Interim Results
To: Stock Exchange For immediate release:
5 September 2005
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST plc
Interim results for the six months to 31 July 2005
· Substantial outperformance. The company's net asset value total return was 14.7% compared with
the 10.4% return of the benchmark, the FTSE All- Share index.
Chairman's statement
Performance
Over the last six months, global stockmarkets have continued to build on their
recovery from the depths of 2003. The company's net asset value (NAV) per share
increased by 11.9% in the six months to 31 July, comparing favourably with the
10.8% gain recorded over the entire year to 31 January 2005. Over the interim
period, the company's NAV total return of 14.7% compared favourably with the
10.4% return of the benchmark, the FTSE All-Share index.
I am pleased to report, that with the new arrangements in place, and as a
consequence of this outperformance, the manager has received a performance fee
payment on account.
Discount
The company's share price performance has broadly mirrored that of its NAV per
share, increasing by 11.2% in the six-month period. Because the company does
not distribute all of its revenue at the interim stage, the discount calculated
on the basis used by the Association of Investment Trust Companies (AITC) -
which assumes 100% distribution - was 7.7% at 31 July.
It is this AITC discount that the company uses in respect of its annual and five-
yearly redemption opportunities. As a reminder, if this discount averages more
than 7.5% over the 12-week period prior to each financial year-end, shareholders
will have the opportunity to redeem their shares at NAV, less relevant costs.
The board remains committed to maintaining the discount, where possible, in
single figures utilising, as necessary, the company's buyback powers. From 31
January to 31 July we have bought back 1,776,178 shares or 1.1% of the share
capital as at 31 January 2005, at discounts ranging from 7.2% to 9.5% and this
has added 0.1% to NAV per share.
Earnings and dividends
Headline earnings per share have declined over the six months, compared with the
same period last year, from 1.88p to 1.34p. Last year, our overall income
receipts were boosted by a second interim dividend from our holding in the
former Martin Currie Capital Return Trust equivalent to 0.71p per share, that we
paid out as a special dividend. No such dividend has been paid to us this year
but, excluding this special dividend, earnings per share have actually increased
by 14.5%. The board has declared an interim dividend of 0.50p per share,
unchanged on the underlying level of last year. This dividend will be paid on 28
October 2005 to shareholders on the register on 7 October 2005.
Strategy and outlook
The company has maintained, since inception, a significant commitment to private
equity, largely through its holding in Martin Currie Capital Return Trust plc.
Your company's managers, Martin Currie, have decided to exit from private equity
fund management. So the investment team responsible for Martin Currie Capital
Return Trust plc, together with the management contract, have transferred to F&C
Asset Management. Since the period end, Martin Currie Capital Return Trust plc
has been re-named F&C Private Equity Trust. We retain excellent contacts with
the management team and remain significant shareholders in the re-named vehicle.
However, this new arrangement will afford us more flexibility to develop our
private equity presence.
As to the public equity markets, their performance over the last six months,
both domestically and internationally, has been surprisingly robust, given the
political and economic uncertainties still prevalent globally. As the manager
reports below, there are reasons to remain positive on the outlook, despite the
strong recent run on markets. "Cautious optimism" best reflects the outlook.
Manager's review
Review
The recent strength of stockmarkets around the world has been a surprise to many
commentators and investors, me included. Happily, that strength combined with
the outperformance of our portfolio has led to very positive returns over the
last six months. It has helped to be heavily exposed to resource and basic
industrial stocks, which have commanded improved earnings prospects. That is
because commodity prices have risen and construction activity has gone from
strength to strength in many parts of the world. It has also been correct to
have limited investment in banks; they have underperformed, and not least in the
UK. On top of this, the portfolio of 30 overseas stocks that we identify as
among the most exciting prospects outside the UK has done its job of
outperforming the benchmark. Our commitment to private equity has also been
rewarded in this period. The sector has been in favour and our investments,
including F&C Private Equity Trust, have reflected this.
