Interim Results

Scottish Oriental Smlr Co Tst PLC 28 March 2007 THE SCOTTISH ORIENTAL SMALLER COMPANIES TRUST PLC Preliminary Results (Unaudited) for the six months to 28th February 2007 The Board of The Scottish Oriental Smaller Companies Trust PLC is pleased to announce the results for the six months to 28th February 2007. These results summarise the information which will be given in the forthcoming Interim Report. All the figures stated here are total return with the exception of the Nomura Asia Small Cap Index. Financial Highlights • Net asset value per ordinary share rose by 18.9% to 304.52p. • This compares with a rise of 14.8% in the benchmark Index - the MSCI AC Asia (ex Japan) Index. • The Nomura Asia Small Cap Index in sterling and the FTSE All-Share Index increased 20.3% and 7.4% respectively over the same period. • Share price rose by 18.7%. Statement of Total Return for the six months to 28th February 2007 (Unaudited) Six months to 28th February 2007 Six months to 28th February 2006 Income* Capital Total Income* Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Gains on investments - 15,178 15,178 - 12,498 12,498 Income from investments 1,164 - 1,164 623 - 623 Other income 88 - 88 133 - 133 Investment management fee (214) - (214) (183) - (183) Currency (losses)/gains - (82) (82) - 78 78 Other administrative expenses (155) - (155) (141) - (141) -------- -------- ------- -------- -------- ------- Net return before finance costs and taxation 883 15,096 15,979 432 12,576 13,008 Finance costs of borrowing (1) - (1) (12) (5) (17) -------- -------- ------- -------- -------- ------- Return on ordinary activities before taxation 882 15,096 15,978 420 12,571 12,991 Tax on ordinary activities (264) - (264) (112) 2 (110) -------- -------- ------- -------- -------- ------- Return attributable to equity shareholders 618 15,096 15,714 308 12,573 12,881 -------- -------- ------- -------- -------- ------- Weighted average number of shares 26,850,990 25,604,160 Return per ordinary share** 2.30p 56.22p 58.52p 1.20p 49.10p 50.30p * The total column of this statement is the Profit and Loss Account of the Trust. **Based on the weighted average number of shares during the period. All income and capital items derive from continuing operations. Statement of Total Return for the six months to 28th February 2007 (Unaudited) (Continued) Year ended 31st August 2006 Income* Capital Total £'000 £'000 £'000 Gains on investments - 10,413 10,413 Income from investments 2,199 - 2,199 Other income 217 - 217 Investment management fee (371) - (371) Currency (losses)/gains - (42) (42) Other administrative expenses (277) - (277) -------- -------- ------- Net return before finance costs and 1,768 10,371 12,139 taxation Finance costs of borrowing (12) (5) (17) -------- -------- ------- Return on ordinary activities before 1,756 10,366 12,122 taxation Tax on ordinary activities (517) 1 (516) -------- -------- ------- Return attributable to equity 1,239 10,367 11,606 shareholders -------- -------- ------- Weighted average number 25,922,475 of shares Return per ordinary share** 4.78p 39.99p 44.77p * The total column of this statement is the Profit and Loss Account of the Trust. **Based on the weighted average number of shares during the period. All income and capital items derive from continuing operations. SUMMARY BALANCE SHEET At 28th At 28th At 31st (Unaudited) February 2007 February 2006 August 2006 £'000 £'000 £'000 Total investments 84,577 69,603 68,722 Net current assets 7,455 5,269 4,617 Deferred Tax (24) (42) (78) ------------ ----------- ----------- Equity shareholders' funds 92,008 74,830 73,261 ============ =========== =========== Net asset value per share 304.52p 261.63p 256.22p Cash Flow Statement for the six months to 28th February 2007 (unaudited) Six months to Six months to Year to 28th February 2007 28th February 2006 31st August 2006 £'000 £'000 £'000 £'000 £'000 £'000 OPERATING ACTIVITIES: Dividends received from investments 1,320 771 2,168 Interest received 87 132 211 -------- -------- ------- 1,407 903 2,379 Investment management fee (198) (222) (411) Secretarial fee (23) (22) (45) Directors' fees (42) (37) (75) Other expenses (88) (96) (165) -------- -------- -------- (351) (377) (696) -------- -------- ------- Net cash inflow from operating activities 1,056 526 1,683 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest paid on borrowings (1) (12) (13) TAXATION: Total tax paid (36) (31) (415) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT: Purchases of investments (12,623) (10,327) (28,410) Sales of investments 12,066 11,172 27,811 Capital Corporation Tax 2 - - Indian capital gains tax - - (1) Currency gains/ (losses) (82) 24 (95) Capital expenses - (5) (5) -------- -------- -------- Net cash (outflow)/inflow from capital expenditure and financial investment (637) 864 (700) EQUITY DIVIDEND PAID (944) (663) (663) Financing: Subscription of new capital: Ordinary shares 3,978 747 747 Loan Repayment - (3,300) (3,300) -------- -------- -------- 3,978 (2,553) (2,553) -------- -------- ------- Increase/(decrease) in cash 3,416 (1,869) (2,661) ======== ======== ======= BOARD STATEMENT Investment Performance In the six months ending 28th February 2007, Scottish Oriental's net asset value per share rose 18.9 per cent to 304.52p. This compares with sterling-adjusted increases of 14.8 per cent in the MSCI AC Asia Free (ex Japan) Index and 20.3 per cent in the Nomura Asia Small Cap Index. The Trust's share price appreciated by 18.7 per cent over the period and the discount to net asset value was 4.3 per cent on 28th February 2007. The Trust outperformed the FTSE All-Share Index, which rose 7.4 