Interim Results
To: Stock Exchange For immediate
release:
28 September 2004
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST plc
Interim results for the six months to 31 July 2004
For the 12-month period ended 31 July 2004, the net
asset value (NAV) per share rose by 10.0%, whereas
the FTSE All-Share rose by 7.2%.
A 'special' dividend of 0.71p per share, representing
an additional dividend received from our holding in
Martin Currie Capital Return Trust, combined with a
maintained interim dividend of 0.50p.
As at 27 September 2004, the discount was 7.7%,
compared with 12.7% for the Global Growth sector
(Source: Cazenove).
Chairman's statement
On 30 June, the company offered shareholders their first opportunity to redeem
shares at NAV less costs. Some 44.5% of shareholders decided to accept this
opportunity and received 81.67p per share, a 1.2% discount to the then NAV per
share. A significant number of the redeemers appear to have been relatively
short-term shareholders, who established positions in the weeks leading up to 30
June, apparently to take advantage of the narrowing in the company's discount
that the redemption opportunity afforded. The Board is delighted that,
proportionately, fewer private shareholders redeemed. The company's register is
now more heavily populated by individual investors, for whom the company was
originally designed.
Over the six months to 31 July, global stockmarkets have been consolidating the
strong gains made over the previous twelve months, and now await further
impetus. Over the six months to 31 July 2004, the company's benchmark, the FTSE
All-Share index, gained just 0.2%, whereas the company's NAV per share rose by
0.8%. Over the 12 months to 31 July, the increase in NAV per share of 10.0% was
ahead of the 7.2% gain registered by the benchmark.
The discount of the company's share price to its NAV per share had narrowed
consistently in the period leading up to the redemption opportunity. However, it
has since widened, to stand at 7.7% on 27 September 2004. Nonetheless, this
compares favourably with the average discount of the Global Growth sector of
12.7% on this date (Source: Cazenove).
Your Board believes that the discount, as disclosed on the Association of
Investment Trust Companies' basis, should be maintained, where possible, in
single figures utilising, as necessary, the company's buyback powers. From 30
June to 27 September we have bought back 2,767,941 shares, or 1.7% of the
reduced share capital as at 30 June 2004. Shareholders are reminded that, in
addition to the five-yearly redemption opportunity, the company has a 'trigger'
whereby, if the average discount exceeds 7.5% over the 12-week period prior to
each financial year-end, a further redemption opportunity should become
available.
Earnings per share (EPS) for the six months have increased sharply from 1.25p to
1.88p. It is likely that this increase will be more marked over the full year
because we are required to use the weighted average number of shares outstanding
to calculate EPS. This means that the lower number of shares outstanding post-
redemption will have a greater influence over 12 twelve months than six. In
addition, this year we have received a second interim dividend from our holding
in Martin Currie Capital Return Trust (MCCRT) boosting our overall income
receipts. Taking account of this, the Board has declared an interim dividend of
0.50p per share, together with a special dividend of 0.71p per share,
representing the payment from MCCRT. These dividends will be paid on 29 October
to shareholders on the register on 8 October.
As part of the Board's succession planning, Ian Bodie was appointed as a
director on 28 September 2004. Ian, a chartered accountant, is Group Operations
Director of Amcor Flexibles, a global packaging company, and was recently
Managing Director of its Nordic regional operation. He was formerly (1988-1999)
Group Finance Director of Sidlaw Group plc. As such, he has extensive business,
financial and accounting experience, and the directors believe that he will be a
valuable addition to the Board.
While overall we remain cautious about the outlook for stockmarkets, there are
clear opportunities for selected companies and sectors to do well.
Manager's report
Review
The UK stockmarket has ebbed and flowed over the last six months in a fairly
tight range. It has ended almost where it started - the FTSE All-Share index was
up by 0.2%. In fact, the UK market (with Japan) was one of the better performing
markets. The US market fell, as did Asia's emerging markets, while returns from
Europe were held back by a weakening euro. This underperformance of overseas
markets held back the fund's performance. In particular, our exposure to Asian
companies detracted from performance, as many of these stocks fell heavily in
this six-month period. Despite this, net asset value per share did marginally
outperform the benchmark.
