Interim Results
Aberdeen Asian Smaller Co's Inv Tst
11 April 2007
ABERDEEN ASIAN SMALLER COMPANIES INVESTMENT TRUST PLC
ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS
for the six months ended 31 January 2007
Highlights
• Share price up 17.5%
• Diluted NAV rose 17.1%
• MSCI AC Asia Pacific ex Japan Index rose 14.2%
Chairman's Statement
I am pleased to report another successful period for the six months to 31
January 2007, as investors continued to take a positive view of global economic
growth. During the period the Company's diluted net asset value increased 17.1%
to 323.8p, while the share price increased 17.5% to 310.25p.
As there is no readily available benchmark that tracks Asian smaller companies,
the Manager uses a broad index for comparative purposes, in particular the MSCI
AC Asia Pacific Free ex-Japan Index, which rose by 14.2% in sterling terms over
the same period.
Overview
Liquidity has remained a key driver of Asian equities with strong capital
inflows, buoyant M&A activity and a record new issue market. This was supported,
in most cases, by good company results. Over the period stock markets in India,
Singapore, Hong Kong, China and Australia reached all-time highs. Against the
trend, Thailand and Korea ended the period flat.
These conditions favoured big caps in general and particularly in China, where
the Shanghai market more than doubled. Speculators bid up IPOs, with many state
enterprises coming to the market after a one-year freeze on new issues. For now,
while fundamentals on the mainland have improved, valuations there suggest a
bubble, which is one reason, along with the low quality of companies, why our
Managers still have no direct exposure.
Alongside China, India's market has looked the most expensive. However, the hot
money that returned so quickly after the sell-off in May has at least been
justified by earnings growth. Company results have continued to surprise on the
upside, testimony to the high level of pent-up demand in the economy, and the
growing share of manufacturing and services.
There was some rotation into Malaysia, where a longstanding valuation discount
finally disappeared. The promise of more public spending plus the streamlining
of government stakes across the economy spurred gains. In neighbouring
Singapore, exports were exceptionally strong but it was the property sector that
was most active as the government unveiled its ambitious plans for casinos. The
Philippines, which has languished for some time, also had a positive run, buoyed
by continued flows from overseas workers (which now account for around 10% of
GDP).
Of the underperformers, Korea felt the brunt of a rising Won on its big export
base. Thailand, which had earlier stood out for value, saw its military junta
impose capital controls. This has proven the first of many policy blunders.
Nonetheless, the risk of contagion is small and our holdings, bought at lower
levels, have upside.
Overall, Asian economies were generally healthy, and largely unaffected by the
now-familiar external concerns, the main one being the health of the US economy.
For companies, conditions have been good with corporate earnings for the most
part exceeding expectations. Some notable examples were Singapore's Wheelock
Properties and Straits Trading, South Korea's Jeonbuk Bank, the Philippines'
Jollibee Foods, and in Malaysia, Malaysian Oxygen and Bursa Malaysia.
Notably, not only has the quality of earnings improved but balance sheets are
healthier (because cash is being used cautiously and surpluses even returned).
Standards of corporate governance have improved as well. These bode well for
smaller companies, in particular, which have traditionally been less transparent
and under-researched.
Portfolio
Two new stocks were introduced to the portfolio over the six months: Castrol
India, a lubricants company which is attractively valued and offers a good
dividend yield, and the leading financial journal the Hong Kong Economic Times,
which trades on attractive valuations. Against this, our Managers sold out of
India's ICICI Bank, after a strong run in its share price pushed its market
capitalisation to in excess of US$10 billion.
Among the period's outstanding performers were Distilleries, Sri Lanka's largest
Arrak producer, whose share price doubled; Bursa Malaysia, the country's stock
exchange, rose more than 80%, as did Wheelock Properties, one of Singapore's
most respected developers. Other stocks such as Cebu Holdings and Asian
Terminals in the Philippines, ICI India and Jammu & Kashmir Bank had gains of
around 50%.
A particular mention must be made of India, one of the long-standing overweights
in our portfolio. Given our Manager's conservative investment style that
emphasises quality companies, it was not surprising that our Indian holdings
lagged in last year's momentum driven market. On a short-term basis, the Indian
market is not cheap, having rebounded from its June lows. Longer term, however,
the market continues to appeal to us for its bottom-up, stock-picking potential.
