Client Update Note
First State Stewart Asia - The Scottish Oriental Smaller Companies Trust plc
Client Note
This is the first in what will be semi-annual updates on the Scottish Oriental Smaller Companies Trust plc ("The Trust" or "Scottish Oriental"). Our aim is to provide a general update on some of our current thoughts and views, insights about existing holdings and changes to the portfolio over the period.
How we invest
Scottish Oriental is managed by the First State Stewart Asia team, an independent investment management team within First State Investments. The team manages a range of Asia Pacific equity strategies on behalf of institutional and wholesale clients globally, with offices in Hong Kong, Singapore and Edinburgh.
The Trust aims to achieve long-term capital growth by investing mainly in smaller listed companies across the Asia region; that is companies with market capitalisations of below US$1.5 billion, or the equivalent thereof, at the time of first investment.
We are conviction-based, bottom-up (meaning we put strong emphasis on high quality proprietary research and company analysis) stock selectors with a strong emphasis on high quality proprietary research. Our investment approach adopts an absolute return mind-set and is inherently conservative, focusing on capital preservation as well as capital growth. By focusing on the potential downside (not just the upside) when making any investment decision, we believe the risk to long-term client returns is significantly reduced. We are long-term investors and prefer to invest in quality companies that we can hold on to for many years.
The most significant source of investment ideas for the portfolio comes through country and company visits. As a team, we conduct more than a thousand direct company meetings throughout the year, seeking to identify a small sub-set of quality companies that meet our investment criteria. We place a clear emphasis on frequent visits to countries in the Asia region and on meeting the management of those companies in which the Trust is invested, or might invest.
While cultural, political, economic and sectoral influences play an important part in the decision-making process, the availability of attractively-priced, good quality companies with solid long-term growth prospects is the major determinant of Scottish Oriental's investment policy. Our country weightings bear no relationship to regional stock market indices and we do not consider ourselves obliged to hold investments in any individual market, sector or company. As a result, our asset allocation on a country and industry level is a residual of our stock selection process.
Current portfolio positioning
|
Country weightings (%) |
Scottish Oriental |
Asia Index* |
Small Cap Index** |
|
China |
15.5 |
30.3 |
25.0 |
|
Hong Kong |
8.5 |
12.6 |
9.0 |
|
Taiwan |
13.5 |
13.8 |
17.5 |
|
Greater China |
37.5 |
56.7 |
51.5 |
|
India |
24.0 |
10.0 |
11.7 |
|
Sri Lanka |
2.2 |
0.0 |
0.0 |
|
Indian subcontinent |
26.2 |
10.0 |
11.7 |
|
Indonesia |
3.0 |
2.9 |
2.2 |
|
Malaysia |
2.4 |
3.7 |
3.6 |
|
Philippines |
1.9 |
1.6 |
1.3 |
|
Singapore |
16.6 |
5.1 |
6.3 |
|
Thailand |
4.1 |
2.3 |
3.6 |
|
South East Asia |
28.0 |
15.6 |
17.0 |
|
South Korea |
3.7 |
17.7 |
19.8 |
|
Gearing |
-7.5 |
0.0 |
0.0 |
|
Liquidity |
12.1 |
0.0 |
0.0 |
|
Total |
100.0 |
100.0 |
100.0 |
Source: First State Investments as at 31 December 2015. *MSCI AC Asia (ex Japan) ** MSCI Asia (ex Japan) Small Cap Index.
