Final Results

RNS Number : 5753P

Aberdeen Asian Income Fund Limited

26 March 2009

ABERDEEN ASIAN INCOME FUND LIMITED

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2008

1. CHAIRMAN' STATEMENT

Highlights

Diluted NAV total return -8.4%
Share price total return -3.1%
MSCI AC Asia Pacific Free ex Japan Index total return -33.0%
Share price discount to NAV narrowed to 5.6%
Dividend maintained

Background

Although I am disappointed to report a fall in asset value in absolute terms, it is reassuring to be able to report that your Company outperformed its benchmark significantly on a relative basis in the year ended 31 December 2008. The diluted net asset value total return per Ordinary share was -8.4% compared to the total return on the MSCI All Country Asia Pacific ex-Japan Free Index of -33.0%.

This relative outperformance was attributable mostly to stock selection. Your Manager's commitment to investing in stable, cash-generating businesses run by sensible management teams achieved good results and in a year where strong risk aversion triggered a flight to quality, investor attention rotated back to defensive stocks with high yields.

During the year under review, the share price fell by 7.3% to 102p, as the discount to NAV narrowed from 10.5% to 5.6%.

Overview

2008 was a calamitous year for global equities. The credit crisis, which started in the US sub-prime mortgage market in August 2007, played out to devastating effect. The pace of the fallout accelerated following the collapse last September of Wall Street titan Lehman Brothers. Confidence evaporated as banks hoarded capital and credit markets froze. The malaise spread from the US and Europe to Asia, with panic and forced selling reaching a peak in October 2008. Plummeting stock prices and deteriorating growth prospects triggered unprecedented government responses to support financial markets and boost growth. Waves of indiscriminate selling were interspersed with short-lived relief rallies. By the end of the year, no market or economy was left unscathed.

The spectre of financial catastrophe triggered a massive flight to quality. In Asia, the previously 'hot' markets of China and India were punished heavily. Your Company benefited from a lack of exposure to India. In contrast, markets such as Malaysia that had lagged badly in the 2007 run-up were more resilient. The rotation of investor interest from momentum-driven stocks, including mining and resources, to more stable and defensive plays also worked in your Company's favour, as it is these companies that tend to boast the higher yields that we seek.

Asian economies succumbed to the negative effects of falling export demand and consumption, as the credit crunch and global downturn worsened. Their initial resilience - seen in steady growth through to August despite weakening exports and rising inflation - raised hopes of a possible 'decoupling' from the rapidly deteriorating US economy. However, these hopes were dashed as the financial maelstrom gathered pace and export demand plunged. GDP contracted in most economies, with Australia, Hong Kong and Singapore sinking into recession before the year end.

Economic policymakers in Asia had their hands full. Rising inflation early in the year posed a significant threat, as oil prices neared US$150 a barrel in July, forcing central banks to raise interest rates. However, as the credit crunch began to impact on Asian economies, demand for commodities tumbled as consumption took a sharp dive. Oil prices sank to below US$40 a barrel in December. Policy responses were abruptly reversed as interest rates were cut to support growth. The severity of the credit turmoil also led governments to pump money into wholesale markets and increase the flow of funds to financial institutions. Conventional monetary policy appeared ineffective and policymakers resorted to stimulatory measures.

In summary, cash and US Treasuries were the only havens in 2008, a year that saw indiscriminate selling and capitulation in virtually all asset classes. The flaws of free market global capitalism were brutally exposed, with government bailouts becoming increasingly necessary and accepted. Decoupling notions were dumped as the period showed that in times of severe stress, economies and stockmarkets move in tandem - downwards. Global re-pricing of risk also meant sharp falls in valuations, which in Asia's case was perhaps overdue following a five-year bull run.

Share Buy-backs, Dividends, Special Dividends and Gearing

At the time of the launch of the Company your Board indicated that an active discount management policy would be operated through the use of share buy-backs with the aim of maintaining the price of the Ordinary shares at a discount of no more than 5% to the underlying NAV. During the year the Company purchased in the market 760,000 Ordinary shares for cancellation. Your Board has absolute discretion to make purchases of Ordinary shares for cancellation, subject to the Listing Rules and Jersey law and the Directors will consider the merits of making further purchases of Ordinary shares subject to the volatility of the markets, if and when any suitable opportunities arise in the future. Subsequent to the year end this buyback trend has been reversed and I am pleased to advise that 200,000 new Ordinary shares have been issued at a premium to the prevailing NAV and in response to on-going demand from the market. At the time of writing the Ordinary shares are trading at a discount to NAV of 0.4%.

On 16 July 2008 the Board declared a first interim dividend of 2.0p per Ordinary share in respect of the year ended 31 December 2008 (2007 - 2.0p), which was paid on 28 August 2008 to shareholders on the register on 25 July 2008. A second interim dividend of 2.75p per Ordinary share (2007 - 2.75p) was announced on 15 January 2009 and was paid on 20 February 2009 to shareholders on the register on 23 January 2009. Following the payment of the second interim dividend, the Company's brought forward year end revenue reserve stands at £2.4m.

I commented last year that the Company's overall payout had been lifted by a number of special dividends from our investments and that they should not necessarily be expected to occur in the future. This could lead to a distorting effect when comparing future dividend pay-outs against last year's. In fact, our special dividend receipts in the year ended 31 December 2008 were only slightly reduced and represented approximately 9.6% (2007 12%) of total revenue. However, given current economic and commercial conditions in Asia, with corporate earnings under downward pressure we expect that the level of dividends (both special and ordinary) received in 2009 will be below that of 2008.

At the year end the Company had short-term borrowings of HKD102.8 million and USD9.3 million (GBP15.7 million in total) representing a gearing level of 13.4% of net assets. In March 2009 the Company's bank facility with Barclays Bank was extended for twelve months at a margin of 1.75% over LIBOR. Your Board is responsible for establishing and implementing the Company's gearing strategy, as advised by your Managers, and will continue to have a close regard to the level of gearing in the context of the current volatility in stockmarkets.

Outlook

The year ahead continues to present a challenging environment for investors. A global recovery will not take root until there are signs of a real improvement in credit markets and consumer confidence returns. Deleveraging and forced asset sales are expected to continue apace, among both corporates and individuals. Along with slowing exports and consumption, these portend further falls in earnings and growth for Asia, with the potential impact on dividends mentioned above.

Meanwhile, although it appears a distant prospect, one should not forget the potential long term inflationary consequences of today's government initiatives. Whether Asian markets have fully discounted the credit crisis and deepening global downturn remains to be seen. Receding inflationary pressures have offered some respite for economies, but another concern has taken its place, namely rising unemployment. This could fuel social unrest, an additional challenge for governments already grappling with economic woes.

Fundamentally, Asian economies are on a strong footing. National, corporate and personal debt levels are low, compared to the West. Governments have deep pockets to pump prime, backed by strong foreign reserves. In the wake of the Asian financial crisis in the mid nineteen nineties, most banks are now well capitalised. Their focus on a traditional originate-and-hold lending model has shielded them well from exposure to toxic financial assets.

The credit crunch has emphasised the divide between companies with strong cashflow and their overly leveraged rivals. The former will have the financial resources to invest in core businesses and gain market share, perhaps through the acquisition of struggling rivals, during the coming months and years.

Earnings are expected to deteriorate, given the rising downward revisions to forecasts. Undoubtedly, this will hurt dividend payouts. Your Manager's investing philosophy nevertheless remains unchanged: buying into high-quality companies with strong cashflow, low debt and trustworthy management, at the right price. This prudent approach served the portfolio well in 2008, and is likely to prove even more crucial in the uncertain months ahead.

