Interim Results
Scottish Mortgage Inv Tst PLC
26 October 2007
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
Results for the six months to 30 September 2007
The Company delivered excellent results, over the six month period Scottish
Mortgage significantly outperformed its benchmark. The share price rose by 19.6%
and net asset value per share (at fair value) by 17.4% compared to a 6.0%
increase in the FTSE All World Index.
In line with the investment approach, performance is assessed over a longer
period. Over 5 years, in total return terms, the share price is up by 198%, net
asset value (at par) by 172% while the FTSE All World Index is 103% higher.
• The portfolio benefited from its exposure to growth in emerging markets,
for example, through companies such as the Brazilian iron ore giant CVRD,
China Mobile and from several of its technology investments, for example
Amazon.com and Vestas. A sceptical approach is taken towards British and
American consumer financial stocks.
• Earning per share rose by 6.4% to 5.49p and a 5.00p interim dividend is
proposed, an 11.1% increase.
• While problems in credit markets may take some time to unwind, on a global
basis there is no shortage of long term investment opportunities.
Scottish Mortgage Investment Trust PLC is a low cost investment trust that aims
to maximise total returns over the long term from a focused and actively managed
portfolio. It invests globally, looking for strong businesses with above-average
returns. The trust has total assets of £2.4 billion (before deduction of
debentures, long and short term borrowings of £353 million).
Scottish Mortgage is managed by Baillie Gifford & Co, an Edinburgh based fund
management group with around £55 billion under management and advice as at 25
October 2007.
Scottish Mortgage Investment Trust PLC - Your low cost choice for global
investment.
26 October 2007
- ends -
For further information please contact:
Robert O'Riordan,
Baillie Gifford & Co 07730 412007
Mike Lord, Director,
Broadgate Marketing 020 7726 6111
The following is the unaudited Half-Yearly Financial Report for the six months
to 30 September 2007.
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
Half-Yearly Financial Report 30 September 2007
Responsibility Statement
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared in accordance
with the Accounting Standards Board's statement 'Half-Yearly Financial
Reports';
b) the interim management report includes a fair review of the information
required by Disclosure and Transparency Rules 4.2.7R (indication of
important events during the first six months and description of principal
risks and uncertainties for the remaining six months of the year); and
c) the interim management report includes a fair review of the information
required by Disclosure and Transparency Rules 4.2.8R (disclosure of related
party transactions and changes therein).
By order of the Board
Sir Donald MacKay
Chairman
25 October 2007
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
INTERIM MANAGEMENT REPORT
Results
The Company delivered excellent results over the six months to 30 September
2007: net asset value per share (NAV) increased by 17.4% and the share price by
19.6%. The benchmark, the FTSE All World Index, ended the period 6.0% higher.
Performance is assessed over a longer period to match the investment approach
and in total return terms over the 5 years to 30 September 2007 the share price
has increased by 198% and the NAV per share by 172%. By comparison, the FTSE All
World Index is 103% higher.
Earnings per share rose by 6.4% to 5.49p. The Board proposes an interim dividend
of 5.00p per share, an 11.1% increase on last year. A greater proportion of
earnings now derives from overseas sources where improving dividend streams can
be found but where the timing of payments is sometimes less predictable.
Investment
The last six months have given a clear indication of the changing nature of the
global economy. Even the debacle in the American housing market combined with a
widespread dislocation in Western credit markets has failed to halt the boom in
the emerging markets. We think this will remain the case for years to come and
have been the beneficiaries of our heavy exposure to companies such as the
Brazilian iron ore giant CVRD and China Mobile. We remain sceptical of the
attractions of most British and American consumer and financial stocks and plan
to continue to concentrate our developed market exposure in areas such as
technology where from strong internet franchises to new energy sources we think
there is still much to be done for patient growth investors.
Outlook
The objective remains to invest in companies on a global basis with a view to
achieving long term growth. The portfolio is not over-diversified but contains a
broad spread of interests. While problems in credit markets will take some time
to unwind, possibly with the creation of further casualties on the way, there is
currently no overall shortage of long term equity investment opportunities but
some caution in terms of expectations is sensible given the scale of recent
rises.
VAT
During the year the case raised by the AIC and Claverhouse against HM Revenue &
Customs, challenging the legality of levying VAT on investment trust management
fees, was referred to the European Court of Justice which ruled that such
management fees should be exempt from VAT. Exemption would have some positive
impact upon the Company's expense ratio in future years. The Company should also
benefit from a recovery of VAT suffered in prior years; however, the position
remains uncertain. A formal judgement is awaited from the UK VAT Tribunal and HM
Revenue and Customs
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
INTERIM MANAGEMENT REPORT (Ctd)
may yet continue to fight the case. As a result of this uncertainty the Company
is not in a position to recognise the potential recovery of VAT in the financial
statements.
Risks and Opportunities
We believe that risk should be seen as the danger of a permanent loss of capital
rather than as the inevitable fluctuation of markets or divergence from index
performance. Risk is inherently difficult to predict and calculate. It is the
management, interpretation and application of judgement with respect to these
risks wherein opportunity lies. We think attempts to measure it numerically are
pernicious and intrinsically dangerous.
