Annual Financial Report

RNS Number : 6393A

Aberdeen Asian Smaller Co's Inv Tst

12 October 2009

 



ABERDEEN ASIAN SMALLER COMPANIES INVESTMENT TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JULY 2009

1.  CHAIRMAN'S STATEMENT

Results

The year under review covers a hugely volatile period across the financial world with large stock market swings and dramatic moves in exchange rates. This was and still is set against an economic background as uncertain as any encountered since the end of the Second World War. Despite these challenges, I am pleased to report that in the year ended 31 July 2009, the Company's diluted net asset value per share rose 12.5% to 355.9p while the share price gained 12.8% to 300.5p. This compared favourably with the currency adjusted gains of 6.5% and 4.0% in the MSCI AC Asia Pacific ex Japan Small Cap index and the MSCI Asia Pacific ex Japan index respectively.

Dividend

We are very pleased to declare a final dividend of 5p which is the same overall dividend as last year but really represents an increase of 25% on last year's Ordinary dividend as the total dividend in 2008 included a 1p special dividend. In last year's Annual Report, I referred to the slowdown in the receipt of special dividends. This continued into 2009. However during the year, revenues derived from ordinary dividends held up well despite the gyrations of the stock market and the downward pressure on corporate earnings. With the income remaining static, the revenue return per Ordinary share increased by 14.8% due to a reduction in other expenses, a smaller tax charge and the positive effect of having fewer shares in issue. 

If approved by shareholders at the Annual General Meeting of the Company on 25 November 2009, the dividend will be paid on 27 November 2009 to shareholders on the register on 23 October 2009.

Overview

The investment philosophy pursued by Hugh Young and the investment management team at Aberdeen in Singapore of only investing in companies with strong management, well structured balance sheets and superior prospects has stood us in good stead during this turbulent period. The good short term results are mirrored by good long term performance. Since the Company was established in 1995, its share price has returned over 300% (including dividends) compared with the currency adjusted total return of the MSCI AC Asia Pacific ex Japan index of just 91%.

With these statistics in mind, I feel that it is worth analysing for shareholders why we, as a Board, feel that this Company is worthy of your continued long term support. In doing this, we have attempted to answer three questions.

The first question is why invest in Asia?

You can argue that trade cycles and political influence go in cycles; the nineteenth century saw the rise of the British Empire, the twentieth century saw the emergence of the United States as the dominant world power and there is a very strong likelihood that the twenty first century will see the emergence of Asia as the great centre of trade and influence. India and China seem poised for a long period of sustained growth off what is a relatively low base. The GDP per capita of China is just US$3,000, which is comparable to the Republic of the Congo and India is even lower. But the growth across the region over the last thirty years has outstripped any other global region. The high rates of saving, the emphasis on manufacturing, the rise in domestic markets with the consequent gradual decoupling of Asian economic reliance on the rest of the world, point to this as being near the beginning of the cycle. But it is not without risks. The dependence of the Asian economies on other regions for raw materials can lead to pressure on both supply and volatility in input prices but we have recently seen China using its financial muscle to compensate for this by extending its influence in mineral rich countries and corporations. The chance of a more volatile political backdrop is a risk, but Asia seems to have an ability to muddle through political crises with no long term slowdown in its economic growth. The less developed corporate governance model found in Asian companies can lead to some unexpected results but this is improving and better reporting and improved transparency have taken considerable strides during the last decade. 

The second question is why smaller companies?

We believe that the more exciting opportunities exist in this sector. The companies tend to be more exposed to the domestic economy where long term growth prospects seem most interesting. Market inefficiencies inherent in a sector, which is under researched, can lead to the identification of interesting investment opportunities in companies that either own proprietary technology, or have interesting service offerings or have niche positions in the market or a combination of the three. Some of these small companies have the ability to grow rapidly and become the brands of the future. Added to this, in Asia, there are strong managers and managements who conduct their affairs in a sustainable and conservative manner with low debt and well founded balance sheets and where the work ethic is strong across the whole work force.

The third question is why Aberdeen Asian Smaller Companies Investment Trust?

Aberdeen has a long established reputation of conducting fundamental proprietary research by a well qualified team of investment professionals. In our case, they are based in Singapore. They pursue a highly disciplined process whereby thousands of companies are screened to meet the stringent criteria of being well managed, having strong balance sheets and good prospect; all companies are visited at least twice by more than one member of the team before an investment is made and then detailed reporting and follow up are agreed so that the progress of the company can be carefully monitored and evaluated. This can lead to some stocks being held for a long time thus leading to low turnover within the portfolio. This lack of reliance on market gossip enables the managers to take long term decisions and then back their judgement.

This methodology has served us well over the last fourteen years. The current crisis is the second we have successfully weathered without a single investee company failing. The fact that our dividend flow has been maintained points to the sustainability of earnings even in times of difficult trading. This underlying strength in the portfolio has been reflected in the results for the year with the values recovering well from those reported at the time of the interim statement.

The Managers' Report covers the performance of the portfolio and the companies within it in more detail.

Share Capital and Gearing

During the year, 662,210 Ordinary shares were purchased by the Company. A further 65,000 shares have been purchased subsequent to the year end.

The Company modestly increased its gearing during the year. It stood at approximately 4.5% at the year end (on a net basis) compared with 2.6% at the start of the year. The Board monitors the Company's gearing on a regular basis under advice from the Manager. 

Annual General Meeting

The Annual General Meeting is scheduled to be held on 25 November 2009 at 12.30 p.m. In addition to the usual ordinary business, as special business the Board is seeking to renew its existing authority to issue new shares for cash without pre-emption rules applying and to renew its authority to buy back shares and either hold them in treasury for future sale (at asset value or above) or cancel them.  

The Directors are also proposing to adopt new articles of association which will take account of further changes as a result of the implementation of the Companies Act 2006 and the recent implementation of the Shareholder Rights Directive. Further details of these changes are provided in the Appendix to the Annual Report and Accounts.

Outlook

At the time of writing, it looks like markets have run ahead of fundamentals. This does not mean that they cannot continue to rise, only that they have become more vulnerable, particularly if the broader global turnaround does not materialise. Governments have resorted to public spending to help compensate for the plunge in exports and private investment, but such pump priming, if coupled with loose monetary policy, can create other problems. Most of the region's governments have been prudent but in China, excess cash in the banking system is sowing the seeds of future asset bubbles. We therefore prefer to gain exposure to China through well-managed companies listed in Hong Kong.

Demand for exports is likely to remain weak for some time. Governments are seeking to boost private consumption as an engine of growth, but this is unlikely to occur overnight, given Asia's propensity to save. 

The holdings within the portfolio have a domestic bias and hence stand to benefit from the evolving consumer-spending story. Importantly, as I have stated above, the quality of the portfolio and the way it is managed should provide us with some protection if we see renewed economic weakness.

We remain optimistic about the long-term growth potential of Asia. The region is expected to lead the world out of recession, given its healthy foreign reserves, low debt, high savings rates and growing middle class.

Nigel Cayzer

Chairman

12 October 2009

2. MANAGER'S REPORT

Overview

In a year characterised by extreme volatility, Asian equity markets posted positive returns, though this was due in large part to sterling's weakness (in local currency terms Asian markets were generally flat over the period). Concerns over inflation had dominated sentiment in the first half of 2008, but the second half quickly saw attention shift to the imploding financial sector and the threat of debt deflation. September and October were particularly volatile months, as the failures and near-failures of once-trusted Western financial institutions momentarily paralysed the global financial system and triggered steep declines in stock markets. Even though Asia had limited exposure to toxic assets and its banks were, on the whole, well capitalised, investors deserted the region's markets amid the general crisis of confidence. 

