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Aberdeen All Asia IT (AJIT)

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Tuesday 10 June, 2008

Aberdeen All Asia IT

Final Results

RNS Number : 3870W
Aberdeen All Asia Inv Tst PLC
10 June 2008
 



ABERDEEN ALL ASIA INVESTMENT TRUST PLC


ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2008

 

  1.   CHAIRMAN'S STATEMENT

 Performance 

Over the year ended 31 March 2008, the Company achieved a net asset value total return per share of 3.3% compared with the benchmark MSCI AC Asia Pacific (including Japan) Index which fell by 2.8% in Sterling terms. The net asset value per share rose to 247.8p by the end of the year while the share price fell marginally by 0.7% to 214.0p as greater volatility and weaker retail buying led to a widening of the discount.


The principal reason for the outperformance against the benchmark was the underweight position in Japan where the economy suffered from a reliance on imported oil during the global commodity squeeze. Relative return was boosted during the year by the portfolio's overweight allocation to both India and Singapore while the portfolio gained from currency returns.


In the second half of the year, the threat posed by domestic inflation increased throughout the region while political change was witnessed in AustraliaSouth KoreaTaiwan and Thailand as well as in Japan where the full impact remains to be seen.

 

Portfolio Activity

Your Manager's conservative style and investment process, which puts careful stock selection for long-term investment at the core of its approach, tends to outperform when markets are suffering a period of weakness and volatility. Such conditions usually generate buying opportunities and gearing was increased over the year from 3.7% to 8.6% by 31 March 2008 to take advantage of this.


Further information on the portfolio activity may be found in the Manager's Report below.

 

Board

The Board has a defined plan for retirement and succession of Directors and, accordingly, Keith Mackrell retired at the Annual General Meeting on 31 July 2007. 


I should like to welcome Kevin Pakenham who joined the Board in August 2007. Kevin has many years' experience in the management of investment trusts. I am also pleased to report that Sir Andrew Burns agreed to join the Board in February 2008; Sir Andrew was formerly British Consul-General in Hong-Kong and Macau between 1997 and 2000 and brings extensive experience of Asia and the Indian sub-continent.  


Kevin Pakenham and Sir Andrew Burns are required by the Company's Articles of Association to retire as directors and seek election by shareholders at their first AGM. In accordance with the Combined Code, both the Chairman, David Price, and I, are required to stand for re-election. Led by me as Senior Independent Director, the Board has reviewed the other commitments, skills and experience of the Chairman, David Price, and recommends to shareholders his re-election. For his part, the Chairman has reviewed the other commitments, skills and experience of Kevin Pakenham, Sir Andrew Burns and myself. He recommends to shareholders the elections of Kevin Pakenham and Sir Andrew Burns, respectively, and my own re-election.

 

Investment Manager

The Board has undertaken a detailed review of the performance of the Manager during the current year. Given the good performance and the strengths of the Manager's investment team in the region, the Board believes that the continuing appointment of AAM Asia as Manager is in the interests of shareholders as a whole.

 

Share Capital

During the period under review the Company bought in for cancellation 413,400 Ordinary shares at a weighted-average discount of 11.5% which leaves 16,273,367 shares remaining in issue as at 31 March 2008. Such buy backs provide necessary liquidity to the market during difficult trading periods and enhance the net asset value for continuing shareholders. Between 1 April 2008 and the date of this Report, an additional 99,000 shares were bought in for cancellation which results in 16,174,367 shares in issue.

 

Outlook

The Asia-Pacific region, while growing strongly, is not immune from wider global concerns. As a net exporter of goods and services, the Asia-Pacific region is dominated by the out-turn for the US economy. A continuation of rising prices for food and fuel can only exacerbate social pressures.  


The outlook for Japan remains uncertain. Elsewhere in the Asia-Pacific region, the underlying fundamentals point to positive returns from investment over the longer term.


The Manager highlights strong balance sheets, good management and profit margins increasing in line with revenues as key features of the portfolio's underlying investments. Accordingly the Board believes that the Company is well-positioned to benefit when global economic conditions improve.

 

Sir Robin McLaren

Senior Independent Director and Acting Chairman *

 

10 June 2008

 

* Sir Robin McLaren is acting as Chairman in the absence, due to illness, of the Chairman, David Price.

 

2    MANAGER'S REPORT

 

Overview

Asian equities faced one of the most volatile periods since 2001, as initial bullish sentiment dissipated in the face of the imploding US sub-prime market and the credit crunch that followed. Heightened risk aversion led leading central banks to cut interest rates and boost liquidity to shore up confidence, but the ensuing relief rallies proved short-lived. By the end of the period, the benchmark MSCI AC Asia Pacific (including Japan) Index had posted a decline of 2.8% in Sterling terms against a gain by your portfolio of 3.3% (all total returns).


On the macroeconomic front, the region's growth story remained largely intact. Backward-looking indicators were

positive with healthy GDP figures for most countries. Malaysia benefited from strong domestic consumption and high

commodity prices, while exports and investment underpinned economic expansion in Hong KongTaiwanSouth

Korea and Thailand. Asia's main engines of growth, China and India, continued to surpass

expectations. Singapore maintained its steady pace on strong manufacturing activity. 


The exception was Japan. Its six-year expansion lost steam due to rising oil and commodity prices, which pushed inflation

to a 10-year high - albeit not enough to raise interest rates. Domestic demand remained weak due to stagnating wage

growth, while the strengthening yen hurt exporters. Political gridlock compounded the uncertainty as the government's ability to implement policy was severely impeded with the opposition in charge of the upper house. Reflecting these

concerns, the stock market was the worst regional performer over the period.