10 Largest Holdings
|
Total Assets (%) |
Country |
Sector |
|
||
|
Marico |
3.0 |
India |
Consumer Staples |
|
|
|
Tong Ren Tang Technologies |
3.0 |
China |
Healthcare |
|
|
|
Amorepacific Group |
2.7 |
South Korea |
Consumer Staples |
|
|
|
Standard Foods |
2.7 |
Taiwan |
Consumer Staples |
|
|
|
Taiwan Familymart |
2.7 |
Taiwan |
Consumer Discretionary |
|
|
|
Tata Consultancy Services |
2.7 |
India |
Information Technology |
|
|
|
Raffles Medical |
2.6 |
Singapore |
Healthcare |
|
|
|
Minth Group |
2.5 |
China |
Consumer Discretionary |
|
|
|
Tata Global Beverages |
2.4 |
India |
Consumer Staples |
|
|
|
Kansai Nerolac Paints |
2.3 |
India |
Materials |
|
|
|
26.6 |
|||||
Source: First State Investments as at 31 December 2015.
Given our bottom-up approach we tend to be reticent to compare our country weightings with benchmark indices. But a stock market index does show the volume of available companies in a market or sector so there is perhaps no harm in discussing why we find far more or far fewer opportunities than would be expected. In this update, we will focus on Scottish Oriental's country positioning and in the next one we will look at sectors.
Greater China
Without wishing to make any political statement, we have always thought about the Trust's combined weighting in China, Hong Kong and Taiwan (or Greater China as these three markets are often called) together as their economic fortunes are very much interlinked. Despite the obvious slowdown in China, we still have a significant percentage of Scottish Oriental's holdings in companies within Greater China. We believe that our preferred companies here either have the potential to build longstanding franchises or have already done so.
Scottish Oriental owns only one company listed in mainland China: Luthai Textile (Consumer Discretionary), the world's largest high‑grade yarn-dyed fabric producer. We like this company because of its innovative mind-set, which sees the development of fabrics in partnership with its customers, helping to cement long-term relationships. It is also not complacent; the company has been investing in new technology and establishing manufacturing capabilities in Vietnam and Cambodia, where much garment manufacturing capacity is moving. Otherwise, the Trust's China-categorised companies are all listed in Hong Kong. Examples of such companies are Tong Ren Tang Technologies (Health Care) - one of the oldest and most respected traditional Chinese medicine companies (think herbal cures for common ailments) and Minth Group (Consumer Discretionary) - a leading supplier of automobile body parts which has grown from a single small factory in 1992 to a multinational corporation with annual sales of more than US$1 billion. Minth spent 2015 under the cloud of an investigation by the Hong Kong regulator into a related party acquisition made in 2008. Minth has remained open about this case and from our dealings with the company we do not doubt its integrity; we continue to maintain the Trust's position in the company.
Scottish Oriental's largest holding in Hong Kong is Vitasoy (Consumer Staples), a producer of a soybean-based beverages as well as a range of other non-alcoholic drinks ubiquitous in Hong Kong. A decade ago, Vitasoy booked revenues in China that were less than one tenth of those in Hong Kong. Chinese sales are now set to outstrip Hong Kong and continue to grow rapidly. This growth resulted in a positive profit alert released in October. Although we classify Vitasoy as a Hong Kong stock, we could just as easily classify it as a China one. The Trust's two largest holdings in Taiwan are Standard Foods (Consumer Staples) (a producer of foods and nutritional supplements in Taiwan and China) and Taiwan Familymart (Consumer Staples) (the exclusive operator of the Familymart convenience stores in Taiwan and owner of an 18% stake in the profitable China Familymart). Both of these companies are seeing much of their growth from China. As can be seen from these examples, reducing Greater China companies into classifications based upon China, Hong Kong and Taiwan is somewhat arbitrary.