Outlook
At the time of writing, global markets face their biggest challenge for some
time. Volatility has increased as investors adjust their view of the US economy
in light of weaker housing data. The fear is that consumption will fall sharply,
which will surely affect corporate profits (which are at record levels).
Still, Asia is in good shape. Whilst there are many markets such as China and
India which seem over-extended, there are others like Thailand or Korea that
continue to appear inexpensive. Overall, valuations are fair, if no longer
cheap. Economies have reaped the benefits of structural improvements over the
past few years. Meanwhile, the asset reflation story is at too early a stage to
be seriously derailed.
Your Company's portfolio is currently trading on a price/earnings multiple of
16.6 times for calendar year 2007 according to our Manager's conservative
estimates. We remain confident about your Company's prospects as we believe the
Manager's strategy of focusing on good quality companies and emphasising
discipline, particularly on price at this point of the cycle, should hold up
well.
Nigel Cayzer
Chairman
11 April 2007
Aberdeen Asian Smaller Companies Investment Trust PLC
Income Statement (unaudited)
Six months ended 31 January 2007 Six months ended 31 January 2006
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 18,379 18,379 - 12,182 12,182
Income 2,643 - 2,643 1,620 - 1,620
Investment management fees (581) - (581) (435) - (435)
Administrative expenses (308) - (308) (298) - (298)
Exchange (losses)/gains (19) 384 365 14 48 62
_______ _______ _______ _______ _______ _______
Net return on ordinary activities before 1,735 18,763 20,498 901 12,230 13,131
finance costs and taxation
Finance costs (227) - (227) (219) - (219)
_______ _______ _______ _______ _______ _______
Net return on ordinary activities before 1,508 18,763 20,271 682 12,230 12,912
taxation
Taxation (428) - (428) (187) - (187)
_______ _______ _______ _______ _______ _______
Net return on ordinary activities after 1,080 18,763 19,843 495 12,230 12,725
taxation
_______ _______ _______ _______ _______ _______
Return per Ordinary share (pence):
Basic 3.34 58.10 61.44 1.67 41.20 42.87
_______ _______ _______ _______ _______ _______
Diluted 3.01 52.31 55.32 1.46 36.16 37.62
_______ _______ _______ _______ _______ _______
The total column of this statement represents the profit and loss account of the
Company.
A Statement of Total Recognised Gains and Losses has not been prepared as all
gains and losses are recognised in the Income Statement.
All revenue and capital items are derived from continuing operations.
Balance Sheet
As at As at As at
31 January 2007 31 July 31 January 2006
2006
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Non-current assets
Investments at fair value through profit or loss 122,063 103,101 106,466
Current assets
Debtors 208 427 611
Cash at bank and in hand 3,669 3,970 1,007
_________ _________ _________
3,877 4,397 1,618
_________ _________ _________
Creditors: amounts falling due within one year
Bank loans (7,626) (8,012) (8,454)
Other creditors (826) (763) (427)
_________ _________ _________
(8,452) (8,775) (8,881)
_________ _________ _________
Net current liabilities (4,575) (4,378) (7,263)
_________ _________ _________
Total assets less current liabilities 117,488 98,723 99,203
Provision for liabilities and charges (29) (54) (74)
_________ _________ _________
Net assets 117,459 98,669 99,129
_________ _________ _________
Capital and reserves
Called-up share capital 8,145 8,047 7,847
Share premium account 11,087 10,259 7,880
Special reserve 14,990 14,990 14,990
Warrant reserve 1,738 1,785 2,275
Capital redemption reserve 2,062 2,062 2,062
Capital reserve - realised 31,151 27,211 19,748