Inflation was also the top domestic risk elsewhere in the region. Consumer prices hit multi-year highs as oil and food prices rose to record levels. Policymakers in China and India responded by tightening monetary policy, while Malaysia relied on subsidies and price controls. Singapore, on the other hand, allowed its currency to rise further to counteract price rises. Accelerating inflation, coupled with falling global demand that has already hurt exports, led most governments to lower their growth forecasts, albeit modestly.


Mindful of a slowing world economy, budgets for 2008 focused on boosting consumption. Hong Kong reduced both personal and corporate tax rates and offered a one-off tax rebate, while Singapore left its tax rates unchanged but offered broad measures to help lower-income families. In India, support for the agricultural sector included farm debt waivers. 


Meanwhile, there was a heightening of political risk, with the changing of the guard in some countries and parliamentary setbacks to incumbents in others. Australian prime minister John Howard's 11-year tenure was brought to an end, Thailand's pro-Thaksin People Power Party formed a coalition government, and Taiwan's opposition candidate Ma Ying-jeou and South Korea's conservative candidate Lee Myung-Bak won landslide victories at the polls. In Japan, LDP stalwart Yasuo Fukuda was elected as prime minister after Shinzo Abe resigned following the ruling party's embarrassing upper house defeat. Malaysia's Umno party, meanwhile, suffered the shock loss of its two-third parliamentary majority at the general election. 


Portfolio Activity

The portfolio outperformed the benchmark, returning 3.3% in Sterling terms, compared with the Index's decline of 2.8%. Our underweight exposure to Japan and our overweight positions in India and Singapore boosted relative return. Japanese equities laboured under the weight of domestic concerns, while the Indian market was buoyed by energy and industrial stocks. The defensive nature of Singapore equities stood us in good stead. In contrast, our underweight to Australia and lack of exposure to Indonesia cost the fund, as the two markets benefited from the commodity boom. 


We initiated positions in Japanese carmaker Toyota Motor, which has a strong product range and a different geographic

emphasis from rival Honda, which we also hold; and Singapore's Fraser & Neave, a regional food and beverages

company with interests in property and publishing. 


We topped up our Japanese holdings mainly on valuation grounds, including Canon, Mitsubishi Estate, Sapporo Hokuyo,

Shin-Etsu and Yamaha. Elsewhere, we added to Oversea-Chinese Banking Corporation and City Developments in Singapore, Bumiputra Commerce in Malaysia and QBE Insurance in Australia.


Against this, we top-sliced Zhejiang Expressway, China Mobile and PetroChina taking advantage of the strong run-up in

China's mainland stock market and pared Thailand's PTTEP, Australia's Leighton and Hong Kong's Hang Lung

Properties, following increases in their share prices. We also sold part of our holdings in Australia's Rio Tinto at a

substantial premium over the prevailing market price on a 'dawn raid' by Chinalco and Alcoa. In addition, we continued to trim Japan's Kaneka on concerns over its business prospects.


Outlook

Some caution is warranted in the short term, given that sentiment has been driven more by credit markets and the US economy, rather than local news flow. US economic data remains weak, increasing the likelihood of a recession. 


This would hurt Asian exports, and the jury is out on whether shipments to Europe and other markets will be able to offset falling US demand. The fallout from the credit crunch is still being felt, with more write-downs posted in the first quarter of 2008, and more on the way likely as financial de-leveraging continues. 


On the domestic front, inflation continues to muddy the waters when it comes to policymaking. Governments face the difficult challenge of not only managing slowing economic growth but also mitigating the cost of rising food and energy prices, which falls disproportionately on the poor. 


Despite external and domestic risks, the region's macroeconomic fundamentals remain sound. Following the Asian crisis of 1997/98, the quality of balance sheets in general has improved with companies more attuned to shareholder interests and the prudent use of capital. Companies continue to generate decent returns and earnings have kept pace with revenue growth. On the policy side, governments have the option of pump priming given the huge foreign exchange reserves built up over the years. The exception is Japan, due to its huge fiscal deficit. However, recent data suggests that inflation has turned positive, which may be a catalyst for long-overdue spending in an environment of negative real interest rates.  


In the first quarter of 2008 stock markets fell sharply, led by China and India. We estimate our portfolio of stocks to be trading on a prospective price/earnings multiple of 15.1 times for calendar 2008 and, importantly, the weighted average debt/equity ratio (ex financials) is just 20%, showing the strength of underlying balance sheets. We are therefore confident that our holdings, comprising companies with good management and attractive long-term prospects, will hold up well under the current volatile conditions and provide much scope for growth in an improving environment. 

