Final Results

Scottish Oriental Smlr Co Tst PLC 18 October 2006 THE SCOTTISH ORIENTAL SMALLER COMPANIES TRUST PLC Preliminary Results for the year ended 31 August 2006 (Extracted from the Audited Accounts) The Board of The Scottish Oriental Smaller Companies Trust PLC is pleased to announce the results for the year ended 31 August 2006. These results are presented in a format which summarises the information which will be given in the forthcoming Annual Report. Financial Highlights â€¢ The share price rose by 15.4% from 212.75p to 245.50p. â€¢ The warrant price rose by 28.0% from 112.50p to 144.00p. â€¢ Fully diluted net asset value per ordinary share rose by 16.5% from 219.95p to 256.22p and undiluted net asset value rose by 15.6% from 241.56p to 279.24. â€¢ This compares with a rise of 18.6% in the benchmark index - the MSCI AC Asia (ex Japan) Index. â€¢ The Nomura Asia Small Cap Index rose 17.8% and the FTSE All-Share Index rose 16.8% respectively over the same period. â€¢ A final dividend of 3.6p net is recommended to be paid on 26th January 2007 to shareholders registered on 22nd December 2006. Income Statement for the year ended 31 August 2006 2006 2005 Income* Capital Total Income* Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 (Restated) (Restated) Gains on investments - 10,413 10,413 - 14,737 14,737 Income from investments 2,199 - 2,199 2,080 - 2,080 Other income 217 - 217 182 - 182 Investment management fee (371) - (371) (562) - (562) Currency (losses)/gains - (42) (42) - 100 100 Other administrative expenses (277) - (277) (297) - (297) -------- -------- -------- -------- -------- -------- Net return before finance costs and taxation 1,768 10,371 12,139 1,403 14,837 16,240 Finance costs of borrowing (12) (5) (17) (36) - (36) -------- -------- -------- -------- -------- -------- Return on ordinary activities before taxation 1,756 10,366 12,122 1,367 14,837 16,204 Tax on ordinary activities (517) 1 (516) (407) 29 (378) -------- -------- -------- -------- -------- -------- Return attributable to equity shareholders 1,239 10,367 11,606 960 14,866 15,826 -------- -------- -------- -------- -------- -------- Return per ordinary share 4.78p 39.99p 44.77p 3.77p 58.33p 62.10p Fully diluted return per ordinary share (in accordance with FRS 14) 4.36p 36.48p 40.84p 3.47p 53.73p 57.20p * The total column of this statement is the Profit and Loss Account of the Company. All income and capital items derive from continuing operations. The financial statements for the year ended 31st August 2005 have been restated to reflect the change to accounting policies as set out in note 2 at the end of this document. Summary Balance Sheet as at 31 August 2006 2006 2005 Â£'000 Â£'000 Â£'000 Â£'000 (Restated) (Restated) Total investments 68,722 56,995 Current Assets: Debtors 487 1,090 Cash and deposits 4,825 7,486 -------- -------- 5,312 8,576 Current Liabilities (due within one year) Creditors (695) (569) -------- -------- (695) (569) Net current assets 4,617 8,007 -------- -------- 73,339 65,002 Creditors (due after one year) Foreign currency loan - (3,353) Provision for liabilities and charges Deferred tax (78) (78) -------- -------- Equity shareholders' funds 73,261 61,571 ======== ======== Capital and reserves Ordinary share capital 6,559 6,372 Share premium account 18,354 17,794 Warrant reserve unexercised 1,105 1,313 exercised 214 6 Capital Reserves realised 32,609 21,219 unrealised 11,785 12,809 Revenue Reserve 2,635 2,058 -------- -------- 73,261 61,571 ======== ======== Net asset value per share - undiluted 279.24p 241.56p Net asset value per share - fully diluted 256.22p 219.95p Reconciliation of Movements in Shareholders Funds Opening shareholders' funds 61,571 46,140 Total return attributable to shareholders 11,606 15,826 Warrants exercised 747 6 Dividend paid (663) (401) -------- -------- Closing shareholders' funds 73,261 61,571 ======== ======== Summary Cash Flow Statement for the year ended 31 August 2006 2006 2005 Â£'000 Â£'000 Net cash inflow from operating activities 1,683 1,334 Interest paid on borrowings (13) (36) Taxation (415) (233) Net cash (outflow)/inflow from capital expenditure and financial investment (700) 3,913 Equity dividend paid (663) (401) Financing (2,553) 6 ---------- ---------- (Decrease)/increase in cash (2,661) 4,583 ========== ========== (a) Reconciliation of total income to net cash inflow from operating activities 2006 2005 Â£'000 Â£'000 Income 2,416 2,261 Administration expenses (648) (859) Decrease/(Increase) in debtors 14 (8) Increase in dividends accounted for but not yet received (37) (100) (Decrease)/Increase in creditors (62) 40 ---------- ---------- Net cash inflow from operating activities 1,683 1,334 ========== ========== (b) Analysis of changes in cash and net debt during the year At the start of Cash Currency At the end of the year Flows Movements the year Â£'000 Â£'000 Â£'000 Â£'000 Cash 7,486 (2,661) - 4,825 Foreign Currency Loan (3,353) 3,300 53 - ---------- --------- --------- ---------- Net cash 4,133 639 53 