Annual General Meeting

The Company's Annual General Meeting ('AGM') will be held at 2.30 p.m. on Wednesday 6 May 2009 at No.1 Seaton Place, St Helier, Jersey and your Board looks forward to meeting as many shareholders as possible. We will also be holding an informal shareholder presentation in London at 12.30 p.m. on Thursday 7 May 2009 at One Bow Churchyard, Cheapside, London for those shareholders who are unable to travel to Jersey for the AGM. The presentation will be accompanied by a buffet lunch and will provide shareholders with an opportunity to meet a representative from the management team and to receive a general update on the Company and the markets in the Far East. The meeting in London will not constitute a formal meeting of the Company and there will not be any resolutions to vote upon. Accordingly, If you are unable to attend the AGM, I would like to take this opportunity to encourage you to vote by returning your proxy (or letter of directions if you invest via the Aberdeen ISA or Savings Plan) which is enclosed with the Annual Report and Accounts. If you intend to attend either of the meetings, I would also be grateful if you would tick the relevant box when voting.

I look forward to reporting to you again with the Half Yearly Report to 30 June 2009, which will be issued to shareholders at the end of August 2009. Those shareholders who wish to keep up to date with developments between formal reports may wish to visit the Company's own website at www.asian-income.co.uk where there are monthly updates from the Manager as well as the latest net asset value and share price information which is updated daily.

Peter Arthur

Chairman

26 March 2009

2. MANAGER'S REVIEW

Overview

Asian markets fell at an increasing pace throughout most of 2008, after a five-year run-up that had lifted most market benchmarks to record highs. Initially, hopes that the region could decouple from the West had inspired sporadic countertrend rallies. The declines steepened, however, as the credit crisis spread. In September, the US government's decision to allow Lehman Brothers to fail proved a turning point, causing paralysis in the financial system. Assets experienced further sharp declines in value, with volatility at its highest since the crash of 1929. During an extraordinary five-week period in September and October, governments scrambled to unlock frozen credit markets through huge liquidity injections, sharp cuts in interest rates and extend funding to financial institutions.

By the end of the year, Asian stockmarkets had fallen more than developed ones. This was due partly to an abrupt slowdown in exports, which showed up in weaker economic data and corporate earnings growth. Although domestic consumption in Asia had grown in recent years, it had not increased sufficiently to make up for the sudden fall in external demand, particularly from developed markets in the West. Even China and India, with large, fast-growing economies, saw their growth rates tumble to single digits by the third quarter, while the more open and trade-dependent economies of Hong Kong and Singapore slipped into recession. The deceleration was made more sudden by declining domestic spending which had been in retreat since the second quarter. Inflation - in the shape of record food and fuel prices - had begun to erode incomes. In hindsight, the delayed effect of higher interest rates, needed to cool price rises then, continued to mute demand.

Altogether, market indices lost between 20% and 60% in sterling terms, while the MSCI Asia Pacific ex-Japan Index fell by 33%, equal to about half its cumulative gains from the previous four years. Among the worst hit was India, where foreign investors withdrew record sums. There appeared an element of forced selling as leveraged investors raised cash to meet redemptions elsewhere.

Performance Review

Against this backdrop, the diluted NAV total return was -8.4%. In relative returns, however, the decline translates into a significant outperformance versus the benchmark MSCI Asia Pacific ex-Japan index which posted a return of 33.0%.

Overall, the portfolio's defensive footing has helped it stay resilient amid the plunge in equity prices. This was clearly underlined by the breakdown in contribution to relative return, in which the asset allocation effect accounted for only about a third of the overall outperformance, while stock selection made up the remaining two-thirds.

Also, unlike the previous year, in which gains had been concentrated in several markets and sectors, last year's falls were felt across the board, with those that had attracted the 'hot money' suffering most. Conversely, the more neglected markets, such as Malaysia and Thailand, had less room to fall.

Our lack of exposure to India added most to relative return. Although we like the country's domestic growth prospects and there are many companies that meet our quality criteria, dividend yields continue to be poor. Similarly, our overweight to Malaysia, where the economy expanded at a measured pace, was also beneficial. The preference is for high dividend-paying companies with good cash flows such as lenders (Hong Leong Bank and Public Bank), as well as consumer stocks (Guinness Anchor, BAT Malaysia and Digi.com). Collectively, they added most to stock selection. Additionally, the banks had bucked global trends because of their lack of exposure to toxic assets, unlike their more sophisticated counterparts in the West.

Thailand continues to present elevated political risk, though much of this is already reflected in low share valuations. The kingdom has been wracked by a deep political divide. Large protests and sit-ins were mobilised during the review period by both pro- and anti-Thaksin groups, the worst of which saw Thailand's two main international airports blockaded in November, bringing air travel to a standstill. The disruption led to fresh elections, and yet another prime minister, adding further murkiness to the country's already uncertain outlook. Despite the upheaval, the fund's overweight position in Thailand contributed positively to performance. This was due mostly to the good relative performance of holdings such as Advanced Info and Siam Makro, but the baht, perhaps surprisingly, was also stronger than other Asian currencies.

In contrast, the underweight to China cost the most in relative performance. However, we continue to prefer to gain exposure via traditional Hong Kong stocks. Although this may cost us in the short term, we are comfortable with our Hong Kong holdings, which have healthy balance sheets, high standards of transparency and are run by shareholder-focused managements.

In selection terms, our Singapore holdings, such as SingPost, Singapore Press Holdings, United Overseas Bank, ST Engineering and SingTel outperformed the benchmark, along with Taiwanese holdings, Taiwan Mobile and TSMC.

Portfolio Activity

We sold Taiwan's Fubon Financial because of deteriorating prospects and divested Malaysian lender Maybank and Taiwanese lender Sinopac, after management suffered a loss of focus. Maybank was a relatively recent holding but we became apprehensive about its spate of overseas acquisitions, while Sinopac's management failed to live up to expectations. We also disposed of Australia's SP Ausnet and Hong Kong-listed utility CLP, both of which had outperformed the broader market, and Indonesia's Unilever in view of more attractive opportunities elsewhere.

In terms of buying, we introduced Australia's largest general insurer QBE as its yield had become attractive after its shares had fallen. The insurer's management has an excellent track record in controlling risk and takes a conservative approach towards its business and balance sheet. We also initiated a holding in Malaysia's Digi.com because of its defensiveness and attractive dividend payout.

Outlook

The outlook for dividend yields is likely to get dimmer in the year ahead, in line with the gloomier corporate earnings forecasts. Companies will conserve cash against the backdrop of global economic contraction, increasing difficulties in obtaining funds from traditional sources, as well as a sharp deterioration in the operating environment.

At the same time, we expect Asian equity markets to remain volatile, as more bad news is expected. Sentiment is weak because the speed of the contraction had taken everyone by surprise, underlining the region's dependence on global trade.

Although regional governments have announced billions in stimulus measures, hoping that state spending and tax cuts will trickle down and encourage consumption, the benefits will take time to kick in. Having said that, however, Asia's fundamentals are still sound. Regional economies have not suffered from the same excesses that have afflicted the West, which should allow them to recover faster eventually. Foreign exchange reserves are considerable and debt is manageable, unlike a decade ago.

We also believe that the quality of our holdings will stand out in this environment. We foresee the better-managed companies being able to consolidate their positions as weaker rivals stumble. Given the decline in valuations, there should be attractive opportunities to add to our existing holdings or acquire new ones.

Aberdeen Asset Management Asia Limited

26 March 2009

3. STATEMENT OF DIRECTORS' RESPONSIBILITIES

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

Jersey Company law requires the Directors to prepare financial statements for each financial period in accordance with any generally accepted accounting principles. The financial statements of the Company are required by law to give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the Directors should:

select suitable accounting policies and then apply them consistently;
make judgments and estimates that are reasonable and prudent;
specify which generally accepted accounting principles have been adopted in their preparation; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The Directors are responsible for keeping accounting records which are sufficient to show and explain its transactions and are such as to disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements prepared by the company comply with the requirements of the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

The Directors confirm that to the best of their knowledge:

the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
the Annual 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 Income Fund Limited

P A K Arthur

26 March 2009

4. BUSINESS REVIEW

Risk

A review of the Company's operations is given in the Chairman's Statement and the Manager's Review. This includes a review of the business of the Company and its principal activities, likely future developments of the business, recommended final dividend and details of the issue of new shares during the year by the Company. The major risks associated with the Company are detailed below and in Note 15 to the Financial Statements.