In the UK, resource, industrial and utility companies have done best. Resource
companies have benefited from the high prices of commodities, especially oil;
industrials have been helped by increased demand in certain areas; while the
utility sector has done well as a result of its steady earnings profile and
strong cash flow. Information technology companies have performed very poorly,
and not just in the UK. As overcapacity drives prices down, many technology
companies are operating in a deflationary environment. Because their share
prices generally are overvalued, we do not hold any UK technology companies.
The UK continues to enjoy a healthy economy. House prices have risen by 20% over
the last year and various cautions about overheating have, so far, had little
effect. The consumer has been spending enthusiastically, and borrowing as
enthusiastically to fund that spending. Household debt is now £1 trillion.
Although base rates have risen to 4.75% (from 3.5%) over the last nine months,
the healthy employment situation seems to be supporting demand despite higher
interest rates.
Globally, the economic slowdown in China has been prominent in the headlines
during the first half of the year. In fact it, like most of the rest of the
world economy, remains strong. But US interest rates have risen from 1% to just
1.5%, which remains considerably lower than what may be considered a 'neutral'
level. In other words, the Federal Reserve is still worried about the economic
outlook and wishes to stimulate as much growth as possible through low interest
rates. This has contributed to a strong and broad-based recovery in corporate
earnings. This sort of recovery would normally lead stockmarkets higher, yet
they have stalled in the last six months.
Our principal investment in private equity, Martin Currie Capital Return Trust
plc (MCCRT), has returned significant amounts of cash by way of dividend and, to
the "A" shareholders, capital distributions. It now represents 14% of the
company's net assets.
Outlook
What is worrying investors is that growth of corporate earnings and of economies
around the world is unlikely to be as good in 2005 as it is currently. At the
same time, interest rates are low, especially in the US, so are likely to rise
to more normal levels in 12 months' time. A combination of lower growth and
higher interest rates is not usually a signal to buy equities.
It is for this reason that the portfolio was ungeared at the period end, with
cash offsetting the amount of the £10m loan. Since then, we have repaid the debt
and established a revolving credit facility, currently undrawn. We do not
believe a long term bull market is in the offing, so long term borrowing is not
appropriate. However, we will endeavour to move more actively from a borrowed
position to holding cash depending on the stockmarket outlook. The next year
may yield fairly modest returns from equities, though of course there will
always be companies that can do well in a difficult environment. For example,
oil stocks are beneficiaries of the higher oil price that is so costly to many
other companies and this is an area where the portfolio is overweight. We should
not lose sight of the fact that the world economy is growing and, despite all
the uncertainties, equity investment has a long history of providing rates of
return that surpass most other asset classes.
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST plc
Statement of total return (incorporating the revenue account*) for the
six months to 31 July 2004
Unaudited
Revenue Capital Total
£'000 £'000 £'000
Losses on - realised - (581) (581)
investments
- unrealised - (13,334) (13,334)
Currency gains - 82 82
Income - franked 4,789 12,128 16,917
- unfranked 1,209 - 1,209
Investment management fee (212) (423) (635)
Performance fee - (161) (161)
Other expenses (281) - (281)
_______ _______ _______
Net return before finance costs and 5,505 (2,289) 3,216
taxation
Interest payable and similar charges (259) (517) (776)
_______ _______ _______
Return on ordinary activities before 5,246 (2,806) 2,440
taxation
Taxation on ordinary activities (16) - (16)
_______ _______ _______
Return on ordinary activities after 5,230 (2,806) 2,424
taxation for the financial year
Dividends in respect of equity shares: (1,982) - (1,982)
1.21p per ordinary share
_______ _______ _______
Transfer to/(from) reserves 3,248 (2,806) 442
_______ _______ _______
Return per ordinary share 1.88p (1.01p) 0.87p
* 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 directors have recommended an interim dividend of 0.50p per share plus a
0.71p per share 'special' dividend. If approved, these will be paid on 29
October 2004 to shareholders on the register on 8 October 2004.