4,825 ========== ========= ========= ========== BOARD STATEMENT This has been in some respects a testing year for Scottish Oriental. Asian stockmarkets in general rose strongly; however, as the year progressed it became increasingly difficult for our Manager to find good value in smaller companies. Because of this we repaid our yen borrowings in January with a modest capital profit produced by the weakness of the yen over the period of the loan; taking its low interest rate into account, this loan contributed to returns during its existence. The net asset value per share (fully diluted) increased by 16.5%, slightly behind the MSCI AC Asia (ex Japan) Index and the Nomura Asia Small Cap Index which rose by 18.6% and 17.8% respectively. Given our comparatively cautious view during the year, this is a satisfactory result for our shareholders. As this is written, 5.7% (Â£4.3m) of the portfolio is in cash. When the warrants expire in January 2007, assuming all outstanding warrants are exercised, further cash of approximately Â£4.0m will be available for investment. This money, together with borrowings if we consider the circumstances to be appropriate, will be used to take advantage of market volatility to buy good quality smaller companies at attractive prices. We continue to be optimistic about the prospects for the companies in our portfolio. Performance for the year ended 31 August 2006 (Total Return) Net Asset Value - fully diluted +16.5% MSCI AC Asia (ex Japan) +18.6% - undiluted +15.6% Index (Â£) Nomura Asia Small Cap +17.8% Share Price +15.4% Index (Â£) Warrant Price +28.0% FTSE All-Share Index (Â£) +16.8% Performance for the period 31st August 1996 to 31st August 2006 Net Asset Value - fully diluted +142.0% MSCI AC Asia (ex Japan) +5.45% - undiluted +161.1% Index (Â£) FTSE All-Share Index (Â£) +110.8% Summary Data at 31 August 2006 Shares in issue 26,235,601 Shareholders' Funds Â£73.26m Warrants in issue 3,978,049 Market Capitalisation Â£64.41m Net Asset Value per share - fully diluted 256.22p Share Price Discount to 4.2% Net Asset Value - fully diluted Net Asset Value per share - undiluted 279.24p Share Price Discount to 12.1% Net Asset Value - undiluted Share Price 245.50p Warrant Price 144.00p Review by Investment Manager Asian stockmarkets continued to rise in the year ending 31st August 2006. A strong appetite for risk amongst the international investment community resulted in a substantial flow of funds into the Region. This euphoria lasted until May when markets fell owing to concerns that higher interest rates, particularly in the US and Japan, would cause a slowdown in global economic growth. For the remainder of the year, regional markets provided more limited returns, with only subdued foreign inflows returning to the Region. Indonesia was the best performing market over the period as inflation peaked and interest rates began to fall. India was also strong as it continued to benefit from the large flow of portfolio investment attracted by the strong growth in corporate earnings. The Philippines performed surprisingly well driven by positive economic data as well as strong overseas workers' remittances. Asian smaller companies underperformed their larger counterparts over the period. This underperformance was exacerbated by the decline in investors' appetite for risk after the markets' correction in May. Outlook by Investment Manager Susie Rippingall, Portfolio Manager for Scottish Oriental said, 'In the short term, the uncertain outlook for inflation and interest rates will continue to overshadow Asian stockmarkets. Valuations are no longer attractive though they are still much more attractive than those that prevailed in the mid 1990s. Corporate earnings remain vulnerable to high commodity prices and rising wage costs, particularly in China. Rising wages throughout the Region may create inflationary pressures given Asia's position as the world's manufacturing base. The companies most likely to benefit from this are those selling to Asian consumers. We remain optimistic about the long-term outlook for the Region in absolute and, even more so, in relative terms. The combination of favourable demographics, sound fiscal/monetary policies, competitive cost structures and rapidly expanding domestic consumption is a powerful one. More specifically, the developed world continues to outsource its manufacturing to Asia, most notably to China; outsourcing in service industries has also become more commonplace, with India being the main beneficiary. In Asia in general, individuals tend to have high levels of savings. The corporate sector has reduced its debt exposure in recent years. A dividend culture has emerged in many parts of the Region. As elsewhere, controlling families and other major stakeholders of listed entities do not always treat minorities with respect, but corporate governance and stockmarket regulation have undoubtedly improved over the last ten years.' Dividend The Board is proposing a final dividend of 3.6p net (2005: 2.6p net), representing