 

Aberdeen Asset Management Asia Limited

Manager

 

10 June 2008

 

3.    RESULTS


Financial Highlights

 

31 March 2008

31 March 2007


change

Total Assets 

£44,181,000

£41,707,000

5.9

Total Equity Shareholders' funds (Net Assets)

£40,329,000

£40,026,000

0.8

Share price (mid market)

214.00p

215.50p

(0.7)

Net Asset Value per share

247.82p

239.87p

3.3

Discount to Net Asset Value

13.6%

10.2%

 

MSCI AC Asia Pacific (cum Japan) Index 
(in sterling terms) *

70.11

73.75

(4.9)

Actual gearing

8.6%

3.7%

 

Potential gearing

19.1%

8.4%

 

Total expense ratio 

1.22%

1.36%

 

 



 

Earnings



 

Total return per share

7.49p

(18.89p)

 

Revenue return per share

3.04p

0.47p

 

Revenue reserves

(£15,000)

(£519,000)

 





* Index figure stated on a capital only basis





Performance (total return)

 

1 year 
% return

3 year 
% return

5 year 
return

Share price 

-0.70

36.52 

125.26

Net Asset Value

3.32

 46.93 

126.90

MSCI AC Asia Pacific (cum Japan) Index 
(in sterling terms)

-2.76

 41.35 

108.74


Proposed final dividend

No dividend is proposed for the year.

 

4    BUSINESS REVIEW


A review of the Company's activities is given in the Chairman's Statement in Section 1 and the Manager's Report in Section 2. This includes a review of the business of the Company and its principal activities, recommended dividends and likely future developments of the business. The major risks associated with the Company are detailed in the section on "Principal Risks and Uncertainties".


Monitoring Performance - Key Performance Indicators

An outline of the performance, market background, investment activity and portfolio strategy during the period under review, as well as the market outlook, is provided in the Chairman's Statement and Manager's Report.


The Key Performance Indicators for the CompanyNAV performance (total return), discount of share price to net asset value and share price performance, are detailed i"Results".


Principal Activity

The business of the Company is that of an investment trust investing in the Asia-Pacific region including Japan.


Status

The Company is registered as a public limited company. The Company is an investment company as defined by Section 833 of the Companies Act 2006 and is a member of the Association of Investment Companies.


The Company has been approved by the Inland Revenue as an investment trust for the purposes of Section 842 of the Income and Corporation Taxes Act 1988 for the year ended 31 March 2007. The Directors are of the opinion, under advice, that the Company has conducted its affairs for the year ended 31 March 2008 so as to be able to continue to obtain approval as an investment trust under Section 842 of the Income and Corporation Taxes Act 1988 for that year.


The Company intends to manage its affairs so as to be a qualifying investment for inclusion in the stocks and shares component of an Individual Savings Account and it is the Directors' intention that the Company should continue to qualify.


Investment Objective and Investment Policy

The Board's objective is to generate capital growth through investment in a focused portfolio of companies in the

Asia-Pacific region, including Japan. The securities which make up the portfolio are selected from companies that

have quality management and whose securities are considered to be under-priced, either in light of their foreseeable

growth or their current comparable value. The exposure to Japan offers a number of

unique investment opportunities for the Company.  


The Board regularly reviews gearing, which has increased from 3.7% at the previous year end to 8.6% at 31 March 2008.


Investments are not limited as to market capitalisation, sector or country weightings within the region. It is the Company's policy to have a focused portfolio and there were 56 holdings at 31 March 2008.


Principal Risks and Uncertainties

The Board regularly reviews major strategic risks and sets out the delegated controls designed to manage those risks.  


Aside from the risks associated with investment in Asia, the key risks related to investment strategy, including inappropriate asset allocation or gearing, are managed through a defined investment policy, specific guidelines and restrictions and by the process of oversight at each board meeting as outlined above. Further detail on the Company's Investment Policy, including gearing and the approach to risk diversification, may be found under the paragraph "Investment Objective and Policy", above. Operational disruption, accounting and legal risks are also covered at least annually and regulatory compliance is reviewed at each board meeting.


The major risks associated with the Company are:

  • Resource risk: like most other investment trusts, the Company has no employees. The Company therefore relies on services provided by third parties, including, in particular, the Manager, to whom responsibility for the management of the Company's portfolio has been delegated under an investment management agreement (the "Agreement"). The terms of the management agreement cover the necessary duties and conditions expected of the Manager. The Board reviews the performance of the Manager on a regular basis, and their compliance with the Agreement formally on an annual basis.

  • Investment and market risk: the Board continually monitors the investment policy of the Company, taking account of stockmarket factors, and reviews the Company's performance compared to its benchmark index. Further details on other risks relating to the Company's investment activities, including market price, interest rate, liquidity and foreign currency risks, are disclosed in Note 17 to the Financial Statements


The particular risks of investment in Asia are : 

  • greater risk of expropriation, confiscation, taxation, nationalisation and social, political and economic instability; the small current size of the markets for securities of emerging markets issuers and low volumes of trading, resulting in lack of liquidity and in price volatility;

  • certain national policies which may restrict the investment opportunities available in respect of a fund, including restrictions on investing in issuers or industries deemed sensitive to national interests; changes in taxation laws and/or rates which may affect the value of the Company's investments;  

  • the absence in some markets of developed legal structures governing private or foreign investment and private property leading to supervision and regulation; and changes in government which may have an adverse effect on economic reform. Companies in the Asia Pacific region are not, in all cases, subject to the equivalent accounting, auditing and financial standards of those in the United Kingdom; and

  • currency fluctuations which may affect the value of the Company's investments and the income derived therefrom.


  • Gearing risk: the Company currently uses gearing in the form of bank loans of US$5,700,000 (equivalent to approximately £2,868,000) and JPY 194,700,000 (equivalent to approximately £984,000) under its loan facility of £7,000,000 (see Note 10 to the Financial Statements).

  • Regulatory risk:    the Company operates in a complex regulatory environment and faces a number of regulatory risks. Serious breaches of applicable regulations could lead to a number of detrimental outcomes and reputational damage. The Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager.


