Half-yearly Report
Invesco Asia Trust plc
Half-Yearly Financial Report
For the Six Months to 31 October 2008
Key Facts
Invesco Asia Trust plc is an investment trust listed on the London Stock
Exchange.
Objective of the Company
The objective of Invesco Asia Trust plc is to provide long-term capital growth
by investing in a diversified portfolio of Asian and Australasian companies.
The Company aims to achieve growth in its net asset value in excess of the
Benchmark Index, the Morgan Stanley Capital International All Countries Asia
Pacific ex Japan Index, measured in sterling.
Investment Policy and Risk
Invesco Asia Trust plc invests primarily in the equity securities of companies
listed on the stockmarkets of China, Hong Kong, India, Malaysia, Singapore,
South Korea, Taiwan, Thailand and Australasia. It may also invest in unquoted
securities up to 10% of the value of the Company's gross assets and in warrants
and options when it is considered the most economical means of achieving
exposure to an asset.
The Company is actively managed and the Manager has broad discretion to invest
the Company's assets to achieve its investment objective. The Manager seeks to
ensure that the portfolio is appropriately diversified having regard to the
nature and type of securities (such as performance and liquidity) and the
geographic and sector composition of the portfolio.
Share Capital
The Company's issued share capital consists of 93,837,425 ordinary shares of
10p each.
Performance Statistics
At At
31 October 30 April %
2008 2008 Change
Net assets (£'000) 76,757 118,862 -35.4
Actual gearing 100 102
Asset gearing 99 101
Net asset value per ordinary share
- Balance sheet 81.8p 126.7p -35.4
- after charging final dividend
(capital NAV) 81.8p 125.2p -34.7
Net asset value (total return)(1) -34.8
Mid-market price per ordinary share 71.5p 112.8p -36.6
Discount per ordinary share
on capital NAV 12.6% 9.9%
Benchmark index(1)
-capital return 150.8 247.9 -39.2
-total return 283.1 455.6 -37.9
(1) Source: Thomson Financial Datastream.
INTERIM MANAGEMENT REPORT INCORPORATING THE CHAIRMAN'S STATEMENT
Chairman's Statement
Performance and Prospects
The six months to the end of October 2008 witnessed a number of unprecedented
events across global financial markets, which resulted in extreme levels of
volatility and severe share price weakness. As western economies and financial
markets suffered the continued fall-out from the credit crisis, including
high-profile bank collapses and government rescue packages, risk aversion
increased sharply and had an adverse impact on Asian equity markets. While
growth among Asian economies remained relatively robust, and significantly
stronger than that of western economies, the pace of expansion slowed and a
clear moderation in inflation gave policymakers the scope to undertake
expansionary measures. Over the period, the net asset value (total return) per
ordinary share declined 34.8%, compared to the benchmark index, the MSCI All
Countries Asia Pacific ex Japan (total return) index, which fell by 37.9%,
adjusted for sterling. The Company's share price fell from 112.8p to 71.5p,
while the discount to net asset value at which the shares trade widened to
12.6% from 9.9% at the beginning of the period. At the date of this report, the
latest available net asset value (15 December 2008) has risen to 85.0p.
Dividend
As in previous years, no dividend is being declared in respect of the interim
period.
Outlook
The market and economic background is characterised by great uncertainty. The
slowdown in key western economies will have a significant impact on Asia,
highlighting that today's issues are global in nature. This is also clearly
demonstrated by the co-ordinated interest rate cuts made recently by global
central banks and by the stimulus measures planned in Asia and elsewhere. The
commitment of governments to support growth and repair confidence is a positive
development and should help Asia's key economies to maintain reasonable levels
of growth during this challenging period.
In the short term, fragile investor sentiment is likely to result in further
volatility. Whilst this may lead to further significant swings in share and
index values in the months ahead, the Company will maintain its focus on the
long term, through investment in those companies that offer sustainable
prospects and attractive valuations.
David Hinde
Chairman
17 December 2008
Market & Economic Review
The turmoil in financial markets gathered pace over the period, resulting in
falls in equity markets amid concerns about imminent global recession. Asian
equities suffered sustained selling pressure as investor risk appetite swiftly
deteriorated and a flight to the relative safety of cash and government bonds
took place. Despite sporadic attempts to rally, equity markets in Asia ended
the period significantly lower. Concerns that the faltering global economy
could undermine Asian corporate earnings were sufficient to outweigh any
potential support that stocks may have found from depressed valuation levels
and relatively resilient economic performance. During the period, equities in
China, India, Korea, Thailand and Indonesia all declined more than 40% in
sterling terms, while the most resilient market was the Philippines, which
still fell heavily, ending 24.9% lower, sterling adjusted.