The financial turmoil soon spread to the real economy, and the fourth quarter of 2008 saw most economies either contract severely or grow well below long-term average rates. Correspondingly, share prices worldwide tumbled on the back of the general gloom about the economic outlook. March, however, marked the turning point for global equities, though by then Asian markets had been outperforming their developed counterparts for the best part of six months, having underperformed for most of 2008. Markets maintained a general uptrend until the end of the period, recovering their previous losses. The second quarter was dominated by talk of green shoots of economic recovery, but arguably it was financial catastrophe having been averted that was the main driver of the equity rally. By the end of the reporting period, there were still few, if any, signs of genuine economic strength. The decline in risk aversion was exceptionally rewarding for small cap stocks, which outpaced their larger counterparts from March until the period-end.

It should be noted that throughout this turmoil, the holdings within your Company were surprisingly resilient, falling substantially less than the MSCI AC Asia Pacific ex Japan Small Cap Index in the first half of the Company's financial year and rising less sharply in the rebound in the second half. This is due to the more stable nature of the businesses and balance sheets of the companies in which we invest when compared to the make-up of the index. 

On the economic front, the downturn in the West had a pronounced impact on Asia's trade-reliant economies. Adding to the strains, already-weak domestic consumption was further dented by rising unemployment and shrinking wages. Many economies contracted at a record pace, while Singapore, Hong Kong, Taiwan and  Thailand entered recession. Even China and India posted large declines in their growth rates. 

To boost flagging growth, Western governments undertook massive measures to pump money into the system. As well, lower inflation - thanks to rapidly falling commodity prices and low capacity utilisation - allowed Asian central banks to cut interest rates. The tremendous global policy response started to take effect in the latter half of the period. At the time of writing, GDP for many economies have turned positive in the second quarter after earlier contractions.

Portfolio review

During the review period, the Company outperformed the MSCI AC Asia Pacific ex Japan Index by around 7 percentage points in sterling terms on a total return basis. Measured against the MSCI AC Asia Pacific ex Japan Small Cap Index, the Company outperformed by more than 4 percentage points. The good performance, despite very volatile markets, is a reflection of the quality of your Company's investments. Furthermore, the smaller companies that we prefer are generally more domestically orientated, cushioning their businesses during periods when the world's major economies contract, if not their share prices.

The outperformance was attributable in the main to the Company's exposure to India, Indonesia and Malaysia. Our zero weight to Australia's sluggish market also proved beneficial, helped further by the weak Australian dollar. From an investment perspective, Australia has limited long-term upside compared with the rest of Asia and few companies with which we can feel comfortable. 

India, on the other hand, has been a core overweight. The economy is less dependent on external demand compared to other Asian countries, and has weathered the global downturn relatively well. The Indian stock universe of around 7,000 companies also provides great stock-picking potential, though the vast majority can be disregarded with a cursory glance. Our positioning enhanced relative performance significantly, given the stock market's strong performance over the year. Furthermore, our Indian holdings were also the period's best performers. Godrej Consumer Products, a leader in the fast-moving consumer goods sector, gained from expectations that falling raw material prices would raise profit margins, along with resilient demand for its soap and hair colour products. Its strong rural thrust also lifted its business, as the government has committed to developing rural areas, with schemes like the rural employment guarantee and debt waiver plan. Aventis Pharma also fared well, particularly alongside other companies in the more defensive pharmaceutical sector. Castrol India was a beneficiary of the falling oil price, while Gujarat Gas' share price was buoyed by a pick-up in industrial activity along with hopes of volume growth once gas from the KG Basin starts to flow.

Likewise, our overweight to Indonesia boosted performance. Stock prices there were supported by the resilient economy and the relatively trouble-free election, which saw president Yudhoyono return to power. At the stock level, Multi Bintang, a leading beer and beverage company, rose substantially, thanks to durable domestic demand. Another significant outperformer was cement maker Holcim Indonesia, which was helped by an increase in infrastructure spending. 

The performance of our investments in Malaysia was equally pleasing, largely owing to the defensive nature of the domestic market. Notable mentions include brewer Guinness Anchor, which enjoyed good demand and improved operational efficiency, and Pos Malaysia, which was boosted by restructuring hopes following the appointment of a new CEO. Well-run retailer Aeon Company and general insurer LPI Capital also held up well, while United Plantations' strong performance, attributable to firm palm oil prices, was in line with other plantation stocks. 

Conversely, our holdings in Hong Kong detracted from relative performance. Among the disappointments were Hong Kong & Shanghai Hotels, which struggled with falling occupancy rates as the tourism industry declined amid the global downturn. On the positive side, the business continues to boast a strong brand and solid asset base. Elsewhere, the collapse of advertising spend dampened the share price of leading financial journal Hong Kong Economic Times, while clothing retailer Giordano's underperformance reflected the difficult market conditions. Pacific Basin Shipping, a regional vessel operator, was beset by industry overcapacity as global trade stalled but remains an interesting investment. The company has several advantages - its young fleet, which is more reliable and fuel-efficient, gives it a strong competitive edge; and its net-cash position will allow it to buy distressed assets as they become available. 

The lack of exposure to China also worked against the portfolio. The mainland market eclipsed most of the main bourses in the region over the period, but finding good stocks in that market is a challenge, in view of the lack of proven management as well as poor transparency and complicated corporate structures. Another reservation is valuations, which are in most cases excessive. As such, our preference is still for Hong Kong-listed stocks and H shares with diversified, regional business activities, or those that provide an exposure to China. 

Apart from Hong Kong and China, our exposure to Singapore also weighed on performance, as the stock market of the trade-dependent city-state lagged the region over the year. Property developer Bukit Sembawang Estates was slow to develop and launch projects, and subsequently felt the brunt of tightening liquidity. Its share price was also hurt by its need for a rights issue. The developer's large landbank, however, remains its key strength. In addition, WBL Corp, a conglomerate with principal activities in technology, automotive distribution and property investments, failed to keep pace because of negative sentiment towards technology businesses. Still, the salient point is that Singapore is home to some of the best Asian companies, while its economy still boasts a strong regulatory environment and rich business culture.

In portfolio activity, your Manager introduced two new holdings. The first, Hong Kong's Public Financial, is a subsidiary of Malaysia's Public Bank. The company has a good, conservative management team and is carefully pursuing growth opportunities in China. The second new investment was CDL Hospitality Trust, a Singapore-listed real estate investment trust with a decent portfolio of assets. We also topped up several holdings on account of depressed valuations. Among these were Thailand's Hana Microelectronics; Holcim Indonesia; Kansai Nerolac Paints and Aventis Pharma in India; Singapore's Wheelock Properties; and Hong Kong's Giordano. 

Against this, we divested some holdings whose fundamentals deteriorated amid the challenging operating environment. These included Korea's Jeonbuk Bank and Korean Reinsurance as well as Hong Kong's Fong's Industries and Hong Kong Catering. We also disposed of Thailand's Aeon Thana, which had a strong run in its share price, and top-sliced Hong Kong-listed Café de Coral, Jollibee Foods in the Philippines, Malaysia's Aeon Co, and WBL in Singapore after their share prices rebounded. 

