Half Yearly Report Announceme

RNS Number : 0450J

Scottish Oriental Smlr Co Tst PLC

23 March 2010

 



THE SCOTTISH ORIENTAL SMALLER COMPANIES TRUST PLC

Interim Results for the six months to 28th February 2010

(Extracted from the Interim Report)

The Board of The Scottish Oriental Smaller Companies Trust PLC is pleased to announce the results for the six months to 28^th February 2010.

Financial Highlights

Performance for the six months to 28th February 2010 (Unaudited)
Net Asset Value	24.1%	MSCI AC Asia ex Japan Index (£) †	17.4%
Share Price	24.3%	MSCI AC Asia ex Japan Small Cap	24.3%
		Index (£) †
		FTSE All-Share Index (£) †	10.1%
Summary Data at 28th February 2010 (Unaudited)
Shares in issue	30,213,650	Shareholders' Funds	£141.25m
Net Asset Value per share	467.49p	Market Capitalisation	£122.97m
Share Price	407.00p	Share Price Discount to Net Asset Value	12.9%

† Total return (capital return with dividends reinvested)

Corporate Objective

The investment objective of The Scottish Oriental Smaller Companies Trust plc ("Scottish Oriental", "the Company" or "the Trust") is to achieve long-term capital growth by investing mainly in smaller Asian quoted companies with market capitalisations under US$1,000m, or the equivalent thereof, at the time of investment. For investment purposes, the Region includes the Indian sub-continent but excludes Japan and Australasia.

(This is an abridged version of Scottish Oriental's investment policy. A full statement of Scottish Oriental's investment policy can be found on page 3 of the Annual Report and Accounts for the year ending 31^st August 2009)

Principal Risks and Uncertainties

Given the nature of its investment activities, the principal risks that Scottish Oriental faces from its financial instruments are market prices (comprising interest rate, currency and share price risks) and credit risk.  The principal risks and uncertainties have not changed since the publication of the Annual Report and Accounts for the year ended 31^st August 2009.  A detailed explanation of these risks and how they are managed is set out in Note 15 of the Annual Report.  As Scottish Oriental's assets mainly comprise readily realisable securities, other than in exceptional circumstances there should be no significant liquidity risk.  Scottish Oriental's investment portfolio is exposed to market price fluctuations and currency fluctuations which are monitored by the Investment Manager.  Scottish Oriental does not invest in either fixed or floating rate securities and interest rate risk exposure is restricted to interest receivable on bank deposits or payable on bank overdraft positions which will be affected by fluctuations in interest rates.

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:

(a)      the condensed set of financial statements within the half-yearly financial report, prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports' gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

(b)      the Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the Financial Services Authority's Disclosure and Transparency Rules.

The half-yearly report, for the six months to 28^th February 2010, comprises the Interim Management Report, the Directors' Responsibility Statement and a condensed set of financial statements and has not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

By order of the Board

James Ferguson

Chairman

23^rd March 2010

Interim Management Report

Investment Performance

In the six months ending 28^th February 2010, Scottish Oriental's net asset value per share rose by 24.1 per cent to 467.49p.  This compares with a sterling-adjusted increase of 17.4 per cent in the MSCI AC Asia Free ex Japan Index and a rise of 24.3 per cent in the MSCI AC Asia ex Japan Small Cap Index.  The Trust's share price also increased by 24.3 per cent over the period and the discount to net asset value was 12.9 per cent on 28^th February 2010.  The Trust outperformed the FTSE All-Share Index, which rose by 10.1 per cent over the six months.

Scottish Oriental had no borrowings during the six month period and held cash equivalent to 5.6 per cent of net assets on 28^th February 2010.

Review

Asian stockmarkets achieved significant gains in the six months ending 28th February 2010 as the loose fiscal and monetary policies continued despite evidence of a robust recovery in the underlying economies. The inventory replenishment cycle had a positive impact on output and new orders, particularly for technology related companies.  The data from China was particularly strong with GDP growth of 8.7% in 2009. 

The value of new equity raised in Asia (excluding China A share, Japan and Australia) rose substantially in 2009, reaching a total of US$42bn of which US$20bn was issued in the fourth quarter. The bulk of this was from Chinese companies which raised money in Hong Kong.  This was partially absorbed by the US$19bn of net inflows into the Region in 2009.

Asian smaller companies generally outperformed their larger counterparts with particularly strong returns from China and Thailand.