Asian equities were driven largely by global factors and with the fall-out from
the subprime and credit market crises impacting the performance of some of the
world's most influential economies, export dependent Asian countries
experienced a period of weaker performance. Even the dominant Chinese economy
is not immune to the slowdown in demand from the US and Europe, and whilst
trade with emerging market countries helped to limit the declines, the pace of
economic growth continued to slow. Despite the steep equity market falls,
macroeconomic data during the period was relatively robust. Leading indicators
softened from previous levels, but underlying performance in most Asian
economies remained significantly stronger than was the case for western peers.
Third quarter growth in China eased to 9% year-on-year (`y-o-y') from 10.1%
y-o-y in the second quarter, but annualised export growth remained around 20%
and both September's and October's trade balance figures of US$29.3bn and
US$35.2bn represented new highs.
Falling inflation provided the scope required for interest rates to be cut and
monetary policy was eased in the majority of Asian countries by the end of
October. Chinese authorities led the way, cutting interest rates, reducing bank
reserve requirements and most recently announcing a stimulus plan for the
period to the end of 2010 valued at RMB4trn (US$586bn), although the headline
figure does include spending that had already been planned. In addition, the
Australian government outlined a A$10.4bn package of their own and Korean
authorities detailed a US$130bn bank rescue initiative and US$10.8bn of
infrastructure spending and tax cuts.
Company Performance
Over the period, the performance of the company was impacted by the widespread
weakness in financial markets, leaving it 34.8% lower (NAV, total return £),
which was a slightly more resilient performance than that of the benchmark MSCI
All Countries Asia Pacific ex Japan index, which fell 37.9% (total return, £).
Over the period the Company's underweight exposure to those areas most
vulnerable to slower global growth, including energy and materials, helped to
achieve a stronger performance than that of the benchmark. Among individual
stocks, the holding of Datacraft Asia performed well, gaining over 40%, as
majority shareholder Dimension Data acquired the remainder of the company. In
terms of detractors, the Company's underweight representation in utilities had
a negative impact as the sector's defensive qualities provided a degree of
downside protection, despite valuations looking expensive relative to the
growth outlook and to other market sectors. The underweight position in
Malaysia also weighed on returns as the market was among the more resilient
during the period.
Outlook for Asian Economies and Markets
The lack of visibility surrounding the global economy poses an ongoing
challenge to investor sentiment and is likely to result in further equity
market volatility in the short term. We expect the weaker economic background
to result in a period of slower earnings growth in 2008 and 2009. Although this
has now been largely discounted in earnings estimates, forecasts for 2009 may
still need to be revised lower. Valuations have now corrected significantly
from the levels experienced at the end of 2007 and at around 10x earnings have
reached the levels which have historically marked the trough for Asian markets.
We continue to hold a positive view on Asian equities. We believe that the
long-term outlook is strong and that Asia's performance should remain
attractive in the context of a slower global growth environment. The concerted
efforts of monetary and fiscal authorities to support growth, both in Asia and
globally, are also positive factors. The easing of inflation has given central
banks and governments the scope to follow supportive policies, which should
help to mitigate part of the impact from lower US and European demand. The
relative strength of Asian economies and the region's lack of indebtedness
compared to western counterparts also leave Asia well placed to attract
investors should any signs of stabilisation in economic conditions emerge.
Company Strategy
The fundamental philosophy behind the Company's investment strategy remains the
same: to seek exposure to quality businesses, with positive long-term
potential, trading at undemanding valuations. The volatile market conditions
experienced over the six months to the end of October provided the opportunity
to exploit the, at times, indiscriminate selling that took place to either
introduce, or increase, exposure to companies where we believe valuations have
become disconnected from their future prospects.
The Company was significantly underweight in Chinese equities at the start of
the period, reflecting what we considered to be expensive valuations. However,
as weakness in Chinese markets accelerated, selective investments were made in
those companies where share price falls had been excessive. As a result, the
Company's exposure to Chinese equities ended the period higher and was
supplemented by the continuing overweight position in Hong Kong. The
combination of very low US interest rates and the potential for sustained long
term growth in China are positive factors for Hong Kong. Valuations are also
attractive, both on a standalone basis and relative to Chinese equities, which
makes Hong Kong a good vehicle for accessing the long-term Chinese growth
story.