Outlook

Asian economies appear to be recovering fast, at least compared with Western peers. Still, some wariness is merited. The rebound has been driven largely by arguably unsustainable fiscal and monetary expansions from governments in the West. There is an increasing school of thought that economies may experience a double dip recession - a fear we share. Economically, Asia will, of course, be affected but the region is resilient, given its prudent government finances, stable banking system and generally low levels of debt among corporates and consumers. 

Therefore, although equity markets appear to have run ahead of fundamentals at the time of writing, the long-term attraction of Asia and of our companies in particular remain and we are confident about the growth prospects of the region's economies in the long run. Our strategy will, as always, be to remain conservative with respect to stock selection, focusing on attractively valued and well-run businesses. These, we believe, are the companies that will deliver good results for our shareholders over the long term.  

Aberdeen Asset Management Asia Limited

12 October 2009

  3.  RESULTS

	31 July 2009	31 July 2008	% change
Total Assets	£130,106,000	£114,039,000
Total Equity Shareholders' funds (Net Assets)	£121,963,000	£109,829,000	+11.0
Share price (mid market)	300.50p	266.50p	+12.8
Warrant price (mid market)	196.50p	165.50p	+18.7
Net Asset Value per share (basic)	390.96p	347.24p	+12.6
Net Asset Value per share (diluted)	355.95p	316.46p	+12.5
Discount to diluted Net Asset Value	15.6%	15.8%
MSCI AC Asia Pacific ex Japan Index (currency adjusted, capital gains basis)	409.34	393.75	+4.0
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted, capital gains basis)	876.79	823.03	+6.5
Actual gearing	4.5%	2.6%
Potential gearing	6.7%	3.8%
Dividends and earnings
Total return per share (basic){A}	48.21p	(50.80)p
Revenue return per share (undiluted)	6.75p	5.88p	+14.8
Dividends per share{B}	5.00p	5.00p	-
Dividend cover	1.35	1.18	+14.4
Revenue reserves{C}	£3,700,000	£3,151,000	+17.4
Operating costs
Total expense ratio	1.91%	1.69%
{A} Measures the total earnings for the year divided by the weighted average number of Ordinary shares in issue (see note 8).
{B} The figures for dividends per share reflect the dividends for the year in which they were earned. The figure for 2008 includes a special dividend of 1.00p per share.
{C} Prior to payment of final and special dividends.

Performance (total return)

	1 year	3 year	5 year	since
	% return	% return	% return	inception
Share price	+15.3	+21.2	+101.3	+300.0
Net Asset Value (basic) per Ordinary share	+14.6	+34.2	+114.7	+373.5
Net Asset Value (diluted) per Ordinary share	+14.6	+36.2	+119.5	+336.5
MSCI AC Asia Pacific ex Japan Index (currency adjusted)	+7.7	+36.8	+120.8	+91.3
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted)	+10.4	+36.5	+127.8	N/A
Source: Aberdeen Asset Management PLC, Fundamental Data, Factset & Russell Mellon

Dividends

	Rate	xd date	Record date	Payment date
Proposed Final 2009	5.00p	21 October 2009	23 October 2009	27 November 2009
Final 2008	4.00p	15 October 2008	17 October 2008	28 November 2008
Special 2008	1.00p	15 October 2008	17 October 2008	28 November 2008

4. BUSINESS REVIEW

The business of the Company is that of an investment trust investing in the economies of Asia and Australasia excluding Japan. The objective of the Company is set out below. A review of the Company's activities is given in the Chairman's Statement and the Manager's Review. This includes a review of the business of the Company and its principal activities, likely future developments of the business, recommended dividends and details of the issue of new shares during the year by the Company. The major risks associated with the Company are detailed below and in Note 19 to the Financial Statements.  

The Key Performance Indicators for the Company, including NAV performance and share price performance, are under Results in section 3 above.

Principal Risk Factors

Investment in Far East equities or those of companies that derive significant revenue or profit from the Far East  involves a greater degree of risk than that usually associated with investment in the securities in major securities markets. The securities that the Company owns may be considered speculative because of this higher degree of risk. Further details of the risks attaching to the Company's shares are provided in note 19 to the financial statements. These risks include:

Ordinary Shares

The market price and the realisable value of the Ordinary shares, as well as being affected by their underlying net asset value, also take into account supply and demand, market conditions and general investor sentiment. As such, the market value and the realisable value of the Ordinary shares may fluctuate and vary considerably from their net asset value and investors may not be able to realise the full value of their original investment. 

Dividends

The Company will only pay dividends on the Ordinary shares to the extent that it has profits available for that purpose. The ability of the Company to pay any dividends in respect of the Ordinary shares will depend primarily on the level of income received from its investments. Accordingly, the amount of the dividends paid to shareholders may fluctuate.

Borrowings

Whilst the use of borrowings should enhance the total return on the Ordinary shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is less than the cost of borrowing, further reducing the total return on the Ordinary shares. The Company currently utilises gearing in the form of bank borrowings (see note 11).

Market Risks

The Company's investments are subject to normal market fluctuations and the risks inherent in the purchase, holding or selling of securities, and there can be no assurance that appreciation in the value of those investments will occur. Investment in emerging securities markets in the Asia Pacific region involves a greater degree of risk than that usually associated with investment in more developed securities markets including the risk of social, economic and political instability which may have an adverse effect on economic reforms or restrict investment opportunities.

Foreign Exchange Risks

The Company accounts for its activities and reports its results in sterling while investments are made and realised in other currencies. It is not the Company's present intention to engage in currency hedging, although it reserves the right to do so. Accordingly, the movement of exchange rates between sterling and the other currencies in which the Company's investments are denominated or its borrowings are drawn down may have a material effect, unfavourable as well as favourable, on the returns otherwise experienced on the investments made by the Company.

Taxation and Exchange Controls

Any change in the Company's tax status or in taxation legislation (including the tax treatment of dividends or other investment income received by the Company) or failure to satisfy the conditions of section 842 of the Income and Corporation Taxes Act 1988 could affect the value of the investments held by the Company, affect the Company's ability to provide returns to shareholders or alter the post-tax returns to shareholders.

The Company may purchase investments that may be subject to exchange controls or withholding taxes in various jurisdictions. In the event that exchange controls or withholding taxes are imposed with respect to any of the Company's investments, the effect will generally be to reduce the income received by the Company on its investments and the capital value of the affected investments.

  5. STATEMENT OF DIRCTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and 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 the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

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 and Companies Act 2006, where applicable. 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.