The Company's main risk is investment risk. Markets and share prices fluctuate
and are driven in part by economic, political and social factors at local and
global levels. In particular, major developments in the economic and political
direction of China could have great impact for good or ill. The Managers do have
long experience of global investment. The portfolio does not replicate the
benchmark index therefore performance will deviate from the index. Other risks
that face the Company are detailed in note 12.
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
INCOME STATEMENT
(unaudited)
For the six months ended For the six months ended For the year ended
30 September 2007 30 September 2006 31 March 2007
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Realised gains on investments - 114,626 114,626 - 111,645 111,645 - 221,145 221,145
Unrealised gains/(losses) on - 174,118 174,118 - (201,829) (201,829) - (168,144) (168,144)
investments
Currency (losses)/gains - (2,223) (2,223) - 2,963 2,963 - 5,083 5,083
Income from investments and
interest receivable 27,457 - 27,457 23,803 - 23,803 45,472 - 45,472
Other income 25 - 25 25 - 25 50 - 50
Investment management fee (1,985) (1,985) (3,970) (1,648) (1,648) (3,296) (3,462) (3,462) (6,924)
(note 4)
Other administrative
expenses (958) - (958) (756) - (756) (1,731) - (1,731)
Net return before finance
costs and taxation 24,539 284,536 309,075 21,424 (88,869) (67,445) 40,329 54,622 94,951
Finance costs of
borrowings (4,680) (4,680) (9,360) (4,220) (4,220) (8,440) (8,452) (8,452) (16,904)
Net return on ordinary
activities before taxation 19,859 279,856 299,715 17,204 (93,089) (75,885) 31,877 46,170 78,047
Tax on ordinary activities (4,595) 2,914 (1,681) (2,499) 1,674 (825) (4,060) 2,650 (1,410)
Net return on ordinary
activities after taxation 15,264 282,770 298,034 14,705 (91,415) (76,710) 27,817 48,820 76,637
Net return per ordinary
share (note 5) 5.49p 101.64p 107.13p 5.16p (32.11p) (26.95p) 9.80p 17.19p 26.99p
Dividends paid and proposed
per ordinary share (note 6) 5.00p 4.50p 9.50p
The total 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.
A Statement of total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the above statement.
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
BALANCE SHEET
(unaudited)
At At At
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
FIXED ASSETS
Investments held at fair value through profit or loss 2,349,345 1,895,752 2,031,907
CURRENT ASSETS
Debtors 8,593 10,131 25,037
Cash and short term deposits 22,305 26,165 19,165
30,898 36,296 44,202
CREDITORS
Amounts falling due within one year
Bank loans (note 7) (48,374) (76,258) (74,155)
Other creditors (9,301) (12,243) (30,594)
(57,675) (88,501) (104,749)
NET CURRENT LIABILITIES (26,777) (52,205) (60,547)
TOTAL ASSETS LESS CURRENT LIABILITIES 2,322,568 1,843,547 1,971,360
CREDITORS
Amounts falling due after more than one year
Bank loans (note 7) (152,796) (49,505) (49,542)
Debenture stocks (151,895) (152,003) (151,953)
(304,691) (201,508) (201,495)
2,017,877 1,642,039 1,769,865
CAPITAL AND RESERVES
Called-up share capital 68,860 70,959 70,365
Capital redemption reserve 21,320 19,221 19,815
Capital reserves - realised 1,146,850 976,752 1,067,888
Capital reserves - unrealised 708,949 504,829 541,179
Revenue reserve 71,898 70,278 70,618
EQUITY SHAREHOLDERS' FUNDS 2,017,877 1,642,039 1,769,865
NET ASSET VALUE PER ORDINARY SHARE
(after deducting borrowings at fair value) (note 8) 712.5p 554.5p 607.1p
NET ASSET VALUE PER ORDINARY SHARE
(after deducting borrowings at par) 734.9p 580.7p 631.0p
ORDINARY SHARES IN ISSUE (note 9) 275,440,243 283,836,176 281,461,176
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited)
For the six months ended 30 September 2007
Capital Capital Capital Total
Share redemption reserve - reserve - Revenue shareholders'
capital reserve realised unrealised reserve funds
£'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at
1 April 2007 70,365 19,815 1,067,888 541,179 70,618 1,769,865
Net return on ordinary
activities after taxation - - 115,000 167,770 15,264 298,034
Shares bought back (note 9) (1,505) 1,505 (36,038) - - (36,038)
Dividends paid during the
period (note 6) - - - - (13,984) (13,984)
Shareholders' funds at
30 September 2007 68,860 21,320 1,146,850 708,949 71,898 2,017,877
For the six months ended 30 September 2006
Capital Capital Capital Revenue Total
Share redemption reserve - reserve - reserve shareholders'