Throughout the period, we maintained the large underweight representation in
Australia. This position is partly a reflection of the Company's underweight
exposure to materials, which account for a significant proportion of the
Australian market. We also consider that, in addition to its highly leveraged
banks, Australia's growth profile is not as strong as that of many other
countries in the Asia Pacific region.
Sectorally, the Company remains overweight in consumer staples companies, based
on favourable demographic and savings trends, and is underweight in some
cyclical areas which are vulnerable to a weaker global economy. The Company is
also underweight in banks, where capital is being reduced as a result of loan
and investment losses, and within financials we prefer insurance companies
where many are trading below their embedded value, representing compelling
buying opportunities. We also have a marginally overweight position in real
estate, which is again based on valuation grounds, as current share prices
reflect what we believe is an overly pessimistic outlook.
Stuart Parks
Manager
17 December 2008
Related Party
Invesco Asset Management Limited (`IAML'), a wholly-owned subsidiary of Invesco
Limited, acts as Manager, Company Secretary and Administrator to the Company.
Details of IAML's services and fee arrangements are given in the latest Annual
Financial Report, which is available on the Company's website.
Principal Risks and Uncertainties
The principal risks and uncertainties that could affect the Company's business
can be divided into the following areas:
- Investment Objective and Policy;
- Market Movements and Portfolio Performance;
- Gearing; and
- Regulatory and Tax.
A detailed explanation of these principal risks and uncertainties can be found
on pages 21 to 22 of the latest published Annual Financial Report which is
available on the Company's website.
In the view of the Board, these principal risks and uncertainties are equally
applicable to the remaining six months of the financial year as they were to
the six months under review.
DIRECTORS' RESPONSIBILITY STATEMENT
In respect of the preparation of the half-yearly financial report
The Directors are responsible for preparing the half-yearly financial report
using accounting policies consistent with applicable law and UK Accounting
Standards.
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements contained within the half-yearly
financial report have been prepared in accordance with the Accounting Standards
Board's Statement `Half-Yearly Financial Report';
- the interim management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R of the FSA's Disclosure and Transparency
Rules; and
- the interim management report includes a fair review of the information
required on related party transactions.
The half-yearly financial report has not been audited or reviewed by the
Company's auditors.
Signed on behalf of the Board of Directors.
David Hinde
Chairman
17 December 2008
twenty-five largest holdings AT 31 October 2008
Ordinary shares unless otherwise stated
Market
Value % of
Company Principal Activity Country £'000 Portfolio
Samsung Electronics Technology Hardware South Korea 5,018 6.6
Equipment
Jardine Matheson Diversified Financials Hong Kong 4,358 5.7
Taiwan Semiconductor Semiconductors Taiwan 4,254 5.6
Manufacturing
China InsuranceR Insurance Hong Kong 2,648 3.5
QBE Insurance Insurance Australia 2,425 3.2
China MobileR Telecommunication Hong Kong 2,345 3.1
Services
Sina Software & Services China 2,082 2.7
Beijing EnterpriseR Capital Goods Hong Kong 1,858 2.4
United Phosphorus Chemicals India 1,692 2.2
Shinsegae Food & Staples South Korea 1,641 2.2
Retailing
BHP Billiton Materials Australia 1,612 2.1
Wharf Diversified Financials Hong Kong 1,606 2.1
PetrochinaH Energy China 1,593 2.1
China UnicomR Telecommunication Hong Kong 1,575 2.1
Services
Far East Textile Consumer Durables & Taiwan 1,554 2.0
Apparel
Ping An Insurance H Insurance China 1,546 2.0
China Life Insurance Insurance Taiwan 1,444 1.9
DBS Banking Singapore 1,330 1.8
Bharti Airtel Telecommunication India 1,222 1.6
Services
Wing Lung Bank Banking Hong Kong 1,208 1.6
Newcrest Mining Materials Australia 1,163 1.5
Keppel Capital Goods Singapore 1,160 1.5
Noble Capital Goods Hong Kong 1,150 1.5
Cheung Kong Real Estate Hong Kong 1,107 1.5
CnoocR Energy Hong Kong 1,048 1.4
48,639 63.9
Other investments 27,420 36.1
Total investments 76,059 100.0
R: Red Chip Holdings
H: H - Shares
condensed Income Statement
Year to
Six Months to Six Months to 30
April
31 October 2008 31 October 2007 2008
Revenue Capital Total Revenue Capital Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on - (41,508) (41,508) - 32,898 32,898 17,239
investments held at fair
value through profit or
loss
(Losses)/gains on foreign - (122) (122) - (67) (67) 50
currency revaluation
Income
UK dividends 19 - 19 19 - 19 19
Overseas dividends 1,813 - 1,813 1,613 - 1,613 2,817
Scrip dividends - - - 202 - 202 385
Deposit interest 28 - 28 13 - 13 26
Gross return 1,860 (41,630) (39,770) 1,847 32,831 34,678 20,536
Investment management fee (84) (252) (336) (137) (411) (548) (1,000)
- note 2
Other expenses (222) (12) (234) (229) (15) (244) (471)
Net return before finance
costs and
taxation 1,554 (41,894) (40,340) 1,481 32,405 33,886 19,065
Interest payable and (6) (19) (25) (70) (211) (281) (481)
similar charges - note 2
Return on ordinary
activities before
taxation 1,548 (41,913) (40,365) 1,411 32,194 33,605 18,584
Tax on ordinary activities (408) 76 (332) (466) 187 (279) (492)
Net return on ordinary
activities after
tax for the period 1,140 (41,837) (40,697) 945 32,381 33,326 18,092
Return per ordinary share
- note 3
Basic 1.2p (44.6)p (43.4)p 0.9p 30.6p 31.5p 18.0p
The total column of this statement represents the Company's profit and loss
account prepared in accordance with UK Accounting Standards. The supplementary
revenue and capital columns are presented for information purposes as
recommended by the guidance published by the Association of Investment
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 period.