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

The financial statements are published on www.asian-smaller.co.uk which is a website maintained by the Company's Manager. 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 that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

• 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 Aberdeen Asian Smaller Companies Investment Trust PLC

Nigel Cayzer

Chairman

12 October 2009

6.   INVESTMENT PORTFOLIO

Ten Largest Investments

As at 31 July 2009

			Valuation	Total	Valuation
			2009	assets	2008
Company	Sector	Country	£'000	%	£'000
Bukit Sembawang Estates
Singapore-based residential property developer with a large land bank.	Real Estate	Singapore	5,959	4.6	6,062
Bank OCBC NISP
72 per cent-owned by Singapore's OCBC, it specialises in lending to the small and medium-sized business segment.	Commercial Banks	Indonesia	4,443	3.4	4,753
Godrej Consumer Products
A leading FMCG company in India with strong market-leading brands in soaps and hair colour.	Personal Products	India	4,155	3.2	2,643
LPI Capital
Malaysia-based insurance company involved in underwriting fire, motor, marine, aviation, transit and miscellaneous insurance.	Insurance	Malaysia	3,870	3.0	3,411
Holcim Indonesia
The Indonesian subsidiary of the Swiss cement producer.	Construction & Materials	Indonesia	3,793	2.9	655
Wheelock Properties
Property investor and developer, with a focus on luxury residences.	Real Estate	Singapore	3,765	2.9	2,822
AEON Stores
Operator of general merchandise stores, supermarkets, discount stores, home centres, convenience stores, department stores and speciality stores.	Multi-line Retail	Hong Kong	3,728	2.9	2,974
WBL
Conglomerate with principal activities in technology, automotive distribution and property investments.	Electronic Equipment & Instruments	Singapore	3,672	2.8	4,606
AEON Co
Operator of general merchandise stores, supermarkets and convenience stores.	Multi-line Retail	Malaysia	3,581	2.8	3,223
Castrol
The Indian subsidiary of Castrol Ltd., which manufactures and distributes automotive and industrial lubricants and specialty products.	Chemicals	India	3,426	2.6	2,056
Top ten investments			40,392	31.1

  Investment Portfolio - Other Investments

As at 31 July 2009

			Valuation	Total	Valuation
			2009	assets	2008
Company	Sector	Country	£'000	%	£'000
Hana Microelectronic	Electronic Equipment & Instruments	Thailand	3,308	2.5	2,277
Giordano International	Specialty Retail	Hong Kong	3,124	2.4	2,469
United Plantations	Food Products	Malaysia	3,010	2.3	2,523
Kansai Nerolac Paints	Chemicals	India	2,710	2.1	2,087
Siam Makro	Food & Staples Retailing	Thailand	2,687	2.1	2,652
ICI India	Chemicals	India	2,655	2.1	3,391
Multi Bintang Indonesia	Beverages	Indonesia	2,597	2.0	1,445
United Malacca	Food Products	Malaysia	2,512	1.9	1,811
CDL Hospitality Trust	Real Estate	Singapore	2,505	1.9	-
Gujarat Gas	Gas Utilities	India	2,469	1.9	1,446
Top twenty investments			67,969	52.3
The Hong Kong & Shanghai Hotels	Hotels, Restaurants & Leisure	Hong Kong	2,436	1.9	2,749
Guinness Anchor	Beverages	Malaysia	2,370	1.8	1,814
Hong Kong Economic Times	Media	Hong Kong	2,358	1.8	2,889
Asian Terminals	Transportation Infrastructure	Philippines	2,266	1.7	1,778
Pos Malaysia	Air Freight & Logistics	Malaysia	2,204	1.7	1,586
Public Financial Holdings	Consumer Finance	Hong Kong	2,152	1.7	-
Shangri-La Hotels	Hotels, Restaurants & Leisure	Malaysia	2,135	1.7	1,678
Daegu Bank	Commercial Banks	South Korea	2,063	1.6	1,886
Hong Leong Finance	Consumer Finance	Singapore	1,988	1.5	1,926
Jammu & Kashmir Bank	Commercial Banks	India	1,951	1.5	2,008
Top thirty investments			89,892	69.2
IDS Group	Distributors	Hong Kong	1,908	1.5	-
Aventis Pharmaceuticals	Pharmaceuticals	India	1,889	1.5	934
Jollibee Foods	Hotels, Restaurants & Leisure	Philippines	1,882	1.4	1,968
Eastern Water Resources	Water Utilities	Thailand	1,833	1.4	1,756
AEON Credit Service	Consumer Finance	Hong Kong	1,747	1.3	2,124
Cebu Holdings	Real Estate	Philippines	1,726	1.3	1,782
M.P. Evans	Food Products	Other Asia	1,720	1.3	1,661
Tisco Financial Group	Consumer Finance	Thailand	1,697	1.3	1,373
Cafe de Coral	Hotels, Restaurants & Leisure	Hong Kong	1,655	1.3	2,586
Keells (J)	Industrial Conglomerates	Sri Lanka	1,622	1.2	1,126
Top forty investments			107,571	82.7
SBS Transit	Road and Rail	Singapore	1,579	1.2	1,721
Millennium & Copthorne Hotels	Hotels, Restaurants & Leisure	New Zealand	1,521	1.2	1,375
Commercial Bank of Ceylon	Commercial Banks	Sri Lanka	1,518	1.2	1,160
WBL 2.5% 10/06/14	Electronic Equipment & Instruments	Singapore	1,309	1.0	-
Asia Satellite Communications	Telecommunications	Hong Kong	1,296	1.0	1,159
YNH Property	Real Estate	Malaysia	1,274	1.0	980
Pacific Basin Shipping	Marine	Hong Kong	1,217	0.9	1,792
Chevron Lubricants	Oil & Gas	Sri Lanka	1,204	0.9	882
Unilever Pakistan	Food Products	Pakistan	1,057	0.8	1,069
Regional Container Lines	Marine	Thailand	1,056	0.8	1,350
Top fifty investments			120,602	92.7
Other investments (13)			7,010	5.4
Total investments			127,612	98.1
Net current assets{A}			2,494	1.9
Total assets			130,106	100.0
{A} excludes bank loans of £8,143,000.
All investments are in equities or warrants to convert to equities with the exception of a holding in WBL 2.5% 10/6/14 Convertible Bonds. For a full portfolio listing for Aberdeen Asian Smaller Companies Investment Trust PLC, please go to www.asian-smaller.co.uk.

  7.   INCOME STATEMENT

			Year ended 31 July 2009			Year ended 31 July 2008
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments	9	-	14,420	14,420	-	(17,988)	(17,988)
Income	2	4,954	-	4,954	5,021	-	5,021
Exchange (losses)/gains		-	(1,475)	(1,475)	-	48	48
Investment management fees	3	(1,494)	-	(1,494)	(1,493)	-	(1,493)
Administrative expenses	4	(623)	-	(623)	(640)	-	(640)
		_______	_______	_______	_______	_______	_______
Net return on ordinary activities before finance costs and taxation		2,837	12,945	15,782	2,888	(17,940)	(15,052)
Finance costs	5	(167)	-	(167)	(237)	-	(237)
		_______	_______	_______	_______	_______	_______
Return on ordinary activities before taxation		2,670	12,945	15,615	2,651	(17,940)	(15,289)
Taxation	6	(563)	-	(563)	(761)	(271)	(1,032)
		_______	_______	_______	_______	_______	_______
Return on ordinary activities after taxation		2,107	12,945	15,052	1,890	(18,211)	(16,321)
		_______	_______	_______	_______	_______	_______
Return per share (pence):	8
Basic		6.75	41.46	48.21	5.88	(56.68)	(50.80)
		_______	_______	_______	_______	_______	_______
Diluted		6.24	38.32	44.56	5.36	(51.68)	(46.32)
		_______	_______	_______	_______	_______	_______
The total column of this statement represents the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement. The accompanying notes are an integral part of the financial statements.

