Final Results
INVESCO Asia Trust plc
Preliminary Announcement of Unaudited Final Results
For the Financial Year Ended 30 April 2006
Chairman's Statement
Performance
I am pleased to report that the Company's performance for the 12 months to 30
April 2006 reflected solid outperformance in both absolute and relative terms.
Over the period, the net asset value per ordinary share increased from 66.9p to
101.2p, a rise of 51.3%, compared to the benchmark index, the MSCI (All
Country) Far East ex Japan Free Index, which rose by 42.8% - adjusted for
sterling. The Company's share price increased from 57.8p to 96.0p at the end of
the period, while the discount to net asset value at which the shares trade
narrowed to 5.1% from 13.6%. More details of the Company's operations and
activities appear in the Annual Report and Accounts.
The turnaround in performance since the management of the Company moved to
Henley in March 2004 represents an extension of the Henley-based team's strong
track record and I am confident that the team will continue to deliver solid
results.
Long-term growth prospects for the Asia Pacific region are expected to remain
superior to those of the developed world, driven by supportive demographics,
high savings rates, cost competitiveness, and an increasingly-educated
workforce. There are also signs that Asia is reducing its export dependence as
domestic demand makes an increasingly positive contribution to the overall
growth position. At the same time, the Chinese economy continues to experience
strong growth and is becoming increasingly influential on the economic
prospects of the rest of the region. The emergence of the Japanese economy from
recession is more firmly based than in previous years and is also an important
driver.
From an economic perspective, the general message is therefore that Asian
economies are still performing better than their global counterparts, in spite
of the more unsettled external backdrop and uncertainties as to the direction
of international interest rates and the continuing high cost of oil and other
commodities.
Dividend
As I said in my statement in last year's Annual Report, your Board is of the
view that as much as possible of the Company's net revenue should be
distributed to shareholders. The Board is therefore recommending a final
dividend of 1.2p per ordinary share (2005: 0.9p). The dividend, which is
subject to the approval of shareholders at the Annual General Meeting, will be
payable on 28 July 2006 to shareholders on the Register on 7 July 2006.
Gearing
The Company has a £15 million uncommitted revolving loan facility, of which £
6.8 million was drawn down at the year end, gearing the portfolio by 6% (2005:
5%).
The Board and the Manager review gearing regularly and closely.
Special Business at the Annual General Meeting (AGM)
As in previous years, the Board wishes to renew the authorities to issue new
ordinary shares, if necessary, whilst disapplying pre-emption rights, and to
buy back the Company's ordinary shares in the market within the limits set out
in Special Resolutions 10 and 11 in the Notice of Annual General Meeting in the
Annual Report and Accounts.
Resolution 12 concerns the maximum total amount which may be paid annually in
fees to Directors, the current limit being £100,000. Although this amount is
adequate for the time being, the Directors consider that it would be prudent to
allow for the possibility that an additional Director may be appointed to the
Board. Such an appointment and future fee reviews might mean that an aggregate
amount in excess of the current limit is required at some point. The Board
therefore proposes an increase in the maximum level to £150,000 per annum. As
indicated in the Directors' Remuneration Report in the Annual Report and
Accounts, fees are set with reference to prevailing rates for comparable
investment trusts, workloads and responsibilities.
The Board recommends that shareholders vote in favour of all resolutions, as
they believe that the proposed resolutions set out in the Notice of Annual
General Meeting are in the best interests of the Company and shareholders.
Prospects
Since the end of the year under review we have seen risk aversion levels
increase due to the sharp falls in global stockmarkets. Worries over inflation
and the pace of growth in the US along with tighter global monetary policy have
seen investors become more cautious. This has caused some stockmarkets to fall
quite sharply, the heaviest falls being seen in previous outperformers India,
Indonesia and Korea. Nonetheless, the long-term outlook for the region remains
promising. With valuations having fallen, the region now trades on a forward
price to earnings ratio of around 12 times 2006 earnings. This should provide a
cushion against further falls in Asian stockmarkets. In the view of the
Managers and the Board, the long-term case for investing in Asian equities
remains persuasive.