Capital reserve - unrealised 46,204 31,334 43,079
Revenue reserve 2,082 2,981 1,248
_________ _________ _________
Equity Shareholders' funds 117,459 98,669 99,129
_________ _________ _________
Net asset value per Ordinary share (pence):
Basic 360.53 306.56 315.84
_________ _________ _________
Diluted 323.79 276.45 283.69
_________ _________ _________
Reconciliation of Movements in Shareholders' Funds (unaudited)
As at 31 January 2007
Six months ended 31 January 2007
Share Capital Capital Capital
Share premium Special Warrant redemption reserve- reserve- Revenue
capital account reserve reserve reserve realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 July 2006 8,047 10,259 14,990 1,785 2,062 27,211 31,334 2,981 98,669
Net return on ordinary - - - - - 3,893 14,870 1,080 19,843
activities after taxation
Dividends paid - - - - - - - (1,979) (1,979)
Issue of Ordinary shares 62 721 - - - - - - 783
Exercise of Warrants 36 107 - (47) - 47 - - 143
_____ _______ _______ _______ _______ _______ _______ ______ _______
Balance at 31 January 2007 8,145 11,087 14,990 1,738 2,062 31,151 46,204 2,082 117,459
_____ _______ _______ _______ _______ _______ _______ ______ _______
Six months ended 31 January
2006
Share Capital Capital Capital
Share premium Special Warrant redemption reserve- reserve- Revenue
capital account reserve reserve reserve realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 July 2005 7,214 4,194 14,990 2,275 2,062 17,581 33,016 1,750 83,082
(restated)
Net return on ordinary - - - - - 2,167 10,063 495 12,725
activities after taxation
Dividends paid - - - - - - - (997) (997)
Issue of Ordinary shares 633 3,686 - - - - - - 4,319
_____ _______ _______ _______ _______ _______ _______ ______ _______
Balance at 31 January 2006 7,847 7,880 14,990 2,275 2,062 19,748 43,079 1,248 99,129
_____ _______ _______ _______ _______ _______ _______ ______ _______
Cash Flow Statement (unaudited)
Six months ended Six months ended
31 January 2007 31 January 2006
£'000 £'000
Return on ordinary activities before taxation 20,498 13,131
Adjustments for:
Realised gains on investments (3,509) (2,118)
Unrealised gains on investments (14,870) (10,064)
Effect of foreign exchange rates (384) (48)
Decrease/(increase) in accrued income 16 (46)
(Increase)/decrease in other debtors (56) 967
Increase in other creditors 21 6
Overseas withholding tax suffered (2) (58)
_____________ _____________
Net cash inflow from operating activities 1,714 1,770
Net cash outflow from servicing of finance (108) (218)
Net tax paid (433) (292)
Net cash outflow from financial investment (419) (4,713)
Equity dividends paid (1,979) (998)
_____________ _____________
Net cash outflow before financing (1,225) (4,451)
Issue of shares 926 4,319
_____________ _____________
Decrease in cash (299) (132)
_____________ _____________
Reconciliation of net cash flow to movements in net debt
Decrease in cash as above (299) (132)
Exchange movements 384 49
_____________ _____________
Movement in net debt in the period 85 (83)
Net debt at start of period (4,042) (7,364)
_____________ _____________
Net debt at end of period (3,957) (7,447)
_____________ _____________
Represented by:
Cash 3,669 1,007
Debt due within one year (7,626) (8,454)
_____________ _____________
(3,957) (7,447)
_____________ _____________
Notes to the Financial Statements
1. Accounting policies
The accounts have been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (UK GAAP) and with the Statement of
Recommended Practice for 'Financial Statements of Investment Trust Companies'
issued in December 2005. They have also been prepared on the assumption that
approval as an investment trust will continue to be granted.
The same accounting policies used for the year ended 31 July 2006 have
been applied.
