at fair value.

20.	Fair value hierarchy
	The Company adopted the amendments to FRS 29 'Financial Instruments: Disclosures' effective from 1 January 2009. These amendments require an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:
	-     Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
	-     Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and
	-     Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy at 31 July 2011 as follows:
			Level 1	Level 2	Level 3	Total
	As at 31 July 2011	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	241,502	-	-	241,502
			_______	_______	_______	_______
	Net fair value		241,502	-	-	241,502
			_______	_______	_______	_______
			Level 1	Level 2	Level 3	Total
	As at 31 July 2010	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	191,369	-	-	191,369
	Quoted bonds	b)	1,681	-	-	1,681
			_______	_______	_______	_______
	Net fair value		193,050	-	-	193,050
			_______	_______	_______	_______
	a) Quoted equities
	The fair value of the Company's investments in quoted equities have been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.
	b) Quoted bonds
	The fair value of the Company's investments in quoted bonds has been determined by their quoted bid price at reporting date.

21.	Subsequent events
	Since the year end, equity markets have fallen, with share prices in Asia Pacific being particularly affected. The NAV has fallen by 4.1% and the MSCI AC Asia Pacific ex Japan Small Cap Index and MSCI Asia Pacific ex Japan Index (both currency adjusted) have fallen by 11.7% and 9.8% respectively in the period 31 July 2011 to 16 September 2011.

       The Annual General Meeting will be held at 11.30 a.m. on 29 November 2011 at Bow Bells House, One Bread Street, London EC4M 9HH.

       Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.

     The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 July 2011 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2010 and 2011 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 s.498(2) or 498(3) of the Companies Act 2006.  The financial information for 2010 is derived from the statutory accounts for 2010 which have been delivered to the Registrar of Companies. The 2011 accounts will be filed with the Registrar of Companies in due course.

The audited Annual Report and Accounts will be posted to in early October. Copies may be obtained during normal business hours from the Company's Registered Office, Bow Bells House, 1 Bread Street, London EC4M 9HH or from the Company's website, www.asian-smaller.co.uk*

* Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

By Order of the Board

Aberdeen Asset Management PLC

Secretary

20 September 2011

 

END

 

 

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