5.    STATEMENT OF DIRECTORS' RESPONSIBILITIES


The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards. The financial statements 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 are required to:

  • select suitable accounting policies and then apply them consistently; 
  • make judgments and estimates that are reasonable and prudent;  
  • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; 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 proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.


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


Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.


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


  The Directors confirm to the best of their knowledge, that:


  • the Financial Statements have been prepared in accordance with UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit; and that

  • the Directors' Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces.


For and on behalf of the Board of Aberdeen All Asia Investment Trust PLC



Sir Robin McLaren

Senior Independent Director and Acting Chairman


10 June 2008

  INCOME STATEMENT 

for the year ended 31 March 2008 (audited) 


 


Year ended 31 March 2008

Year ended 31 March 2007

 


Revenue

Capital

Total

Revenue

Capital

Total

 

Notes

£'000

£'000

£'000

£'000

£'000

£'000

Gains/(losses) on investments

8

-

834 

834 

-

(3,407)

(3,407)

Income

2

1,202 

-

1,202 

747 

-

747 

Exchange (losses)/gains


-

(77)

(77)

-

328 

328 

Investment management fee

3

(305)

-

(305)

(295)

-

(295)

Performance fee

3

-

-

-

-

Administration expenses

4

(218)

(19)

(237)

(232)

(161)

(393)



_______

_______

_______

_______

_______

_______

Net return before finance costs and taxation


679 

738 

1,417 

220 

(3,231)

(3,011)

 







 

Finance costs

5

(120)

-

(120)

(90)

-

(90)



_______

_______

_______

_______

_______

_______

Net return on ordinary activities before taxation


559 

738 

1,297 

130 

(3,231)

(3,101)

 







 

Tax on ordinary activities

6

(55)

-

(55)

(52)

-

(52)



_______

_______

_______

_______

_______

_______

Net return on ordinary activities after taxation


504 

738 

1,242 

78 

(3,231)

(3,153)

 


_______

_______

_______

_______

_______

_______

 







 

Return per Ordinary share (pence):

7

3.04

4.45

7.49

0.47

(19.36)

(18.89)

 


_______

_______

_______

_______

_______

_______


The total column of this statement represents the profit and loss account of the Company. 

No Statement of Total Recognised Gains and Losses has been prepared as all gains and losses have been reflected in the Income Statement.

All revenue and capital items in the above statement derive from continuing operations. 

The accompanying notes are an integral part of the financial statements. 



  BALANCE SHEET

as at 31 March 2008 (audited)


 


As at

As at

 


31 March 2008

31 March 2007

 

Notes

£'000

£'000

Fixed assets



 

Investments at fair value through profit or loss

8

43,583 

41,407 

 


__________

__________

Current assets



 

Debtors

9

320 

187 

Cash at bank and in hand


381 

213 



__________

__________

 


701 

400 

 


__________

__________

Creditors: amounts falling due within one year



 

Foreign currency loans

10

(3,852)

(1,681)

Other creditors

10

(103)

(100)



__________

__________

 


(3,955)

(1,781)



__________

__________

Net current liabilities


(3,254)

(1,381)



__________

__________

Net assets


40,329 

40,026 

 


__________

__________

 



 

Share capital and reserves



 

Called-up share capital

11

1,627 

1,669 

Special reserve


2,022 

2,961 

Capital redemption reserve


2,105 

2,063 

Capital reserve - realised

12

34,590 

32,471 

Capital reserve - unrealised

12

-  

1,381 

Revenue reserve


(15)

(519)



__________

__________

Equity Shareholders' funds


40,329 

40,026 

 


__________

__________

 




Net asset value per Ordinary share (pence): 

13

247.82

239.87



__________

__________

  Reconciliation of Movements in Shareholders' Funds


For the year ended 31 March 2008

 

 

 

 

 

 

 

 



Capital

Capital

Capital


 

 

Share

Special

redemption

reserve - 

reserve - 

Revenue

 

 

capital

reserve

reserve

realised

unrealised

reserve

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 March 2007

1,669

2,961

2,063

32,471

1,381

(519)

40,026

Reclassification of reserves

-

-

-

1,381

(1,381)

-

-

Purchase of own shares for cancellation

(42)

(939)

42

-

-

-

(939)

Return on ordinary activities after taxation

-

-

-

738

-

504

1,242


______

_______

_________

_______

________

________

_______

Balance at 31 March 2008

1,627

2,022

2,105

34,590

-

(15)

40,329

 

______

_______

_________

_______

________

________

_______

 







 

For the year ended 31 March 2007







 

 



Capital

Capital

Capital


 

 

Share

Special

redemption

reserve -

reserve -

Revenue

 

 

capital

reserve

reserve

realised

unrealised

reserve

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 March 2006

1,669

2,961

2,063

32,219

4,864

(597)

43,179

Return on ordinary activities after taxation

-

-

-

252

(3,483)

78

(3,153)


______

_______

_________

_______

________

________

_______

Balance at 31 March 2007

1,669

2,961

2,063

32,471

1,381

(519)

40,026


______

_______

_________

_______

________

________

_______



The accompanying notes are an integral part of the financial statements.