  8.  BALANCE SHEET

		As at	As at
		31 July 2009	31 July 2008
	Notes	£'000	£'000
Non current assets
Investments at fair value through profit or loss	9	127,612	113,089
		__________	__________
Current assets
Debtors and prepayments	10	374	523
Cash and short term deposits		2,642	1,387
		__________	__________
		3,016	1,910
		__________	__________
Creditors: amounts falling due within one year	11
Bank loan		(8,143)	(4,173)
Other creditors		(522)	(960)
		__________	__________
		(8,665)	(5,133)
		__________	__________
Net current liabilities		(5,649)	(3,223)
		__________	__________
Total assets less current liabilities		121,963	109,866
Provisions for liabilities and charges	12	-	(37)
		__________	__________
Net assets		121,963	109,829
		__________	__________
Capital and reserves
Called-up share capital	13	8,220	8,163
Capital redemption reserve		2,062	2,062
Share premium account		11,312	11,140
Special reserve		10,386	11,975
Warrant reserve		1,387	1,461
Capital reserve	14	84,896	71,877
Revenue reserve	14	3,700	3,151
		__________	__________
Equity Shareholders' funds		121,963	109,829
		__________	__________
Net asset value per share (pence):	15
Basic		390.96	347.24
		__________	__________
Diluted		355.95	316.46
		__________	__________

  9.   RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 July 2009
			Capital	Share
		Share	redemption	premium	Special	Warrant	Capital	Revenue
		capital	reserve	account	reserve	reserve	reserve	reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 July 2008		8,163	2,062	11,140	11,975	1,461	71,877	3,151	109,829
Purchase of own shares		-	-	-	(1,589)	-	-	-	(1,589)
Exercise of warrants		57	-	172	-	(74)	74	-	229
Return on ordinary activities after taxation		-	-	-	-	-	12,945	2,107	15,052
Dividends paid	7	-	-	-	-	-	-	(1,558)	(1,558)
		_______	_________	_______	_______	_______	_______	_______	_______
Balance at 31 July 2009		8,220	2,062	11,312	10,386	1,387	84,896	3,700	121,963
		_______	_________	_______	_______	_______	_______	_______	_______
For the year ended 31 July 2008
			Capital	Share
		Share	redemption	premium	Special	Warrant	Capital	Revenue
		capital	reserve	account	reserve	reserve	reserve	reserve	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 July 2007		8,145	2,062	11,087	14,990	1,576	90,554	3,265	131,679
Issue of shares		-	-	-	(3,015)	-	-	-	(3,015)
Exercise of warrants		18	-	53	-	(23)	23	-	71
Buyback of warrants		-	-	-	-	(92)	(489)	-	(581)
Return on ordinary activities after taxation		-	-	-	-	-	(18,211)	1,890	(16,321)
Dividends paid	7	-	-	-	-	-	-	(2,004)	(2,004)
		_______	_________	_______	_______	_______	_______	_______	_______
Balance at 31 July 2008		8,163	2,062	11,140	11,975	1,461	71,877	3,151	109,829
		_______	_________	_______	_______	_______	_______	_______	_______
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. The accompanying notes are an integral part of the financial statements

10.   CASH FLOW STATEMENT

		Year ended		Year ended
		31 July 2009		31 July 2008
	Notes	£'000	£'000	£'000	£'000
Net cash inflow from operating activities	16		2,383		2,688
Servicing of finance
Bank and loan interest paid			(173)		(348)
Taxation
Net taxation paid			(658)		(748)
Financial investment
Purchases of investments		(15,602)		(17,185)
Sales of investments		15,728		19,742
		_______		_______
Net cash inflow from financial investment			126		2,557
Equity dividends paid	7		(1,558)		(2,004)
			_______		_______
Net cash inflow before financing			120		2,145
Financing
Purchase of own shares		(1,589)		(3,015)
Exercise of warrants		229		71
Buyback of warrants		-		(581)
Drawdown/(repayment) of loan	17	2,069		(3,389)
		_______		_______
Net cash inflow/(outflow) from financing activities			709		(6,914)
			_______		_______
Increase/(decrease) in cash			829		(4,769)
			_______		_______
Reconciliation of net cash flow to movements in net debt
Increase/(decrease) in cash as above			829		(4,769)
(Drawdown)/repayment of loan			(2,069)		3,389
Exchange movements			(1,475)		48
			_______		_______
Movement in net debt in the year			(2,715)		(1,332)
Net debt at 1 August			(2,786)		(1,454)
			_______		_______
Net debt at 31 July	17		(5,501)		(2,786)
			_______		_______

  11.   NOTES TO THE FINANCIAL STATEMENTS

For the Year Ended 31 July 2009

1.	Accounting policies
	(a)	Basis of preparation and going concern
		The financial statements have been prepared in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (issued in January 2009 and adopted early). The early adoption of the January 2009 SORP had no effect on the financial statements of the Company, other than:
		the recommendation to disclose separately capital reserves that relate to the revaluation of investments held at the reporting date. These are disclosed in note 14. This new requirement replaces the previous requirement to disclose the value of the capital reserve that was unrealised.
		the requirement to present tax reconciliations based on the total column of the Income Statement rather than the revenue column as was previously recommended. The reconciliation is disclosed in note 6.
		The financial statements have also been prepared 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. The Directors believe this is appropriate for the reasons outlined in the Directors' Report in the Annual report.
		The financial statements, and the net asset value per share figures, have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP).
	(b)	Valuation of investments
		Listed investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured at cost. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Income Statement and are ultimately recognised in the capital reserve.
	(c)	Income
		Dividends receivable on equity shares are recognised on the ex-dividend date. Dividends receivable on equity shares where no ex-dividend date is quoted are recognised when the Company's right to receive payment is established. Fixed returns on debt securities are recognised on a time apportioned basis so as to reflect the effective yield on shares. Other returns on debt securities are recognised when the right to return is established. Where the Company has elected to receive its dividends in the form of additional shares rather than in 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.
	(d)	Expenses
		All expenses are accounted for on an accruals basis. Expenses, including management fees and finance costs, are charged 100% through the revenue column of the Income Statement with the exception of transaction costs incurred on the purchase and disposal of investments which are either added to the cost of the investment or deducted from the sales proceeds. Such transaction costs are disclosed in accordance with the SORP. These expenses are charged to the capital column of the Income Statement are separately identified and disclosed in note 9 within gains/(losses) on investments.
	(e)	Taxation
		The charge for taxation is based on the revenue return for the year.
		Deferred tax
		The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred taxation is provided using the liability method on all timing differences, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in future against which the deferred tax asset can be offset.
	(f)	Capital reserve
		Gains and losses on the sale of investments and changes in fair values of investments held are transferred to the capital reserve.
	(g)	Foreign currency
		Overseas monetary assets are converted into Sterling at the rate of exchange ruling at the balance sheet date. Transactions during the year involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or in the revenue account depending on whether the gain or loss is of a capital or revenue nature respectively.

		2009	2008
2.	Income	£'000	£'000
	Income from investments
	UK dividend income	36	42
	Overseas dividends	4,886	4,730
	Stock dividends	15	56
	Fixed interest	3	-
		__________	__________
		4,940	4,828
		__________	__________
	Other income
	Deposit interest	15	193
	Interest on tax refunded	(27)	-
	Underwriting commission	26	-
		__________	__________
	Total income	4,954	5,021
		__________	__________

		2009			2008
		Revenue	Capital	Total	Revenue	Capital	Total
3.	Investment management fees	£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fees	1,494	-	1,494	1,493	-	1,493
		_______	_______	_____	_______	______	_______
	The Company has an agreement with Aberdeen Asset Management Asia Limited ('AAM Asia') for the provision of management services.
	During the period the management fee was payable monthly in arrears and is based on an annual amount of 1.2%, calculated on the average net asset value of the Company over a 24 month period, valued monthly. The agreement is terminable on one year's notice. The balance due to AAM Asia at the year end was £240,000 (2008 - £257,000).