An investment in the Ordinary shares and/or Warrants is only suitable for investors capable of evaluating the risks (including the potential risk of capital loss) and merits of such investment and who have sufficient resources to bear any loss which may result from such investment. Furthermore, an investment in the Ordinary shares and/or Warrants should constitute part of a diversified investment portfolio. The risks described below are the principal risks which are considered by the Directors to be material to shareholders and potential investors in the Company. Greater detail on these risks is provided in Note 15 to the Accounts.

Principal Risk Factors

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 for the Ordinary shares, 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 the net asset value of the Ordinary shares and investors may not be able to realise the value of their original investment. There is no guarantee that the Board's discount management policy will achieve its objective.

Warrants

Warrants represent a geared investment, so a relatively small movement in the market price of the Ordinary shares may result in a disproportionately large movement, unfavourable as well as favourable, in the market price of the Warrants.

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 and any future dividend growth will depend primarily on the level of income received from its investments. The Company's income is derived from ordinary and special dividends and the level of these dividends received in any year is liable to fluctuation. Accordingly, the amount of the dividends paid to Shareholders may also 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.

Market Risks

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. Market risk comprises three elements, interest rate risk, currency risk and other price risk. Further details of these risks are disclosed in note 15. 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 returns or restrict investment opportunities.

General

The Company does not have a fixed winding-up date and, therefore, unless Shareholders vote to wind up the Company, Shareholders will only be able to realise their investment through the market.

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) 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

Peter Arthur

Chairman

26 March 2009

5 INCOME STATEMENT

		Year ended			Year ended
		31 December 2008			31 December 2007
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Investment income	3
Dividend income		7,017	5	7,022	6,939	-	6,939
Interest income		948	-	948	833	-	833
		_______	_______	_______	_______	_______	_______
Total revenue		7,965	5	7,970	7,772	-	7,772
(Losses)/gains on financial assets at fair value through profit or loss	9	-	(11,003)	(11,003)	-	12,186	12,186
Currency (losses)/gains	13	-	(5,908)	(5,908)	-	365	365
		_______	_______	_______	_______	_______	_______
		7,965	(16,906)	(8,941)	7,772	12,551	20,323
		_______	_______	_______	_______	_______	_______
Expenses
Investment management fee	4	(475)	(712)	(1,187)	(505)	(757)	(1,262)
Other operating expenses	5	(726)	-	(726)	(622)	-	(622)
		_______	_______	_______	_______	_______	_______
Profit/(loss) before finance costs and tax		6,764	(17,618)	(10,854)	6,645	11,794	18,439
		_______	_______	_______	_______	_______	_______
Finance costs	6	(208)	(312)	(520)	(339)	(508)	(847)
		_______	_______	_______	_______	_______	_______
Profit/(loss) before tax		6,556	(17,930)	(11,374)	6,306	11,286	17,592

Tax expense		(369)	-	(369)	(317)		(317)
		_______	_______	_______	_______	_______	_______
Profit/(loss) for the year attributable to equity Shareholders		6,187	(17,930)	(11,743)	5,989	11,286	17,275
		_______	_______	_______	_______	_______	_______

Earnings per Ordinary share (pence):	8
Basic and diluted		5.69	(16.49)	(10.80)	5.45	10.27	15.72
		_______	_______	_______	_______	_______	_______

The total column of this statement represents the Income Statement of the Company, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of Aberdeen Asian Income Fund Limited. There are no minority interests.
In accordance with the undertaking provided by the Board in the launch Prospectus, dividends may only be paid of the Company's distributable reserves.
The accompanying notes are an integral part of the financial statements.

6. BALANCE SHEET

		As at	As at
		31 December	31 December
		2008	2007
	Notes	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss	9	127,490	146,686
		__________	__________
Current assets
Cash and cash equivalents		4,968	3,243
Other receivables	10	673	706
		__________	__________
		5,641	3,949
		__________	__________
Current liabilities
Bank loans	11	(15,686)	(15,010)
Other payables	11	(316)	(784)
		__________	__________
		(16,002)	(15,794)
		__________	__________
Net current liabilities		(10,361)	(11,845)
		__________	__________
Net assets		117,129	134,841
		__________	__________
Share capital and reserves
Ordinary share capital	12	108,440	109,200
Warrant reserve		2,200	2,200
Capital redemption reserve		1,560	800
Capital reserve	13	(513)	18,215
Revenue reserve		5,442	4,426
		__________	__________
Equity Shareholders' funds		117,129	134,841
		__________	__________
Net asset value per Ordinary share (pence):	14
Basic		108.01	123.48
		__________	__________
Diluted		108.01	122.90
		__________	__________

7. STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2008
			Capital
	Share	Warrant	redemption	Capital	Revenue	Retained
	capital	reserve	reserve	reserve	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance	109,200	2,200	800	18,215	4,426	-	134,841
Purchase of own shares	(760)	-	760	(798)	-	-	(798)
Profit for the year	-	-	-	-	-	(11,743)	(11,743)
Transferred from retained earnings to capital reserve{A}	-	-	-	(17,930)	-	17,930	-
Transferred from retained earnings to revenue reserve	-	-	-	-	6,187	(6,187)	-
Dividends paid	-	-	-	-	(5,171)	-	(5,171)
	________	______	________	_______	_______	_______	________
Balance at 31 December 2008	108,440	2,200	1,560	(513)	5,442	-	117,129
	________	______	________	_______	_______	_______	________

For the year ended 31 December 2007
			Capital
	Share	Warrant	redemption	Capital	Revenue	Retained
	capital	reserve	reserve	reserve	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance	110,000	2,200	-	7,786	3,383	-	123,369
Purchase of own shares	(800)	-	800	(857)	-	-	(857)
Profit for the year	-	-	-	-	-	17,275	17,275
Transferred from retained earnings to capital reserve{A}	-	-	-	11,286	-	(11,286)	-
Transferred from retained earnings to revenue reserve	-	-	-	-	5,989	(5,989)	-
Dividends paid	-	-	-	-	(4,946)	-	(4,946)
	________	______	________	_______	_______	_______	________
Balance at 31 December 2007	109,200	2,200	800	18,215	4,426	-	134,841
	________	______	________	_______	_______	_______	________
{A} Represents the capital (loss)/profit attributable to equity Shareholders per the Income Statement. 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.

8. CASH FLOW STATEMENT

		Year ended		Year ended
		31 December 2008		31 December 2007
	Notes	£'000	£'000	£'000	£'000
(Loss)/profit for the year{A}			(11,743)		17,275
Non cash stock dividend			(5)		-
Add back interest payable	6		520		847
Add back taxation paid			369		317
Losses/(gains) on investments held at fair value through profit or loss	9		11,003		(12,186)
Net currency losses/(gains)	13		5,908		(365)
Decrease in amounts due from brokers	10		67		-
Increase in other receivables			(49)		(258)
(Decrease)/increase in other payables			(87)		197
			_______		_______
Net cash inflow from operating activities before finance costs and tax			5,983		5,827

Bank and loan interest paid			(886)		(644)

Overseas taxation paid			(369)		(317)
			_______		_______
Net cash inflow from operating activities			4,728		4,866

Investing activities
Purchases of investments		(20,475)		(21,208)
Sales of investments		28,673		23,976
		_______		_______
Net cash inflow from investing activities			8,198		2,768

Financing activities
Purchase of own shares	13	(798)		(857)
Dividends paid	7	(5,171)		(4,946)
Loans drawn down		14,949		-
Loans repaid		(19,877)		-
		_______		_______
Net cash outflow from financing activities			(10,897)		(5,803)
			_______		_______
Net increase in cash and cash equivalent			2,029		1,831
Cash and cash equivalents of the start of the year			3,243		1,327
Effect of foreign exchange rate changes			(304)		85
			_______		_______
Cash and cash equivalents at the end of the year	15, 2		4,968		3,243
			_______		_______

{A} Includes income from dividends of £7,031,000 gross (2007 - £6,890,000 gross) and interest income of £837,000 (2007 - 573,000). The accompanying notes are an integral part of the financial statements.

