Final Results
Aberdeen Asian Income Fund Limited
06 March 2007
ABERDEEN ASIAN INCOME FUND LIMITED
PRELIMINARY ANNOUNCEMENT OF UNAUDITED FINAL RESULTS
for the period ended 31 December 2006
Background
I am pleased to report that your Company's performance was satisfactory during
the period under review. Over the period, the net asset value total return of
the Company was 13.8%, although this puts it behind the benchmark MSCI Asia
Pacific ex-Japan Index total return, which was 22.0%. The share price total
return was also 13.8% and the shares traded at a discount to the net asset value
per Ordinary share of 0.6% at 31 December 2006. At the time of writing (2 March
2007), the Company's net asset value is 109.5p, and the mid market price of the
Ordinary shares is 107.25p.
In line with the stated intention in the prospectus, your Board is pleased to
confirm the payment of a second interim dividend of 2.5p on 21 February 2007,
making a total of 4.5p for the period as a whole.
Overview
Asian equity markets ended 2006 on a buoyant note, posting their third straight
year of double-digit gains. The strong performance, fuelled in large part by
liquidity-driven inflows and robust corporate earnings, was all the more
impressive given the presence of still uncertain external factors such as
volatile oil and commodity prices, rising interest rates and continued question
marks about the health of the US economy. A mid-year correction also proved
short-lived and failed to temper investor optimism.
Overall, markets in China, Indonesia and the Philippines registered the
strongest advances. Chinese shares, in particular, were one of the key
beneficiaries of robust liquidity inflows as investors, eager to tap into the
mainland's burgeoning economic growth story, bought into a series of initial
public offerings, notably from the major banks. However, your Company's Managers
remain wary of the euphoric response to the recent IPOs, many of which have been
of indifferent quality, in turn raising renewed concerns about overheating in
China.
The main laggards in an otherwise positive year for Asia included South Korea,
where your Company has no exposure currently, and Thailand. In Korea, the
strength of the won has weighed on the country's dominant exporters and economic
growth has been sluggish; whilst the continued political uncertainty has caused
further pressure in Thailand, the situation exacerbated by the newly-installed
military government's bungled attempt to stem the currency's appreciation
through indirect capital controls, and a series of bomb blasts on New Year's
Eve.
Economic news over the 12 months remained positive, with the region's GDP
continuing to outpace the developed world. In addition, growth has shown signs
of becoming more broad-based, as increasing domestic consumption - fuelled by
favourable demographics, rising disposable incomes and falling unemployment -
have all helped bolster sentiment. Unsurprisingly, China and India remained
Asia's growth locomotives; Australia's commodities boom has proven to be a boon
for its resource companies; while Singapore has benefited from a buoyant
services sector and a sustained property rebound.
Portfolio review
Over the period, your Company's Managers have been prudent in adding to holdings
or top-slicing where share prices have run up excessively. In terms of asset
allocation, the three-largest geographical areas of investment are Singapore,
Malaysia and Australia. Significant investments have also been made in Taiwan,
Hong Kong and Thailand. Our holdings in Singapore include high-yielding cash
generative companies such as OCBC, UOB and Singapore Exchange. The Malaysian
holdings reflect similar themes with strong cash generators such as British
American Tobacco and Guinness, capital management plays including Maybank and
Public Bank and restructuring stories like POS Malaysia which has the potential
to pay back excess cash on its balance sheet. Your Company's investments in
Australia are centred on companies that are not only well managed, but also
generate significant levels of free cashflow and tend to be high yielders,
despite their limited growth prospects in a mature market.
Your Board drew down the first tranche of debt, equivalent to £10m, in Hong Kong
dollars, on 18 January 2006 at an all-in cost of 4.7%. Despite its peg to the US
dollar, we chose to draw down the debt in Hong Kong dollars as it was trading at
a discount to US dollar debt and it matched our investment exposure. The second
tranche of debt was drawn down on 10 February, for an amount equal to £7m. This
was drawn in US dollars at an all-in cost of 5.3% per annum for the period to 18
July. This debt enabled the Company to assume a geared position of around 13% at
the time of drawdown. The Board is responsible for determining your Company's
gearing strategy and has maintained the absolute level of gearing since draw
down (equating to £15.3m at 31 December 2006) using short term interest rate
fixes to maintain flexibility. The Hong Kong dollar element of the gearing is
currently fixed to 19 March 2007 and the US dollar element is fixed to 18 April
2007.
The one holding which was fully disposed of over the period was Wheelock
Properties, as buoyant sentiment in Singapore's property sector boosted its
share price to levels beyond that representing reasonable value. Also, with the
Company having already paid out the bulk of its cash position in the form of a
special dividend earlier in the year, it was deemed a sensible time to sell. We
also trimmed our exposure in Singapore Exchange, Telekom Indonesia and
PetroChina - effectively taking profits after strong performance.
