Interim Results

Aberdeen All Asia Inv Tst PLC 15 November 2007 ABERDEEN ALL ASIA INVESTMENT TRUST PLC HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 CHAIRMAN'S STATEMENT The investment objective of Aberdeen All Asia Investment Trust PLC is to generate capital growth from a concentrated portfolio of companies domiciled, operating or generating revenue in the Asia Pacific region, including Japan. Performance The Company delivered a satisfactory performance over the six months to 30 September 2007, despite very volatile markets. The Company's net asset value rose by 10.8% on a total return basis, compared with a 10.0% rise in the benchmark MSCI Asia Pacific (cum Japan) Index, in Sterling terms. The Company's performance was helped by its overweight positions in the Hong Kong and Indian markets and its significant underweight position in Japan, whose economy expanded by only 2.6% (annualised) in the quarter ended 30 September 2007 following a contraction of 1.6% (annualised) in the previous quarter. The Company's borrowings, which were modestly increased to 6% during the period of weakness in August, also added to performance. Stock selection, by contrast, was generally not helpful during this period, reflecting your Manager's conservative style and process. The Manager was also underweight in China, which performed particularly well. The reasons for this are set out in the Manager's Review. The share price rose 7.7% to end the period at 232.0p, representing a 12.7% discount to the net asset value of 265.9p. The discount was 10.2% at 31 March 2007. Outlook Economic growth rates are likely to continue relatively strong, particularly in China and India. Abundant and cheap labour, with generally helpful political leadership, has led to rapid industrialisation in the region. Added to this has been improving corporate governance and ample liquidity which are reflected in buoyant stock markets. But in the short term, there are risks of continued market turbulence. Weakening housing markets, particularly in the US with associated credit problems, coupled with a high level of consumer debt, may restrain growth generally and hit demand for exports from the Asia Pacific region. Inflation, both of commodity prices and domestic wages, is beginning to affect the region and has already led to increases in interest rates. However, apart from Japan, where economic growth remains sluggish, the longer term outlook for the region remains good. DIRECTORS' RESPONSIBILITY STATEMENT The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge - • the condensed set of Financial Statements have been prepared in accordance with the Accounting Standards Board's statement "Half-Yearly Financial Reports"; and • the Interim Management Report includes a fair review of the general conditions required by 4.2.7R and 4.2.8R of the Financial Services Authority's Disclosure and Transparency Rules. The Half Yearly Financial Report, for the six months ended 30 September 2007, comprises an Interim Management Report in the form of the Chairman's Statement, the Directors' Responsibility Statement and a condensed set of Financial Statements and has not been audited or reviewed by the auditors pursuant to the APB guidance on Review of Interim Financial Information. For and on behalf of Aberdeen All Asia Investment Trust PLC David Price Chairman 15 November 2007 Manager's Review Overview The half-year under review was one of the most volatile periods for regional equity markets since 2002. After steady gains early on, regional equities corrected sharply in August on problems in the US housing and credit markets. However, within days a powerful rally had formed, which gained further impetus from US interest rate cuts. As well as global liquidity, that rally reflects buoyant trade and investment across the region. China and India, especially, are both enjoying breakneck growth. If there is reason for caution, it is that inflation has started to pick up, forcing central banks into monetary tightening. So far, any signs of overheating appear to have been contained. That said, China's inflation is at a ten-year high, on shortages of key foodstuffs such as pork. India's problems relate more to credit growth, with producers struggling to keep up with demand. Mention is made of these two economies because of their size, which makes them the engine room of the region, and perhaps the world. A contrast can be drawn with Japan, which is selling more to Asian neighbours than ever before; but as a mature economy, where spending makes up 50% of GDP, the five-year-old recovery has stuttered because of weak wage growth. These various developments have been mirrored in stock markets. Japanese shares actually fell over the period as foreigners became net sellers. Local investors, meanwhile, have either kept their savings in cash or deserted the market for higher gains overseas. Among companies, only exporters have really shown any broad gains, apart from one or two narrow areas of the domestic economy such as property. India has been a popular investment choice for international investors of all types. Big industrial stocks have led the market advance. Areas vulnerable to rupee strength, such as software or pharmaceuticals, have tended to lag behind. The performance of banks was mixed because higher interest rates impaired lending, despite a boom in credit demand. Still, it is China's closed mainland markets (which are mainly off-limits to foreigners) that have eclipsed all others. The