condensed Balance Sheet
At At At
31 October 30 April 31 October
2008 2008 2007
£'000 £'000 £'000
Fixed assets
Investments held at fair value 76,059 120,155 148,738
Current assets
Amounts due from brokers 149 28 820
Tax recoverable 185 133 -
VAT recoverable 7 7 59
Prepayments and accrued income 44 387 60
Cash at bank 1,982 1,123 1,192
2,367 1,678 2,131
Creditors: amounts falling due within
one year
Amounts owed to brokers (1,024) - (1,379)
Tax payable (385) (17) (219)
Short-term loan - (2,500) (3,500)
Accruals and deferred income (256) (341) (390)
(1,665) (2,858) (5,488)
Net current assets/(liabilities) 702 (1,180) (3,357)
Total assets less current liabilities 76,761 118,975 145,381
Provisions for liabilities
Deferred tax (4) (113) (10)
Total net assets 76,757 118,862 145,371
Capital and reserves
Share capital 9,383 9,383 10,366
Share premium 74,588 74,588 74,588
Other reserves
Capital redemption reserve 1,863 1,863 880
Special reserve 11,798 11,798 23,073
Capital reserve - realised (3,467) 707 (3,643)
Capital reserve - unrealised (19,895) 17,768 38,169
Revenue reserve 2,487 2,755 1,938
76,757 118,862 145,371
Net asset value per share - note 4
Basic 81.8p 126.7p 140.2p
condensed Cash Flow Statement
Six Months Six Months
to Year to to
31 October 30 April 31 October
2008 2008 2007
£'000 £'000 £'000
Net return before finance costs and (40,340) 19,065 34,049
taxation
Adjustment for losses/(gains) on 41,508 (17,239) (33,061)
investments
Translation differences 122 (50) 67
Tax on unfranked investment income (125) (251) (83)
Scrip dividends received as income - (385) -
Decrease/(increase) in debtors 343 (145) 40
(Decrease)/increase in creditors (88) (16) 34
Cash inflow from operating activities 1,420 979 1,046
Servicing of finance
Interest paid on bank loans (22) (483) (283)
Taxation - (206) -
Dividends paid (1,408) (1,378) (1,378)
Capital expenditure and financial
investment
Purchase of investments (23,771) (101,033) (62,335)
Sale of investments 27,262 121,332 70,072
Net cash inflow before management of
liquid
resources and financing 3,481 19,211 7,122
Management of liquid resources 56 412 278
Financing (2,500) (19,498) (7,223)
Increase in cash in the period 1,037 125 177
Cash flow from movement in debt 2,500 5,500 4,500
Cash movement from decrease in liquid (56) (412) (278)
resources
Translation difference (122) 50 (67)
Movement in net funds/(debt) in the 3,359 5,263 4,332
period
Net debt at beginning of period (1,377) (6,640) (6,640)
Net funds/(debt) at end of period 1,982 (1,377) (2,308)
Analysis of changes in net funds/(debt)
Brought forward:
Cash at bank 1,067 892 892
Cash placed on short-term deposit 56 468 468
Debt due within one year (2,500) (8,000) (8,000)
Net debt brought forward (1,377) (6,640) (6,640)
Movements in the period:
Cash inflow from bank 1,037 125 177
Exchange movement (122) 50 (67)
Cash recalled from short-term deposit (56) (412) (278)
Debt due within one year 2,500 5,500 4,500
Net funds/(debt) at end of period 1,982 (1,377) (2,308)
Condensed Reconciliation of movements in Shareholders' Funds
Capital Capital Capital
Share Share Redemption Special Reserve Reserve - Revenue
-
Capital Premium Reserve Reserve Realised Unrealised Reserves Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
For the six
months ended
31 October 2007
Balance as at 1 10,596 74,588 650 25,796 (21,256) 23,401 2,371 116,146
May 2007
Net return from - - - - 17,613 14,768 945 33,326
ordinary
activities
Final dividend - - - - - - (1,378) (1,378)
for 2007
Shares bought (230) - 230 (2,723) - - - (2,723)
back and
cancelled
At 31 October 10,366 74,588 880 23,073 (3,643) 38,169 1,938 145,371
2007
For the year
ended 30 April
2008
