Interim Results
Scottish Mortgage & Trust PLC
31 October 2002
THE SCOTTISH MORTGAGE AND TRUST PLC
Results for the six months to 30 September 2002
In exceptionally difficult markets, Scottish Mortgage outperformed its benchmark
index at the interim stage. Net asset value per share declined by 30.6% compared
to a 31.6% fall in the benchmark index comprised of 50% FTSE All-Share Index and
50% FTSE World Ex. UK Index (in sterling terms). The interim dividend has been
increased by 5.0%.
• Equity market conditions remained difficult. Markets were hurt by fears
that the global economy is weakening and by tensions in the Middle East.
Relative performance in the UK and US was good. There were some reductions
to the European, US and UK equity content of the portfolio while the
Japanese element was increased.
• Dividend increased. The interim dividend has been increased by 5.0% to
2.10p. A further increase in the dividend at the final stage is anticipated.
As expected, earnings per share fell by 8.5% to 3.77p reflecting changes to
the fixed interest element of the portfolio.
• Outlook. Although prospects are uncertain, valuations are reasonable and
will become attractive when confidence recovers. Equity positions have
recently been increased on market weakness. It is the intention to continue
with this approach over the coming months.
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 trust has total assets of £1.1
billion. An ISA and Share Plan are available.
Scottish Mortgage is managed by Baillie Gifford & Co., the leading Edinburgh
based fund management group with around £19 billion under management and advice.
31 October 2002.
- ends -
For further information please contact:
James Anderson, Manager, 0131 222 4000
The Scottish Mortgage and Trust PLC 07730 412007
Mike Lord, Director,
Broadgate Marketing 020 7726 6111
Baillie Gifford & Co. is regulated by the FSA.
THE SCOTTISH MORTGAGE AND TRUST PLC
Interim Report
Over the six months to 30 September, in one of the most difficult periods of
stockmarket weakness in recent years, the Company's net asset value per share
fell 30.6% from 423.6p to 293.9p. Equity markets have been badly hurt by fears
that the global economy is weakening once again and by tensions in the Middle
East. The decline in net asset value was slightly less than the 31.6% fall in
the benchmark index of 50% FTSE All-Share Index and 50% FTSE World Ex. UK Index
(in sterling terms). Relative performance in the UK and the US was good.
In the course of the last six months we have made net sales of £49m of equities.
This reduction was made in the early months of the period under review as
evidence of faltering economic and corporate news mounted. The principal
reduction was in Europe (£29.3m), where growth has been particularly
disappointing, but we have also made net sales of £19m in the US and £11m in the
UK. The only increase came in Japan (£14m), where corporate results have shown
some signs of improvement even if the process of political and economic reform
remains painfully slow.
The Board is proposing an interim dividend of 2.10p, an increase of 5.0% on the
previous year. Earnings fell 8.5% to 3.77p. This was largely the consequence of
the prudent sale of Argentine and telecommunications bonds in the previous year.
The fall in earnings was therefore expected and is likely to be replicated over
the full year. This should not preclude an increase in the full year dividend in
line with the rise in the interim payment.
Prospects for equity markets remain uncertain. However, valuations are now
reasonable even for troubled circumstances and will be seen to be attractive
when global economic confidence recovers. In recent weeks we have begun to add
cautiously to our equity positions in the UK and to a lesser extent overseas at
moments of market weakness. We intend to continue with this approach in the
months ahead. We believe that the attractions of a stable portfolio of high
quality equities will be recognised in the period ahead.
By order of the Board
Baillie Gifford & Co.
30 October 2002
The following is the interim statement for the six months ended 30 September
2002 which has been neither reviewed nor audited by the auditors. This statement
is being printed and will be sent to all shareholders on 11 November 2002.
