Interim Results
Scottish Mortgage & Trust PLC
1 November 2001
THE SCOTTISH MORTGAGE AND TRUST PLC
Results for the six months to 30 September 2001
1 November 2001
Salient points
Difficult six months for stockmarkets globally. NAV fell from 447.5p to
368.8p as equity markets reacted to the deteriorating international
economic and political environment. On a total return basis, the portfolio
fell by 15.0% compared to a decline of 13.9% in the benchmark index of 50%
FTSE All-Share Index and 50% FTSE World Ex. UK Index.
Proposed interim dividend of 2.00p which is an increase of 5.3% on the
previous year. Earnings fell by 0.7% to 4.12p as fixed interest income
declined sharply after the sale of the remaining Argentine bonds. Once
again the Board expects to recommend an increase in the real value of the
full year dividend.
Action against deterioration in the world economies in the past six
months. Net equity sales of £81 million have been made including £101
million in Europe, where growth has been well-below expectations, as the
German economy has proved especially vulnerable. In contrast, £36 million
has been added to the Japanese position and the UK stake has risen above
the benchmark weighting to 51% of equity assets.
Investment outlook. Most economies were already slowing down before the
tragic events of 11 September. It is possible that further terrorist acts
or political instability in the Middle East could deepen the downturn in
2002. However, it is equally possible that the substantial monetary and
fiscal easing of recent months will finally begin to revive the
international economy.
The Scottish Mortgage and Trust PLC aims to maximise total return to
shareholders at the same time as generating real dividend growth through
investment in UK and international markets. The Company has total assets of £
1.4 billion. An ISA and Share Plan are available.
Scottish Mortgage is managed by Baillie Gifford & Co., the leading independent
Edinburgh based fund management group with around £20 billion under management
and advice.
- ends -
For further information please contact:
James Anderson, Manager,
The Scottish Mortgage and Trust PLC 0131 222 4000
Mike Lord, Director,
Broadgate Marketing 020 7726 6111
THE SCOTTISH MORTGAGE AND TRUST PLC
Interim Report
Over the six months to 30 September the Company's net asset value per share
fell from 447.5p to 368.8p as equity markets reacted to the deteriorating
international economic and political environment. On a total return basis the
value of the portfolio fell by 15.0% compared with a decline of 13.9% in the
benchmark index of 50% FTSE All-Share Index and 50% FTSE World Ex. UK Index.
Performance in the UK has been pleasing but the Company has underperformed in
all overseas markets as the weakness in growth stocks has continued.
In the course of the last six months we have made net sales of £81m of
equities. We were prompted to take this action in the light of the sharp
deterioration in prospects for the world economy. In particular we made net
sales of £101m in Europe, where growth has been well-below expectations, as
the key German economy has proved especially vulnerable to the global
downturn. In contrast we have added £36m to our Japanese equity position as
the corporate sector is learning to cope with a difficult economic background.
The UK stake has risen above the benchmark weighting to 51% of equity assets
as the comparative stability of both the economy and corporate sector has been
attractive.
The Board is proposing an interim dividend of 2.00p, which is an increase of
5.3% on the previous year. Earnings were almost flat at 4.12p but if the
previous year's £2.9 million deferred tax write off, which reduced earnings by
0.85p to 4.15p, is taken into account, there was an underlying fall in
earnings of 18%. Fixed interest income declined sharply, principally as a
result of the sale of the remaining Argentine bonds. Once again the Board
expects to recommend an increase in the real value of the full year dividend.
Prospects are even more uncertain than is normal. The global economy appeared
to be heading into recession even before the tragic events of 11 September. It
is possible that further terrorist acts or political instability in the Middle
East could deepen the downturn in 2002. But it is equally possible that the
substantial monetary and fiscal easing of recent months will begin to revive
the international economy. We suspect that market sentiment will be volatile
as these factors compete for influence. Despite the present unpredictable
circumstances we continue to have confidence in the prospects for our
portfolio of high quality and geographically diversified equities.
The following is the interim statement for the six months ended 30 September
2001 which has been neither reviewed nor audited by the auditors. This
statement is being printed and will be sent to all shareholders on 12 November
2001. Copies will be available for inspection at the Registered Office of the
Company or may be obtained on request from the Managers and Secretaries after
that date.