Annual General Meeting
Your Company's Annual General Meeting will be held at 9.30 a.m. on Tuesday, 17
April 2007 at No.1 Seaton Place, St Helier, Jersey and your Board looks forward
to meeting as many shareholders as possible. If you are unable to attend the
meeting, I would like to take this opportunity to encourage you to vote on the
resolutions by returning your proxy (or letter of directions if you invest via
the Aberdeen ISA or Savings Plans) which is enclosed with the Annual Report and
Accounts.
Buy-back and Issuance Policy
As indicated in the launch Prospectus, the Company has undertaken to operate an
active discount management policy through the use of share buy-backs, the
objective being to maintain the price at which the Ordinary shares trade
relative to their underlying net asset value at a discount of no more than 5%.
Any purchases will be made through the market at a discount to the prevailing
net asset value per Ordinary share in circumstances where the directors believe
that such purchase will enhance shareholder value. The Directors have the power
to purchase Warrants for cancellation and any purchases of Warrants will only be
made if the net asset value per Ordinary share is greater than 120p (the
exercise price of a Warrant). The buy-back of Warrants and Ordinary shares will
be subject to the Listing Rules and Jersey law and will be at the absolute
discretion of the Directors.
Under the Company's Articles of Association, the Directors have wide powers to
issue new Ordinary shares on a non pre-emptive basis. Ordinary shares would
only ever be issued at a premium to the prevailing net asset value per Ordinary
share and will not, therefore, be disadvantageous to Ordinary shareholders or
Warrantholders. Any issues of new Ordinary shares will be conducted in
accordance with the Listing Rules.
Outlook
Looking ahead, the widely anticipated slowdown in the global economy is likely
to affect Asian corporate earnings' growth, which is estimated to ease
marginally to around 10% this year. Corporate fundamentals, however, remain
intact as company balance sheets are generally strong and substantial
improvement has been made in raising corporate governance standards. Meanwhile,
cash flows are increasingly being paid out to shareholders in the form of higher
dividends and share buybacks, rather than being directed towards non-productive
investments.
As such, valuations continue to be reasonable, despite the sharp rise in share
prices in recent years. However, this masks a wide disparity in performance:
there are signs of frothiness in markets, such as India and China, while stocks
in laggard markets, such as Thailand and Korea, appear undervalued. Indeed,
market declines in recent weeks have served to remind investors that global
liquidity flows can exert significant, and at times exaggerated, influences on
share prices in the short term. The reasons for these declines have more to do
with investors' short term leveraged positions and changing perception of risk
leading to profit-taking rather than anything to do with declining economic or
corporate fundamentals, particularly from an Asian perspective. As such, your
Manager remains comfortable with the Company's underlying holdings and the
sell-off does allow earnings to catch up with the gains in share prices.
I look forward to reporting to you again with the Interim Report to 30 June
2007, which will be issued to shareholders at the end of August 2007. 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,
6 March 2007
INCOME STATEMENT
Period from 8 November 2005
to 31 December 2006
Revenue Capital Total
£'000 £'000 £'000
Investment income
Dividend income 6,197 - 6,197
Interest income 831 - 831
________ ________ ________
Total revenue 7,028 - 7,028
Gains on financial assets at fair value through profit or loss - 9,195 9,195
Currency gains - 1,147 1,147
________ ________ ________
7,028 10,342 17,370
________ ________ ________
Expenses
Investment management fee (445) (667) (1,112)
Other operating expenses (612) - (612)
Set up costs (75) - (75)
________ ________ ________
Profit before finance costs and tax 5,896 9,675 15,571
________ ________ ________
Finance costs (313) (469) (782)
________ ________ ________
Profit for the period attributable to equity Shareholders 5,583 9,206 14,789
________ ________ ________
Earnings per Ordinary share (pence):
Basic and diluted 5.08 8.37 13.45
________ ________ ________
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.
BALANCE SHEET
As at
31 December
2006
£'000
Non-current assets
Investments held at fair value through profit or loss 136,714
_________
Current assets
Cash and cash equivalents 1,327
Other receivables 1,809
_________
3,136
_________
Current liabilities
Bank loans (15,290)
Other payables (1,191)
_________
(16,481)
_________
Net current liabilities (13,345)
_________
Net assets 123,369
_________
Share capital and reserves
Ordinary share capital 110,000
Warrant reserve 2,200
Capital reserve 7,786
Revenue reserve 3,383
_________
Equity Shareholder's funds 123,369
_________
Net asset value per Ordinary share (pence):
Basic and diluted 112.15
_________
STATEMENT OF CHANGES IN EQUITY
Period from 8 November 2005 to 31 December 2006
Share Warrant Capital Revenue Retained
capital reserve reserve reserve earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
Opening balance - - - - - -
Issue of Ordinary shares 110,000 - - - - 110,000
Issue of Warrants - 2,200 - - - 2,200
Share issue costs - - (1,420) - - (1,420)
Profit for the period - - - - 14,789 14,789
Transferred from retained earnings to capital - - 9,206 - (9,206) -
reserve*
Transferred from retained earnings to revenue - - - 5,583 (5,583) -
reserve
Dividends paid - - - (2,200) - (2,200)
________ ________ ________ ________ ________ ________
Balance at 31 December 2006 110,000 2,200 7,786 3,383 - 123,369
________ ________ ________ ________ ________ ________
* Represents the capital profit attributable to equity Shareholders per Income
Statement.
