Interim Results

RNS Number : 3966P

Scottish Oriental Smlr Co Tst PLC

24 March 2009

 



THE SCOTTISH ORIENTAL SMALLER COMPANIES TRUST PLC

Interim Results for the six months to 28th February 2009

(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 2009.

Financial Highlights 

Performance for the six months to 28th February 2009 (Unaudited)
Net Asset Value	-23.3%	MSCI AC Asia ex Japan Index (£) †	-25.8%
Share Price	-21.9%	MSCI AC Asia ex Japan Small Cap	-29.4%
		Index (£) †
		FTSE All-Share Index (£) †	-32.1%
Summary Data at 28th February 2009 (Unaudited)
Shares in issue	30,213,650	Shareholders' Funds	£72.44m
Net Asset Value per share	239.77p	Market Capitalisation	£61.79m
Share Price	204.50p	Share Price Discount to Net Asset Value	14.7%

† 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 2008)

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 2008. A detailed explanation of these risks and how they are managed is set out in Note 16 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 general conditions 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 2009, 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

24th March 2009

Interim Management Report 

Investment Performance

In the six months ending 28th February 2009, Scottish Oriental's net asset value per share fell 23.3 per cent to 239.77p. This compares with a sterling-adjusted decline of 25.8 per cent in the MSCI AC Asia ex Japan Index and a decline of 29.4 per cent in the MSCI AC Asia ex Japan Small Cap Index. The Trust's share price fell by 21.9 per cent over the period and the discount to net asset value was 14.7 per cent on 28th February 2009. The Trust outperformed the FTSE All-Share Index, which fell by 32.1 per cent over the six months.

Scottish Oriental had no borrowings during the six month period and held cash equivalent to 4.6% of net assets on 28th February 2009.

Review

Most Asian stockmarkets suffered significant declines in the six months ending 28th February 2009 as the global credit crisis worsened, resulting in not only in the demise of several financial institutions in the US and Western Europe, but also a massive contraction in global trade. The authorities responded with the announcement of higher Government spending and lower interest rates which resulted in a rebound in the markets during November and December. This proved short lived as the economic data confirmed the full impact of the crisis with substantial declines in fourth quarter GDP for those Asian countries with high exposure to global trade. The disappointing economic data raised concerns over the outlook for corporate profits and resulted in further reductions in analysts' earnings forecasts and share price targets. 

Asian smaller companies generally underperformed their larger counterparts with particularly sharp declines in India and Indonesia.

Outlook

The short term outlook for Asian stockmarkets remains uncertain. Although forecasts for economic growth and corporate earnings have fallen significantly, there are no real indications of when the recovery may materialise. Exports are expected to remain weak given lower consumer spending in Europe and the US. In the meantime, the authorities continue to provide support through additional fiscal spending and historically low interest rates.  

Companies throughout Asia are responding to the lower demand with reductions in costs, specifically wages. Overcapacity in a number of industries suggests that average selling prices could fall and industry consolidation should accelerate as those companies with high operating costs suffer losses and close. Rising unemployment and the uncertain economic outlook will undermine consumer spending in the Region despite the lower cost of food and fuel.  

A decline in 2009 corporate earnings is largely reflected in share prices which in many cases have more than halved in a year. However, the timing of the expected recovery is difficult to predict. In the meantime, Scottish Oriental will continue to invest in those soundly financed companies which offer good long term prospects and are expected to benefit from industry consolidation. 

Dividend

A dividend of 5.0p per share net (equivalent to 5.6p gross) was paid on 28th January 2009 for the year ending 31st August 2008 (31st August 2007: 4.6p per share net). It is too early to make a forecast of the 2009 distribution.  

Income Statement for the six months to 28th February 2009

	Six months to 28th February  2009 (unaudited)			Six months to 29th February  2008 (unaudited)
	Revenue £'000	Capital £'000	Total* £'000	Revenue £'000	Capital £'000	Total* £'000
(Losses)/gains on investments	-	(21,211)	(21,211)	-	920	920
Income from investments	928	-	928	786	-	786
Other income	7	-	7	136	-	136
Investment management fee	(271)	-	(271)	(276)	-	(276)
Currency gains/(losses)	-	301	301	-	(15)	(15)
Other administrative expenses	(160)	-	(160)	(168)	-	(168)
Net return before finance costs and taxation	504	(20,910)	(20,406)	478	905	1,383
Return on ordinary activities before taxation	504	(20,910)	(20,406)	478	905	1,383
Tax on ordinary activities	(142)	-	(142)	(142)	-	(142)
Return attributable to equity shareholders	362	(20,910)	(20,548)	336	905	1,241
Weighted average number of shares		30,213,650			30,213,650
Return per ordinary share (p) †	1.20	(69.21)	(68.01)	1.11	3.00	4.11

Income Statement for the six months to 28th February 2009 (unaudited) (Continued)