  CASHFLOW STATEMENT

Year ended 31 March 2008 (audited)


 

 

Year ended

Year ended

 


31 March 2008

31 March 2007

 

Notes

£'000

£'000

£'000

£'000

Net cash inflow/(outflow) from operating activities

14


579 


(197)

 





 

Servicing of finance





 

Bank and loan interest paid



(121)


(85)

 





 

Financial investment





 

Purchases of investments


(7,542)


(79,603)

 

Sales of investments


6,102 


83,724 

 

Expenses allocated to capital

 

(5)

 

(22)

 



_______


_______


Net cash (outflow)/inflow from financial investment

 

 

(1,445)

 

4,099 




_______


_______

Net cash (outflow)/inflow before financing



(987)


3,817 

 





 

Financing





 

Purchase of ordinary share capital


(939)


-  

 

Loan drawndown/(repaid)


2,076 


(4,041)

 



_______


_______


Net cash inflow/(outflow) from financing

 

 

1,137 

 

(4,041)




_______


_______

Increase/(decrease) in cash

15

 

150 

 

(224)

 



_______


 _______

 






Reconciliation of net cash flow to movements in net debt





 

Increase/(decrease) in cash as above



150 


(224)

(Increase)/decrease in borrowings

 

 

(2,076)

 

4,041 




_______


_______

Change in net debt resulting from cash flows



(1,926)


3,817 

Exchange movements

 

 

(77)

 

328 




_______


_______

Movement in net debt in the year



(2,003)


4,145 

Opening net debt

 

 

(1,468)

 

(5,613)




_______


_______

Closing net debt

15

 

(3,471)

 

(1,468)




_______


_______

  NOTES :


1.    Accounting policies

(a)    Basis of accounting and going concern

The financial statements have been prepared under the historic cost convention, except for the measurement of fair value of investments and derivative instruments, and in accordance with applicable UK Accounting Standards, with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (issued January 2003 and revised in December 2005) and on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. 


(b)    Valuation of investments

The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Company's Board of Directors. Accordingly, upon initial recognition the Company designates the investments 'at fair value through profit or loss'. Fair value is taken to be the investments cost at the trade date (excluding expenses incidental to the acquisition which are written off in the Income Statement, and allocated to 'capital' at the time of acquisition.


Subsequent to initial recognition, investments continue to be designated at fair value through profit or loss, which is deemed to be bid prices, where the bid price is available, or otherwise at fair value based on published price quotations.


(c)    Income 

Dividends (other than special dividends), including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares are recognised on a time apportioned basis so as to reflect the effective yield on shares. Other returns on non-equity shares are recognised when the right to return is established. The fixed return on a debt security, if material, is recognised on a time apportioned basis so as to reflect the effective yield on each security. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is dealt with on an accruals basis.


Where applicable the dividend income is disclosed net of irrecoverable Malaysian and Singaporean taxes deducted at source. 


(d)    Expenses

All expenses are accounted for on an accruals basis. Expenses are allocated to revenue in the Income Statement except as follows:

    expenses which are incidental to the acquisition or disposal of an investment are allocated to capital of the Income Statement and separately identified and disclosed in note 8; and

    expenses are allocated and borne by realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect performance fees are charged 100% to realised capital reserves.


(e)    Taxation

The charge for taxation is based on the revenue return for the financial period.


Deferred taxation

Deferred taxation is provided on all timing differences, that have originated but not reversed at the Balance Sheet date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Balance Sheet date, measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.


(f)    Capital reserve

Gains and losses on realisation of investments and changes in fair values of investments which are readily convertible to cash, without accepting adverse terms, are transferred to the realised capital reserve.


(g)    Foreign currencies

Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction.


Translation of all other foreign currency balances including foreign assets and foreign liabilities is at the middle rates of exchange at the year end. Differences arising from translation are treated as capital gain or loss to capital or revenue within the Income Statement depending upon the nature of the gain or loss.


 

 

2008

2007

2.

Income

£'000

£'000

 

Income from investments


 

 

UK dividend income

37

19

 

Overseas dividends

1,156

703

 

Stock dividends

1

-



_______

_______

 


1,194

722

 


_______

_______

 

Other income


 

 

Deposit interest

8

25



_______

_______

 

Total income

1,202

747



_______

_______


 

 

2008

2007

 


Revenue

Capital

Total

Revenue

Capital

Total

3.

Investment management fee

£'000

£'000

£'000

£'000

£'000

£'000

 

Investment management fee

305

-

305

295

-

295

 

Performance fee

-

-

-

-

(9)

(9)



_______

_______

_______

_______

_______

_______

 


305

-

305

295

(9)

286



_______

_______

_______

_______

_______

_______

 

The Company had an agreement with Gartmore Investment Limited ('Gartmore') for the provision of management services. On 10 November 2006 Aberdeen Asset Management Asia Limited ('AAM Asia') was appointed Manager.


During the year the management fee was payable monthly in arrears and was based on an annual amount of 0.75% of total assets less current liabilities of the Company valued monthly. The agreement is terminable on six months notice. The balance due to AAM Asia at the year end was £50,000 (2007 - £24,000). The Company's investment in Aberdeen Global - India Opportunities Fund is excluded from the calculation of the investment management fee.


The total value of commonly managed funds, on a bid basis (basis on which management fee is calculated), at the year end was £4,110,000 (2007 - £3,789,000).


In addition, AAM Asia is entitled to a performance related fee of up to 15% of the portfolio's outperformance of the MSCI AC Asia Pacific (cum Japan) Index (in Sterling terms).


In the event that the Company outperforms this benchmark but the year end net asset value per Ordinary share is less than at the previous year end, the performance fee is capped at 0.25% of year end net asset value. The performance fee is only payable where the final net asset value on which the fee is calculated exceeds the net asset value on which any performance fee was paid in the previous three years.