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST plc
Statement of total return (incorporating the revenue account) for the
six months to 31 July 2003
Unaudited
Revenue Capital Total
£'000 £'000 £'000
(Losses)/gains - realised - (3,642) (3,642)
on investments
- unrealised - 35,767 35,767
Currency losses - (159) (159)
Income - franked 3,454 - 3,454
- unfranked 1,203 - 1,203
Investment management fee (259) (517) (776)
Performance fee - (278) (278)
Other expenses (164) - (164)
_______ _______ _______
Net return before finance costs and 4,234 31,171 35,405
taxation
Interest payable and similar (393) (786) (1,179)
charges
_______ _______ _______
Return on ordinary activities 3,841 30,385 34,226
before taxation
Taxation on ordinary activities (85) - (85)
_______ _______ _______
Return attributable to equity 3,756 30,385 34,141
shareholders
Dividends in respect of equity (1,484) - (1,484)
shares: 0.50p per ordinary share
_______ _______ _______
Transfer to reserves 2,272 30,385 32,657
_______ _______ _______
Return per ordinary share 1.25p 10.15p 11.40p
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST plc
Statement of total return (incorporating the revenue account) for the
twelve months to 31 January 2004
Audited
Revenue Capital Total
£'000 £'000 £'000
Gains on - realised - 1,599 1,599
investments
- unrealised - 49,770 49,770
Currency losses - (218) (218)
Income - franked 6,802 4,071 10,873
- unfranked 1,809 14 1,823
Investment management fee (528) (1,055) (1,583)
Performance fee - (454) (454)
Other expenses (416) - (416)
_______ _______ _______
Net return before finance costs and 7,667 53,727 61,394
taxation
Interest payable and similar (795) (1,590) (2,385)
charges
_______ _______ _______
Return on ordinary activities 6,872 52,137 59,009
before taxation
Taxation on ordinary activities (82) - (82)
_______ _______ _______
Return attributable to equity 6,790 52,137 58,927
shareholders
Dividends in respect of equity (5,573) - (5,573)
shares: 1.87p per ordinary share
_______ _______ _______
Transfer to reserves 1,217 52,137 53,354
_______ _______ _______
Return per ordinary share 2.27p 17.44p 19.71p
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST PLC
BALANCE SHEET
31 July 2004 31 July 2003 31 January 2004
Unaudited Unaudited Audited
£000 £000 £000 £000 £000 £000
Fixed assets
Investment at 137,262 255,724 265,478
market value
Current assets
Debtors 2,673 1,149 4,489
Cash in bank 10,547 14,973 24,376
_______ _______ _______
13,220 16,122 28,865
Creditors
Amounts falling (13,493) (34,633) (46,529)
due within one
year
_______ _______ _______
Net current (273) (18,511) (17,664)
liabilities
_______ _______ _______
Total assets less 136,989 237,213 247,814
current
liabilities
Creditors
Amounts falling - (10,000) -
due after one
year
_______ _______ _______
Net assets 136,989 227,213 247,814
_______ _______ _______
Capital and
reserves
Called up 8,189 14,935 14,928
ordinary capital
Share premium - 159,208 159,208
account
Capital 7,828 1,082 1,089
redemption
reserve
Special 182,086 134,242 134,146
distributable
reserve
Capital reserve (67,825) (86,772) (65,020)
Revenue reserve 6,711 4,518 3,463
_______ _______ _______
Equity 136,989 227,213 247,814
shareholders'
funds
_______ _______ _______
Net asset value 83.65p 76.07p 83.00p
per ordinary
share
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST plc
STATEMENT OF CASH FLOW
Year to Year to
31 July 2004 31 July 2003
(Unaudited) (Unaudited)
£000 £000 £000 £000
Operating activities
Net dividends and interest 15,857 3,846
received from investments
Interest received from 477 541
deposits
Investment management fee (871) (1,159)
Cash paid to and on behalf of (59) (58)
Directors
Bank charges (17) (14)
Net taxation recovered - 6
Other cash payments (355) (187)
_______ _______
Net cash inflow from operating 15,032 2,975
activities
Servicing of finance
Interest paid (917) (1,190)
_______ _______
Net cash outflow from (917) (1,190)
servicing of finance
Capital expenditure and
financial investment
Payments to acquire (102,994) (43,456)
investments
Receipts from disposal of 221,611 26,792
investments
Foreign exchange differences 107 -
_______ _______
Net cash inflow/(outflow) for 118,724 (16,664)
capital expenditure and
financial investment
Equity dividends paid (4,090) (3,142)
_______ _______
Net cash inflow/(outflow) 128,749 (18,021)
before financing
Financing
Repurchase of ordinary share (111,268) (925)
capital
Movement in short-term (31,422) 25,037
borrowings
Movement in long-term - (25,000)
borrowings
_______ _______
Net cash outflow from (142,690) (888)
financing
_______ _______
Decrease in cash (13,941) (18,909)
_______ _______
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