I look forward to seeing shareholders at the Company's AGM on 27 July 2006.
They will have an opportunity to meet members of the Board and the Investment
Manager over light refreshments after the meeting.
David Hinde
Chairman
27 June 2006
Income Statement
for the year ended 30 April
2005
2006 Restated*
Revenue Capital Total Revenue Capital Total
Return Return Return Return Return Return
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 36,735 36,735 - 5,282 5,282
Losses on foreign
currency revaluation - (125) (125) - (114) (114)
Income 2,593 - 2,593 2,033 858 2,891
Investment management fee (184) (552) (736) (125) (379) (504)
Other expenses (413) (95) (508) (370) (25) (395)
Net return before finance
costs and taxation 1,996 35,963 37,959 1,538 5,622 7,160
Interest payable and
similar
charges (68) (204) (272) (35) (29) (64)
Dividends on ordinary (954) - (954) (530) - (530)
shares 1(c)
Return on ordinary
activities before tax 974 35,759 36,733 973 5,593 6,566
Tax on ordinary activities (621) 249 (372) (485) 237 (248)
Return on ordinary
activities after
tax for the financial 353 36,008 36,361 488 5,830 6,318
year
Return per ordinary share:
Basic 5 1.23p 33.99p 35.22p 0.96p 5.50p 6.46p
*Restated for new UK Accounting Standards as detailed in note 9.
The total column of this statement represents the Company's Income Statement,
prepared in accordance with UK Accounting Standards. The supplementary revenue
and capital columns are both prepared under guidance published by the
Association of Investment Trust Companies. All items in the above statement
derive from continuing operations and the Company has no other gains or losses,
therefore no Statement of Total Recognised Gains and Losses is presented. No
operations were acquired or discontinued in the year.
Balance Sheet
at 30 April
2006 2005
Restated*
£'000 £'000
Fixed assets
Investments 113,101 68,964
Current assets
Debtors 832 602
Cash at bank 1,098 5,476
1,930 6,078
Creditors: amounts falling due within one year (7,778) (4,160)
Net current (liabilities)/assets (5,848) 1,918
Total assets less current liabilities 107,253 70,882
Provisions for liabilities and charges (44) (34)
Total net assets attributable to Shareholders 107,209 70,848
Total net assets attributable to Shareholders
are
represented by:
Called up share capital 10,596 10,596
Share premium account 74,588 74,588
Other reserves:
Capital redemption reserve 650 650
Special reserve 25,796 25,796
Capital reserve - realised (28,357) (46,805)
Capital reserve - unrealised 21,727 4,167
Revenue Reserve 2,209 1,856
107,209 70,848
Net asset value per ordinary share
Basic 101.2p 66.9p
* Restated for new UK Accounting Standards as detailed in note 9.
Cash Flow Statement
for the year ended 30 April
2006 2005
£'000 £'000
Cash inflow from operating activities 1,157 1,694
Servicing of finance (1,255) (558)
Net financial investment (7,255) (1,645)
Net cash (outflow) before management of
liquid
resources and financing (7,353) (509)
Management of liquid resources 3,588 (2,015)
Financing 3,100 3,700
(Decrease)/increase in cash in the year (665) 1,176
Reconciliation of cash flow to movement in
net funds/(debt)
(Decrease) / increase in cash in the year (665) 1,176
Cash outflow from movement in debt (3,100) (3,700)
Cash (outflow)/inflow from increase in liquid (3,588) 2,015
resources
Change in net funds resulting from cash flows (7,353) (509)
Translation differences (125) (114)
Movement in net funds in the year (7,478) (623)
Net funds at beginning of year 1,776 2,399
Net (debt)/funds at end of year (5,702) 1,776
NOTES
1. Changes in Accounting Policies
Basis of Preparation
The financial statements have been prepared in accordance with applicable
United Kingdom Accounting Standards and with the Statement of Recommended
Practice ("SORP") "Financial Statements of Investment Trust Companies" issued
by the Association of Investment Trust Companies in 2005. The SORP has also
given rise to some changes in presentation. The Statement of Total Return is
now called the Income Statement and the total return column, as opposed to the
revenue column, is now the profit and loss account of the Company.
