Interim Results
Scottish Mortgage Inv Tst PLC
29 October 2004
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
Results for the six months to 30 September 2004
After a period of strong performance in the year to 31 March 2004, Scottish
Mortgage's interim results to 30 September 2004 showed net asset value lagging
the benchmark.
• While the Managers are enthusiastic about the long-term growth prospects
and stock opportunities available in Asian and Emerging Markets, six month
performance was hurt in the early part of the period under review by a
brief but sharp burst of anxiety surrounding them. Performance may be open
to short-term volatility that can characterise holdings in these areas.
• Net asset value per share fell by 0.3% compared to a gain of 1.7% in the
benchmark (50% FTSE All-Share Index and 50% FTSE World Ex. UK Index (in
sterling terms)). Over the six months, the share price rose by 1.0%. (In
the year to 31 March 2004 net asset value per share rose by 33.6% while the
benchmark rose by 24.7%).
• The interim dividend has been increased by 4.5% to 2.30p. A similar scale
of increase is expected for the full year.
• During the period the Company was granted an Aaa issuer rating by Moody's
which is unique both amongst investment trusts and FTSE All-Share
companies.
• The Managers are watching carefully for any adverse consequences of the
sharp rise in the oil price on corporate profits and inflation which could
challenge their long-term optimism. This is largely based on the remarkable
progress of Emerging Markets economies.
Scottish Mortgage Investment Trust PLC aims to maximise total return whilst also
generating real dividend growth. Investment is made internationally but with a
core of exposure to the UK market. The trust has total assets of £1.3 billion
(before deduction of debentures, long and short term borrowings of £204
million).
Scottish Mortgage is managed by Baillie Gifford & Co., an Edinburgh based fund
management group.
29 October 2004
- ends -
For further information please contact:
Robert O'Riordan,
Baillie Gifford & Co. 07730 412007
Mike Lord, Director,
Broadgate Marketing 020 7726 6111
________________________________________________________________________________
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
INTERIM REPORT
While we remain enthusiastic about the long-term growth prospects and stock
opportunities available in Asian and Emerging Markets, our six month
performance was hurt in the early part of the period under review by a brief but
sharp burst of anxiety surrounding them. We recognise that performance may be
open to the short-term volatility that can characterise our holdings in these
areas. Over the six months to 30 September the net asset value fell by 0.3% to
380.4p and the share price rose by 1.0%. This compares to a gain of 1.7% in the
benchmark index of 50% FTSE All-Share Index and 50% FTSE World Ex. UK Index (in
sterling terms).
Over the last six months we have made net sales of £23m of equities. We reduced
our US exposure by £27m as we continued to find valuations challenging and the
current account deficit daunting. We have added modestly to our Asian and
Emerging Markets exposure and would continue to do so more vigorously should
further market weakness occur. Meanwhile, we have repaid $42m (£23m) of short
term borrowings. Our balance sheet remains flexible and strong. We were
delighted that this has been recognised by the granting of an Aaa issuer rating
by Moody's which is unique both amongst investment trusts and FTSE All-Share
companies.
The Board is proposing an interim dividend of 2.30p, an increase of 4.5% on the
previous year. Earnings were 3.74p against 3.75p last year. We expect that the
total dividend for the year will rise approximately in line with the interim
increase.
The global economy has been expanding rapidly. The dynamism of China has been
the critical factor in this growth. Competitive pressures and weak employment
data in the developed world have kept inflation under tight control. However,
if it persists, the sharp rise in the oil price would cast doubt on the
continuance of this satisfactory background to equity investment. We will be
watching closely to see if damage to corporate profits or the danger of rising
inflation are sufficient to call into question our long-term optimism which is
largely based on the remarkable progress of Emerging Markets economies.
By order of the Board
Baillie Gifford & Co.
28 October 2004
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
PERFORMANCE ATTRIBUTION (in sterling terms)
for the six months to 30 September 2004
Computed relative to the benchmark (50% FTSE All-Share Index and 50% FTSE World
Ex. UK Index (in sterling terms)) with net income reinvested.