9.NOTES TO THE FINANCIAL STATEMENTS


For the year ended 31 December 2008

1. Principal activity The Company is a closed-end investment company incorporated in Jersey, with its shares being listed on the London Stock Exchange.

2.	Accounting policies
	The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Reporting Interpretations Committee of the IASB (IFRIC).

	(a)	Basis of preparation
		The financial statements are prepared on a historical cost basis, except for derivative financial instruments and financial assets that have been measured at fair value through profit or loss.

		The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2008.

		The financial statements are presented in sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

		Where guidance set out in the Statement of Recommended Practice ('SORP') for investment trusts issued by the Association of Investment Companies ('AIC') is consistent with the requirement of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

		The Company did not adopt any new or amended IFRS and IFRIC interpretations during the year which had any effect on the financial statements of the Company, or require additional disclosures.

		At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective:
		-		Amendment to IAS 1 - Presentation of Financial Statements: A Revised Presentation (effective for annual periods beginning on or after 1 January 2009)
		-		Amendments to IAS 23 - Borrowing Costs (effective for annual periods beginning on or after 1 January 2009)
		-		Amendments to IAS 27 - Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 1 January 2009)
		-		Amendments to IAS 36 - Impairment of Assets (effective for annual periods beginning on or after 1 January 2009)
		-		Amendments to IAS 39 - Financial Instruments: Recognition and Measurement (effective for annual periods beginning on or after 1 January 2009)
		-		Revised IFRS 1 - First-time Adoption of International Financial Reporting Standards (effective for annual periods beginning on or after 1 January 2009)
		-		Amendments to IFRS 7 - Financial Instruments: Disclosures - Improving Disclosures about Financial Instruments (effective for annual periods beginning on or after 1 January 2009)

		The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact on the financial statements of the Company. The Company concludes however that certain additional disclosures may be necessary and will be considered on their application.

	(b)	Segmental reporting
		The Directors are of the opinion that the Company is engaged in a single segment of business, the primary statement being investment business. A secondary statement of investment on a geographic basis and an analysis is provided in the Annual Report
	(c)	Income
		Dividends receivable on equity shares (other than special dividends) are brought into account on the ex-dividend date. 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. Where the Company has elected to receive dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Special dividends are credited to capital or revenue according to their circumstances. Dividend revenue is presented gross of any non-recoverable withholding taxes, which are disclosed separately in the Income Statement.

		The fixed returns on debt securities and non-equity shares are recognised using the effective interest rate method.

		Interest receivable from cash and short-term deposits is accrued to the end of the financial period.

	(d)	Expenses
		All expenses, with the exception of interest expenses, which are recognised using the effective interest method, are accounted for on an accruals basis. Expenses are charged through the revenue column of the Income Statement except as follows:
		-	expenses which are incidental to the acquisition or disposal of an investment are treated as capital and separately identified and disclosed in note 9;
		-	expenses (including share issue costs) are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated; and
		-	the Company charges 60% of investment management fees and finance costs to capital, in accordance with the Board's expected long term return in the form of capital gains and income respectively from the investment portfolio of the Company.

	(e)	Taxation
		Under Article 123A of the Income Tax (Jersey) law 1961, as amended, the Company has obtained Jersey exempt company status for the year and is therefore exempt from Jersey income tax on non Jersey source income and bank interest (by concession). A £600 annual exempt company fee is payable by the Company. As from 1 January 2009 the exempt company regime will no longer apply. The general rate of corporation tax for companies resident in Jersey will be 0% from this date.

		However, in some jurisdictions, investment income and capital gains are subject to withholding tax deducted at the source of the income. The Company presents the withholding tax separately from the gross investment income in the Income Statement. For the purpose of the Cash Flow Statement, cash inflows from investments are presented net of withholding taxes, when applicable.

	(f)	Investments
		All investments have been designated upon initial recognition as fair value through profit or loss. This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the grouping is provided internally on that basis.

		Purchases of investments are recognised on a trade date basis and designated upon initial recognition at fair value through the profit or loss. Sales of assets are also recognised on a trade date basis. Proceeds are measured at fair value, which are regarded as the proceeds of sale less any transaction costs.

		The fair value of the financial assets is based on their quoted bid price at the Balance Sheet date, without deduction for any estimated future selling costs. Unquoted investments would be valued by the Directors using primary valuation techniques such as earnings multiples, recent transactions and net assets.
		Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as 'Gains on financial assets at fair value through profit or loss'. Also included within this caption are transaction costs in relation to the purchase or sale of investments, including the difference between the purchase price of an investment and its bid price at the date of purchase.

	(g)	Cash and cash equivalents
		Cash comprises cash in hand and at banks. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in values.

	(h)	Other receivables and payables
		Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their recoverable amount. Other payables are non interest bearing and are stated at their payable amount.

	(i)	Dividends payable
		Dividends are recognised in the financial statements in the period in which they are paid.

	(j)	Nature and purpose of reserves
		Warrant reserve
		The Warrant reserve was created on the issue of the 22,000,000 Warrants at the launch of the Company. Each Warrant issued entitles the holder to subscribe in cash for one Ordinary share on the terms contained in note 12. The reserve reflects the issue price of unexercised Warrants.

		Capital redemption reserve
		The capital redemption reserve is created on the cancellation of share capital and the balance reflects the value of Ordinary share capital redeemed by the Company. This reserve is not distributable.

		Capital reserve (see note 13)
		(i)		Realised
				This reserve reflects any gains or losses on investments realised in the period that have been recognised in the Income Statement. In addition, any prior unrealised gains or losses on such investments are transferred from the unrealised capital reserve to realised capital reserve on disposal of the investment.
		(ii)		Investment holdings gains
				This reserve reflects any increases and decreases in the fair value of investments which are recognised in the Income Statement.

		Revenue reserve
		This reserve reflects all income and costs which are recognised in the revenue column of the Income Statement. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.

	(k)	Foreign currency
		Monetary assets and liabilities denominated in foreign currencies are converted into Sterling at the rate of exchange ruling at the Balance Sheet date. The financial statements are presented in sterling, which is the Company's functional and presentational currency. The Company's performance is evaluated and its liquidity is managed in sterling. Therefore sterling is considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. Transactions during the year involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Gains or losses arising from a change in exchange rates subsequent to the date of a transaction is included as an exchange gain or loss in revenue or capital in the Income Statement, depending on whether the gain or loss is of a revenue or capital nature.

	(l)	Borrowings
		Monies borrowed to finance the investment objectives of the Company are stated at the amount of the net proceeds immediately after the issue plus cumulative finance costs less cumulative payments made in respect of the debt. The finance cost of such borrowings are allocated to years over the term of the debt at a constant rate on the carrying amount and, as per the Prospectus, are charged 40% to revenue and 60% to capital reserves to reflect the Company's investment policy and prospective income and capital growth.

		Borrowings are held at amortised cost using the effective interest rate method.

		Year ended	Year ended
		31 December 2008	31 December 2007
3.	Income	£'000	£'000
	Income from investments
	Overseas dividends	7,017	6,939
		____________	____________
	Interest income
	Bond interest	832	773
	Deposit interest	116	60
		____________	____________
		948	833
		____________	____________
	Total income	7,965	7,772

	The comparative figure for the year ended 31 December 2007 relating to overseas dividends has been adjusted to take account of a reclassification of withholding tax.