The Company's Articles of Association require that, unless the AGM of the
Company to be held in 2007 approves on ordinary resolution releasing the
Directors from the obligation, the Directors shall convene an Extraordinary
General Meeting in 2008 at which a special resolution will be proposed to wind
up the Company. The Board intends to propose the necessary resolution at the
AGM in 2007 to seek release from the obligation to wind up the Company and the
financial statements have therefore been drawn up on the going concern basis.
The same accounting policies used for the year ended 30 April 2005 have been
applied, with the following exceptions.
(a) As the obligation to wind up the Company in 2007 is regarded as a current
obligation, FRS 25: "Financial Instruments: Disclosure and Presentation"
requires that shareholders' funds should be presented as liabilities.
Consequently, dividends are included within finance costs. It should be noted
that these changes are purely presentational, and that the rights attributable
to ordinary shareholders are unchanged.
(b) Investments
Investments are accounted for on the date they are traded and classified at
fair value through profit or loss. Investments, designated as at fair value
through profit or loss, are measured at subsequent reporting dates at fair
value, which is the bid price. Previously, these were valued at middle-market
prices. Gains and losses on revaluation are taken to the Income Statement.
Comparatives have been restated to reflect this change as disclosed in note 9.
FRS 26 "Financial Instruments: Measurement" requires that transaction costs for
financial investments at fair value through profit or loss be expensed. The
Company's policy is to capitalise transaction costs on acquisition and the
profit or loss on disposal is calculated net of transaction costs on disposal.
Whilst there is no overall impact on the total return for the year or on net
assets, this results in an overstatement of investment book cost and a
misallocation between realised and unrealised capital reserves. In the view of
the Directors, this departure from UK GAAP does not have a material impact on
the Company's results. Transaction costs on purchases of £371,000 (2005: £
185,000) and on sales of £466,000 (2005: £262,000) are included within gains
and losses on investments.
(c) Dividends
Following the introduction of FRS 21 "Events After the Balance Sheet Date",
dividends are not recognised in the accounts unless there is an obligation to
pay at the balance sheet date. Proposed final dividends are thus recognised in
the period in which they are either approved by or paid to shareholders. As a
result, the accounts for the year ended 30 April 2005 have been restated to
reflect this change (see note 9) and the final dividend for the year ended 30
April 2006 is disclosed as shown in note 4.
As dividends paid to ordinary shareholders are now classified as liabilities,
the dividends payable on the ordinary shares are now accounted for under
finance costs (see note 1(a)).
2. Income
2006 2005
£'000 £'000
Income from investments
UK dividends 6 -
Overseas dividends 2,407 1,914
Scrip dividends 154 34
2,567 1,948
Other income
Deposit interest 26 85
Total income 2,593 2,033
Total income comprises:
Dividends 2,567 1,948
Interest 26 85
2,593 2,033
During the year no income attributable to capital was received. In 2005, £
858,000 of income was allocated to capital in respect of final proceeds from
the liquidation of Drayton Far Eastern of £787,000 and special dividends from
City Developments of £71,000.
3. Investment management fee
2006 2005
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 184 552 736 125 379 504
(i) INVESCO Asset Management Limited acts as Manager and Secretary to the
Company under an agreement dated 2 June 1995, subsequently revised on 14 July
1997 and 28 January 2004. This agreement is terminable by either party upon
expiry of not less than six month's written notice. The fee is calculated at
the rate of 0.75% per annum (plus VAT) by reference to the total assets less
current liabilities (excluding any short-term loans) of the Company at the end
of each respective calendar quarter. The assets for this purpose exclude the
value of any investment in other funds managed by the Manager. At 30 April 2006
£207,000 (2005: £136,000) was due for payment to the Manager in respect of
investment management fees.
(ii) The manager is also paid a separate fee for secretarial and administrative
services which is subject to annual adjustment in line with the UK Retail Price
Index. During the year the Company paid £64,500 (2005: £62,000) for these
services.