THE SCOTTISH MORTGAGE AND TRUST PLC
STATEMENT OF TOTAL RETURN
(unaudited and incorporating the revenue account*)
for the six months ended for the six months ended
30 September 2001 30 September 2000
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Realised - (47,633) (47,633) - 78,480 78,480
(losses)/gains
on
investments
Unrealised - (213,216) (213,216) - (225,132) (225,132)
losses on
investments
Currency - 418 418 - (5,316) (5,316)
gains/(losses)
Income (note 19,902 - 19,902 25,559 - 25,559
4)
Investment (1,365) (1,365) (2,730) (1,860) (1,860) (3,720)
management
fee
Other (641) - (641) (911) - (911)
administrative
expenses
Net return 17,896 (261,796) (243,900) 22,788 (153,828) (131,040)
before
finance
costs and
taxation
Finance (3,842) (3,842) (7,684) (5,297) (5,297) (10,594)
costs of
borrowings
Return on 14,054 (265,638) (251,584) 17,491 (159,125) (141,634)
ordinary
activities
before
taxation
Tax on (646) - (646) (3,575) - (3,575)
ordinary
activities
(note 5)
Return on 13,408 (265,638) (252,230) 13,916 (159,125) (145,209)
ordinary
activities
after
taxation
Dividends in (6,361) - (6,361) (6,226) - (6,226)
respect of
equity shares
Transfer 7,047 (265,638) (258,591) 7,690 (159,125) (151,435)
to/(from)
reserves
Return per 4.12p (81.68p) (77.56p) 4.15p (47.41p) (43.26p)
ordinary
share
(note 6)
Dividend per 2.00p 1.90p
ordinary
share (note
7)
* The revenue column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
for the year ended
31 March 2001
Revenue Capital Total
£'000 £'000 £'000
Realised (losses)/gains on - 125,325 125,325
investments
Unrealised losses on - (527,141) (527,141)
investments
Currency gains/(losses) - (8,477) (8,477)
Income (note 4) 44,075 - 44,075
Investment management fee (3,408) (3,408) (6,816)
Other administrative expenses (1,811) - (1,811)
Net return before finance 38,856 (413,701) (374,845)
costs and taxation
Finance costs of borrowings (9,661) (9,661) (19,322)
Return on ordinary activities 29,195 (423,362) (394,167)
before taxation
Tax on ordinary activities (3,983) - (3,983)
(note 5)
Return on ordinary activities 25,212 (423,362) (398,150)
after taxation
Dividends in respect of equity (19,679) - (19,679)
shares
Transfer to/(from) reserves 5,533 (423,362) (417,829)
Return per ordinary share 7.57p (127.14p) (119.57p)
(note 6)
Dividend per ordinary share 6.00p
(note 7)
* The revenue column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
THE SCOTTISH MORTGAGE AND TRUST PLC
SUMMARISED BALANCE SHEET
at 30 September 2001
(unaudited)
30 September 2001 30 September 2000 31 March
2001
£'000 £'000 £'000
NET ASSETS
Fixed asset investments 1,290,117 1,954,100 1,633,893
Net liquid assets 71,882 54,379 26,289
Total assets (before 1,361,999 2,008,479 1,660,182
deduction of loans and
debentures)
Loans and debentures (186,043) (261,798) (195,893)
(note 2)
1,175,956 1,746,681 1,464,289
CAPITAL AND RESERVES
Called-up share capital 80,170 83,111 82,179
Capital reserves 1,045,477 1,618,151 1,338,848
Revenue reserve 50,309 45,419 43,262
EQUITY SHAREHOLDERS' 1,175,956 1,746,681 1,464,289
FUNDS
NET ASSET VALUE PER ORDINARY 368.8p 527.4p 447.5p
SHARE (note 2)
(after deducting prior charges at
par)
Ordinary shares in issue (note 3) 320,680,188 332,442,888 328,717,888
DISTRIBUTION OF ASSETS
at 30 September 2001
(unaudited)
30 September 30 September 31 March
2001 2000 2001
% % %
Equities: United Kingdom 45.5 39.5 40.9
Continental 10.6 20.6 18.1
Europe
North America 19.8 17.6 18.9
Latin America 1.5 2.3 2.4
Japan 9.0 7.0 7.5
Asia Pacific 2.2 4.4 4.7
Total equities 88.6 91.4 92.5
United Kingdom bonds 3.1 1.5 1.8
European bonds 2.6 1.7 2.2
Argentine bonds - 2.1 1.3
North American bonds 0.4 0.6 0.6
Net liquid assets 5.3 2.7 1.6
Total assets (before deduction of 100.0 100.0 100.0
loans and debentures)
THE SCOTTISH MORTGAGE AND TRUST PLC
SUMMARISED CASH FLOW STATEMENT
(unaudited)
Six months to Six months to Year to
30 September 2001 30 September 2000 31 March 2001
£'000 £'000 £'000
NET CASH INFLOW FROM 18,997 21,285 33,018
OPERATING ACTIVITIES
NET CASH OUTFLOW FROM (7,908) (9,413) (17,811)
SERVICING OF FINANCE
TOTAL TAX PAID (692) (2,202) (3,541)
FINANCIAL INVESTMENT
Acquisitions of (278,747) (449,863) (856,742)
investments
Disposals of 362,410 533,381 1,015,473
investments
Realised currency (405) 804 1,616
(loss)/gain