per cent over the six months. Smaller companies generally outperformed their larger counterparts over the period, with particularly strong returns in China, Malaysia and the Philippines. Review Asian equity markets continued to perform strongly in the six months ending 28th February 2007 as the global appetite for risk remained high. Malaysia and the Philippines were the best performing markets over the period, rising more than 30% in sterling terms. A combination of historically low interest rates and a significant improvement in the Government's fiscal deficit contributed to the strong returns from the Philippines. Malaysia benefited from positive economic data as well as ongoing corporate restructuring. South Korea was the worst performing market over the period, as a result of the negative impact of a strong currency on corporate earnings and slowdown in the domestic economy. In Thailand the stockmarket initially responded positively to the military coup in September but fell sharply following the imposition of capital controls in December. Outlook Valuations for many Asian stocks are no longer as attractive following their recent strong performance. The outlook for earnings is uncertain given that a slowdown in US domestic consumption would have a negative impact on Asia's exports and economic growth. This may be offset by a lower oil price and falling interest rates. However, the upward pressure on wages could feed through into higher inflation due to Asia's position as the world's manufacturing base. The companies most likely to benefit from this are those selling to Asian consumers. The long-term outlook for the Region remains positive, supported by the ongoing trend to outsource manufacturing and services to Asia, as well as a relatively high savings rate and improving corporate governance. We continue to focus on well-managed companies with strong franchises and robust balance sheets. Warrants 31st January 2007 was the final date for warrant holders to exercise their right to subscribe for one ordinary share at 100p. As at 28th February 2007, all the warrants had been converted resulting in Scottish Oriental Smaller Companies Trust having 30,213,650 ordinary shares in issue (26,235,601 ordinary shares in issue at 31st August 2006). The proceeds from the exercise of the warrants have been gradually invested following the identification of suitable investment opportunities. Dividend A dividend of 3.6p per share net (equivalent to 4.0p gross) was paid on 26th January 2007 for the year ending 31st August 2006. It is too early to make a forecast of the 2007 distribution, but your Board expects to pay an increase in dividend this year. Performance for the six months to 28th February 2007 (Unaudited) Net Asset Value +18.9% MSCI AC Asia (ex Japan) Index (£) +14.8% Share Price +18.7% Nomura Asia Small Cap Index (£) +20.3% FTSE All-Share Index +7.4% Summary Data at 28th February 2007 (Unaudited) Shares in issue 30,213,650 Shareholders' Funds £92.01m Net Asset Value per 304.52p Market Capitalisation £88.07m share Share Price 291.50p Share Price Discount to Net 4.3% Asset Value All of the above figures are total return with the exception of the Nomura Asia Small Cap Index. Benchmark and Comparative Indices From inception in March 1995 until October 1999, the Trust adopted the Morgan Stanley Capital International AC Asia (ex Japan) Index ('MSCI') as its benchmark. No suitable regional smaller companies index was available at that time. In October 1999 the Directors agreed to the replacement of the MSCI with the SG Asian (ex Japan) Smaller Companies Index, following its reconstitution to cover previously excluded countries. Unfortunately, this Index ceased to be available from the end of 2002. The Directors consequently decided to revert to the MSCI as its benchmark. This Index, being dominated by larger companies, is far from an ideal performance measurement tool. It has, however, the dual merit of being the most widely recognised regional index and of pre-dating the inception of the Trust. For comparison purposes, the Trust is also displaying The Nomura Small Cap Index ('NASCI') which covers the relevant markets with the exception of Pakistan and Sri Lanka. The NASCI is made up of companies with a market capitalisation of between US$100m and US$1,000m, This range does not match exactly that of the Trust, which has no lower limit and which is generally restricted to companies with a market capitalisation of under US$1,000m. Unfortunately this Index dates only from the end of 1996, and thus cannot provide a complete historical performance comparison with the Trust. Nevertheless, the NASCI gives a useful indication of the performance of smaller companies in Asia over recent years. As most investors in the Trust are based in the United Kingdom, the Directors consider that it is also relevant to compare the Trust's performance to that of the FTSE All-Share Index. Notes 1. Dividends At At At 28th February 28th February 31st August 2007 2006 2006 £000 £000 £000 Amounts recognised as distributions in the period: Dividend for the year ending 31st August 2006 of 3.60p (2005 - 2.60p) paid 27th January 2007 944 663 663 --------- -------------- -------------- 2. The terms of the interim report and the preliminary announcement were approved by the Board on 28th March 2007. 3. Copies of the Interim 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: Angus Tulloch/Susie Rippingall, First State Investments, Edinburgh Ph:+44 (0) 131 473 2200 28th March 2007 This information is provided by RNS The company news service from the London Stock Exchange

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