		Year ended			Year ended
		31 December 2008			31 December 2007
		Revenue	Capital	Total	Revenue	Capital	Total
4.	Investment management fee	£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fee	475	712	1,187	505	757	1,262
		________	________	________	________	________	________

	The Company has an agreement with Aberdeen Private Wealth Management (APWM) for the provision of management services. This agreement has been sub-delegated to Aberdeen Asset Management Asia Limited (AAM Asia).

	During the year the management fee was payable monthly in arrears and was based on an annual amount of 1% of the net asset value of the Company valued monthly. The balance due to APWM at the year end was £167,000 (2007 - £213,000). The investment management fees are charged 40% to revenue and 60% to capital.

		Year ended			Year ended
		31 December 2008			31 December 2007
		Revenue	Capital	Total	Revenue	Capital	Total
5.	Other operating expenses	£'000	£'000	£'000	£'000	£'000	£'000
	Directors' fees	115	-	115	104	-	104
	Marketing contribution	111	-	111	103	-	103
	Auditors' remuneration:
	- statutory audit	29	-	29	14	-	14
	- interim accounts review	5	-	5	5	-	5
	Custodian charges	143	-	143	152	-	152
	Secretarial and administration fee	109	-	109	104	-	104
	Other	214	-	214	140	-	140
		________	________	________	________	________	________
		726	-	726	622	-	622
		________	________	________	________	________	________

	The Company has an agreement with Aberdeen Asset Managers Limited (AAM) for the provision of marketing services in relation to the Company's participation in the Aberdeen Investment Trust share plan and ISA. The total fees paid are based on an annual rate of £109,000 (2007 - £101,100). There was no sum due to AAM at the year end (2007 - £nil).

	In addition, Aberdeen Private Wealth Management Limited (APWM) is entitled to an annual company secretarial and administration fee of £109,000, which increases annually in line with any increases in RPI. A balance of £27,000 (2007 - £26,000) was payable to APWM at the year end.

		Year ended			Year ended
		31 December 2008			31 December 2007
		Revenue	Capital	Total	Revenue	Capital	Total
6.	Finance costs	£'000	£'000	£'000	£'000	£'000	£'000
	On bank loans and overdrafts	208	312	520	339	508	847
		________	________	________	________	________	________

	Finance costs are charged 40% to revenue and 60% to capital as disclosed in the accounting policies.

		Year ended	Year ended
		31 December 2008	31 December 2007
7.	Dividends on equity shares	£'000	£'000
	Amounts recognised as distributions to equity holders in the year:
	Second interim dividend for 2007 - 2.75p per share (2006 - 2.5p)	2,995	2,750
	First interim dividend for 2008 - 2.0p per share (2007 - 2.0p)	2,176	2,196
		____________	____________
		5,171	4,946
		____________	____________

	The second interim dividend for 2008, amounting to £2,982,100 (2007 - £3,003,000), has not been included as a liability in these financial statements as it was announced and paid after 31 December 2008.

	The table below sets out the total dividends paid in respect of the financial year. The revenue available for distribution by way of dividend for the year is £6,187,000 (2007 - £5,989,000).

		2008	2007
		£'000	£'000
	First interim dividend for 2008 - 2.0p per share (2007 - 2.0p)	2,176	2,196
	Second interim dividend for 2008 - 2.75p per share (2007 - 2.75p)	2,982	3,003
		____________	____________
		5,158	5,199
		____________	____________

8.	Earnings per share
	Basic
	The earnings per Ordinary share is based on the net loss after taxation of £11,743,000 (2007 - profit of £17,275,000) and on 108,724,754 (2007 - 109,862,890) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

	The earnings per Ordinary share detailed above can be further analysed between revenue and capital as follows:

		Year ended			Year ended
		31 December 2008			31 December 2007
		Revenue	Capital	Total	Revenue	Capital	Total
	Net profit (£'000)	6,187	(17,930)	(11,743)	5,989	11,286	17,275
		_______	_______	__________	______	______	__________
	Weighted average number of Ordinary shares in issue			108,724,754			109,862,890
				__________			__________
	Return per Ordinary share (pence)	5.69	(16.49)	(10.80)	5.45	10.27	15.72
		_______	_______	_________	______	______	_________
	Diluted
	The calculation of the diluted earnings per Ordinary shares is based on the average traded share price over the year. As a result warrants that could potentially dilute the earnings per share in the future are not included in calculation of the diluted earnings per share because they are anti-dilutive for the period presented.

				Year ended	Year ended
9.	Investments held at fair value through			31 December 2008	31 December 2007
	profit or loss			£'000	£'000
	Opening valuation			146,686	136,714
	Movements in the year:
	Purchases at cost			20,480	20,416
	Sales	-	proceeds	(28,673)	(22,630)
		-	realised gains on sales	2,143	4,584
	(Decrease)/increase in investment holdings fair value			(13,146)	7,602
				___________	___________
	Closing valuation at 31 December 2008			127,490	146,686
				___________	___________
	Closing book cost			124,190	130,240
	Closing investment holdings fair value gains			3,300	16,446
				___________	___________
				127,490	146,686
				___________	___________

	The portfolio valuation			£'000	£'000
	Listed on stock exchanges at market valuation:
	Overseas:
	- equities			119,167	138,915
	- bonds			8,323	7,771
				___________	___________
	Total			127,490	146,686
				___________	___________

	Gains on held-at-fair-value investments			£'000	£'000
	Realised gains on sales of investments			2,143	4,584
	(Decrease)/increase in investment holdings fair value			(13,146)	7,602
				___________	___________
				(11,003)	12,186
				___________	___________

	All investments are categorised as held at fair value through profit or loss.

	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 (losses)/gains on financial assets at fair value through profit or loss in the Income Statement. The total costs were as follows:
				Year ended	Year ended
				31 December 2008	31 December 2007
				£'000	£'000
	Purchases			54	29
	Sales			93	32
				___________	___________
				147	61
				___________	___________

		2008	2007
10.	Debtors: amounts falling due within one year	£'000	£'000
	Prepayments and accrued income	664	625
	Amounts due from brokers	-	67
	Other receivables	9	14
		___________	___________
		673	706
		___________	___________
	None of the above assets are past their due date or impaired.

			2008	2007
11.	Creditors: amounts falling due within one year		£'000	£'000
	(a)	Bank loans	15,686	15,010
			___________	___________

		At the year end, the Company's unsecured bank loans of HK$102,825,000 and US$9,285,000 equivalent to £9,228,000 (2007 - £8,870,000) and £6,458,000 (2007 - £6,140,000) respectively were drawn down from the £30,000,000 facility with Barclays Bank at fixed interest rates of 1.19% (2007 - 5.44%) and 0.95% (2007 - 5.80%), respectively.

		On 22 January 2009 both unsecured bank loans were rolled over. At the signing of this report HK$102,825,000 and US$9,285,000 remained drawn down from the £30,000,000 facility with Barclays Bank at fixed interest rates of 1.45% and 1.72563% respectively. Both are repayable on 31 March 2009.
		The bank loans outstanding at 31 December 2008 are valued at the middle rates of exchange at the year end, resulting in cumulative foreign exchange loss of £907,000 (2007 - loss of £20,000) against the original book cost of these loans.

			2008	2007
	(b)	Other payables	£'000	£'000
		Other payables	316	784
			___________	___________

		2008		2007
12.	Called-up share capital	Number	£'000	Number	£'000
	Authorised
	Ordinary shares of no par value	Unlimited	110,000	Unlimited	110,000

	Issued and fully paid
	Balance brought forward	109,200,000	109,200	110,000,000	110,000
	Purchased for cancellation in the year	(760,000)	(760)	(800,000)	(800)
		____________	____________	____________	____________
	Balance carried forward	108,440,000	108,440	109,200,000	109,200
		____________	____________	____________	____________

	During the year 760,000 (2007 - 800,000) Ordinary shares were purchased for cancellation by the Company at a total cost, including transaction costs, of £798,000 (2007 - £857,000). Following the share purchase 108,440,000 (2007 - 109,200,000) Ordinary shares remain in issue. Further details of the share purchases are contained in the Directors' Report in the Annual Report.