In the UK, there has been a slowing of economic activity. House prices, high
street sales and a still sluggish manufacturing sector all confirm this. The
Bank of England has acknowledged this and, indicating their comfort with current
inflation, they have cut interest rates to 4.5%. Though slower, the economy is
still growing and corporate earnings expectations have actually increased as
2005 has progressed. This is probably the main reason that the stockmarket has
made such positive progress in the first half of the year.
Overseas, the US economy has improved beyond expectations. Interest rates are
proceeding higher on a measured and thoroughly predictable basis. Again,
corporate earnings have exceeded expectation and the dollar has stabilised. Both
of these are good news for US equities. The Chinese economy is an important
source of demand for all commodities and, as such, it attracts a great deal of
comment. Despite all the scare stories, it continues to grow strongly and this
has been the case with many emerging markets. Only Europe and Japan, of the
major economies, remain sluggish. We have managed to identify companies in these
areas that have done well despite their domestic environments.
The relatively low levels of interest rates around the world clearly reflect the
abundance of cash in the system. That has encouraged merger and acquisition
(M&A) activity, which is generally good for all equity investments. Perhaps the
major beneficiary has been private equity investments where realisations and M&A
have been accelerated, boosting valuations and our investment returns.
So despite worries over terrorism, the oil price, debt and house prices, much
has gone well in the first half of the year.
Outlook
I believe the world economy is going to grow for a sustainable period. That
provides a good backdrop for equity investment.
One of my main concerns remains the impact of higher oil prices. Because there
is limited spare capacity, I suspect the oil price is unlikely to fall and may
indeed move higher still. This could cause a slowdown in the world economy, or,
as I think more likely, increase inflation. Modest inflation is no bad thing,
but it would mean global interest rates are likely to rise further than
indicated by the bond market.
Companies have done an excellent job of maintaining or increasing margins at a
time when many have little pricing power. At some stage, higher input and
interest costs are going to pressure those margins or, where companies can get
away with it, output prices (and inflation) are going to rise. So I favour
companies where I believe management can move prices higher to protect their
margins without destroying their market.
For some time now, low long-term interest rates have provided plentiful supplies
of cash, while good economic growth has improved earnings prospects. This is a
fruitful combination for investors in equities. The economic outlook remains
positive; there are even signs that the Japanese economy may at last be turning
the corner. The main threat to this favourable environment is inflation. If it
is contained, we can look forward to further growth in equity markets.
- ends -
For further information, please contact:
Tom Walker/Mike Woodward 0131 229 5252
Martin Currie Investment Management Ltd
twalker@martincurrie.com/mwoodward@martincurrie.com
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST plc
Statement of total return (incorporating the revenue account*) for the
six months to 31 July 2005
Unaudited
Revenue Capital Total
£000 £000 £000
Gains on investments - realised - 1,905 1,905
- unrealised - 12,632 12,632
Currency losses - (31) (31)
Income - franked 2,170 2,238 4,408
- unfranked 386 - 386
Investment management fee (108) (218) (326)
Performance fee - (431) (431)
Other expenses (269) - (269)
_______ _______ _______
Net return before finance costs and taxation 2,179 16,095 18,274
Interest payable and similar charges - - -
Dividends in respect of ordinary shares (3,842) - (3,842)
Movement in redemption entitlement to ordinary - 26,012 26,012
shareholders
_______ _______ _______
Return on ordinary activities before taxation (1,663) 42,107 40,444
Taxation on ordinary activities (26) - (26)
_______ _______ _______
Return attributable to shareholders (1,689) 42,107 40,418
_______ _______ _______
Return per ordinary share (note 2) 1.34p 10.01p 11.35p
*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.
On 5 September 2005, the Board declared an interim dividend of 0.5p per share.