Indian subcontinent
We continue to have a significant portion of the portfolio invested in India, which is growing more robustly than the rest of Asia. Although optimism surrounding Prime Minister Narendra Modi and the Bharatiya Janata Party has abated, we continue to find excellent quality businesses with world-class managements targeting both domestic and overseas expansion. Four examples of such companies feature in the Trust's top ten holdings. Marico (Consumer Staples) has a dominant franchise in India's hair oil market as well as other consumer products such as edible oils, cold water starch and processed foods. Tata Consultancy Services (TCS) (Information Technology) is India's largest provider of IT services. Scottish Oriental received shares in TCS when it acquired 100% of the Trust's holding in CMC. Although TCS is a very large business, perhaps unbefitting a smaller companies fund, we chose not to immediately sell down the position as we value the power of TCS's franchise and the strength of its cash flows in today's less‑than‑certain times. Meanwhile, Tata Global Beverages (Consumer Staples) has not performed as well as most of the Trust's other Indian holdings but we see signs of a renewed focus on the company from the Tata Group with a reinvigorated management team; we believe that its strong brands (Tata Tea in India as well as Tetley and Tea Pigs in the UK) should allow the company to prevail. Finally, Kansai Nerolac Paints (Materials) is one of India's leading paint companies and should grow with the auto, property and industrial sectors. Our one complaint about Scottish Oriental's Indian holdings is that they are far from cheap but our experience has always been that it is worth paying up for quality.
South East Asia
We find that South East Asia is generally a good hunting ground for high quality companies and particularly favour those with a long track record. This allows us to see how companies perform over a market cycle and confirms whether management have been tested in difficult times. However, it seems that all the main ASEAN countries have issues at present. Indonesia is suffering a hangover from the commodity-led party it enjoyed so much. The Malaysian government continues to lose credibility over the 1Malaysia Development Berhad scandal and, as a significant hydrocarbon producer, is struggling in the low oil price environment. The Philippines faces a presidential election this year which always brings uncertainty and, unlike Indonesia, always seems to be the last to realise that the party has ended. Singapore continues to suffer from its lacklustre domestic economy and its position as an entrepôt for South East Asia. Thailand remains in a power vacuum with its military government having little strategic vision for the country.
Despite all this, 28% of Scottish Oriental's portfolio is invested in South East Asia with the lion's share of this in the "Lion City" that is Singapore. This is driven very much by bottom-up stock selection. Outside Singapore the Trust's largest position is Delta Electronics (Thailand) (Industrials), a leading producer of power supplies and associated components. Within Singapore there is one top ten position, Raffles Medical (Health Care), a hospital and clinic operator which has generated growth in Singapore for a long time, but is now taking tentative steps to expand into China. Scottish Oriental also has significant positions in Petra Foods (Consumer Staples), which is Singapore-listed but derives the majority of its sales in Indonesia, where it is by far the leading chocolate brand; and Interplex (Industrials), a mechanical component manufacturer. Interplex's private equity controlling shareholders are in the process of selling their stake to another private equity firm. In due course, we should receive an offer for the Trust's shares. The transaction price appears cheap to us but perhaps this means we overvalued the company, given that the acquirer is an independent third party who will likely have had access to the books.
South Korea
Despite the seemingly large investible universe indicated by South Korea's weight in Asian indices, we have always struggled to generate ideas in this country. The large chaebols dominate the economy and make life difficult for smaller companies. Additionally, corporate governance in South Korea is arguably weaker than in the rest of Asia. The Trust only has two holdings in South Korea but one of these, Amorepacific Group (Consumer Staples), features in Scottish Oriental's top ten. Amorepacific Group is the holding company for Amorepacific Corp, Korea's leading domestic cosmetics company. Amorepacific continues to perform strongly in Korea and has as good a chance as any at success in China.
Recent changes to the portfolio
|
Country weightings (%) |
31-Dec-15 |
30-Jun-15 |
|
China |
15.5 |
17.4 |
|
Hong Kong |
8.5 |
8.2 |
|
Taiwan |
13.5 |
13.8 |
|
Greater China |
37.5 |
39.4 |
|
India |
24.0 |
22.2 |
|
Sri Lanka |
2.2 |
2.9 |
|
Indian subcontinent |
26.2 |
25.1 |
|
Indonesia |
3.0 |
2.5 |
|
Malaysia |
2.4 |
2.2 |
|
Philippines |
1.9 |
0.9 |
|
Singapore |
16.6 |
17.1 |
|
Thailand |
4.1 |
4.2 |
|
South East Asia |
28.0 |
26.9 |
|
South Korea |
3.7 |
4.6 |
|
Gearing |
-7.5 |
-7.0 |
|
Cash |
12.1 |
11.0 |
|
Total |
100.0 |
100.0 |
Source: First State Investments as at 31 December 2015.