	The Ordinary shares give Shareholders the entitlement to all of the capital growth in the Company's assets and to all the income from the Company that is resolved to be distributed.

	At 31 December 2008 there were 22,000,000 (2007 - 22,000,000) Warrants in issue. The Warrantholders are entitled to subscribe in cash for one Ordinary share at 120p on the subscription date, which is the twentieth business day after the dispatch to Ordinary Shareholders of the Company's Annual Report and Accounts or half-yearly report for each year, commencing with the twentieth business day after the dispatch to Ordinary Shareholders of the Company's Annual Report and Accounts for the year ending 31 December 2009 and ending on the twentieth business day after the dispatch to Ordinary Shareholders of the Company's Annual Report and Accounts for the year ending 31 December 2012.

	Voting rights
	In accordance with the Articles of Association of the Company, on a show of hands, every member (or duly appointed proxy) present at a general meeting of the Company has one vote; and, on a poll, every member present in person or by proxy shall have one vote for every 1p nominal amount of Ordinary shares held.

	The Company does not have any externally imposed capital requirements.

	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 capital structure of the Company consists of debt, cash and cash equivalents and equity, comprising issued capital, reserves and retained earnings. The Company's risk management committee reviews the capital structure on a semi-annual basis. As a part of this review the committee considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the committee the Company will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt. The Company's overall strategy remains unchanged from 2007.

		Capital	Capital	Total
		reserve	reserve	capital
		- realised	- unrealised	reserve
13.	Capital reserve	£'000	£'000	£'000
	Year ended 31 December 2008
	At 1 January 2008	1,789	16,426	18,215
	Loans - movement in unrealised currency loss	-	(887)	(887)
	Currency loss	(5,021)	-	(5,021)
	Movement in unrealised fair value	-	(13,146)	(13,146)
	Gain on realisation of investments	2,143	-	2,143
	Stock dividend	5	-	5
	Costs charged to capital	(1,024)	-	(1,024)
	Purchase of own shares	(798)	-	(798)
		_________	_________	_________
	At 31 December 2008	(2,906)	2,393	(513)
		_________	_________	_________

		Capital	Capital	Total
		reserve	reserve	capital
		- realised	- unrealised	reserve
	Year ended 31 December 2007	£'000	£'000	£'000
	At 1 January 2007	(1,713)	9,499	7,786
	Loans - movement in unrealised currency loss	-	(675)	(675)
	Currency gain	1,040	-	1,040
	Movement in unrealised fair value	-	7,602	7,602
	Gain on realisation of investments	4,584	-	4,584
	Costs charged to capital	(1,265)	-	(1,265)
	Purchase of own shares	(857)	-	(857)
		_________	_________	_________
	At 31 December 2007	1,789	16,426	18,215
		_________	_________	_________

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

		Net asset value	Net asset values	Net asset value	Net asset values
		per share	attributable	per share	attributable
		2008	2008	2007	2007
	Basic	p	£'000	p	£'000
	Ordinary shares	108.01	117,129	123.48	134,841
		___________	___________	___________	___________
	The basic net asset value per Ordinary share is based on 108,440,000 (2006 - 109,200,000) Ordinary shares, being the number of Ordinary shares in issue at the year end.

		Net asset value	Net asset values	Net asset value	Net asset values
		per share	attributable	per share	attributable
		2008	2008	2007	2007
	Diluted	p	£'000	p	£'000
	Ordinary shares	108.01	117,129	122.90	161,241
		___________	___________	___________	___________

	The calculation of the diluted net asset value per Ordinary share is based on the total number of Ordinary shares in issue at the year end and on the assumption that those Warrants which are not exercised at the year end, amounting to 22,000,000 Warrants as at 31 December 2008 (31 December 2007 - 22,000,000) were exercised on the first day of the financial year at 120p per share, giving a total of 130,440,000 Ordinary shares (2007 - 131,200,000).

	The diluted net asset value has not been shown as the calculation would result in an anti-dilutive effect.

15.

Financial instruments

The Company's financial instruments comprise securities, other investments, cash balances and bank overdrafts.

The main risks arising from the Company's financial instruments are (i) market price risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk, (iii) credit risk and (iv) gearing risk.

The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing each of these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors.

(i)

Market price risk

The fair value or future cash flows of 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 fair value of the investments in fixed interest rate securities;

- the level of income receivable on cash deposits;

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

Financial assets

Although the majority of the Company's financial assets comprise equity shares which neither pay interest nor have a stated maturity date, at the year end the Company had a holding in a fixed rate Indonesian Government Bond, in the form of a Currency Loan Note issued by Deutsche Bank, valued at £8,323,000 (2007 - £7,771,000). Bond prices are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short-term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee entity.

Returns from bonds are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. This means that if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred.

Financial liabilities

The Company primarily finances its operations through use of equity, retained profits and bank borrowings. The credit facility for £30 million due to expire on the 28 November 2008 has been extended until 31 March 2009 and details of the terms and conditions of the loan are disclosed in note 11. Current loans drawndown are of HK$102,825,000 (2007 - HK$137,675,000), (equivalent to £9,228,000 at 31 December 2008; 2007 - £8,870,000) were drawn down at an all-in rate of 1.19% (2007 - 5.44%) per annum and US$9,285,000 (2007 - US$12,222,700), (equivalent to £6,458,000 at 31 December 2008; 2007 - £6,140,000) at an all-in rate of 0.95% (2007 - 5.80%) per annum. Both tranches are unsecured. Interest is due on both tranches at the maturity date, being 31 March 2009 respectively. The loans are included in creditors falling due within one year.

The Board actively monitors its bank borrowings. A decision on whether to roll over its existing borrowings will be made prior to their maturity dates, taking into account the Company's policy of not having any fixed, long-term borrowings.

The interest rate profile of the Company (excluding short term debtors and creditors as stated previously) was as follows:

Weighted average
period for which

Weighted
average

Floating

Fixed

Non-interest

rate is fixed

interest rate

rate

bearing

At 31 December 2008

Years

£'000

Assets

Indonesian Government Bond

8.56

10.00

8,323

Equities

119,167

Cash at bank - Sterling

4,536

Cash at bank - Taiwan Dollar

Cash at bank - Thailand Baht

431

___________

__________

4,968

8,323

119,167

___________

__________

Weighted average
period for which

Weighted average

Floating

Fixed

Non-interest

rate is fixed

interest rate

rate

bearing

Years

£'000

Liabilities

Bank loan - Hong Kong Dollars

0.06

1.19

(9,228)

Bank loan - US Dollars

0.06

0.95

(6,458)

___________

__________

(15,686)

___________

__________

Weighted average
period for which

Weighted average

Floating

Fixed

Non-interest

rate is fixed

interest rate

rate

bearing

At 31 December 2007

Years

£'000

Assets

Indonesian Government Bond

9.56

10.00

7,771

Equities

138,915

Cash at bank - Australian Dollar

512

Cash at bank - Sterling

1,921

Cash at bank - Malaysian Ringgit

683

Cash at bank - Taiwan Dollar

127

___________

__________

3,243

7,771

138,915

___________

__________

Weighted average
period for which

Weighted average

Floating

Fixed

Non-interest

rate is fixed

interest rate

rate

bearing

Years

£'000

Liabilities

Bank loan - Hong Kong Dollars

0.22

5.54

(8,870)

Bank loan - US Dollars

0.05

5.80

(6,140)

___________

__________

(15,010)

___________

__________

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 the interest rate payable, weighted by the total value of the loans.

The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.

The non-interest bearing assets represent the equity element of the portfolio.