Balance as at 1 10,596 74,588 650 25,796 (21,256) 23,401 2,371 116,146
May 2007
Net return from - - - - 21,963 (5,633) 1,762 18,092
ordinary
activities
Final dividend - - - - - - (1,378) (1,378)
for 2007
Shares bought (1,213) - 1,213 (13,998) - - - (13,998)
back and
cancelled
At 30 April 2008 9,383 74,588 1,863 11,798 707 17,768 2,755 118,862
For the six
months ended
31 October 2008
Balance as at 1 9,383 74,588 1,863 11,798 707 17,768 2,755 118,862
May 2008
Net return from - - - - (4,174) (37,663) 1,140 (40,697)
ordinary
activities
Final dividend - - - - - - (1,408) (1,408)
for 2008
At 31 October 9,383 74,588 1,863 11,798 (3,467) (19,895) 2,487 76,757
2008
Notes to the Condensed Financial Statements
1. Accounting Policy
The condensed financial statements have been prepared using the same accounting
policies as those adopted in the Annual Financial Report for the year ended 30
April 2008, which were prepared under the historical cost convention and are
consistent with applicable UK Accounting Standards and with the Statement of
Recommended Practice `Financial Statements of Investment Trust Companies'.
2. Management Fee and Interest Payable
Investment management fees and interest payable on borrowings are charged 75%
to the capital reserve and 25% to the revenue account.
3. Basis of Returns
Six Months Six Months Year to
to to
31 October 31 October 30 April
2008 2007 2008
£'000 £'000 £'000
Returns after tax:
Revenue 1,140 945 1,762
Capital (41,837) 32,381 16,330
Total (40,697) 33,326 18,092
Weighted average number of ordinary
shares in issue
during the period 93,837,425 105,713,658 100,690,977
4. Basis of Net Asset Value
At At At
31 October 31 October 30 April
2008 2007 2008
Shareholders' funds £76,757,000 £ £
145,371,000 118,862,000
Ordinary shares in issue at the 93,837,425 103,662,425 93,837,425
period end
5. Movements in Share Capital
Six Months Six Months Year to
to to
31 October 31 October 30 April
2008 2007 2008
Number of ordinary shares:
Brought forward 93,837,425 105,962,425 105,962,425
Shares bought back and cancelled - (2,300,000) (12,125,000)
In issue at period end 93,837,425 103,662,425 93,837,425
Average price of shares
repurchased - 117.57p 114.65p
Since the period end no shares have been repurchased.
6. Dividends
The Company paid a final dividend of 1.5p per ordinary share for the year ended
30 April 2008 on 11 August 2008 to shareholders on the register on 11 July
2008. The Directors do not propose the payment of an interim dividend (2007:
nil).
7. Investment Trust Status
It is the intention of the Directors to conduct the affairs of the Company so
that it satisfies the conditions for approval as an investment trust company
set out in section 842 of the Income and Corporation Taxes Act 1988.
8. Status of Half-Yearly Financial Report
The financial information contained in this half-yearly report, which has not
been reviewed or audited by the independent auditors, does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
financial information for the half years ended 31 October 2008 and 31 October
2007 have not been audited. The figures and financial information for the year
ended 30 April 2008 are extracted and abridged from the latest published
accounts and do not constitute the statutory accounts for that year. Those
accounts have been delivered to the Registrar of Companies and included the
Report of the Independent Auditors, which was unqualified and did not include a
statement under either section 237(2) or 237(3) of the Companies Act 1985.
By order of the Board
Invesco Asset Management Limited
Company Secretary
17 December 2008
www.invescoperpetual.co.uk/investmenttrusts
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