Greater China
We initiated one new position in the Greater China region over the last six months. Posiflex Technology (Information Technology), a Taiwanese-branded manufacturer of Point-of-Sales terminals, has achieved economies of scale and is gaining market share as this area seems to be a mere sideline for some of its multinational competitors. Trading on a mid-teens price-to-earnings ratio and paying a 5% dividend yield, we believe it is reasonably priced for the growth it is targeting. We made significant additions to TSC Auto ID Technology (Information Technology) (a producer of barcode printers) and Luthai Textile (Consumer Discretionary) and also added to several holdings where performance has been weak but where we still believe in the long-term potential.
We completely sold out of three positions during the period. Although Pacific Textiles and Luthai Textiles operate in different areas of the textile supply chain, we felt that Pacific Textiles is perhaps yesteryear's company in terms of working practices and technology compared to Luthai Textile which is investing for the future. As a result, we sold out of Pacific Textiles (Consumer Discretionary) for a significant gain although we will miss its dividend yield. Flytech Technology (Information Technology) competes with Posiflex in Point-of-Sales terminals but does not enjoy the same pricing power so we opted to sell out of Flytech to focus on the latter. Finally, we divested Taiflex Scientific (Industrials), a company that primarily produces flexible copper-clad laminates. Whilst we believe it is a good company, we felt that it lacked pricing power in a cyclical industry.
We are also in the process of completely exiting YGM Trading (Consumer Discretionary). Disappointingly, we are crystallising a significant loss on YGM for the Trust. The company has been hit hard by a slowdown in luxury spending in Hong Kong and China and with hindsight, we underestimated the difficulty YGM faced in rejuvenating the Aquascutum brand.
Over the period Scottish Oriental's exposure to China decreased, largely because of poor performance from the Trust's holdings.
Indian subcontinent
We like to think that we are long-term investors and with this in mind we have been troublingly active in India over the last six months. We have taken profits from a few holdings and completely sold out of five. Of these companies, four - Great Eastern Shipping (Industrials), Indian Hotels (Consumer Discretionary), Lakshmi Machine Works (Industrials) and Pidilite Industries (Materials) - gave us healthy profits. The fifth, Trent (Consumer Discretionary) was sold at approximately break-even as we concluded that management had bitten off more than they could chew and would struggle to execute in an increasingly competitive retail environment in India. We also had concerns on its parent establishing a separate e-commerce business. Sadly, the market decided to disagree with us, with Trent's shareprice performing strongly after we had sold Scottish Oriental's shares which is always frustrating. We also sold out of CT Holdings (Consumer Discretionary) in Sri Lanka at a small loss for the Trust, concluding that management are not as focused as we would wish them to be with far too many businesses demanding management attention.
During the period, we added to pharmaceutical producer Indoco Remedies (Health Care) and bought four new companies for the Trust. We are still slowly building up a position in one of these four so will only mention three. We bought Godrej Industries (Materials), which has a controlling stake in FMCG producer Godrej Consumer Products and a controlling stake in Godrej Properties (a company we took profits from during the period). IDFC (Financials) is the recently created holding company for IDFC Bank, which somewhat confusingly was created when the old IDFC was awarded a banking license. The creation of two entities from one seems to have confused not just us, but even so we were amazed to be able to buy IDFC on less than half of its book value. Finally, Mphasis (Information Technology) is an IT provider historically reliant on its controlling shareholder Hewlett-Packard (HP). In 2010 HP accounted for approximately 70% of Mphasis' sales but HP now represents 30% and falling as Mphasis successfully grows its non-HP business.