There was no performance fee due to AAM Asia for the year ended 31 March 2008 (2007 - £nil). The £9,000 shown under performance fee for 2007 is in relation to an over-provision made in the previous period. This movement had arisen due to the change in irrecoverable VAT rates. 


 


2008

2007

 


Revenue

Capital

Total

Revenue

Capital 

Total

4.

Administrative expenses

£'000

£'000

£'000

£'000

£'000

£'000

 

Investor relations/Marketing initiative

31

-

31

11

-

11

 

Directors' fees

61

-

61

60

-

60

 

Safe custody fees

18

5

23

25

21

46

 

Transaction costs on investment purchases

-

14

14

-

140

140

 

Auditors' remuneration:






 

 

- audit of the financial statements *

19

-

19

18

-

18

 

- other services pursuant to legislation

1

-

1

-

-

-

 

- other services relating to taxation

1

-

1

1

-

1

 

Other

87

-

87

117

-

117



______

______

______

______

______

______

 


218

19

237

232

161

393



______

______

______

______

______

______


Includes work carried out on the Directors' Remuneration Report, Corporate Governance Statement and Directors' Report.


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 and payable under the agreement were £31,000 (2007 - £11,000) and the accrual to AAM at the year end was £nil (2007 - £nil).


No pension contributions were made in respect of any of the Directors.


The Company does not have any employees.



 

 

2008

2007

 


Revenue

Capital

Total 

Revenue

Capital

Total 

5.

Finance costs

£'000

£'000

£'000

£'000

£'000

£'000

 

Interest on bank loans and overdrafts

120

-  

120

90

-  

90



_______

_______

_______

_______

_______

_______


 

 

 

2008

2007

 



Revenue

Capital

Total 

Revenue

Capital

Total 

6.

Tax on ordinary activities

£'000

£'000

£'000

£'000

£'000

£'000

 

(a)

Analysis of charge for the year






 

 


Corporation tax

22

-

22

42

-

42

 


Irrecoverable overseas taxation

55

-

55

52

-

52




_______

_______

_______

_______

_______

_______

 



77

-

77

94

-

94

 


Relief for overseas taxation

(22)

-

(22)

(42)

-

(42)




_______

_______

_______

_______

_______

_______

 


Current taxation

55

-

55

52

-

52

 



_______

_______

_______

_______

_______

_______


(b)    Factors affecting current tax charge for the year 

The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The differences can be explained below:


 


2008

2007

 


£'000

£'000

 

Revenue on ordinary activities before taxation

559 

130 

 


_______

_______

 

Revenue on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2007 - 19%)

106 

25 

 

Effects of:


 

 

UK dividend income

(7)

(4)

 

Irrecoverable overseas withholding tax suffered

55

52 

 

Relief for overseas taxation

(22)

(42)

 

Timing differences on taxation of income

(15)

19 

 

Excess management expenses used in period

(62)

-

 

Tax effect of expenses charged to capital

-



_______

_______

 

Current tax charge for the year

55 

52 


  

 


2008

2008

2007

2007

7.

Return per Ordinary share

p

£'000

p

£'000

 

The return per Ordinary share is based on the following figures:




 

 

Revenue return

3.04

504

0.47

78

 

Capital return

4.45

738

(19.36)

(3,231)



_____

_______

_____

________

 

Total return

7.49

1,242

(18.89)

(3,153)

 


_____

_______

_____

________

 

Weighted average Ordinary shares in issue

 

16,591,260

 

16,686,767


 


Listed

Listed

 

 


overseas

in UK

Total

8.

Investments held at fair value through profit or loss

£'000

£'000

£'000

 

Opening book cost

38,629

1,397 

40,026

 

Opening unrealised appreciation

1,338

43 

1,381



________

________

________

 

Opening fair value

39,967

1,440 

41,407

 

Movements in the year:



 

 

Purchases at cost (excluding transaction costs)

7,350

178

7,528

 

Sales 

- Proceeds (net of transaction costs)

(5,784)

(402)

(6,186)

 


- realised gains on sales

482

200

682

 

(Decrease)/increase in unrealised appreciation

(578)

730

152



________

________

________

 

Closing fair value

41,437

2,146

43,583

 


________

________

________

 


Listed

Listed

 

 


overseas

in UK

Total

 


£'000

£'000

£'000

 

Closing book cost

40,677

1,373

42,050

 

Closing unrealised appreciation

760

773

1,533



________

________

________

 


41,437

2,146

43,583

 


________

________

________

 



2008

2007

 



£'000

£'000

 

Investments listed on a recognised investment exchange


43,583

41,407

 



________

________

 



2008

2007

 

Gains/(losses) on investments


£'000

£'000

 

Realised gains on sales


682

76

 

Increase/(decrease) in unrealised appreciation


152

(3,483)




________

________

 



834

(3,407)

 



________

________


Transaction costs 

During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. Expenses incurred in acquiring investments have been expensed through capital and are included within administration expenses in the Income Statement, whilst expenses incurred in disposing of investments have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:


 


2008

2007

 


£'000

£'000

 

Purchases

14

140

 

Sales

10

145



________

________

 

 

24

285



________

________


 

 

2008

2007

9.

Debtors

£'000

£'000

 

Amounts due from brokers

84

-  

 

Prepayments and accrued income

234

185

 

Other loans and receivables

2

2



________

________

 

 

320

187



________

________


 

 

 

2008

2007

10.