NET CASH INFLOW FROM 83,258 84,322 160,347
FINANCIAL INVESTMENT
EQUITY DIVIDENDS PAID (13,425) (12,951) (19,242)
NET CASH INFLOW 80,230 81,041 152,771
BEFORE FINANCING
FINANCING
Shares purchased for (29,742) (29,468) (45,466)
cancellation
Loans repaid (79,350) (149,116) (259,519)
Loans drawn down 70,355 132,552 176,969
Realised currency (26) (6,781) (10,626)
loss on
multi-currency loans
NET CASH OUTFLOW FROM (38,763) (52,813) (138,642)
FINANCING
INCREASE IN CASH 41,467 28,228 14,129
RECONCILIATION OF NET
CASH FLOW TO MOVEMENT
IN NET DEBT
Increase in cash in 41,467 28,228 14,129
the period
Decrease in bank loans 9,021 23,345 93,176
Exchange movement 808 (6,149) (10,093)
Other non-cash changes 21 17 34
MOVEMENT IN NET DEBT 51,317 45,441 97,246
IN THE PERIOD
NET DEBT AT 1 APRIL (163,113) (260,359) (260,359)
2001
NET DEBT AT 30 (111,796) (214,918) (163,113)
SEPTEMBER 2001
THE SCOTTISH MORTGAGE AND TRUST PLC
TWENTY LARGEST EQUITY HOLDINGS
at 30 September 2001
Business Market value % of
total
Name £'000 assets
GlaxoSmithKline Pharmaceuticals 71,049 5.2
BP Integrated oil 43,437 3.2
Vodafone Mobile telecommunications 43,032 3.2
Royal Bank of Scotland Banking 40,446 3.0
Shell Transport & Trading Integrated oil 35,394 2.6
Diageo Branded spirits 24,950 1.8
Barclays Banking 22,807 1.7
Imperial Tobacco Tobacco 22,694 1.7
Lloyds TSB Banking 22,432 1.6
* Freddie Mac Mortgages 20,800 1.5
* Golden West Financial Savings and loans 20,161 1.5
* Philip Morris Tobacco, food and beer 19,484 1.4
HSBC Holdings Banking 19,130 1.4
HBOS Banking 18,732 1.4
* Wellpoint Health Managed care 17,824 1.3
Gallaher Tobacco 16,800 1.2
CGNU Insurance 16,790 1.2
* Pfizer Pharmaceuticals 16,398 1.2
Compass Catering 15,896 1.2
Bunzl Distributor 14,788 1.1
523,044 38.4
* primary listing outwith the UK
THE SCOTTISH MORTGAGE AND TRUST PLC
NOTES
The financial statements for the six months to 30 September 2001 have been
1. prepared on the basis of the accounting policies set out in Company's Annual
Financial Statements at 31 March 2001.
The Interim Report was approved by the Board on 31 October 2001.
2. Loans and debentures include Y5,900 million drawn down under a three year
multi-currency loan facility (30 September 2000 - US$100 million and Euro70
million and 31 March 2001 - Euro70 million, both drawn down under short term
facilities).
Net asset value per share (after deducting prior charges at market value)
was 353.4p (30 September 2000 - 511.6p and 31 March 2001 - 430.9p). The
market value of debenture stocks at 30 September 2001 was £194,907,000 (30
September 2000 - £198,383,000 and 31 March 2001 - £200,048,000).
3. On 11 February 1999 authority was first granted to the Company to buy back
its ordinary shares (equivalent to 14.99% of its issued share capital at
that date). The authority has been renewed at each subsequent AGM and was
last renewed at the AGM on 5 July 2001 in respect of 48,499,079 ordinary
shares (equivalent to 14.99% of its issued share capital at that date). In
the six months to 30 September 2001 a total of 8,037,700 ordinary shares
with a nominal value of £2,009,425 were brought back at a total cost of £
29,742,000. At 30 September 2001 the Company had authority to buy back a
further 45,636,379 ordinary shares.
30 September 2001 30 September 31 March
2000 2001
£'000 £'000 £'000
4. Income
Income from 19,893 25,523 44,039
investments and
interest receivable
Other income 9 36 36
5. The tax charge for the 6 months to 30 September 2000 and the year to
31 March 2001 includes the £2,879,000 deferred tax write off.
6. Return per ordinary share
Revenue return 13,408 13,916 25,212
Capital return (265,638) (159,125) (423,362)
Return per ordinary share is based on the above totals of revenue and
capital and on 325,199,855 (30 September 2000 - 335,629,243 and 31
March 2001 - 332,981,965) ordinary shares, being the weighted average
number of ordinary shares in issue during the period.
7. The interim dividend will be paid on 30 November 2001 to all
shareholders on the register at the close of business on 16 November
2001.
8. The financial information for the year ended 31 March 2001 has been
extracted from the statutory accounts which have been filed with the
Registrar of Companies and which contain an unqualified Auditors'
Report.
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