All financial liabilities are measured at amortised cost using the effective interest rate method.

Maturity profile

The following table sets out the carrying amount, by maturity, of the Company's financial instruments that are exposed to interest rate risk at the Balance Sheet date:

Within

More than

1 year

2-3 years

4-5 years

5 years

Total

At 31 December 2008

£'000

Fixed rate

Bonds

8,323

Bank loans

(15,686)

_________

(15,686)

8,323

(7,363)

_________

Floating rate

Cash

4,968

_________

Within

More than

1 year

2-3 years

4-5 years

5 years

Total

At 31 December 2007

£'000

Fixed rate

Bonds

7,771

Bank loans

(15,010)

_________

(15,010)

7,771

(7,239)

_________

Floating rate

Cash

3,243

_________

Interest rate sensitivity

The sensitivity analyses demonstrates the sensitivity of the Company's profit/(loss) for the year to a reasonably possible change in interest rates, with all other variables held constant.

The sensitivity of the profit/(loss) for the year is the effect of the assumed change in interest rates on:

- the net interest income for one year, based on the floating rate financial assets held at the Balance Sheet date; and

- changes in fair value of investments for the year, based on revaluing fixed rate financial assets at the Balance Sheet date.

If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's:

- profit for the year ended 31 December 2008 would decrease / increase by £24,000 (2007 - decrease / increase by £40,000). This is attributable to the Company's exposure to interest rates on its floating rate cash balances, fixed interest securities and bank loans.

- the Company holds no financial instruments that will have an equity reserve impact.

In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Company's objectives.

Foreign currency risk

A significant proportion of the Company's investment portfolio is invested in overseas securities and the Balance Sheet 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. All of the Company's borrowings, as detailed in note 11, are in foreign currency as at 31 December 2008.

The revenue account is subject to currency fluctuation arising on overseas income. The Company does not hedge this currency risk.

The fair values of the Company's monetary items that have foreign currency exposure at 31 December are shown below. Where the Company's equity investments (which are non monetary items) are priced in a foreign currency, they have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.

31 December 2008

31 December 2007

US$

HK$

Other

US$

HK$

Other

£'000

Investments at fair value through profit or loss that are monetary items

8,323

7,771

Cash at bank

432

1,322

Borrowings under the multi-currency loan facility

(6,458)

(9,228)

(6,140)

(8,870)

________

Foreign currency exposure on net monetary items

2,297

(9,228)

1,631

(8,870)

1,322

Investments at fair value through profit or loss that are equities

7,238

111,929

15,372

123,543

________

Total net foreign currency exposure

2,297

(1,990)

111,929

1,631

6,502

124,865

________

The above year end amounts are not representative of the exposure to risk during the year, because the levels of monetary foreign currency exposure change significantly throughout the year.

Foreign currency sensitivity

The following table details the Company's sensitivity to a 10% increase and decrease in sterling against the major foreign currencies in which the Company has exposure on its monetary items. Monetary items includes the bond holding which is measured at fair value through profit and loss. The sensitivity analysis includes foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates.

If sterling had weakened against the currencies shown, this would have had the following effect:

31 December 2008

31 December 2007

US$

HK$

Other

US$

HK$

Other

£'000

Income statement - profit after taxation

- Revenue return

(5)

- Capital return

207

(1,025)

166

(994)

154

______

Total profit after taxation for the year

252

(1,025)

194

(999)

181

______

Equity

252

(1,025)

194

(999)

181

______

If sterling had strengthened against the currencies shown, this would have had the following effect:

31 December 2008

31 December 2007

US$

HK$

Other

US$

HK$

Other

£'000

Income statement - profit after taxation

- Revenue return

(31)

(29)

(21)

(22)

- Capital return

(170)

839

(39)

(133)

814

(126)

______

Total profit after taxation for the year

(201)

839

(68)

(154)

819

(148)

______

Equity

(201)

839

(68)

(154)

819

(148)

______

In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the currency risk management process used to meet the Company's objectives.

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 Company's quoted equity investments.

Management of the equity 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. The allocation of assets to international markets and the stock selection process, as detailed in the Annual Report, both 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.

Concentration of exposure to other price risks

A geographic analysis of the Company's investment portfolio is shown below, which shows that all of the investments' value is in the Asia Pacific region. It should be recognised that an investment's country of domicile or of listing does not necessarily equate to its exposure to the economic conditions in that country.

Other price risk sensitivity

The following table illustrates the sensitivity of the profit after taxation for the year and the equity to an increase or decrease of 10% in the fair values of the Company's equities. This level of change is considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based on the Company's equities at each Balance Sheet date, with all other variables held constant.

The equity price risk sensitivity incorporates the equity foreign exchange sensitivity analysis.

2008

2007

Increase in

Decrease in

Increase in

Decrease in

fair value

£'000

Income statement - profit after taxation

Revenue return - increase / (decrease)

Capital return - increase / (decrease)

11,917

(11,917)

13,892

(13,892)

_________

Total profit after taxation - increase / (decrease)

11,917

(11,917)

13,892

(13,892)

_________

Equity

11,917

(11,917)

13,892

(13,892)

_________

(ii)

Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities, which stood at £16,002,000 at the year end.

Liquidity risk is not considered to be significant as the Company's assets comprise mainly cash and readily realisable securities, which can be sold to meet funding commitments if necessary and these amounted to £4,968,000 and £127,490,000 at the year end respectively. Short-term flexibility is achieved through the use of loan and overdraft facilities.

(iii)

Credit risk

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

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

- where the investment manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Company of default. The Company has a holding in a CLN issued by Deutsche Bank AG. The issuer currently has a credit rating at Moody's of Aa1;

- investment transactions are carried out with a large number of brokers, whose credit rating of which is taken into account so as to minimise the risk to the Company of default;

- 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 Custodian carries out a stock reconciliation to third party administrators' 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. It is the Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties.

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

- none of the Company's financial assets are secured by collateral or other credit enhancements.

Credit risk exposure

In summary, compared to the amounts included in the Balance Sheet, the maximum exposure to credit risk at 31 December was as follows:

2008

2007

Balance

Maximum

Balance

Maximum

Sheet

exposure

Sheet

exposure

£'000

Non-current assets

Investments at fair value through profit or loss

127,490

8,323

146,686

7,771

Current assets

Cash at bank

4,968

3,243

_________

132,458

13,291

149,929

11,014

_________

None of the Company's financial assets are past due or impaired.

(iv)

Gearing risk

The Company's policy is to increase its exposure to equity markets through the judicious use of borrowings. When borrowings are invested in such markets, the effect is to magnify the impact on Shareholders' funds of changes, both positive and negative, in the value of the portfolio.

During the year the Company's borrowings were short-term loans, details of which can be found in note 11.

The loans are valued at amortised cost, using the effective interest rate method in the financial statements. The Board regulates the overall level of gearing by raising or lowering cash balances.

Fair value of financial assets

Investments held at fair value through profit or loss are valued at their quoted bid prices which equate to their fair values. The Directors are of the opinion that the financial assets are stated at fair value in the Balance Sheet and considers that this is equal to the carrying amount.

Fair values of financial liabilities

The fair value of borrowings as at the 31 December 2008 has been estimated at £15,686,000 which is the same as the carrying value due to their short term nature. At 31 December 2007 the fair value was £15,314,000 compared to a carrying value of £15,010,000.

16.	Capital management policies and procedures
	The Company's capital management objectives are:
	- to ensure that the Company will be able to continue as a going concern, and
	- to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The policy is that debt should not exceed 25% of net assets.