This dividend is declared with reference to Statutory Instrument 2005/2280,
which clarifies the law with regard to investment companies' distributions. The
dividend will be paid on 28 October 2005 to shareholders on the register on 7
October 2005. The total amount of the distribution, calculated with reference
to the number of shares in issue at 31 July 2005 is £799,000. For the
comparative six-month period to 31 July 2004, an interim dividend of 0.5p per
share, together with a special dividend of 0.71p per share, representing a
payment from Martin Currie Capital Return Trust was declared.
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST plc
Statement of total return (incorporating the revenue account) for the
six months to 31 July 2004
Unaudited
Restated* Restated* Restated*
Revenue Capital Total
£'000 £000 £000
Losses on investments - realised - (581) (581)
- unrealised - (11,822) (11,822)
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 taxation 5,505 (777) 4,728
Interest payable and similar charges (259) (517) (776)
Dividends in respect of ordinary shares (4,091) - (4,091)
Movement in redemption entitlement to ordinary - (111,424) (111,424)
shareholders
_______ _______ _______
Return on ordinary activities before taxation 1,155 (112,718) (111,563)
Taxation on ordinary activities (16) - (16)
_______ _______ _______
Return attributable to shareholders 1,139 (112,718) (111,579)
_______ _______ _______
Return per ordinary share (note 2) 1.88p (0.47p) 1.41p
* Details of the restatement are included within note 1 to this announcement.
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST plc
Statement of total return (incorporating the revenue account) for the
year ended 31 January 2005
Unaudited
Restated* Restated* Restated*
Revenue Capital Total
£000 £000 £000
(Losses)/gains on - realised - (18,974) (18,974)
investments
- unrealised - 20,745 20,745
Currency gains - 71 71
Income - franked 6,584 13,528 20,112
- unfranked 1,451 64 1,515
Investment management fee (360) (721) (1,081)
Performance fee - (243) (243)
Other expenses (484) - (484)
_______ _______ _______
Net return before finance costs and taxation 7,191 14,470 21,661
Interest payable and similar charges (274) (550) (824)
Dividends in respect of ordinary shares (6,060) - (6,060)
Movement in redemption entitlement to ordinary - (98,238) (98,238)
shareholders
_______ _______ _______
Return on ordinary activities before taxation 857 (84,318) (83,461)
Taxation on ordinary activities (43) - (43)
_______ _______ _______
Return attributable to shareholders 814 (84,318) (83,504)
_______ _______ _______
Return per ordinary share (note 2) 3.18p 6.44p 9.62p
* Details of the restatement are included within note 1 to this
announcement.
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST PLC
BALANCE SHEET
31 July 2005 31 July 2004 31 January 2005
Unaudited Unaudited Unaudited
Restated* Restated*
£000 £000 £000 £000 £000 £000
Fixed assets
Investment at market 163,202 137,126 148,652
value
Current assets
Debtors 539 2,673 1,395
Cash at bank and on 1,942 10,547 2,636
deposit
_______ _______ _______
2,481 13,220 4,031
Creditors
Amounts falling due (835) (11,510) (661)
within one year
_______ _______ _______
Net current assets 1,646 1,710 3,370
_______ _______ _______
Total assets less 164,848 138,836 152,022
current liabilities
Creditors
Amounts falling due
after one year
Net assets
attributable to (164,848) (138,836) (152,022)
shareholders on
redemption
_______ _______ _______
- - -
_______ _______ _______
Net asset value per 103.1p 84.8p 94.1p
ordinary share (prior
to shareholders'
redemption liability)
(Notes 2 and 3)
102.4p 81.7p 91.5p
AITC net asset value
per share (Note 3)
* Details of the restatement are included within a note 1 to this announcement.