Creditors: amounts falling due within one year

£'000

£'000

 

(a)

Foreign currency loans

3,852 

1,681 

 



________

________


Bank loans of US$5,700,000 (2007 - US$2,450,000), equivalent to £2,868,000 (2007 - £1,249,000) at an interest rate of 3.30% (2007 - 6.03%) and JPY194,700,000 (2007 - JPY100,000,000), equivalent to £984,000 (2007 - £432,000) at an interest rate of 1.67% (2007 - 1.42%) are drawn down from the £7,000,000 facility with ING Bank N.V. The bank loans have been rolled over to 2 July 2008.


The loans are secured by a floating charge over all the assets of the Company.

 

 



2008

2007

 



£'000

£'000

 

(b)

Other creditors

103

100




________

________



 

 

2008

2007

 



Issued and


Issued and

 


Authorised

fully paid

Authorised

fully paid

11.

Called-up share capital

£'000

£'000

£'000

£'000

 

Ordinary shares of 10p each

60,000 

1,627 

60,000 

1,669 

 


________

________

________

________


During the year, 413,400 (2007 - nil) Ordinary shares of 10p each (representing 2.5% of the issued Ordinary share capital at 31 March 2008) were bought back for cancellation at a total cost of £939,000 (2007 - £nil) including expenses.


 

 

Capital

Capital

Total

 


reserve -

reserve -

capital

 


realised

unrealised

reserve

12.

Capital reserve

£'000

£'000

£'000

 

Year ended 31 March 2008



 

 

At 31 March 2007

32,471 

 1,381 

33,852 

 

Reclassification of reserves

1,381 

 (1,381)

-

 

Changes in unrealised fair value gains

152

-

152 

 

Gains on realisation of investments at fair value

682 

-

682 

 

Exchange losses

 (77)

-

 (77)

 

Administration expenses

  (19)

-

 (19)



________

________

________

 

At 31 March 2008

34,590 

-

34,590 

 


________

________

________


The above split in capital reserve is shown in accordance with the provisions of the Statement of Recommended Practice "Financial Statements of Investment Trust Companies".


Capital reserves available for repurchasing shares are comprised of gains and losses on realisation of investments included in "capital reserve - realised" together with changes in fair value of investments which are readily convertible to cash, without accepting adverse terms, as included in the "capital reserve - unrealised".


13.    Net asset value per share

The net asset value per 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

 


2008

2007

2008

2007

 


p

p

£'000

£'000

 

Ordinary shares

247.82

239.87

40,329

40,026

 


________

________

________

________

 

The movements during the year of the assets attributable to the Ordinary shares were as follows:-

 





 

 




2008

2007

 




£'000

£'000

 

Net assets attributable at 1 April



40,026 

43,179 

 

Buyback of ordinary shares (including expenses)



(939)

-  

 

Capital return for the year



738 

(3,231)

 

Revenue on ordinary activities after taxation



504 

78 





________

________

 

Net assets attributable at 31 March



40,329 

40,026 

 




________

________


The net asset value per Ordinary share is based on net assets, and on 16,273,367 (2007 - 16,686,767) Ordinary shares, being the number of Ordinary shares in issue at the year end. 


14.

Reconciliation of net return before finance costs and taxation 

2008

2007

 

to net cash inflow from operating activities

£'000

£'000

 

Return on ordinary activities before finance costs and taxation

1,417 

(3,011)

 

Adjustments for:


 

 

(Gains)/losses on investments

(834)

3,407 

 

Expenses taken to capital reserve

19 

152 

 

Foreign exchange movements

77 

(328)



________

________

 


679 

220 

 

(Increase)/decrease in accrued income

(80)

80 

 

Decrease in other debtors

27 

58 

 

Increase/(decrease) in other creditors

(494)

 

Overseas withholding tax suffered

(50)

(61)



________

________

 

Net cash inflow/(outflow) from operating activities

579 

(197)



________

________


 

 

1 April

Cash

Exchange

31 March

 


2007

flow

movements

2008

15.

Analysis of changes in net debt

£'000

£'000

£'000

£'000

 

Cash at bank

220 

143 

18 

381 

 

Bank overdraft

(7)

-  

-  



________

________

________

________

 

Net cash

213 

150 

18 

381 

 





 

 

Debts falling due within one year

(1,681)

(2,076)

(95)

(3,852)



________

________

________

________

 

Net debt

(1,468)

(1,926)

(77)

(3,471)



________

________

________

________

 

16.    Related party disclosures

During the course of the year, the Company has held investments in other funds managed by the same manager. These holdings are disclosed in note 3.

  17.    Financial instruments

Risk management 

The Company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. 


The main financial risks that the Company faces from its financial instruments are market price risk, interest rate risk, liquidity risk and credit risk.


The Board has established policies for managing each of these risks and reviews regularly their implementation by the Manager. The Company's policies for managing these risks are summarised below and have been applied throughout the year. 


Market price risk

The fair value of or future cash flows from a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises two elements - security price risk and currency risk.  


Security price risk 

Changes in market prices for the Company's portfolio of securities directly affect their reported value in the Balance Sheet.


It is the Board's investment policy for the Company's assets to be invested in a focused portfolio of securities in quoted companies as explained in the Business Review. The Manager has a dedicated investment management process, which ensures that the risk inherent in this investment policy is controlled. Underlying the process is the belief that risk is not that individual stock prices fluctuate in the short term, or that movement in the value of the portfolio deviates from the benchmark but that risk is investment in poorly managed expensive companies which the Manager does not understand. In depth research and stock selection procedures are in place based on this risk control philosophy. The portfolio is reviewed on a periodic basis by the Manager's Investment Committee and by the Board.