Outlook

Economic growth in Asia excluding Japan is expected to accelerate this year, with GDP growth for the Region forecast at more than 7%.  A recovery in domestic consumption combined with higher food and fuel prices has also resulted in a pickup in inflation.  However, the response from the Region's Central Banks has so far been modest and mainly focused on the reversal of the emergency measures introduced at the depth of the global crisis. For example, China and India have increased the reserve requirements for the banking sector while keeping interest rates at historically low levels.  Only Malaysia has raised interest rates since the onset of the global economic crisis and that was by a modest 25bps.  This suggests that the Region's export-driven economic policy remains intact and that the authorities will avoid raising interest rates if this risks inviting large capital inflows and currency appreciation.  For some countries, however, notably India, Central Banks may move too late to address inflation, resulting in much higher interest rates in the future.

There was a dramatic recovery in corporate earnings in the second half of 2009 and analysts in general remain optimistic in their forecasts for 2010.  On this basis, valuations for most Asian smaller companies are attractive.  The risks to these forecasts come from lower than anticipated demand from Europe and the US which will limit companies' ability to pass on higher costs. 

Scottish Oriental will continue to focus on those well managed, soundly financed companies with strong business franchises that should continue to grow at a sustainable rate over the medium term.

Dividend

A dividend of 6.00p per share net (equivalent to 6.67p gross) was paid on 29^th January 2010 for the year ending 31st August 2009 (31^st August 2008: 5.00p per share net).  It is too early to make a forecast of the 2010 distribution. 

Income Statement for the six months to 28^th February 2010

	Six months to 28th February  2010 (unaudited)			Six months to 29th February  2009 (unaudited)
	Revenue £'000	Capital £'000	Total* £'000	Revenue £'000	Capital £'000	Total* £'000
Gains/(losses) on investments	-	28,339	28,339	-	(21,211)	(21,211)
Income from investments	990	-	990	928	-	928
Other income	-	-	-	7	-	7
Investment management fee	(515)	-	(515)	(271)	-	(271)
Currency gains	-	674	674	-	301	301
Other administrative expenses	(169)	-	(169)	(160)	-	(160)
Net return before finance costs and taxation	306	29,013	29,319	504	(20,910)	(20,406)
Return on ordinary activities before taxation	306	29,013	29,319	504	(20,910)	(20,406)
Tax on ordinary activities	(44)	(77)	(121)	(142)	-	(142)
Return attributable to equity shareholders	262	28,936	29,198	362	(20,910)	(20,548)
Weighted average number of shares		30,213,650			30,213,650
Return per ordinary share (p) †	0.87	95.77	96.64	1.20	(69.21)	(68.01)

	Year ended 31st August 2009 (audited)
	Revenue £'000	Capital £'000	Total* £'000
Gains on investments	-	18,754	18,754
Income from investments	3,726	-	3,726
Other income	18	-	18
Investment management fee	(591)	-	(591)
Currency losses	-	(160)	(160)
Other administrative expenses	(306)	-	(306)
Net return before finance costs and taxation	2,847	18,594	21,441
Finance costs of borrowing	(1)	-	(1)
Return on ordinary activities before taxation	2,846	18,594	21,440
Tax on ordinary activities	(539)	(29)	(568)
Return attributable to equity shareholders	2,307	18,565	20,872
Weighted average number of shares		30,213,650
Return per ordinary share (p) †	7.63	61.45	69.08

* The total column of this statement is the Profit and Loss Account of the Company.

A Statement of Total Recognised Gains or Losses has not been prepared as any gains or losses are

recognised in the Income Statement.

† Based on the weighted average number of shares during the period.

All revenue and capital items derive from continuing operations.

Balance Sheet as at 28^th February 2010

	At 28th February 2010	At 28th February 2009	At 31st August 2009
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
EQUITY INVESTMENTS
China	14,320	7,207	11,409
Hong Kong	14,524	7,498	10,033
India	3,063	1,834	4,314
Indonesia	8,702	4,137	5,756
Malaysia	11,533	7,286	7,861
Philippines	9,332	5,501	6,696
Singapore	19,171	9,743	20,000
South Korea	16,876	6,469	12,106
Sri Lanka	3,779	2,756	4,438
Taiwan	13,781	7,946	9,042
Thailand	16,648	7,929	12,867
Vietnam	1,674	446	532
Total equities	133,403	68,752	105,054
Net current assets	7,844	3,711	8,808
Deferred tax	-	(21)	-
Shareholders' funds	141,247	72,442	113,862
Share capital and reserves
Ordinary share capital	7,554	7,554	7,554
Share premium account	21,337	21,337	21,337
Warrant reserve - exercised	1,319	1,319	1,319
Capital reserve	107,672	39,261	78,736
Revenue reserve	3,365	2,971	4,916
	141,247	72,442	113,862
Net asset value per share	467.49p	239.77p	376.85p