MARTIN CURRIE PORTFOLIO INVESTMENT TRUST plc
STATEMENT OF CASH FLOW
Six months ended Six months ended
31 July 2005 (Unaudited) 31 July 2004 (Unaudited)
Restated*
£000 £000 £000 £000
Operating activities
Net dividends and interest received from 4,661 15,857
investments
Interest received from deposits 124 477
Investment management fee (499) (871)
Cash paid to and on behalf of Directors (60) (59)
Bank charges (12) (17)
Net taxation recovered (3) -
Other cash payments (229) (355)
_______ _______
Net cash inflow from operating activities 3,982 15,032
Servicing of finance
Interest paid - (917)
Dividend paid (3,812) (4,090)
_______ _______
Net cash outflow from servicing of finance (3,812) (5,007)
Capital expenditure and financial investment
Payments to acquire investments (42,748) (102,994)
Receipts from disposal of investments 43,491 221,611
Foreign exchange differences (31) 107
_______ _______
Net cash inflow from capital expenditure and 712 118,724
financial investment
_______ _______
Net cash inflow before financing 882 128,749
Financing
Repurchase of ordinary share capital (1,576) (111,268)
Movement in short-term borrowings - (31,422)
_______ _______
Net cash outflow from financing (1,576) (142,690)
_______ _______
Decrease in cash for the period (694) (13,941)
_______ _______
* Details of the restatement are included within note 1 to this announcement.
Notes
1. Restatement
These statements have incorporated the requirements of FRS 21 "Events after the
Balance Sheet Date", FRS 25 "Financial Instruments: Disclosure and Presentation"
and FRS 26 "Financial Instruments: Measurement". There have been three
significant changes arising from these standards:
· Previously interim dividends were reported in the financial period to which
they related. FRS 21 recommends that they are accounted as a liability in the
period in which they are declared.
· In relation to FRS 26, the company's investments are classified as
"financial assets at fair value through profit and loss" and are therefore
valued at bid price. In prior years, investments were valued at middle market
price.
· Under FRS 25, the ordinary share capital of the company is classified as a
liability rather than equity. This classification arises from the five yearly
opportunity that shareholders have to redeem their shares at net asset value
less costs. Accordingly, a long-term liability for net assets attributable to
shareholders on redemption has been recognised.
The comparative accounting periods for the six months ended 31 July 2004 and the
year ended 31 January 2005 have been restated for these changes.
2. Returns and net asset value
The return and net asset value per ordinary share are calculated with reference
to the following figures:
Six month period ended Six month period ended Year ended 31 January
Revenue return 31 July 2005 31 July 2004 2005
Revenue return
attributable to ordinary (£1,689,000) £1,139,000 £814,000
shareholders
Add back dividend in
respect of ordinary £3,842,000 £4,091,000 £6,060,000
shares
£2,153,000 £5,230,000 £6,874,000
Average number of shares
in issue during period 160,860,978 278,106,887 216,255,943
Revenue return per
ordinary share 1.34p 1.88p 3.18p
Capital return
Capital return
attributable to ordinary £42,107,000 (£112,718,000) (£84,318,000)
shareholders
Adjustment for movement
in redemption entitlement (£26,012,000) £111,424,000 £98,238,000
£16,095,000 (£1,294,000) £13,920,000
Average number of shares
in issue during period 160,860,978 278,106,887 216,255,943
Capital return per
ordinary share 10.01p (0.47p) 6.44p
Net asset value per share As at 31 July 2005 As at 31 July 2004 As at 31 January 2005
Total assets less current £164,848,000 £138,836,000 £152,022,000
liabilities
Number of shares in issue
at period end 159,856,276 163,770,454 161,632,454
Net asset value per share 103.1p 84.8p 94.1p
3. Reconciliation of accounting and AITC net asset values
As at 31 July 2005 As at 31 July 2004 As at 31 January 2005
Accounting net asset 103.1p 84.8p 94.1p
value per share
Adjustment per share from 0.6p 0.1p 0.4p
bid to mid price
valuation of investments
Exclusion of non (1.3p) (3.2p) (3.0p)
distributed current
period revenue
AITC net asset value per 102.4p 81.7p 91.5p
share
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