Scottish Oriental's exposure to India has increased because of strong performance from the Trust's holdings.
South East Asia
In comparison with India we were relatively inactive in South East Asia over the period. We bought one new holding for the Trust, and sold out of another. China Banking Corporation (Financials) is probably the Philippines' most conservative bank (arguably too conservative) and is controlled by the Sy family who we hold in tremendous regard. The company is showing signs of waking up and, at near book value, we could not resist adding it to the portfolio. The sale was Ace Hardware (Consumer Discretionary) in Indonesia, which we sold after its share price rebounded towards the end of the year. Scottish Oriental has done very well out of this investment but we have become increasingly troubled in recent times by what seems like ever-increasing working capital needs.
Other than the above we added to several underperforming holdings most notably Petra Foods (Consumer Staples) in Singapore. The Trust's overall exposure to South East Asia has modestly increased as a result.
South Korea
In South Korea, we sold out of rice cooker maker, Cuckoo Electronics (Consumer Discretionary), generating a reasonable profit, but the position was only a small one as the stock ran away from us when the Trust originally bought shares in the company. The sale of Cuckoo Electronics and poor share price performance by Amorepacific Group in the second half of 2015 saw the Trust's overall exposure to South Korea drop.
Cumulative Performance
|
% |
3 mths |
6 mths |
1 year |
3 years |
5 years |
10 years |
|
NAV |
5.9 |
-5.5 |
-3.3 |
14.3 |
31.3 |
244.7 |
|
Benchmark* |
6.8 |
-7.9 |
-3.6 |
9.1 |
7.0 |
117.9 |
|
Small Cap Index** |
7.7 |
-7.3 |
2.3 |
17.2 |
1.7 |
130.7 |
|
Share price |
4.2 |
-8.2 |
-9.8 |
-2.3 |
19.7 |
225.8 |
* MSCI AC Asia (ex Japan) Index ** MSCI Asia (ex Japan) Small Cap Index.
Source: First State Investments as at 31 December 2015.
Past performance is not necessarily a guide to future performance.
2015, and especially the latter half of the year, have been dull in terms of performance for both Scottish Oriental and Asian stock markets. Moreover, the pound's weakness over the second-half has flattered returns when converted to sterling. We invest with a long-term i.e. three-to-five year mind-set, if not longer, and we hope to be measured over similar time periods. However, we are aware that the long-term is made up of several short- and medium-terms and sometimes it can be helpful to look at what has driven recent performance. We dislike underperforming but we hate losing money. With this in mind, we will focus primarily on the last six months but will also touch on performance for the calendar year.
A paragraph on stock market indices
The Trust's benchmark is the MSCI AC Asia (ex Japan) Index but we also present the MSCI Asia (ex Japan) Small Cap Index for comparative purposes. On occasion, we have been questioned on the choice of a larger companies benchmark for a smaller companies investment trust. Firstly, we should stress that our focus is on making money and believe that the consequence of this should be "outperformance" over a three-to-five year period. Therefore we are somewhat benchmark agnostic. However, given that investment performance should be measured against something other than bank deposits, the main Asian benchmark seems as good a proposition as any, particularly since it pre-dates Scottish Oriental unlike its smaller company counterpart, which was created in 2007 with historic data "back-tested". No index is perfect and for all funds managed by First State Stewart Asia, outperforming an index should be a consequence of our investment process and not the aim of it.
Six-month performance
Over the second half of 2015, Scottish Oriental's NAV fell, albeit by slightly less than the benchmark. We do not consider this a satisfactory outcome and would hope to do relatively better in down markets. However, smaller companies' share prices often get thrown about in market turbulence. We aim to invest in companies with skilled management teams and robust balance sheets and cash flows. These characteristics should allow survival in more difficult operating environments. We also focus on companies with strong franchises, which having survived these testing conditions are in a position to thrive. Sometimes it can be a number of years rather than months for share prices to agree with us. And sometimes we can be plain wrong which is always humbling.