4. Dividends
2006 2005
£'000 £'000
Dividend on shares
Ordinary dividend paid of 0.9p per share 954 530
(2005: 0.5p)
954 530
We set out below the total dividend payable in respect of the financial year,
which is the basis on which the requirements of Section 842 Income and
Corporation Taxes Act 1988 are considered.
2006 2005
£'000 £'000
Dividend on shares
Ordinary dividend proposed of 1.2p per share 1,272 954
(2005: 0.9p)
1,272 954
5. Return per ordinary share
The return per ordinary share is based on 105,962,425 (2005: 105,962,425)
ordinary shares, being the weighted average number of shares in issue
throughout the year and on the following figures:
2006 2005
Revenue Capital Total Revenue Capital Total
Return Return Return Return Return Return
£'000 £'000 £'000 £'000 £'000 £'000
Return on ordinary
activities after tax
for the financial year 353 36,008 36,361 488 5,830 6,318
Dividends paid to 954 - 954 530 - 530
shareholders
Return attributable to
ordinary
shareholders 1,307 36,008 37,315 1,018 5,830 6,848
Return per ordinary share - 1.23p 33.99p 35.22p 0.96p 5.50p 6.46p
basic
Dividends paid to shareholders relate to final dividends proposed in 2005 and
2004 and paid in 2006 and 2005 respectively.
6. Reconciliation of Movements in Net Assets Attributable to Shareholders
Share Capital Capital Capital
Share Premium Redemption- Special Reserve Reserve - Revenue
-
Capital account Reserve Reserve realised un-realised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 30 April
2005
(restated)* 10,596 74,588 650 25,796 (46,805) 4,167 1,856 70,848
Net gains on
realisation
of - - - - 16,890 - - 15,214
investments
Increase in
unrealised
appreciation - - - - - 19,845 - 21,521
Transfer on
disposal of
investments - - - - 2,285 (2,285) - -
Costs charged - - - - (851) - - (851)
to
capital
Exchange
differences
on capital - - - - (125) - - (125)
items
Tax effect of - - - - 249 - - 249
capital
items
Revenue return
for
the year - - - - - - 353 353
At 30 April 10,596 74,588 650 25,796 (28,357) 21,727 2,209 107,209
2006
* Restated for new UK Accounting Standards as detailed in note 9.
Called-up share capital and reserves are now classified as liabilities and,
accordingly, a Reconciliation of Movements in Net Assets Attributable to
Shareholders has been presented in place of the previous Reconciliation of
Movements in Shareholders' Funds.
7. Net asset value
The net asset per ordinary share and the net assets attributable at the
year-end were as follows:
Net Asset Value Per Net Assets
Share Attributable
2006 2005 2006 2005
restated* restated*
Pence Pence £'000 £'000
Ordinary shares
- Basic 101.2p 66.9p 107,209 70,848
* Restated for new UK Accounting Standards as detailed in note 9.
The basic net asset value per ordinary share is based on net assets at the
year-end and on 105,962,425 (2005: 105,962,425) ordinary shares, being the
number of ordinary shares in issue at the year end.