		2009			2008
		Revenue	Capital	Total	Revenue	Capital	Total
4.	Administrative expenses	£'000	£'000	£'000	£'000	£'000	£'000
	Administration fees	72	-	72	69	-	69
	Directors' fees	92	-	92	92	-	92
	Share Plan marketing contribution	101	-	101	98	-	98
	Auditors' remuneration:
	- fees payable to the auditors for the audit of the annual accounts	22	-	22	21	-	21
	- fees payable to the auditors and its associates for other services:
	- interim review	6	-	6	6	-	6
	- tax services	-	-	-	1	-	1
	Custodian charges	176	-	176	195	-	195
	Other expenses	154	-	154	158	-	158
		_______	______	____	_______	______	____
		623	-	623	640	-	640
		_______	______	____	_______	______	____
	The Company has an agreement with Aberdeen Asset Managers Limited ("AAM") for the provision of administration services. The administration fee is payable quarterly in advance and was based on an annual amount of £72,000 (2008 - £69,000) and there was no outstanding balance (2008 - £17,000 prepaid) at the year end. The agreement is terminable on six months' notice.
	The Company also has an agreement with 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 fee paid and payable under the agreement was £101,000 (2008 - £98,000) and there was a £7,000 (2008 - £17,000 prepaid) balance due to AAM the year end.
	No pension contributions were made in respect of any of the Directors.

		2009			2008
		Revenue	Capital	Total	Revenue	Capital	Total
5.	Finance costs	£'000	£'000	£'000	£'000	£'000	£'000
	On bank loans and overdrafts	167	-	167	237	-	237
		_______	_______	_____	_______	______	_______

			2009			2008
			Revenue	Capital	Total	Revenue	Capital	Total
6.	Taxation		£'000	£'000	£'000	£'000	£'000	£'000
	(a)	Analysis of charge for the year
		Corporation tax	577	-	577	836	271	1,107
		Overseas taxation	255	-	255	209	-	209
		Relief for overseas taxation	(245)	-	(245)	(209)	-	(209)
		Prior year adjustment	13	-	13	-	-	-
			_______	_______	_______	_______	______	_______
		Current taxation	600	-	600	836	271	1,107
		Deferred taxation	(37)	-	(37)	(75)	-	(75)
			_______	_______	_______	_______	______	_______
		Total tax	563	-	563	761	271	1,032
			_______	_______	_______	_______	______	_______
	(b)	Factors affecting the tax charge for the year
		The tax assessed for the year is lower than the standard rate of corporation tax in the UK for a large company (28%). The differences are explained below:
			2009			2008
			Revenue	Capital	Total	Revenue	Capital	Total
			£'000	£'000	£'000	£'000	£'000	£'000
		Return on ordinary activities before taxation	2,670	12,945	15,615	2,651	(17,940)	(15,289)
			_______	_______	_______	_______	______	_______
		Return on ordinary activities multiplied by the UK standard tax rate of corporation tax of 28% (2008 - 29.3%)	748	3,625	4,373	777	(5,257)	(4,480)
		Effects of:
		(Gains)/losses on investments not (taxable)/relievable	-	(4,038)	(4,038)	-	5,542	5,542
		Exchange losses/(gains)	-	413	413	-	(14)	(14)
		Franked dividend receipts not chargeable to corporation tax	(10)	-	(10)	(12)	-	(12)
		Overseas tax	255	-	255	204	-	204
		Double tax relief	(245)	-	(245)	(204)	-	(204)
		Movement in income taxable on receipt	(60)	-	(60)	71	-	71
		Non-taxable dividend income	(101)	-	(101)	-	-	-
		Prior year adjustment	13	-	13	-	-	-
			_______	_______	_______	_______	______	_______
		Current tax charge for the year	600	-	600	836	271	1,107
			_______	_______	_______	_______	______	_______

		2009	2008
7.	Dividends	£'000	£'000
	Final dividend for 2008 - 4.00p (2007 - 3.45p)	1,246	1,124
	Special dividend for 2008 - 1.00p (2007 - 2.70p)	312	880
		_________	_________
		1,558	2,004
		_________	_________
	Proposed final and special dividends are subject to approval by shareholders at the Annual General Meeting and are not included as a liability in the financial statements.
	We set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Section 842 of the Income and Corporation Taxes Act 1988 are considered. The revenue available for distribution by way of dividend for the year is £2,107,000 (2008 - £1,890,000).
		2009	2008
		£'000	£'000
	Proposed final dividend for 2009 - 5.0p (2008 - 4.00p)	1,557	1,248
	Proposed special dividend for 2009 - nil (2008 - 1.00p)	-	312
		_________	_________
		1,557	1,560
		_________	_________
	Since the year end the Company has repurchased [65,000] shares, all of which have been placed in treasury. Therefore, the proposed final dividend for 2009 is based on [31,130,986] Ordinary shares in issue.

		2009			2008
8.	Return per Ordinary share	Revenue	Capital	Total	Revenue	Capital	Total
	Basic
	Return on ordinary activities after taxation (£'000)	2,107	12,945	15,052	1,890	(18,211)	(16,321)
	Weighted average number of shares in issue (excluding shares held in treasury)			31,223,576			32,128,649
	Basic return per Ordinary share (p)	6.75	41.46	48.21	5.88	(56.68)	(50.80)
		_______	_______	_______	_______	_______	_______
		2009			2008
		Revenue	Capital	Total	Revenue	Capital	Total
	Diluted
	Number of dilutive shares			2,560,696			3,109,607
	Diluted number of shares in issue (excluding shares held in treasury)			33,784,272			35,238,256
	Diluted return per Ordinary share (p)	6.24	38.32	44.56	5.36	(51.68)	(46.32)
		_______	_______	_______	_______	_______	_______
	The calculation of the diluted total, revenue and capital returns per Ordinary share are carried out in accordance with Financial Reporting Standard No. 22, "Earnings per Share". For the purposes of calculating diluted total, revenue and capital returns per Ordinary share, the number of Ordinary shares is the weighted average used in the basic calculation plus the number of Ordinary shares deemed to be issued for no consideration on exercise of all Warrants by reference to the average share price of the Ordinary shares during the year. The calculations indicate that the exercise of Warrants would result in an increase in the weighted average number of Ordinary shares of 2,560,696 (2008 - 3,109,607) to 33,784,272 (2008 - 35,238,256) Ordinary shares.