India was the standout outperformer for us over the second half of 2015, with Godrej Properties, Kansai Nerolac Paints, Tube Investments, Tata Global Beverages, Mahindra Lifespace, and Blue Dart all producing double digit returns. Outside India, Vitasoy benefited from the strong performance we discussed earlier and Interplex from the pricing of its controlling stake sale which all shareholders should be able to receive in due course.
Sadly, there is a longer list of negatives. Singapore was weak over the period and the Trust's position in Ezion Holdings was particularly poor. It is perhaps worth discussing this company in more detail, despite its now small position size. We have known the founder TK Chew for more than a decade and trust him implicitly. Scottish Oriental had done very well from its holding in Ezion. However, we made the classic stock-pickers' error of falling in love with a company and focused too much on the company's earnings and too little on cash flows, debt levels and valuation. Ezion introduced Asia to liftboats, which make oil production safer and more efficient; significant demand for its liftboats saw the company expand rapidly. The company took on debt to fund this expansion and although it has long-term contracts in place with its customers, the sanctity of a contract means little when these same customers are facing US$30 oil. We have held on to the position for the Trust and it should provide us with a modicum of comfort should the oil price rebound. Until then, we are watching its results and particularly its cash flows closely. Other Singaporean losers were Petra Foods, Eu Yan Sang and M1. Petra Foods remains one of our favourite companies and its management team has been tested during both the Asian Financial Crisis and the Global Financial crisis. We have no doubt its branded chocolate business (where it has more than 50% market share in Indonesia) will withstand the current bump in the road. We are perhaps a bit less convinced by Eu Yan Sang, a branded purveyor of traditional Chinese medicine. Management continued to expand outside Singapore despite China's slow down and revenues have not kept up with rising costs. M1, a cash-generative mobile phone operator, continues to pay a healthy dividend but it seems a fourth operator will be allowed to enter the Singapore market and this has unnerved investors. After its fall, it looks reasonably valued even with a potential increase in competition.
There is little in common with our other disappointments. Asia Satellite fell sharply after paying a large special dividend. The share price fell by considerably more than the dividend so the market appears to have over-adjusted and we are looking at it closely. Singamas Container (a producer of shipping containers) and Pacific Basin (a dry bulk shipper) have been hammered by the slowdown in global trade. We probably bought too early here but their valuations have moved from reasonable to very reasonable. We have added to the latter stock. Hero Supermarket is the Jardine Group's retail business in Indonesia and has been impacted by the commodity crunch in that country. Scottish Oriental has been building up its position into this share price weakness. Towngas China, a gas distributor, has been impacted by China's slowdown and a recent period where gas was uneconomic. The gas price has been adjusted and gas remains an important part of China's energy mix given its less polluting nature, so we were comfortable adding for the Trust. Finally, Amorepacific's share price was weak over the period as the market took profits. Perhaps we should have taken profits too as the company had become expensive, but it continues to perform operationally and in the current environment we prefer proven business models.
One-year performance
Although Scottish Oriental modestly outperformed its benchmark in 2015, the Trust lost money which is disappointing. Additionally, it underperformed the smaller companies index, which rose during 2015. Whilst not wishing to excuse this performance differential, the two strongest performing components of the smaller companies index were South Korea (which was particularly strong - up almost 19%) and China. Scottish Oriental has significantly less invested in both these markets than their representation in the smaller companies index, so although disappointing, this relative performance makes sense. A visit to South Korea in March did not unearth any new opportunities and drew to our attention a somewhat frothy environment for smaller companies in that country, as local investors were steering away from the larger business groups and buying smaller companies instead.