Shanghai index is up more than five-fold in barely two years. But finding good stocks through which to profit from China's growth has become a challenge. There would seem to be no shortage of stocks in basic industries or financials, such as insurers or banks, and which are listed in Hong Kong, typically as 'H' shares. On closer inspection, valuations are in most cases excessive. Another reservation we have is over stock quality. The majority of 'China' stocks which we have visited lack operational transparency. Under current conditions, with a number of mega-IPOs and huge premiums all too common, that fact is often overlooked. We prefer traditional Hong Kong companies that have successfully built franchises in the mainland, and which have a history of growing earnings. We also see Australia as a lateral way of accessing China's need for commodities and to upgrade infrastructure. Looking further afield, market climbs have been led by strong performance in narrow industrial sectors. For example, in Korea there has been a boom in shipbuilding stocks, reflecting new build orders for the next few years, and steel. In Taiwan, it is plastics and petrochemicals that have shone. While new capacity cannot be introduced at will because of the capital investment required, the concern in these examples is that the business cycle can turn very quickly to companies' disadvantage. Latterly, with markets having resumed their upward path, investors would appear to be buying what is going up rather than what is good value. In our view the disparity in valuations between the best and worst performing sectors has become extreme. We have continued to keep the portfolio well spread across countries, with a slight overweight to banks (ex China) which, as we have implied, have been out of favour. Still, the sector's growth characteristics appear good because of a pick-up in domestic demand. In the city states of Hong Kong and Singapore, especially, we expect the recent rise in asset prices to lead to more consumer spending. Elsewhere in the region, demand catalysts are different but equally local: a populist budget in Malaysia looks positive there; while in Thailand, a December election should help revive confidence, which has been in short supply under the junta. All told, the resilience of Asian markets has been encouraging. Outside the aforementioned hotspots, valuations remain reasonable because earnings have stayed strong. But the speed of more recent market rises probably may say more about the state of global liquidity than companies' intrinsic worth. Portfolio The portfolio generated a return of 10.8% in sterling terms, compared with the benchmark return of 10.0%. Our underweight exposure to Japan, where the market's performance shadowed the weak economy, stood us well and boosted performance. Our overweight to Hong Kong, where the market has rallied on hopes that mainland investors would soon be allowed to invest in the domestic market, and to India, which has seen robust capital inflows, also added to relative return. Against this, our underweight position to China detracted. In portfolio activity, we initiated a position in Japanese carmaker Toyota Motor, which has a strong product range and a different geographic emphasis from rival Honda, which we also hold. We built up our positions in Japanese regional bank Sapporo Hokuyo and specialist chemicals manufacturer Shin-Etsu, on account of their attractive valuations and strong track records, and we topped up Japanese motorcycle manufacturer Yamaha, and digital imaging and copying company Canon, both on valuation grounds, and added to Bumiputra Commerce and Oversea-Chinese Banking Corporation, Malaysian and Singaporean banks, respectively. Against this, we top-sliced Chinese toll road operator Zhejiang Expressway, which has performed well due to the strong Chinese market, as well as Thailand's PTTEP, China Mobile, Leighton and Hang Lung Properties, following recent run-ups in their share prices. We exited Japan's Kaneka because of cloudy business prospects. Outlook Continued tight credit conditions and the US housing downturn have renewed fears about the health of corporate earnings and the US economy. After a second US interest rate cut at the end of October, the risks of either higher inflation or slower growth seem broadly balanced. There has been much suggestion that Asia can weather any storm from the US. The region's dependence on US demand for exports has waned in recent years: Europe is now Asia's largest trading partner. Further, intra-regional trade has been growing rapidly. But the vast majority of Asian exports that would appear destined for China, as the region's main buyer, end up in the West. Furthermore, Asia's huge savings surplus is recycled via excess foreign exchange reserves into dollar assets. This helps to keep local currencies competitive but holds back domestic spending. Within financial markets, many investors would appear to be buying the idea of Asia's rising economic might first - and worrying about how much they are paying only later. There is little else to explain the rapid mark-up in stocks during the past year (other than cheap money and the lack of alternatives). However, global markets have probably become more correlated, not less, as global investors have become more comfortable with emerging markets generally. If problems in the credit markets were to spread, affecting corporate earnings in the US, then it is unlikely that Asia would be spared entirely