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Scottish Oriental (SST)

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Tuesday 23 March, 2010

Scottish Oriental

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 28th 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 31st 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 31st 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 28th 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

23rd March 2010

 

Interim Management Report

 

Investment Performance

In the six months ending 28th 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 28th 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 28th 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 29th January 2010 for the year ending 31st August 2009 (31st 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 28th 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 28th 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 31st 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 31st 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 31st August 2009.

 

·           The terms of the interim report and this announcement were approved by the Board on 23rd 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:+44 (0) 131 473 2200

 

23rd March 2010

 


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