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 for the year ended
30 September 2002 30 September 2001 31 March 2002
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Realised losses on
investments - (78,929) (78,929) - (47,633) (47,633) - (113,529) (113,529)
Unrealised (losses)/gains
on investments - (322,065) (322,065) - (213,216) (213,216) - 23,578 23,578
Currency (losses)/gains - (452) (452) - 418 418 - 3,447 3,447
Income (note 4) 17,381 - 17,381 19,902 - 19,902 36,377 - 36,377
Investment management fee (1,072) (1,072) (2,144) (1,365) (1,365) (2,730) (2,695) (2,695) (5,390)
Other administrative
expenses (590) - (590) (641) - (641) (1,103) - (1,103)
Net return before finance
costs and taxation 15,719 (402,518) (386,799) 17,896 (261,796) (243,900) 32,579 (89,199) (56,620)
Finance costs of
borrowings (3,560) (3,560) (7,120) (3,842) (3,842) (7,684) (7,396) (7,393) (14,789)
Return on ordinary
activities before
taxation 12,159 (406,078) (393,919) 14,054 (265,638) (251,584) 25,183 (96,592) (71,409)
Tax on ordinary
activities (570) - (570) (646) - (646) (970) - (970)
Return on ordinary
activities after taxation 11,589 (406,078) (394,489) 13,408 (265,638) (252,230) 24,213 (96,592) (72,379)
Dividends in respect of
equity shares (6,327) - (6,327) (6,361) - (6,361) (19,453) - (19,453)
Transfer to/(from)
reserves 5,262 (406,078) (400,816) 7,047 (265,638) (258,591) 4,760 (96,592) (91,832)
Return per ordinary share
(note 5) 3.77p (132.25p) (128.48p) 4.12p (81.68p) (77.56p) 7.56p (30.17p) (22.61p)
Dividend per ordinary
share (note 6) 2.10p 2.00p 6.25p
* 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 2002
(unaudited)
30 September 2002 30 September 2001 31 March
2002
£'000 £'000 £'000
NET ASSETS
Fixed asset investments 1,043,455 1,290,117 1,493,041
Net liquid assets 48,377 71,882 16,846
Total assets (before deduction of loans and debentures) 1,091,832 1,361,999 1,509,887
Loans and debentures (note 2) (206,098) (186,043) (206,899)
885,734 1,175,956 1,302,988
CAPITAL AND RESERVES
Called-up share capital 75,904 80,170 77,296
Capital reserves 756,546 1,045,477 1,177,670
Revenue reserve 53,284 50,309 48,022
EQUITY SHAREHOLDERS' FUNDS 885,734 1,175,956 1,302,988
NET ASSET VALUE PER ORDINARY SHARE
(after deducting prior charges at par) 293.9p 368.8p 423.6p
Ordinary shares in issue (note 3) 303,615,115 320,680,188 309,184,688
DISTRIBUTION OF ASSETS
at 30 September 2002
(unaudited)
30 September 2002 30 September 2001 31 March 2002
% % %
Equities: United Kingdom 46.3 45.5 45.9
Continental Europe 7.7 10.6 12.7
North America 21.9 19.8 24.2
Japan 6.4 9.0 4.4
Asia Pacific 3.9 2.2 4.1
Other Emerging Markets 2.2 1.5 2.6
Total equities 88.4 88.6 93.9
United Kingdom bonds 3.9 3.1 2.8
European bonds 3.3 2.6 2.2
North American bond - 0.4 -
Net liquid assets 4.4 5.3 1.1
Total assets (before deduction of loans and debentures) 100.0 100.0 100.0
THE SCOTTISH MORTGAGE AND TRUST PLC
SUMMARISED CASH FLOW STATEMENT
(unaudited)
Six months to Six months to Year to
30 September 2002 30 September 2001 31 March 2002
£'000 £'000 £'000
NET CASH INFLOW FROM OPERATING ACTIVITIES 17,774 18,997 29,925
NET CASH OUTFLOW FROM SERVICING OF FINANCE (7,146) (7,908) (15,012)
TOTAL TAX PAID (746) (692) (1,032)
FINANCIAL INVESTMENT
Acquisitions of investments (111,182) (278,747) (495,639)
Disposals of investments 171,099 362,410 539,802
Realised currency loss (1,227) (405) (552)
NET CASH INFLOW FROM FINANCIAL INVESTMENT 58,690 83,258 43,611
EQUITY DIVIDENDS PAID (13,091) (13,425) (19,791)
NET CASH INFLOW BEFORE FINANCING 55,481 80,230 37,701
FINANCING
Shares purchased for cancellation (17,039) (29,742) (67,249)
Loans repaid - (79,350) (79,350)