an increase of 38% on last year. Scottish Oriental's primary investment objective has been and continues to be capital growth, and dividends have been restricted so as to build up a reasonable revenue reserve but it is our intention to at least maintain the proposed level of dividend. Notes: (1) The financial information contained within this Preliminary Announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The results for the years ended 31st August 2006 and 2005 are an abridged version of the statutory accounts for those years, which received unqualified audit reports and did not contain statements under sections 237(2) or (3) of the Companies Act 1985. Statutory accounts for 2005 have been filed with the Registrar of Companies and those for 2006 will be delivered in due course. (2) Accounting Policies The new Financial Reporting Standards, issued as part of the programme to enable United Kingdom Generally Accepted Accounting Practice ('UK GAAP') to converge with International Financial Reporting Standards, were applicable for the year ended 31 August 2006 and the accounts for the year ended 31 August 2005 have also been restated. The main changes arising from these revisions to UK GAAP, in relation to the Company's accounts, are that dividends to shareholders declared after the balance sheet date are now shown in the period of payment rather than in the reporting period, and investments are fair valued at bid price having previously been valued on a mid basis. Dividends were previously recognised in the Statement of Total Return (now the Income Statement) but these are now dealt with as an appropriation of equity and are taken directly through equity in the Reconciliation of Movements in Shareholders' Funds. The Board has elected to adopt UK Generally Accepted Accounting Principles (UK GAAP) and therefore complies with the new Financial Reporting Standards issued as part of the programme to converge UK GAAP with IFRS. Figures for the years ended 31st August 2004 and 31st August 2005 have been restated and the impact of these changes is shown below: Reconciliation of Balance Sheet Effect of adjustments 2005 2004 Â£000 Â£000 (i.) Revaluation of portfolio from mid market to bid market pricing (295) (258) (ii.) Final dividend no longer accrued as at 31st August 663 401 368 143 Previously reported Total Equity Shareholders' Funds 61,203 45,997 Total Equities and Liabilities 61,571 46,140 (a) Restatement for first time adoption of revised UK GAAP (i) Under FRS 26 - 'Financial Instruments: Recognition and Measurement', investments are classified as held at fair value through profit and loss under the Statement of Recommended Practice and are carried at bid prices which equates to their value of Â£46,476,000 (2004) and Â£56,995,000 (2005). These were previously carried at mid prices. The resultant difference of Â£258,000 (2004) and Â£295,000 (2005) is included in retained earnings. (ii)Under FRS 21 - 'Events after the Balance Sheet Date', no provision has been made for the final dividend on ordinary shares for the year ended 31st August 2004 of Â£401,000 and for the year ended 31st August 2005 of Â£663,000 as these were not declared until after the balance sheet date. Under the Statement of Recommended Practice, the dividend is not recognised until it becomes payable. This is not therefore added to retained earnings. Reconciliation of the Income Statement to the Statement of Total Return for the year to 31st August 2005 Â£000 Total transfer from reserve per original Statement of Total Return 15,200 Add back dividends on ordinary shares 663 Change from mid to bid basis as at 31st August 2004 258 Change from mid to bid basis at 31st August 2005 (295) Net profit per Income Statement as restated 15,826 Notes to the reconciliation 1. All dividends authorised and paid during the year are dealt with in the Statement of Changes in Equity 2. The portfolio valuations at 31st August 2004 and 2005 require to be valued at fair value under the Statement of Recommended Practice. These values differ from the previous valuations by Â£258,000 and Â£295,000 respectively. (3) The terms of the Preliminary Announcement were approved by the Board on 18 October 2006. (4) Copies of the Annual Report will be posted to shareholders shortly and further copies may be obtained from the registered office at 23 St Andrew Square, Edinburgh, EH2 1BB. Enquiries: Gillian Davies, First State Investments, Ph: 44 (0) 131 473 2224 Susie Rippingall, Portfolio Manager, First State Investments, Ph: 00 852 2846 7526 Angus Tulloch, Portfolio Manager First State Investments, Ph 44 (0) 131 473 2271 18 October 2006 This information is provided by RNS The company news service from the London Stock Exchange ND FR MPBRTMMIBBRF

Companies

Scottish Oriental Smaller Companies Trust (SST)

Full Archive

UK 100

Latest directors dealings

8 hours ago SSP Group
9 hours ago Card Factory
9 hours ago HSBC Holdings
9 hours ago Direct Line Insurance Group
10 hours ago CRH (CDI)

All directors dealings today