because profits would need to be taken. Selling could well be magnified as borrowing was unwound. Japan stands slightly apart because of its weak state. It might even benefit from capital repatriation. But as a whole Japan is still a frustrating place. Policy makers (and companies) appear to be back-pedalling on reform. The situation is unlike the rest of the region, where gains in that direction continue. It is why the portfolio will remain relatively light in Japan for the foreseeable future. INCOME STATEMENT Six months ended 30 September 2007 (unaudited) Note Revenue Capital Total £'000 £'000 £'000 Gains/(Losses) on held-at-fair-value investments - 3,892 3,892 Income 748 - 748 Investment management fee (150) - (150) Performance fee - - - Administrative expenses (108) (7) (115) Exchange gains - 42 42 ____________ ____________ ____________ Net return before finance costs and taxation 490 3,927 4,417 Interest payable and similar charges (47) - (47) ____________ ____________ ____________ Net return on ordinary activities before taxation 443 3,927 4,370 Taxation on ordinary activities (29) - (29) ____________ ____________ ____________ Net return on ordinary activities after taxation 414 3,927 4,341 ____________ ____________ ____________ Return per Ordinary share (pence): 2 2.5 23.5 26.0 ____________ ____________ ____________ The total column of this statement represents the profit and loss account of the Company. No Statement of Total Recognised Gains and Losses has been prepared as all gains and losses have been reflected in the Income Statement. All revenue and capital items in the above statement derive from continuing operations. INCOME STATEMENT Six months ended 30 September 2006 (unaudited) Note Revenue Capital Total £'000 £'000 £'000 Gains/(Losses) on held-at-fair-value investments - (5,660) (5,660) Income 390 - 390 Investment management fee (155) - (155) Performance fee - - - Administrative expenses (124) (114) (238) Exchange gains - 236 236 ____________ ____________ ____________ Net return before finance costs and taxation 111 (5,538) (5,427) Interest payable and similar charges (53) - (53) ____________ ____________ ____________ Net return on ordinary activities before taxation 58 (5,538) (5,480) Taxation on ordinary activities (24) - (24) ____________ ____________ ____________ Net return on ordinary activities after taxation 34 (5,538) (5,504) ____________ ____________ ____________ Return per Ordinary share (pence): 2 0.2 (33.2) (33.0) ____________ ____________ ____________ The total column of this statement represents the profit and loss account of the Company. No Statement of Total Recognised Gains and Losses has been prepared as all gains and losses have been reflected in the Income Statement. All revenue and capital items in the above statement derive from continuing operations. INCOME STATEMENT Year ended 31 March 2007 (audited) Note Revenue Capital Total £'000 £'000 £'000 Gains/(Losses) on held-at-fair-value investments - (3,407) (3,407) Income 747 - 747 Investment management fee (295) - (295) Performance fee - 9 9 Administrative expenses (232) (161) (393) Exchange gains - 328 328 ____________ ____________ ____________ Net return before finance costs and taxation 220 (3,231) (3,011) Interest payable and similar charges (90) - (90) ____________ ____________ ____________ Net return on ordinary activities before taxation 130 (3,231) (3,101) Taxation on ordinary activities (52) - (52) ____________ ____________ ____________ Net return on ordinary activities after taxation 78 (3,231) (3,153) ____________ ____________ ____________ Return per Ordinary share (pence): 2 0.5 (19.4) (18.9) ____________ ____________ ____________ The total column of this statement represents the profit and loss account of the Company. No Statement of Total Recognised Gains and Losses has been prepared as all gains and losses have been reflected in the Income Statement. All revenue and capital items in the above statement derive from continuing operations. BALANCE SHEET As at As at As at 30 September 2007 30 September 2006 31 March 2007 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 Fixed assets Investments at fair value through 46,807 39,064 41,407 profit or loss ____________ ____________ ____________ Current assets Debtors 185 196 187 Cash at bank and in hand 344 756 213 ____________ ____________ ____________ 529 952 400 ____________ ____________ ____________ Creditors: Amounts falling due within one year Bank loans 3 (2,832) (2,211) (1,681) Other creditors (137) (130) (100) ____________ ____________ ____________ (2,969) (2,341) (1,781) ____________ ____________ ____________ Net current liabilities (2,440) (1,389) (1,381) ____________ ____________ ____________ Net assets 44,367 37,675 40,026 ____________ ____________ ____________ Share capital and reserves Called-up share capital 1,669 1,669 1,669 Special reserve 2,961 2,961 2,961 Capital redemption reserve 2,063 2,063 2,063 Capital reserve - realised 32,645 31,135 32,471 Capital reserve - unrealised 5,134 410 1,381 Revenue reserve (105) (563) (519) ____________ ____________ ____________ Equity Shareholders' funds 44,367 37,675 40,026 ____________ ____________ ____________ Net asset value per Ordinary share 265.9 225.8 240.0 (pence): 4 ____________ ____________ ____________ RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS Six months ended 30 September 2007 (unaudited) Capital Capital Capital Share Special redemption reserve - reserve - Revenue capital reserve reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2007 1,669 2,961 2,063 32,471 1,381 (519) 40,026 Return on ordinary activities after - - - 174 3,753 414 4,341 taxation ________ ________ __________ ________ ________ ________ ________ Balance at 30 September 2007 1,669 2,961 2,063 32,645 5,134 (105) 44,367 ________ ________ __________ ________ ________ ________ ________ Six months ended 30 September 2006 (unaudited) Capital Capital Capital Share Special redemption reserve - reserve - Revenue capital reserve reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2006 1,669 2,961 2,063 32,219 4,864 (597) 43,179 Return on ordinary activities after - - - (1,084) (4,454) 34 (5,504) taxation ________ ________ __________ ________ ________ ________ ________ Balance at 30 September 2006 1,669 2,961 2,063 31,135 410 (563) 37,675 ________ ________ __________ ________ ________ ________ ________ Year ended 31 March 2007 (audited) Capital Capital Capital Share Special redemption reserve - reserve - Revenue capital reserve reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2006 1,669 2,961 2,063 32,219 4,864 (597) 43,179 Return on ordinary activities after - - - 252 (3,483) 78 (3,153) taxation ________ ________ __________ ________ ________ ________ ________ Balance at 31 March 2007 1,669 2,961 2,063 32,471 1,381 (519) 40,026 ________ ________ __________ ________ ________ ________ ________ CASHFLOW STATEMENT Six months ended Six months ended Year ended 30 September 2007 30 September 2006 31 March 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net return on ordinary activities before finance costs and 4,417 (5,427) (3,011) taxation Adjustment for: (Gains)/losses on investments at fair value through profit or (3,892) 5,660 3,407 loss Exchange gains charged to capital (42) (236) (328) Capitalised expenses taken to non-distributable reserves 7 114 152 Decrease in accrued income 27 195 80 Decrease in other debtors 34 25 58 Increase/(decrease) in creditors 35 (16) (494) Overseas withholding tax (37) (21) (61) Stock dividends included in investment income (1) - - ____________ ____________ ____________ Net cash inflow/(outflow) from operating activities 548 294 (197) Net cash outflow from servicing of finance (47) (54) (85) Net cash (outflow)/inflow from financial investment (1,563) 3,682 4,099 ____________ ____________ ____________ Net cash (outflow)/inflow before use of liquid resources and (1,062) 3,922 3,817 financing Net cash inflow/(outflow) from financing 1,151 (3,731) (4,041) ____________ ____________ ____________ Increase/(decrease) in cash 89 191 (224) ____________ ____________ ____________ Reconciliation of net cash flow to movements in net debt Increase/(decrease) in cash as above 89 191 (224) (Decrease)/increase in borrowings (1,151) 3,731 4,041 Exchange movements 42 236 328 ____________ ____________ ____________ Movement in net funds in the period (1,020) 4,158 4,145 Opening net debt (1,468) (5,613) (5,613) ____________ ____________ ____________ Closing net debt (2,488) (1,455) (1,468) ____________ ____________ ____________ NOTES TO THE ACCOUNTS 1. Accounting policies The financial statements have been prepared on a going concern basis in accordance with UK Generally Accepted Accounting Principles including the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies' issued in December 2005. The Company's accounting policies have not varied from those described in the Annual Report and Accounts for the year ended 31 March 2007 and have been prepared on the same basis as that adopted for the Annual Report. 2. Total return per Ordinary share Total return per Ordinary share has been calculated on the return to equity shareholders of £4,341,000 (30 September 2006 - £5,504,000) and Ordinary shares throughout the period of 16,686,767 (30 September 2006 - 16,686,767). 3. Creditors: amounts payable within one year Creditors includes short term bank loans of £2,832,000 (30 September 2007 - £2,211,000; 31 March 2007 - £1,681,000). 4. Net asset value per Ordinary share The net asset value per Ordinary share has been calculated on net assets of £44,367,000 (30 September 2006 - £37,675,000; 31 March 2007 - £40,026,000) and 16,686,767 Ordinary shares in issue at 30 September 2007, 30 September 2006 and 31 March 2007. 5. Transaction costs The following transaction costs were incurred during the period. Six months ended Six months ended Year ended 30 September 2007 30 September 2006 31 March 2007 £'000 £'000 £'000 Purchases 5 102 140 Sales 4 126 145 ____________ ____________ ____________ 9 228 285 ____________ ____________ ____________ 6. The financial information contained in this Half Yearly Financial Report is not the Company's statutory financial statements. The financial information for the six months ended 30 September 2007 and 30 September 2006 is not for a financial year and has not been audited. The statutory financial statements for the financial year ended 31 March 2007 have been delivered to the Registrar of Companies and received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section 237(2) and (3) of the Companies Act 1985. For Aberdeen All Asia Investment Trust plc Aberdeen Asset Management PLC, Secretaries The Interim Report will shortly be available from the Company's website (www.all-asia.co.uk) or from the Secretaries and will be posted to shareholders in December 2007. END This information is provided by RNS The company news service from the London Stock Exchange BELFFDFBZFBQ

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