Contribution
Benchmark Scottish Mortgage Contribution attributable to:
Asset allocation Asset allocation Performance * to relative Stock Asset +
Portfolio 01.04.04 30.09.04 01.04.04 30.09.04 SM Benchmark return selection allocation
breakdown % % % % % % % % %
UK 50.0 50.0 50.5 51.0 3.9 5.1 (0.6) (0.6) -
Europe ex. UK 9.8 10.2 10.7 10.6 1.7 5.1 (0.3) (0.3) -
North America 30.5 30.5 26.1 24.3 2.9 1.6 0.4 0.3 0.1
Japan 5.4 4.9 6.8 6.1 (10.8) (9.8) (0.3) (0.1) (0.2)
Asia Pacific
ex. Japan
3.4 3.4 11.0 10.9 (3.6) 0.5 (0.6) (0.4) (0.2)
Other Emerging
Markets
0.9 1.0 6.3 6.2 (12.4) (1.4) (1.0) (0.1) (0.9)
Bonds - - 7.2 7.3 4.5 - 0.1 - 0.1
Cash - - 1.0 1.1 2.7 - - - -
Debentures and
Loans
- - (19.6) (17.5) - - (0.1) - (0.1)
Total 100.0 100.0 100.0 100.0 0.7 3.1 (2.4) (1.3) (1.1)
Past performance is no guarantee of future performance.
Source: HSBC/Baillie Gifford & Co.
* The above returns are calculated on a total return basis with net income
reinvested and debentures valued at par. Scottish Mortgage's figures
represent the returns on the Company's portfolio and the benchmark figures
for each geographical area represent the return on the appropriate FTSE
index. Contributions cannot be added together as they are geometric; for
example, to calculate how a return of 0.7% against a benchmark return of
3.1% translates into a relative return of (2.4%), divide the portfolio
return of 100.7 by the benchmark return of 103.1 and subtract one.
+ Asset allocation includes the contribution attributable to currency
movements.
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
Interim Report
The following is the interim statement for the six months ended 30 September
2004 which has been neither reviewed nor audited by the auditors. This
statement is being printed and will be sent to all shareholders on 8 November
2004. 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.
SCOTTISH MORTGAGE INVESTMENT 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 2004 30 September 2003 31 March 2004
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Realised losses on - (6,777) (6,777) - (17,187) (17,187) - (11,399) (11,399)
investments
Unrealised gains on - 1,417 1,417 - 188,267 188,267 - 297,086 297,086
investments
Currency gains - 323 323 - 592 592 - 5,980 5,980
Income (note 4) 17,794 - 17,794 16,969 - 16,969 35,829 - 35,829
Investment management
fee (1,150) (1,150) (2,300) (1,071) (1,071) (2,142) (2,276) (2,276) (4,552)
Other administrative (805) - (805) (628) - (628) (1,404) - (1,404)
expenses
Net return before finance
costs and taxation 15,839 (6,187) 9,652 15,270 170,601 185,871 32,149 289,391 321,540
Finance costs of (3,658) (3,658) (7,316) (3,590) (3,604) (7,194) (7,290) (7,303) (14,593)
borrowings
Return on ordinary
activities before
taxation 12,181 (9,845) 2,336 11,680 166,997 178,677 24,859 282,088 306,947
Tax on ordinary (1,091) 552 (539) (535) - (535) (928) - (928)
activities
Return on ordinary
activities after
taxation 11,090 (9,293) 1,797 11,145 166,997 178,142 23,931 282,088 306,019
Dividends in respect
of equity shares (6,799) - (6,799) (6,509) - (6,509) (20,779) - (20,779)
Transfer to/(from) 4,291 (9,293) (5,002) 4,636 166,997 171,633 3,152 282,088 285,240
reserves
Return per ordinary
share (note 5) 3.74p (3.13p) 0.61p 3.75p 56.15p 59.90p 8.05p 94.86p 102.91p
Dividend per ordinary
share (note 6) 2.30p 2.20p 7.00p
* The revenue column of this statement is the profit and loss account of the
Company.
All revenue and capital items in this statement derive from continuing
operations.