Loans drawn down - 70,355 94,423
Realised currency loss on multi-currency loans - (26) (26)
NET CASH OUTFLOW FROM FINANCING (17,039) (38,763) (52,202)
INCREASE/(DECREASE) IN CASH 38,442 41,467 (14,501)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Increase/(decrease) in cash in the period 38,442 41,467 (14,501)
Decrease/(increase) in bank loans - 9,021 (15,047)
Exchange movement 775 808 3,999
Other non-cash changes 26 21 42
MOVEMENT IN NET DEBT IN THE PERIOD 39,243 51,317 (25,507)
NET DEBT AT 1 APRIL (188,620) (163,113) (163,113)
NET DEBT AT 30 SEPTEMBER/31 MARCH (149,377) (111,796) (188,620)
THE SCOTTISH MORTGAGE AND TRUST PLC
TWENTY LARGEST EQUITY HOLDINGS
at 30 September 2002
Business Market value % of total
Name £'000 assets
GlaxoSmithKline Pharmaceuticals 45,516 4.2
BP Integrated oil 41,595 3.8
Vodafone Mobile telecommunication services 29,249 2.7
Diageo Branded spirits 27,552 2.5
Royal Bank of Scotland Banking 25,800 2.4
* Golden West Financial Savings and loans 23,328 2.1
Gallaher Tobacco 22,744 2.1
Allied Domecq Branded spirits 21,654 2.0
Barclays Banking 21,235 1.9
Shell Transport & Trading Integrated oil 20,841 1.9
Imperial Tobacco Tobacco 18,995 1.7
* Wellpoint Managed healthcare 17,479 1.6
HSBC Holdings Banking 17,182 1.6
* Freddie Mac Mortgages 16,717 1.5
Lloyds TSB Banking 16,202 1.5
* Pfizer Pharmaceuticals 15,169 1.4
P&O Princess Cruises Global cruises 14,901 1.4
* Philip Morris Tobacco, food and beer 14,631 1.3
Bunzl Distributor of consumer products 14,333 1.3
Reed International Professional information publisher 13,231 1.2
438,354 40.1
* primary listing outwith the UK
THE SCOTTISH MORTGAGE AND TRUST PLC
NOTES
1. The financial statements for the six months to 30 September 2002 have been prepared on the basis of the
accounting policies set out in Company's Annual Financial Statements at 31 March 2002.
The Interim Report was approved by the Board on 30 October 2002.
2. Loans and debentures include Y5,900 million drawn down under a three year multi-currency loan facility and Y4,400
million drawn down under short term facility (30 September 2001 - Y5,900 million and 31 March 2002 - Y5,900
million and Y4,400 million, drawn down under the three year and the short term facilities).
Net asset value per share (after deducting prior charges at market value) was 274.2p (30 September 2001 - 353.4p
and 31 March 2002 - 409.4p). The market value of debenture stocks at 30 September 2002 was £205,420,000
(30 September 2001 - £194,907,000 and 31 March 2002 - £189,398,000).
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 4 July 2002. In the six months to 30 September 2002 a total of 5,569,573 ordinary
shares with a nominal value of £1,392,393 were brought back at a total cost of £16,438,000. At 30 September 2002
the Company had authority to buy back a further 42,371,149 ordinary shares.
30 September 2002 30 September 2001 31 March
2002
£'000 £'000 £'000
4. Income
Income from investments and interest receivable 17,252 19,893 36,368
Other income 129 9 9
5. Return per ordinary share
Revenue return 11,589 13,408 24,213
Capital return (406,078) (265,638) (96,592)
Return per ordinary share is based on the above totals of revenue and capital and on 307,041,656 (30 September
2001 - 325,199,855 and 31 March 2002 - 320,181,479) ordinary shares, being the weighted average number of
ordinary shares in issue during the period.
6. The interim dividend will be paid on 29 November 2002 to all shareholders on the register at the close of
business on 15 November 2002.
7. The financial information for the year ended 31 March 2002 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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