Six months ended Six months ended
31 January 2007 31 January 2006
(unaudited) (unaudited)
2. Dividends £'000 £'000
Final dividend for 2006 - 3.45p (2005 - 3.45p) 1,110 999
Special dividend for 2006 - 2.70p (2005 - nil) 869 -
_____________ _____________
1,979 999
_____________ _____________
Six months ended Six months ended
31 January 2007 31 January 2006
(unaudited) (unaudited)
3. Income £'000 £'000
Income from investments
UK dividend income 34 34
Overseas dividends 2,538 1,544
_____________ _____________
2,572 1,578
_____________ _____________
Other income
Deposit interest 71 42
_____________ _____________
Total income 2,643 1,620
_____________ _____________
Six months ended 31 January 2007 Six months ended 31 January 2006
(unaudited) (unaudited)
4. Return per Ordinary share Revenue Capital Total Revenue Capital Total
Basic
Net revenue on ordinary activities after 1,080 18,763 19,843 495 12,230 12,725
taxation (£'000)
________ ________ ________ ________ ________ ________
Weighted average number of shares in issue 32,293,727 32,293,727 32,293,727 29,682,118 29,682,118 29,682,118
________ ________ ________ ________ ________ ________
Basic return per share (p) 3.34 58.10 61.44 1.67 41.20 42.87
________ ________ ________ ________ ________ ________
Diluted
Number of dilutive shares 3,575,507 3,575,507 3,575,507 4,135,719 4,135,719 4,135,719
________ ________ ________ ________ ________ ________
Diluted shares in issue 35,869,234 35,869,234 35,869,234 33,817,837 33,817,837 33,817,837
________ ________ ________ ________ ________ ________
Diluted return per share (p) 3.01 52.31 55.32 1.46 36.16 37.62
________ ________ ________ ________ ________ ________
The calculation of the diluted revenue and capital returns per Ordinary share
are carried out in accordance with Financial Reporting Standard No. 22,
"Earnings per Share". For the purposes of calculating diluted total, revenue
and capital returns per Ordinary share, the number of Ordinary shares is the
weighted average used in the basic calculation plus the number of Ordinary
shares deemed to be issued for no consideration on exercise of all Warrants by
reference to the average share price of the Ordinary shares during the period.
The calculations indicate that the exercise of Warrants would result in an
increase in the weighted average number of Ordinary shares of 3,575,507 (2006 -
4,135,719) to 35,869,234 (2006 - 33,817,837) Ordinary shares.
As at As at As at
31 January 2007 31 July 2006 31 January 2006
(unaudited) (audited) (unaudited)
5. Net asset value
Attributable net assets (£'000) 117,459 98,669 99,129
Number of Ordinary shares in issue 32,579,597 32,186,208 31,386,208
Net asset value per Ordinary share (p):
Basic 360.53 306.56 315.84
_____________ _____________ _____________
Diluted 323.79 276.45 283.69
_____________ _____________ _____________
The diluted net asset value per Ordinary share has been calculated on the
assumption that 5,348,903 (31 January 2006 and 31 July 2006 - 5,492,292)
Warrants in issue were exercised on the first day of the financial year at 100p
per share, giving a total of 37,928,500 (31 January 2006 - 36,878,500; 31 July
2006 - 37,678,500) Ordinary shares.
6. Transaction costs
During the period expenses were incurred in acquiring or disposing of
investments classified as fair value though profit or loss. These have been
expensed through capital and are included within gains on investments in the
Income Statement. The total costs were as follows:
Six months ended Six months ended
31 January 2007 31 January 2006
(unaudited) (unaudited)
£'000 £'000
Purchases 21 24
Sales 27 21
_____________ _____________
48 45
_____________ _____________
7. The financial information for the six months ended 31 January 2007 and 31
January 2006 comprises non-statutory accounts within the meaning of Section 240
of the Companies Act 1985. The financial information for the year ended 31 July
2006 has been extracted from published accounts that have been delivered to the
Registrar of Companies and on which the report of the auditors was unqualified
and did not contain a statement under either Section 237(2) or 238(3) of the
Companies Act 1985. The interim accounts have been prepared on the same basis as
the preceding annual accounts.
Copies of the Interim Report will be posted to Shareholders in April and further
copies will be available from the registered Office of the Company, One Bow
Churchyard, Cheapside, London EC4M 9HH
Aberdeen Asset Management PLC
Secretaries
11 April 2007
Independent Review Report to Aberdeen Asian Smaller Companies Investment Trust
PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 31 January 2007 which comprises the Income Statement,
Balance Sheet, Reconciliation of Movements in Shareholders' Funds, Cash Flow
Statement and the related notes 1 to 7. We have read the other information
contained in the Interim Report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The Interim Report, including the financial information held therein, is the
responsibility of, and has been approved by, the Directors. The Directors are
responsible for preparing the Interim Report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data, and based thereon, assessing whether the
accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 January 2007.
Ernst & Young LLP
11 April 2007
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