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
SUMMARISED BALANCE SHEET
at 30 September 2004
(unaudited)
30 September 30 September 31 March
2004 2003 2004
£'000 £'000 £'000
FIXED ASSETS
Investments 1,311,736 1,242,205 1,338,496
CURRENT ASSETS
Debtors 7,599 13,917 16,404
Term deposits 11,052 - -
Cash and short term deposits 2,851 2,483 20,394
21,502 16,400 36,798
CREDITORS
Amounts falling due within one year (11,505) (13,005) (19,953)
NET CURRENT ASSETS 9,997 3,395 16,845
TOTAL ASSETS (before deduction of loans and debentures) 1,321,733 1,245,600 1,355,341
Loans and debentures (note 2) (203,862) (231,426) (227,560)
1,117,871 1,014,174 1,127,781
CAPITAL AND RESERVES
Called-up share capital 73,901 74,326 74,326
Capital reserves 985,638 884,323 999,414
Revenue reserve 58,332 55,525 54,041
EQUITY SHAREHOLDERS' FUNDS 1,117,871 1,014,174 1,127,781
NET ASSET VALUE PER ORDINARY SHARE
(after deducting debentures at par) 380.4p 343.3p 381.5p
NET ASSET VALUE PER ORDINARY SHARE
(after deducting debentures at market value) 357.6p 325.3p 362.8p
Ordinary shares in issue (note 3) 295,605,115 297,305,115 297,305,115
DISTRIBUTION OF ASSETS
at 30 September 2004
(unaudited)
30 September 30 September 31 March
2004 2003 2004
% % %
Equities: United Kingdom 43.5 44.1 42.0
Continental Europe 9.0 9.2 8.9
North America 20.7 22.1 21.7
Japan 5.2 5.8 5.7
Asia Pacific 9.3 6.4 9.2
Other Emerging Markets 5.3 4.8 5.2
Total equities 93.0 92.4 92.7
United Kingdom bonds 4.3 5.4 4.3
European bonds 1.5 1.7 1.5
North American bonds 0.4 0.2 0.2
Net liquid assets 0.8 0.3 1.3
Total assets (before deduction of loans and debentures) 100.0 100.0 100.0
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
SUMMARISED CASH FLOW STATEMENT
(unaudited)
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
£'000 £'000 £'000
Net cash inflow from operating activities 17,212 17,475 31,040
Net cash outflow from servicing of finance (7,478) (7,158) (14,431)
Total tax paid (508) (594) (895)
Net cash inflow/(outflow) from financial 26,594 (19,423) (2,619)
investment
Equity dividends paid (14,270) (13,379) (19,919)
NET CASH INFLOW/(OUTFLOW) BEFORE USE OF LIQUID
RESOURCES AND FINANCING 21,550 (23,079) (6,824)
Shares purchased for cancellation (4,908) (3,184) (3,184)
Net cash (outflow)/inflow from bank loans (note 3) (23,069) 24,831 26,487
Net cash outflow to liquid resources (11,116) - -
(DECREASE)/INCREASE IN CASH (17,543) (1,432) 16,479
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
DEBT
(Decrease)/increase in cash in the period (17,543) (1,432) 16,479
Increase in short term investments 11,116 - -
Exchange movement on short term investments (64) - -
Decrease/(increase) in bank loans 23,069 (24,831) (26,487)
Exchange movement on bank loans 593 600 6,091
Other non-cash changes 36 31 61
MOVEMENT IN NET DEBT IN THE PERIOD 17,207 (25,632) (3,856)
NET DEBT AT START OF THE PERIOD (207,166) (203,310) (203,310)
NET DEBT AT END OF THE PERIOD (189,959) (228,942) (207,166)
RECONCILIATION OF NET REVENUE BEFORE FINANCE COSTS
AND TAXATION TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
Net revenue before finance costs and taxation 15,839 15,270 32,149
Management fees charged to capital (1,150) (1,071) (2,276)
Changes in debtors and creditors 2,523 3,276 1,167
NET CASH INFLOW FROM OPERATING ACTIVITIES 17,212 17,475 31,040
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
THIRTY LARGEST EQUITY HOLDINGS
at 30 September 2004
Market
value % of total
Name Region Business £'000 assets
Vodafone+ United Kingdom Mobile telecommunication services 62,582 4.7
GlaxoSmithKline United Kingdom Pharmaceuticals 42,655 3.2
Royal Bank of Scotland United Kingdom Banking 40,331 3.1
Barclays United Kingdom Banking 35,990 2.7
HSBC United Kingdom Banking 33,922 2.6
British American Tobacco United Kingdom Tobacco 25,432 1.9
Golden West Financial North America Savings and loans 24,525 1.9
Aviva United Kingdom Life assurance 20,936 1.6