CASH FLOW STATEMENT
Period from
8 November 2005
to 31 December 2006
£'000 £'000
Profit for the period 14,789
Add back interest payable 782
Gains on investments held at fair value through profit or loss (9,195)
Net gain on foreign exchange (1,147)
Net purchases of investments held at fair value through profit or loss (127,519)
Increase in amounts due from brokers (1,413)
Increase in other receivables (363)
Increase in amounts due to brokers 792
Increase in other payables 203
_________
Net cash outflow from operating activities before interest and tax (123,072)
Bank and loan interest paid (618)
_________
Net cash outflow from operating activities (123,690)
Financing activities
Net proceeds of Share Issues 108,580
Proceeds of issue of Warrants 2,200
Dividends paid (2,200)
Loans drawndown 17,119
_________
Net cash inflow from financing activities 125,699
_________
Net increase in cash and cash equivalents 2,009
Effect of foreign exchange rate changes (682)
_________
Cash and cash equivalents at the end of the period 1,327
_________
Notes:
1. 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 period from 8 November 2005 to 31
December 2006.
The financial statements have been prepared in accordance with the guidance set
out in the Statement of Recommended Practice ('SORP') for investment trusts
issued by the Association of Investment Companies ('AIC') and revised in
December 2005.
(b) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment
of business, being investment business.
(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 a company has elected to receive
dividends in the form of additional shares rather than in cash, the amount of
the cash dividend is recognised as income. Special dividends are credited to
capital or revenue according to the circumstances.
The fixed returns on debt securities and non-equity shares are recognised on a
time apportionment basis so as to reflect the effective yield on the debt
securities and shares.
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;
- 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.
(f) Investments designated as held at fair value through profit or loss
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 instruments 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 amount 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 nominal value. Other payables are non interest
bearing and are stated at their nominal value.
(i) Dividends payable
Dividends will be paid twice a year (the Company does not intend to pay final
dividends). The first interim dividend was paid on 17 August 2006 and the second
interim dividend was paid on 21 February 2007, both in respect of the period
from Admission to 31 December 2006. Under IFRS dividends are reflected in the
financial statements in the period in which they are paid.
In the future, the Company expects to pay, in respect of each financial year, a
first interim dividend in August and second interim in February.
(j) 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 presentation currency. Transactions during the period involving
foreign currencies are converted at the rate of exchange ruling at the
transaction date. Gains and losses on the realisation of foreign currencies are
recognised in the Income Statement and are then transferred to the realised
capital reserve.
(k) 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 are charged 40% to revenue and 60% to
capital reserves to reflect the Company's investment policy and prospective
income and capital growth.
2. The Company is a closed-end investment company incorporated in Jersey,
with its shares being listed on the London Stock Exchange. The Company was
incorporated on 8 November 2005.
3. Earnings per share
The earnings per Ordinary share is based on the net income after taxation of
£14,789,000 and on 110,000,000 Ordinary shares, being the weighted average
number of Ordinary shares in issue during the period.
The earnings per Ordinary share detailed above can be further analysed between
revenue and capital as follows:
Period from 8 November 2005
to 31 December 2006
Revenue Capital Total
Net profit (£'000) 5,583 9,206 14,789
Weighted average number of Ordinary shares in issue 110,000,000 110,000,000 110,000,000
Return per Ordinary share (pence) 5.08 8.37 13.45
Fully diluted returns calculated on the basis set out in International Financial
Reporting Standard 33 'Earning per share' ('IFRS 33') indicate that the exercise
of Warrants in issue would have no dilutive effect on returns.
4. 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
per share attributable
2006 2006
p £'000
Ordinary shares 112.15 123,369
The basic net asset value per Ordinary share is based on 110,000,000 Ordinary
shares, being the number of Ordinary shares in issue at the period end.
The diluted net asset value is the same as the basic net asset value as the
exercise price of the Warrants, being 120p, exceeded the basic net asset value
per Ordinary share.
5. Income
Period from
8 November 2005
to 31 December 2006
Income £'000
Income from investments
Overseas dividends 6,197
Interest income
Bond interest 676
UK Treasury Bill interest 51
Deposit interest 104
831
Total income 7,028
6. The financial information set out above does not constitute the
Company's statutory accounts for the period ended 31 December 2006. The
statutory accounts for 2006 will be finalised on the basis of the financial
information presented by the Directors in this preliminary announcement and will
be delivered to the Registrar of Companies in due course.
7. 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.
Aberdeen Private Wealth Management Limited
Secretary
6 March 2007
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