In terms of what drove performance for 2015 the big positive was Scottish Oriental's large position in India, where several of the Trust's holdings registered double-digit gains. We have already touched upon the best three performing Indian holdings - Marico, Kansai Nerolac Paints and Godrej Properties. In terms of negatives, Singapore and China stand out for different reasons. Scottish Oriental has a large weighting in Singapore and the Trust's holdings fell with that market, which significantly underperformed in 2015 - down almost 13%. The main laggards in Singapore - Ezion Holdings, Petra Foods and Eu Yan Sang have already been discussed. China, somewhat surprisingly given all the news surrounding it, outperformed marginally in 2015. Unfortunately, Scottish Oriental's China stocks did not, with several of the Trust's holdings harshly penalised for China's economic slowdown. These included Yashili (an infant formula producer backed by China Mengniu and Danone), China Bluechemical (a nitrogenous fertiliser producer backed by the CNOOC Group) and Towngas China (backed by Hong Kong & China Gas). We added to all three of these positions towards the end of the year with the backing of their respective parent groups providing a layer of comfort.
Outlook and conclusion
The outlook for Asian markets is uncertain. 2015 was a year of disappointing corporate earnings caused by the weak global economy and there seems little evidence that 2016 will be any different. The fact that one argument being made for better prospects in 2016 is that emerging market economies couldn't possibly perform any worse than they did in 2015 shows that there is not much to be positive about.
We are not macro-economic commentators, preferring instead to be informed about the economic climate by company management teams rather than by economists. What these management teams are telling us now is that growth is scarce. We are finding that where growth exists, this is well-recognised and, accordingly, valuations are relatively full. Therefore, we are sticking to tried and tested companies, particularly for larger positions in the Trust, and are maintaining a modest net cash position to give us the flexibility to add should some of our favourite companies become less fully valued. We also have £20m of unutilised debt which we will be able to deploy should our favourite companies become cheaply valued. We are not too positive about 2016 but we hope we are wrong. If we are wrong, Scottish Oriental should produce positive returns for its shareholders. If we are right and 2016 is a poor year for Asian economies and companies, then we hope to do a reasonable job of preserving the Trust's capital as best as we can.
We trust this update has given you a better understanding of the companies Scottish Oriental invests in. We would welcome feedback on whether it has been helpful as well as what you would be interested in reading about in the future.
Important information
Please remember that the value of investments and the income from them may go down as well as up and that you may not get back the amount you originally invested. Past performance is not necessarily a guide to future performance. Changes in the rates of exchange between currencies may cause the value of investments to fluctuate. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Shares in companies in the Asia Pacific Region can prove volatile and above average price movements can be expected. There can be no assurance that the Company's investment objective will be achieved and investment results may vary substantially over time. This document is for information purposes only and does not constitute an offer or invitation to purchase shares in the Company and has not been prepared in connection with any such offer or invitation. Investment trust share prices may not fully reflect underlying net asset values. If you are in any doubt about any of the information in this document, please consult your independent financial or other such adviser authorised to give investment advice under the Financial Services and Markets Act 2000. The information contained in this document has been prepared by First State Investments for the use of those people who are United Kingdom residents for tax and investment purposes. First State Investments believes that the information provided is accurate as at the date of its publication, but no representation or warranty of accuracy is given by First State Investments or the Company and therefore no liability in respect of any error or omission by a third party is accepted by First State Investments, the Company or their affiliates or any of their directors, employees, consultants or agents. Scottish Oriental Smaller Companies Trust plc (the "Company") is an investment trust, incorporated in Scotland with registered number SC0156108, whose shares have been admitted to the Official List of the London Stock Exchange plc. The Company is an alternative investment fund for the purposes of the Alternative Investment Fund Managers Directive (AIFMD). First State Investments (UK) Limited acts as the alternative investment fund manager (AIFM) for the Company. This document and its contents have been issued by First State Investment Management (UK) Limited (company number SC47708). First State Investment Management (UK) Limited is authorised and regulated in the United Kingdom by the Financial Conduct Authority. Any comments expressed reflect the views of First State Investments and should not be taken as any kind of recommendation or advice.
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