Moody's North America Bond rating agency 19,713 1.5
Diageo United Kingdom Branded spirits 18,768 1.4
Suncor Energy North America Oil company 18,082 1.4
Prudential United Kingdom Life assurance 18,067 1.4
Omnicom North America Advertising agency 17,603 1.3
BHP Billiton Asia Pacific Diversified resources 17,244 1.3
Imperial Tobacco United Kingdom Tobacco 17,121 1.3
EOG Resources North America Natural gas 16,084 1.2
ConocoPhillips North America Oil company 16,024 1.2
Atlas Copco Continental Europe Engineering 15,983 1.2
Gazprom Other Emerging Mkts Gas producer 15,773 1.2
Altria North America Tobacco and food 15,415 1.2
Samsung Electronics Asia Pacific Electronics manufacturer 15,386 1.2
BG Group United Kingdom Oil and gas exploration and production 14,751 1.1
Man Group United Kingdom Hedge fund manager and asset gatherer 14,482 1.1
Wolseley United Kingdom Builders' merchant 14,379 1.1
SAP Continental Europe Business software 14,229 1.1
Carnival United Kingdom Cruise ship operator 14,158 1.1
Hilton Group United Kingdom Hotels and licensed betting operator 13,838 1.0
BMW Continental Europe Automobiles 13,301 1.0
British Land United Kingdom Property 13,020 1.0
CNOOC Asia Pacific Oil and gas exploration 12,995 1.0
632,789 48.0
+ includes holding partly in convertible loan stock.
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
NOTES
1. The financial statements for the six months to 30 September 2004 have been
prepared on the basis of the accounting policies set out in the Company's
Annual Financial Statements at 31 March 2004.
The Interim Report was approved by the Board on 28 October 2004.
None of the views expressed in this document should be construed as advice
to buy or sell a particular investment.
2. Loans and debentures include Y5,900 million drawn down under a three year
multi-currency loan facility and US$40 million drawn down under a short
term facility (30 September 2003 - Y5,900 million, US$37.1 million and
CHF55 million and 31 March 2004 - Y5,900 million and US$81.8 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 357.6p (30 September 2003 - 325.3p and 31 March 2004 - 362.8p). The
market value of debenture stocks at 30 September 2004 was 212,807,000
(30 September 2003 - £199,345,000 and 31 March 2004 - £201,270,000).
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 1 July 2004 in respect of 44,566,036 ordinary
shares (equivalent to 14.99% of its issued share capital at that date). In
the six months to 30 September 2004 a total of 1,700,000 ordinary shares
with a nominal value of £425,000 were bought back at a total cost of
£4,908,000. At 30 September 2004 the Company had authority to buy back a
further 42,866,036 ordinary shares.
30 September 30 September 31 March
2004 2003 2004
£'000 £'000 £'000
4. Income
Income from investments and interest receivable 17,759 16,874 35,699
Other income 35 95 130
5. Return per ordinary share
Revenue return 11,090 11,145 23,931
Capital return (9,293) 166,997 282,088
Return per ordinary share is based on the above totals of revenue and
capital and on 296,589,814 (30 September 2003 - 297,418,776 and 31 March
2004 - 297,361,946) ordinary shares, being the weighted average number of
ordinary shares in issue during each period.
6. The interim dividend will be paid on 26 November 2004 to all shareholders
on the register at the close of business on 12 November 2004. The ex
dividend date is 10 November 2004.
7. The financial information contained within this interim report does not
constitute statutory accounts as defined in section 240 of the Companies
Act 1985. The financial information for the year ended 31 March 2004 has
been extracted from the statutory accounts which have been filed with the
Registrar of Companies and which contain an unqualified Auditors' Report
and do not contain a statement under the sections 237 2) or (3) of the
Companies Act.
This information is provided by RNS
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