	Year ended 31st August  2008 (audited)
	Revenue £'000	Capital £'000	Total* £'000
(Losses) /gains on investments	-	(10,366)	(10,366)
Income from investments	3,480	-	3,480
Other income	163	-	163
Investment management fee	(512)	-	(512)
Currency gains /(losses)	-	111	111
Other administrative expenses	(310)	-	(310)
Net return before finance costs and taxation	2,821	(10,255)	(7,434)
Return on ordinary activities before taxation	2,821	(10,255)	(7,434)
Tax on ordinary activities	(813)	-	(813)
Return attributable to equity  shareholders	2,008	(10,255)	(8,247)
Weighted average number  of shares		30,213,650
Return per ordinary share (p) †	6.64	(33.94)	(27.30)

* 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 2009

	At 28th February 2009	At 29th February 2008	At 31st August 2008
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
EQUITY INVESTMENTS
China	7,207	11,311	9,439
Hong Kong	7,498	8,922	9,222
India	1,834	4,287	2,772
Indonesia	4,137	3,460	6,298
Malaysia	7,286	11,647	9,712
Philippines	5,501	6,506	7,104
Singapore	9,743	14,235	15,717
South Korea	6,469	10,629	7,848
Sri Lanka	2,756	3,594	3,330
Taiwan	7,946	14,586	10,327
Thailand	7,929	10,137	8,933
Vietnam	446	1,084	872
Total equities	68,752	100,398	91,574
Net current assets	3,711	3,615	3,047
Deferred tax	(21)	(24)	(120)
Equity shareholders' funds	72,442	103,989	94,501
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 - realised	59,990	53,601	58,495
Capital reserve - unrealised	(20,729)	17,729	1,676
Revenue reserve	2,971	2,449	4,120
	72,442	103,989	94,501
Net asset value per share	239.77p	344.18p	312.78p

  Cash Flow Statement for the six months to 28th February 2009 

	Six months to		Six months to		Year to
	28th February 2009 (uaudited)		29th February 2008 (unaudited)		31st August 2008 (audited)
	£'000	£'000	£'000	£'000	£'000	£'000
OPERATING ACTIVITIES:
Dividends received from investments		1,216		1,051		3,418
Interest received		8		138		165
		1,224		1,189		3,583
Investment management fee	(196)		(275)		(520)
Secretarial fee	(25)		(24)		(49)
Directors' fees	(37)		(43)		(78)
Other expenses	(51)		(33)		(169)
		(309)		(375)		(816)
Net cash inflow from operating activities		915		814		2,767
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid on borrowings		-		-		-
TAXATION:
Total tax paid		(409)		(383)		(856)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT:
Purchases of investments	(11,043)		(21,037)		(39,224)
Sales of investments	12,880		18,793		34,580
Currency gains /(losses)	301		(15)		(111)
Net cash inflow/(outflow) from capital expenditure and financial investment		2,138		(2,259)		(4,533)
EQUITY DIVIDEND PAID		(1,511)		(1,390)		(1,390)
Financing:
Subscription of new capital:
Ordinary shares		-		-		-
Increase /(decrease) in cash		1,133		(3,218)		(4,012)

Reconciliation of Movements in Shareholders’ Funds
For the period ended 28th February 2009
		Share Capital	Share premium account	Warrant Reserve Exercised	Capital Reserve Realised	Capital Reserve Unrealised	Revenue Reserve	Total
		£000	£000	£000	£000	£000	£000	£000
Balance at 31st August 2008		7,554	21,337	1,319	58,495	1,676	4,120	94,501
Realised gains on investments		-	-	-	1,194	-	-	1,194
Currency gain		-	-	-	301	-	-	301
Unrealised depreciation on investments in the period		-	-	-	-	(22,405)	-	(22,405)
Income retained in the period		-	-	-	-	-	362	362
Dividend paid in the period		-	-	-	-	-	(1,511)	(1,511)
Balance at 28th February 2009		7,554	21,337	1,319	59,990	(20,729)	2,971	72,442

Reconciliation of Movements in Shareholders’ Funds
For the year ended 31st August 2008
		Share Capital	Share premium account	Warrant Reserve Exercised	Capital Reserve Realised	Capital Reserve Unrealised	Revenue Reserve	Total
		£000	£000	£000	£000	£000	£000	£000
Balance at 31st August 2007		7,554	21,337	1,319	44,151	26,275	3,502	104,138
Realised gains on investments		-	-	-	14,233	-	-	14,233
Currency loss		-	-	-	111	-	-	111
Unrealised appreciation on investments in the year		-	-	-	-	(24,599)	-	(24,599)
Income retained in the year		-	-	-	-	-	2,008	2,008
Dividend paid in the year		-	-	-	-	-	(1,390)	(1,390)
Balance at 31st August 2008		7,554	21,337	1,319	58,495	1,676	4,120	94,501

Notes to Accounts

(1). The position as at 31st August 2008 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 2008.

(2). Dividends

	At  28th February 2009 £000	At  29th February 2008 £000	At  31st August 2008 £000
Amounts recognised as distributions in the period:
Dividend for the year ending 31st August 2008 of 5.0p (2007 - 4.60p) paid 28th January 2009	1,511	1,390	1,390

• The terms of the interim report and this announcement were approved by the Board on 24th March 2009

• 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: Bridgette McDonald/Gillian Davies, First State Investments, Edinburgh Ph:[phone]

24th March 2009

 

END

 

 

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