		Listed	Listed
		in UK	overseas	Total
9.	Investments	£'000	£'000	£'000
	Fair value through profit or loss:
	Opening book cost	362	88,103	88,465
	Opening fair value gains on investments held	1,299	23,325	24,624
		__________	__________	__________
	Opening fair value	1,661	111,428	113,089
	Movements in year:
	Purchases at cost	-	15,502	15,502
	Sales - proceeds	-	(15,399)	(15,399)
	- gains on sales	-	4,010	4,010
	Movement in fair value gains on investments held	59	10,351	10,410
		__________	__________	__________
	Closing fair value	1,720	125,892	127,612
		__________	__________	__________
		Listed	Listed
		in UK	overseas	Total
		£'000	£'000	£'000
	Closing book cost	362	92,216	92,578
	Closing fair value gains on investments held	1,358	33,676	35,034
		__________	__________	__________
		1,720	125,892	127,612
		__________	__________	__________
		Listed	Listed
		in UK	overseas	Total
	Gains on investments	£'000	£'000	£'000
	Gains on sales	-	4,010	4,010
	Movement in fair value gains on investments held	59	10,351	10,410
		__________	__________	__________
		59	14,361	14,420
		__________	__________	__________
	Transaction costs
	During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:
			2009		2008
			£'000		£'000
	Purchases		33		43
	Sales		52		40
			__________		__________
			85		83
			__________		__________

		2009	2008
10.	Debtors: amounts falling due within one year	£'000	£'000
	Amounts due from brokers	-	329
	Other debtors	8	13
	Prepayments and accrued income	366	181
		__________	__________
		374	523
		__________	__________

		2009	2008
11.	Creditors: amounts falling due within one year	£'000	£'000
	Bank loans	8,143	4,173
	Amounts due to brokers	-	115
	Other creditors	345	356
	Corporation tax payable	177	489
		__________	__________
		8,665	5,133
		__________	__________
	At the year end the Company had drawn down a US$13,500,000 loan from Barclays Bank at a rate of 0.725% with repayment or rollover terms to 10 August 2009.
	On 10 August 2009, the US$13,500,000 loan from Barclays Bank was then rolled for one month to 10 September 2009 at a rate of 0.701%. On 10 September 2009, the US$13,500,000 loan from Barclays Bank was rolled forward to 13 October 2009 at a rate of 0.647%.
	The terms of the loan facility with Barclays Bank contains covenants that the minimum number of investments held by the Company be thirty; that the minimum geographical spread be five countries; that the maximum investment in any one country be 25% of the portfolio value; that the maximum investment in MSCI financial services industry category be 40% of portfolio value; and that the maximum investment in other MSCI industry categories be 25% of portfolio value. The Company met these covenants throughout the year and up to the date that this report was signed.

		2009	2008
12.	Provisions for liabilities and charges	£'000	£'000
	Deferred tax on accrued income:
	At 1 August	37	112
	Deferred tax credited to the Income Statement in the year	(37)	(75)
		__________	__________
	At 31 July	-	37
		__________	__________

		2009	2008
13.	Called up share capital	£'000	£'000
	Authorised
	42,000,000 (2008 - 42,000,000) Ordinary shares of 25p	10,500	10,500
		__________	__________
	Called-up, allotted and fully paid
	32,880,207 (2008 - 32,651,144) Ordinary shares of 25p	8,220	8,163
		__________	__________
	During the year 662,210 (2008 - 1,022,011) Ordinary shares of 25p were repurchased by the Company at a total cost of £1,589,000 (2008 - £3,015,000). All these shares were placed in treasury. At the year end 1,684,221 (2008 - 1,022,011) shares were held in treasury, which represents 5.12% (2008 - 3.13%) of the Company's total issued share capital at 31 July 2009.
	During the year an additional 229,063 Ordinary shares of 25p were issued after 229,063 Warrants were exercised at 100p each. The total consideration received was £229,063.
	At 31 July 2009 there were 4,266,293 (2008 - 4,495,356) Warrants in issue. Each Warrant entitles a holder to subscribe for an Ordinary share of 25p at a price of 100p. Further details of exercise rights are included on in the Annual Report.
	The investment objective of the Company is to maximise total return to shareholders over the long term from a portfolio of smaller quoted companies (with a market capitalisation of up to approximately US$750m at the time of investment) in the economies of Asia and Australasia, excluding Japan.
	The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
	The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. The review includes:
	- the planned level of gearing which takes account of the Manager's views on the market;
	- the level of equity shares in issue;
	- the extent to which revenue in excess of that which is required to be distributed should be retained.
	The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
	The Company does not have any externally imposed capital requirements.

		2009	2008
14.	Retained earnings	£'000	£'000
	Capital reserve
	At 31 July 2008	71,877	90,554
	Movement in investment holdings fair value	10,410	(28,909)
	Gains on realisation of investments at fair value	4,010	10,921
	Foreign exchange movement	(1,475)	48
	Capitalised items	74	(737)
		__________	__________
	At 31 July 2009	84,896	71,877
		__________	__________
	Revenue reserve
	At 31 July 2008	3,151	3,265
	Revenue	2,107	1,890
	Dividends paid	(1,558)	(2,004)
		__________	__________
	At 31 July 2009	3,700	3,151
		__________	__________

15.	Net asset value per equity share	2009	2008
	Basic
	Net assets attributable	£121,963,000	£109,829,000
	Number of Ordinary shares in issue (excluding shares held in treasury)	31,195,986	31,629,133
	Net asset value per Ordinary share	390.96p	347.24p
	Diluted
	Net assets attributable	£126,229,000	£114,319,000
	Number of Ordinary shares if Warrants converted (excluding shares held in treasury)	35,462,279	36,124,489
	Net asset value per Ordinary share	355.95p	316.46p
	The diluted net asset value per Ordinary share has been calculated on the assumption that 4,266,293 (2008 - 4,495,356) Warrants in issue were exercised on the first day of the financial year at 100p per share, giving year end figures of 35,462,279 (2008 - 36,124,489) Ordinary shares.

16.	Reconciliation of net return before finance costs and	2009	2008
	taxation to net cash inflow from operating activities	£'000	£'000
	Net returns before finance costs and taxation	15,782	(15,052)
	Adjustments for:
	(Gains)/losses on investments	(14,420)	17,988
	Effect of foreign exchange rate losses/(gains)	1,475	(48)
	(Increase)/decrease in prepayments and accrued income	(185)	242
	Decrease/(increase) in other debtors	5	(4)
	Decrease in other creditors	(4)	(178)
	Overseas withholding tax suffered	(255)	(204)
	Stock Dividends included in investment income	(15)	(56)
		__________	__________
	Net cash inflow from operating activities	2,383	2,688
		__________	__________

		1 August	Cash	Exchange	31 July
		2008	flow	movements	2009
17.	Analysis of changes in net debt	£'000	£'000	£'000	£'000
	Net cash:
	Cash at bank and overdrafts	1,387	829	426	2,642
	Debt:
	Debt falling due within one year	(4,173)	(2,069)	(1,901)	(8,143)
		_________	_________	________	________
		(2,786)	(1,240)	(1,475)	(5,501)
		_________	_________	________	________

18.	Related party transactions
	Mr M J Gilbert is a director of AAM Asia, a subsidiary of Aberdeen Asset Management PLC. Mr Gilbert is also a director of AAM.
	AAM Asia has an agreement to provide management services to the Company, the terms of which are outlined in note 3. AAM has an agreement to provide both administration and marketing services to the Company, the terms of which are outlined in note 4.