8. Notes to the cash flow statement
(a) Reconciliation of revenue to net cash inflow from operating activities
2006 2005
£'000 £'000
Net return before finance costs and taxation 37,959 7,160
Decrease/(increase) in debtors 70 (101)
Increase in creditors 99 17
Overseas tax deducted from unfranked investment (361) (214)
income
Adjustment for gains on investments (36,735) (5,282)
Adjustment for losses on currency revaluation 125 114
Net cash inflow from operating activities 1,157 1,694
9. Restatement of previously reported balances for effects of new UK Accounting
Standards
(a) Balance Sheet as at 30 April 2004
Previously
Reported Restated
30 April Adjust- 30 April
2004 ments 2004
Notes (£'000) (£'000) (£'000)
Investments i 62,574 (136) 62,438
Current assets:
Amounts due from brokers 45 - 45
Tax recoverable 26 - 26
Prepayments and accrued income 151 - 151
Cash at bank 2,399 - 2,399
2,621 - 2,621
Creditors: amounts falling due within
one year:
Bank loan - -
Amounts due to brokers (282) (282)
Proposed dividends ii (530) 530 -
Accruals and deferred income (247) (247)
(1,059) 530 (529)
Net current assets 1,562 530 2,092
Total assets less current liabilities 64,136 394 64,530
Total net assets attributable to
Shareholders i, ii 64,136 394 64,530
Total net assets attributable to
Shareholders are
represented by:
Called-up share capital 10,596 - 10,596
Share premium account 74,588 - 74,588
Other reserves:
Capital redemption reserve 650 - 650
Special reserve 25,796 - 25,796
Other capital reserve - realised (40,664) - (40,664)
Other capital reserve - unrealised i (7,668) (136) (7,804)
Revenue reserve ii 838 530 1,368
64,136 394 64,530
Net asset value per ordinary share:
Basic 60.5p 0.4p 60.9p
(b) Balance Sheet as at 30 April 2005
Previously
Reported Restated
30 April Adjust- 30 April
2005 ments 2005
Notes £'000 £'000 £'000
Investments i 69,099 (135) 68,964
Current assets:
Amounts due from brokers 324 - 324
Tax recoverable 32 - 32
Prepayments and accrued income 246 - 246
Cash at bank 5,476 - 5,476
6,078 - 6,078
Creditors: amounts falling due within
one year:
Bank loan (3,700) - (3,700)
Amounts due to brokers (160) - (160)
Proposed dividends ii (954) 954 -
Accruals and deferred income (300) - (300)
(5,114) 954 (4,160)
Net current assets 964 954 1,918
Total assets less current liabilities 70,063 819 70,882
Provisions for liabilities and charges (34) - (34)
Total net assets attributable to
Shareholders i, ii 70,029 819 70,848
Total net assets attributable to
Shareholders are
represented by:
Called-up share capital 10,596 - 10,596
Share premium account 74,588 - 74,588
Other reserves:
Capital redemption reserve 650 - 650
Special reserve 25,796 - 25,796
Other capital reserve - realised (46,780) (25) (46,805)
Other capital reserve - unrealised i 4,302 (135) 4,167
Revenue reserve ii, iii 877 979 1,856
70,029 819 70,848
Net asset value per ordinary share:
Basic 66.1p 0.8p 66.9p
(c) Income Statement for the year ended 30 April 2005
Notes £'000
Revenue returns as previously reported 993
Capital returns as previously reported 5,854
Total return as previously reported 6,847
Adjustment for dividend paid to Shareholders ii (530)
Adjustment for revaluation of investments to fair 136
value for 30 April 2004
Adjustment for revaluation of investments to fair (135)
value for 30 April 2005
Restated total return 6,318
i Investments are classified as held at fair value through profit or loss being
the bid price for all listed investments. Previously they were carried at
mid-market price.
ii Dividends are not recognised until paid or an obligation to pay the
dividends arises, accordingly no provision is made for the proposed final
dividend and it is added back to revenue reserves for the period. As the
ordinary shares are classed as liabilities, the dividends paid are treated as
part of finance costs in the Income Statement.
10. The financial information set out above does not constitute the Company's
statutory accounts for the year ended 30 April 2006 or 2005. The financial
information for 2005 is derived from the statutory accounts for 2005 which have
been delivered to the Registrar of Companies. The Auditors have reported on the
2005 statutory accounts and their report was unqualified, did not include a
reference to any matter to which the auditors drew attention by way of emphasis
without qualifying their report and did not contain a statement under s237(2)
or (3) of the Companies Act 1985. The statutory accounts for 2006 will be
finalised on the basis of the information presented by the Directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
11. The Annual General Meeting of the Company will be held at 12.00 noon on 27
July 2006 at 30 Finsbury Square, London EC2A 1AG.
12. The audited Report and Accounts will be posted to shareholders shortly.
Copies may be obtained during normal business hours from the Company's
Registered Office, 30 Finsbury Square, London EC2A 1AG.
By order of the Board
INVESCO Asset Management Limited
27 June 2006
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