Cash Flow Statement for the six months to 28th February 2010

	Six months to		Six months to		Year to
	28th February 2010 (uaudited)		28th February 2009 (unaudited)		31st August 2009 (audited)
	£'000	£'000	£'000	£'000	£'000	£'000
OPERATING ACTIVITIES:
Dividends received from investments		1,112		1,216		3,828
Interest received		-		8		19
		1,112		1,224		3,847
Investment management fee	(483)		(196)		(588)
Secretarial fee	(25)		(25)		(50)
Directors' fees	(36)		(37)		(68)
Other expenses	(27)		(51)		(63)
		(571)		(309)		(769)
Net cash inflow from operating activities		541		915		3,078
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid on borrowings		-		-		(1)
TAXATION:
Total tax paid		(283)		(409)		(802)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT:
Purchases of investments	(20,178)		(11,043)		(31,548)
Sales of investments	20,152		12,880		36,330
Indian Capital Gains Tax	(77)		-		(29)
Currency gains / (losses)	674		301		(160)
Net cash inflow from capital expenditure and financial investment		571		2,138		4,593
EQUITY DIVIDEND PAID		(1,813)		(1,511)		(1,511)
(Decrease)/increase in cash		(984)		1,133		5,357

Reconciliation of Movements in Shareholders' Funds
For the period ended 28th February 2010
		Share Capital	Share Premium Account	Warrant Reserve Exercised	Capital Reserve	Revenue Reserve	Total
		£000	£000	£000	£000	£000	£000
Balance at 31st August 2009		7,554	21,337	1,319	78,736	4,916	113,862
Realised gains on investments		-	-	-	8,532	-	8,532
Currency gain		-	-	-	674	-	674
Unrealised appreciation on investments in the period		-	-	-	19,807	-	19,807
Indian Capital Gains Tax		-	-	-	(77)		(77)
Income retained in the period		-	-	-	-	262	262
Dividend paid in the period		-	-	-	-	(1,813)	(1,813)
Balance at 28th February 2010		7,554	21,337	1,319	107,672	3,365	141,247

Reconciliation of Movements in Shareholders' Funds
For the year ended 31st August 2009
		Share Capital	Share Premium Account	Warrant Reserve Exercised	Capital Reserve	Revenue Reserve	Total
		£000	£000	£000	£000	£000	£000
Balance at 31st August 2008		7,554	21,337	1,319	60,171	4,120	94,501
Realised gain on investments		-	-	-	6,546	-	6,546
Currency loss		-	-	-	(160)	-	(160)
Unrealised appreciation on investments in the year		-	-	-	12,208	-	12,208
Indian Capital Gains Tax		-	-	-	(29)	-	(29)
Income retained in the year		-	-	-	-	2,307	2,307
Dividend paid in the year		-	-	-	-	(1,511)	(1,511)
Balance at 31st August 2009		7,554	21,337	1,319	78,736	4,916	113,862

Notes to Accounts

(1). The position as at 31^st August 2009 included within the Balance Sheet is an abridged version of that contained in the full accounts for that year, which received an unqualified audit report and which have been filed with the Registrar of Companies. This interim report has been prepared under the same accounting policies adopted for the year to 31^st August 2009.

(2). Dividends

	At 28th February 2010 £000	At 29th February 2009 £000	At 31st August 2009 £000
Amounts recognised as distributions in the period:
Dividend for the year ending 31st August 2009 of 6.0p (2008 - 5.0p) paid 29th January 2010	1,813	1,511	1,511

(3) Contingent liabilities

Under the terms of the Investment Management Agreement, an annual performance fee may be payable to the Investment Manager at the end of the year.  A detailed explanation of the performance fee computation is set out on page 20 of the Annual Report and Accounts for the year ending 31^st August 2009.

·           The terms of the interim report and this announcement were approved by the Board on 23^rd March 2010.

·           Copies of the Interim Report will be posted to shareholders shortly and will be available thereafter on the Company's website: www.scottishoriental.com and from the registered office at 23 St Andrew Square Edinburgh EH2 1BB

Enquiries: Bridgette McDonald/Gillian Davies/Charlotte Lawrence, First State Investments, Edinburgh Ph:[phone]

23^rd March 2010

 

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