Security price sensitivity

If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary Shareholders for the year ended 31 March 2008 would have increased/(decreased) by £4,358,000 (2007 increased/(decreased) by £4,141,000) and equity reserves would have increased/(decreased) by the same amount. 


Foreign currency risk

All of the Company's investment portfolio is invested in overseas securities and the Balance Sheet, therefore, can be significantly affected by movements in foreign exchange rates. It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. The Company's borrowings, as detailed in note 10, are also in foreign currency. 


The revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk.

  

Foreign currency risk exposure (excluding short-term debtors and creditors) by currency of denomination:

 


31 March 2008

31 March 2007

 



Net 

Total


Net 

Total

 


Overseas 

monetary 

currency

Overseas 

monetary 

currency

 


investments

assets

exposure

investments

assets

exposure

 


£'000

£'000

£'000

£'000

£'000

£'000

 

Australian Dollar

1,669

-

1,669

2,102

-

2,102

 

Hong Kong Dollar

6,168

-

6,168

5,962

-

5,962

 

Japanese Yen

10,589

(984)

9,605

9,987

(432)

9,555

 

Korean Won

3,895

84

3,979

4,720

-

4,720

 

Malaysian Ringgit

2,152

-

2,152

1,798

-

1,798

 

Philippine Peso

683

-

683

673

-

673

 

Singaporean Dollar

6,944

-

6,944

6,247

-

6,247

 

Sterling

6,255

61

6,316

5,230

209

5,439

 

Taiwanese Dollar

2,449

302

2,751

2,336

11

2,347

 

Thailand Baht

1,512

-

1,512

1,311

-

1,311

 

US Dollar

1,267

(2,850)

(1,583)

1,041

(1,256)

(215)



________

________

________

________

________

________

 

Total

43,583

(3,387)

40,196

41,407

(1,468)

39,939



________

________

________

________

________

________


Foreign currency sensitivity

There is no sensitivity analysis included as the Company's significant foreign currency financial instruments are in the form of equity investments, which have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.


Interest rate risk

Interest rate movements may affect:

    the level of income receivable on cash deposits; and

    interest payable on the Company's variable rate borrowings.


The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.


Interest rate sensitivity

Movements in interest rates would not significantly affect net assets attributable to the Company's Shareholders and total profit.


Liquidity risk 

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not considered to be significant as the Company's assets mainly comprise readily realisable securities which can be sold to meet funding requirements if necessary and short-term flexibility is achieved through the use of loan facilities, details of which may be found in note 10.


Liquidity risk exposure

At 31 March 2008 and 31 March 2007 the Company's bank loans, amounting to £3,852,000 and £1,681,000, respectively, were both due for repayment or roll-over within six months.


  Credit risk

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


 
The risk is not significant, and is managed as follows:
-      of the relatively small amounts involved; and
-      investment transactions are carried out with a large number of brokers of good quality credit standing; and
-      cash is held only with reputable banks with high quality external credit enhancements.


 

None of the Company's financial assets is secured by collateral or other credit enhancements and none are past due or impaired.


Credit risk exposure

The amount of cash at bank and in hand of £381,000 (2007 - £213,000) and debtors of £320,000 (£187,000) in the Balance Sheet represent the maximum exposure to credit risk at 31 March.


18.    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 Board normally seeks to limit gearing to 15% of net assets.


The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Manager's views on the market 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.


19.    Contingent liabilities

Cash balances held in India amounting to the equivalent of £373,000 (2007 - £349,000) are currently blocked pending resolution of an action by an agency of the Indian Government in relation to a closed investment transaction. Additionally, as an extension of this action, regulatory action in India may be initiated against various parties including the Company which, inter alia, may seek to repatriate investment proceeds from the UK. These issues affect some 20 foreign institutional investors. The Company has ceased to recognise any value in these balances for the purpose of these accounts.


The Company is defending itself strenuously against this potential action. The Company has commenced proceedings in the Indian High Court seeking an order lifting the blocking order imposed on the Company's bank account and, as an interim protective measure, a direction that the blocked funds should not be taken arbitrarily. These proceedings are continuing.


The Company had no other contingent liabilities at 31 March 2008. 


20.    Subsidiary undertaking

Mountain View Securities Limited

At 31 March 2008 the share capital and net asset value of Mountain View Securities was £1 (2007 - £1).


In the opinion of the Directors, this wholly owned subsidiary, which has not traded in the year, is immaterial, hence consolidated accounts have not been prepared.

  Additional notes for Annual Financial Report:


This Annual Financial Report announcement is not the Company's statutory accounts. The statutory accounts for the year ended 31 March 2007 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 March 2007 and 31 March 2008 received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not include a statement under either section 237(2) or 237(3) of the Companies Act 1985. The statutory accounts for the financial year ended 31 March 2008 have been approved and audited but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which will be held at 11.00am on Tuesday 29 July 2008 at One Bow Churchyard, Cheapside, London EC4M 9HH.


The Annual Report will be posted to shareholders in June 2008 and copies will be available from Manager or from the Company's website (www.all-asia.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.


For Aberdeen All Asia Investment Trust PLC

Aberdeen Asset Management PLC, Secretaries


END

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