	The Company's capital at 31 December comprises:
		2008	2007
		£'000	£'000
	Debt
	Borrowings under the multi-currency loan facility	15,686	15,010
		___________	___________
		2008	2007

		£'000	£'000
	Equity
	Equity share capital	108,440	109,200
	Retained earnings and other reserves	8,689	25,641
		___________	___________
		117,129	134,841
		___________	___________
	Debt as a % of net assets	13.39	11.13
		___________	___________

	The Board, with the assistance of the Investment Manager monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:
	- the planned level of gearing, which takes account of the Manager's views on the market;
	- the need to buy back equity shares for cancellation, which takes account of the difference between the net asset value per share and the share price (ie the level of share price discount or premium);
	- the need for new issues of equity shares; and
	- the extent to which revenue in excess of that which is required to be distributed should be retained.

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

	The Company is subject to the following externally imposed capital requirements:
	- the bank borrowings under the Company's credit facility with Barclays Bank are not to exceed 25% of net assets as measured in accordance with the policies used in the annual financial statements;
	- under the Company's Articles of Association borrowings must not exceed an amount equal to the adjusted total of capital and reserves.

	These requirements are unchanged since last year, and the Company has complied with them during both the current and prior year.

17.	Related party transaction
	Mr H Young is a director of Aberdeen Asset Management Asia Limited (AAM Asia), which is a subsidiary of Aberdeen Asset Management Plc (AAM). Aberdeen Private Wealth Management Limited has an agreement to provide management services to the Company, which it has sub-delegated to AAM Asia. AAM has an agreement to provide administration services to the Company.

	The terms of these agreements are outlined in notes 4 and 5.

18.	Subsequent events
	Since the year end, equity markets have fallen. The Company's NAV has fallen by 10.2% in the period from 31 December 2008 to 24 March 2009.

	On 25 March 2009 the Board agreed a 12 month extension to the existing £20 million bank facility with Barclays Bank. Under the terms of the facility, margin is payable at a rate of 1.75% with an arrangement fee of £100,000 and a non-utilisation fee of 0.9% is payable on any undrawn sums.

	Subsequent to the year end the Company has issued a total of 200,000 new ordinary shares for cash at a premium to the prevailing NAV at the time of issue.

Additional Notes to the Annual Financial Report:

19. The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2008. The annual audited accounts for 2008 will be finalised on the basis of the financial information presented by the Directors in this annual financial report announcement and will be delivered to the Jersey Financial Services Commission in due course.

20. The Annual Report will be posted to Shareholders in due course and further copies may be obtained from the registered office, No.1 Seaton Place, St Helier, Jersey JE4 8YJ and on the Company's website www.asian-income.co.uk.

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

Aberdeen Private Wealth Management Limited

Secretary

26 March 2009

10. INVESTMENT PORTFOLIO - TOP 10 INVESTMENTS

As at 31 December 2008
			Valuation	Total	Valuation
		Country	2008	assets	2007
Company	Sector	of activity	£'000	%	£'000

DB Indo CLN 10% 22/07/17 IDR 'FR28'
Credit linked note issued by Deutsche Bank and linked to the Indonesia Government Bond 10% 07/17 as the underlying asset.	Government Securities	Indonesia	8,323	6.3	7,771

British American Tobacco
Manufacturer & marketer of tobacco products in Malaysia through BAT's international brands such as Dunhill and Lucky Strike.	Tobacco	Malaysia	7,960	6.0	5,605

Taiwan Mobile
One of the leading domestic mobile phone operators, with over 30% market share. Recent results have shown flat revenues due to the maturity of the market, but the company continues to exert good cost controls.	Wireless Telecommunication Services	Taiwan	6,748	5.1	5,848

Taiwan Semiconductor
The world's largest dedicated semiconductor foundry, it provides wafer manufacturing, wafer probing, assembly and testing, mask production and design services.	Semiconductors & Semiconductor Equipment	Taiwan	5,353	4.0	5,427

PTT Exploration & Production
Thailand's sole gas exploration and production company, majority-owned by state enterprise PTT Plc . The company plans to invest US$6bn over the next five years in exploration projects and the expansion of existing sites.	Oil, Gas & Consumable Fuels	Thailand	5,004	3.8	5,684

QBE Insurance Group
One of Australia's leading general insurance and reinsurance companies. Its business is diversified geographically across five locations, and it has a good, long-term track record of generating shareholder returns.	Insurance	Australia	4,727	3.6	-

Telstra
The incumbent telecommunications operator in Australia. It competes across all market segments, including fixed, mobile, broadband and directories	Diversified Telecommunications	Australia	4,631	3.5	5,779

Digi Com
The Malaysian telco, which is 49%-owned by Norway's Telenor Group, is the leading provider of prepaid wireless services with a fast-growing post-paid business, owing to a competitive advantage in product innovation. It has a robust balance sheet with strong cashflow and offers a good dividend yield.	Infrastructure Project Companies	Malaysia	4,603	3.5	-

United Overseas Bank
Historically, this Singapore bank has earned a higher return on its business than its competitors. The bank also looks good in regional terms with a strong capital base and impressive cost-to-income ratio. It has also embarked on a selective regional expansion.	Commercial Banks	Singapore	4,422	3.3	4,394

Oversea-Chinese Banking
A well-run Singaporean bancassurance company seeking to generate additional value for shareholders by restructuring assets and via regional expansion.	Commercial Banks	Singapore	4,408	3.3	4,062
Top ten investments			56,179	42.4

INVESTMENT PORTFOLIO - OTHER INVESTMENTS

As at 31 December 2008
			Valuation	Total	Valuation
			2008	assets	2007
Company	Sector	Country	£'000	%{B}	£'000{C}
Siam Cement	Construction Materials	Thailand	4,251	3.2	5,709
Singapore Telecommunications	Diversified Telecommunications	Singapore	4,161	3.1	4,671
Singapore Press Holdings	Media	Singapore	3,979	3.0	3,753
PetroChina	Oil, Gas & Consumable Fuels	China	3,955	3.0	3,398
Advanced Information Services	Wireless Telecommunication Services	Thailand	3,923	3.0	3,555
Singapore Technologies Engineering	Aerospace & Defence	Singapore	3,890	2.9	4,362
Public Bank	Commercial Banks	Malaysia	3,790	2.9	6,292
Guinness Anchor	Beverages	Malaysia	3,756	2.8	3,063
Swire Pacific 'B'	Real Estate Management & Development	Hong Kong	3,519	2.6	4,164
Tabcorp Holdings	Hotels, Restaurants & Leisure	Australia	3,446	2.5	3,716
Top twenty investments			94,849	71.4
Australia & New Zealand Banking Group	Commercial Banks	Australia	3,332	2.5	4,230
Commonwealth Bank of Australia	Commercial Banks	Australia	3,148	2.4	5,856
Hong Leong Finance	Consumer Finance	Singapore	2,821	2.1	3,430
Singapore Post	Air Freight & Logistics	Singapore	2,776	2.1	2,580
SBS Transit	Road & Rail Operator	Singapore	2,640	2.0	2,853
Telecom Corp of New Zealand	Diversified Telecommunications	New Zealand	2,495	1.9	3,764
Telekomunikasi Indonesia	Diversified Telecommunications	Indonesia	2,454	1.8	1,953
Hong Leong Bank	Commercial Banks	Malaysia	2,409	1.8	2,231
Siam Makro	Food & Staples Retailing	Thailand	2,331	1.8	2,568
Bank Of Philippine Islands	Commercial Banks	Philippines	2,001	1.5	2,209
Top thirty investments			121,256	91.3
Giordano International	Speciality Retail	Hong Kong	1,848	1.4	2,151
Pos Malaysia	Air Freight & Logistics	Malaysia	1,624	1.2	1,477
Swire Pacific 'A'	Real Estate Management & Development	Hong Kong	1,436	1.1
Hana Microelectronics	Electronic Equipment & Instruments	Thailand	891	0.7	1,436
Kingmaker Footwear	Textiles, Apparel & Luxury Goods	Hong Kong	435	0.3	527
Total value of investments			127,490	96.0
Net current assets{A}			5,325	4.0
Total assets{B}			132,815	100.0

This information is provided by RNS

The company news service from the London Stock Exchange

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