19.	Financial instruments
	Risk management
	The Company's financial instruments comprise equities 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 Manager has a dedicated investment management process, which ensures that the investment policy explained in the Annual Report is followed. Stock selection procedures are in place based on the active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a senior investment manager and also by the Manager's investment committee.
	The Company's Manager has an independent investment risk department for reviewing the investment risk parameters of the Company's portfolio on a regular basis. The department reports to the Manager's performance review committee which is chaired by the Manager's chief investment officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk and style characteristics using best practice, industry standard multi-factor models.
	Additionally, the Manager's compliance department continually monitors the Company's investment and borrowing powers and reports to the Manager's risk management committee.
	The main financial risks that the Company faces from its financial instruments are market price risk (comprising interest rate risk, currency risk and other price risk), liquidity risk and credit risk.
	The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors.
	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 three elements - interest rate risk, currency risk and other price risk.
	Interest rate risk
	Interest rate movements may affect:
	- the level of income receivable on cash deposits;
	- 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 risk profile
	The interest rate risk profile of the Company's financial assets and liabilities, excluding equity holdings which are all non-interest bearing, at the Balance Sheet date was as follows:

		Weighted average	Weighted
		period for which	average	Fixed	Floating
		rate is fixed	interest rate	rate	rate
	At 31 July 2009	Years	%	£'000	£'000
	Assets
	Indian Rupee	-	-	-	13
	Philippine Peso	-	-	-	66
	Singapore Dollar	4.42	2.50	1,309	19
	Sri Lankan Rupee	-	-	-	61
	Sterling	-	0.30	-	2,483
		_________	_________	________	________
		n/a	n/a	1,309	2,642
		_________	_________	________	________
	Liabilities
	Bank loan - US Dollar	0.03	0.73	(8,143)	-
		_________	_________	________	________
		Weighted average	Weighted
		period for which	average	Fixed	Floating
		rate is fixed	interest rate	rate	rate
	At 31 July 2008	Years	%	£'000	£'000
	Assets
	Indian Rupee	-	-	-	13
	Malaysian Ringgit	-	-	-	1,023
	Philippine Peso	-	-	-	60
	Sterling	-	2.65	-	291
		_________	_________	________	________
		n/a	n/a	-	1,387
		_________	_________	________	________
	Liabilities
	Bank loan - US Dollar	0.19	3.21	(4,173)	-
		_________	_________	________	________

	The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on interest payable, weighted by the value of the loan. The maturity date of the Company's loan is shown in note 11 to the financial statements.
	The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.
	The Company's equity portfolio and short term debtors and creditors (excluding bank loans) have been excluded from the above tables.
	Maturity profile
	The maturity profile of the Company's financial assets and liabilities at 31 July was as follows:

		Within	Within
		1 year	1 year
		2009	2008
	Assets	£'000	£'000
	Floating rate
	Cash	2,642	1,387
		___________	___________
		Within	Within
		1 year	1 year
		2009	2008
	Liabilities	£'000	£'000
	Fixed rate
	Bank loans	(8,143)	(4,173)
		___________	___________

	All the other financial assets and liabilities do not have a maturity date.
	Interest rate sensitivity
	Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit.
	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 11, 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 by currency of denomination:
		31 July 2009			31 July 2008
		Overseas	Net monetary	Total currency	Overseas	Net monetary	Total currency
		investments	assets/ (liabilities)	exposure	Investments	assets/ (liabilities)	exposure
		£'000	£'000	£'000	£'000	£'000	£'000
	Hong Kong Dollar	23,076	-	23,076	21,553	(111)	21,442
	Indian Rupee	19,255	13	19,268	14,565	17	14,582
	Indonesian Rupiah	12,405	-	12,405	7,944	1,023	8,967
	Korean Won	2,063	-	2,063	6,279	183	6,462
	Malaysian Ringgit	20,956	-	20,956	17,026	32	17,058
	New Zealand Dollar	1,521	-	1,521	1,375	-	1,375
	Pakistan Rupee	1,294	-	1,294	1,610	-	1,610
	Philippine Peso	6,605	66	6,671	6,464	60	6,524
	Singapore Dollar	21,760	19	21,779	19,594	96	19,690
	Sri Lankan Rupee	5,296	61	5,357	4,269	142	4,411
	Thailand Baht	11,661	-	11,661	10,749	-	10,749
	US Dollar	-	(8,143)	(8,143)	-	(4,173)	(4,173)
		_________	_________	_________	_________	_________	________
		125,892	(7,984)	117,908	111,428	(2,731)	108,697
	Sterling	1,720	2,483	4,203	1,661	(492)	1,169
		_________	_________	_________	_________	_________	________
	Total	127,612	(5,501)	122,111	113,089	(3,223)	109,866
		_________	_________	_________	_________	_________	________

	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.
	Other price risk
	Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.
	It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. Both the allocation of assets and the stock selection process, as detailed in the Annual Report, act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on various stock exchanges worldwide.
	Other price risk 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 July 2009 would have increased/(decreased) by £12,761,000 (2008 increased/(decreased) by £11,309,000) and equity reserves would have increased/(decreased) by the same amount.
	Liquidity risk
	This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
	The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise a revolving multi-currency credit facility. The Board has imposed a maximum gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of 25%. Details of borrowings at the 31 July 2009 are shown in note 11.
	Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of a loan facility, details of which can be found in note 11. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis. Details of the Board's policy on gearing are shown in the interest rate risk section of this note.
	Liquidity risk exposure
	At 31 July 2009 and 31 July 2008 the Company's bank loans, amounting to £8,143,000 and £4,173,000, were due for repayment or roll-over within 1 month and 2 months respectively. The maximum exposure during the year was £12,497,000 and the minimum exposure during the year was £4,553,000.
	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 considered to be significant, and is managed as follows:
	-	investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker;
	-	the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a monthly basis. In addition, the Custodian carries out a stock reconciliation to third party administrators' records on a monthly basis to ensure discrepancies are picked up on a timely basis. The Manager's compliance department carries out periodic reviews of the Custodian's operations and reports its finding to the Manager's risk management committee. This review will also include checks on the maintenance and security of investments held; 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.
	Credit risk exposure
	In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 July was as follows:

		2009		2008
		Balance	Maximum	Balance	Maximum
		Sheet	exposure	Sheet	exposure
	Current assets	£'000	£'000	£'000	£'000
	Debtors and prepayments	374	374	523	523
	Cash and short term deposits	2,642	2,642	1,387	1,387
		_________	_________	_________	_________
		3,016	3,016	1,910	1,910
		_________	_________	_________	_________

	None of the Company's financial assets is past due or impaired.
	Fair values of financial assets and financial liabilities
	For the US Dollar loan, the fair value of borrowings has been calculated at £8,144,000 as at 31 July 2009 (2008 - £4,176,000) compared to an accounts value in the financial statements of £8,143,000 (2008 - £4,173,000) (note 11). The fair value of each loan is determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency. All other assets and liabilities of the Company are included in the Balance Sheet at fair value.

Notes Continued:

20.    The Annual General Meeting will be held 25 November 2009 at One Bow Churchyard, Cheapside, London EC4M 9HH.

 21.    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.

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 July 2009 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2008 and 2009 statutory accounts received unqualified reports from the Company's auditors and did not include any reference to matters to which the auditors drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498(2) or 498(3) of the Companies Act 2006. The financial information for 2008 is derived from the statutory accounts for 2008 which have been delivered to the Registrar of Companies. The 2009 accounts will be filed with the Registrar of Companies in due course.

The audited Annual Report and Accounts will be posted to shareholders shortly. Copies may be obtained during normal business hours from the Company's Registered Office, One Bow Churchyard, Cheapside, London EC4M 9HH or from the Company's website, www.asian-smaller.co.uk

By Order of the Board

Aberdeen Asset Management PLC

Secretary

12 October 2009

 

END

 

 

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