capital reserve realised unrealised funds
£'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at
1 April 2006 72,019 18,161 892,063 702,315 68,795 1,753,353
Net return on ordinary
activities after taxation - - 106,071 (197,486) 14,705 (76,710)
Shares bought back (1,060) 1,060 (21,382) - - (21,382)
Dividends paid during the
period (note 6) - - - - (13,222) (13,222)
Shareholders' funds at
30 September 2006 70,959 19,221 976,752 504,829 70,278 1,642,039
For the year ended 31 March 2007
Capital Capital Capital Revenue Total
Share redemption reserve - reserve - reserve shareholders'
capital reserve realised unrealised funds
£'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at
1 April 2006 72,019 18,161 892,063 702,315 68,795 1,753,353
Net return on ordinary
activities after taxation - - 209,956 (161,136) 27,817 76,637
Shares bought back (1,654) 1,654 (34,131) - - (34,131)
Dividends paid during the
year (note 6) - - - - (25,994) (25,994)
Shareholders' funds at
31 March 2007 70,365 19,815 1,067,888 541,179 70,618 1,769,865
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
CONDENSED CASH FLOW STATEMENT
(unaudited)
Six months to Six months to Year to
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
Net cash inflow from operating activities 24,187 21,978 40,741
Net cash outflow from servicing of finance (8,446) (7,942) (16,570)
Total tax suffered (1,719) (789) (1,422)
Net cash outflow from financial investment (36,724) (25,221) (17,426)
Equity dividends paid (note 6) (13,984) (13,222) (25,994)
NET CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES
AND FINANCING (36,686) (25,196) (20,671)
Shares bought back (note 9) (36,038) (21,382) (34,131)
Net cash inflow from bank loans (note 7) 75,864 50,093 51,317
INCREASE/(DECREASE) IN CASH 3,140 3,515 (3,485)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
DEBT
Increase/(decrease) in cash in the period 3,140 3,515 (3,485)
Increase in bank loans (note 7) (75,864) (50,093) (51,317)
Exchange movement on bank loans (1,609) 4,086 7,376
Other non-cash changes 58 50 100
MOVEMENT IN NET DEBT IN THE PERIOD (74,275) (42,442) (47,326)
NET DEBT AT START OF THE PERIOD (256,485) (209,159) (209,159)
NET DEBT AT END OF THE PERIOD (330,760) (251,601) (256,485)
RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS
AND TAXATION TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
Net return on ordinary activities before finance
costs and taxation 309,075 (67,445) 94,951
Net (gains)/losses on investments - securities (288,744) 90,184 (53,001)
Currency losses/(gains) 2,223 (2,963) (5,083)
Amortisation of fixed income book cost 13 (4) (26)
Changes in debtors and creditors 1,620 2,206 3,900
NET CASH INFLOW FROM OPERATING ACTIVITIES 24,187 21,978 40,741
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
THIRTY LARGEST EQUITY HOLDINGS AND EQUITY PERFORMANCE
(unaudited)
Fair value
at 30 Sept % of Performance+
2007 total Absolute Relative
Name Business £'000 assets % %
Petrobras Oil producer 105,312 4.4 41.9 32.1
CVRD Iron ore and nickel mining 102,643 4.3 76.1 64.0
eBay Internet trading company 85,617 3.6 13.3 5.5
Atlas Copco Engineering 80,970 3.4 19.9 11.6
Sandvik Engineering 74,957 3.2 22.4 13.9
Gazprom Gas producer 72,458 3.1 1.4 (5.6)
British American Tobacco Tobacco 69,165 2.9 11.3 3.6
Amazon.com Online retailer 62,115 2.6 125.4 109.8
Porsche Automobiles 61,249 2.6 34.1 24.9
Canon Printers, copiers and cameras 60,437 2.6 (1.0) (7.9)
Schlumberger Oil services 51,463 2.2 46.8 36.7
Norilsk Nickel Diversified mining 48,168 2.0 39.7 30.0
Tesco Food retailer 45,164 1.9 0.2 (6.7)
China Mobile Mobile telecommunications 44,600 1.9 76.7 64.5
Unicredito Italiano Banking 44,126 1.9 (18.3)* (21.3)*
Vestas Windsystems Wind power systems 41,499 1.8 36.3 26.9
UBS Banking 41,446 1.8 (10.7) (16.8)
SAP Business software 41,354 1.7 28.2 19.3
Standard Chartered Banking 41,053 1.7 10.0 2.4
Teva Pharmaceuticals Generic drugs manufacturer 38,143 1.6 14.9 6.9
Omnicom Advertising agency 37,711 1.6 (9.1) (15.4)
Ericsson Telecommunications equipment 36,233 1.5 6.6 (0.7)
Reed Elsevier Publisher 35,332 1.5 6.2 (1.1)
GlaxoSmithKline Pharmaceuticals 35,019 1.5 (5.5) (12.0)
Deere Farm machinery 34,266 1.4 32.4 23.3
Swisscom Fixed line telecommunications 32,537 1.4 6.7* 5.0*
EOG Resources Oil and gas producer 31,340 1.3 (2.2) (9.0)
Monsanto Seed and agricultural chemicals 31,134 1.3 50.7 40.3
Rolls Royce Group Aerospace equipment provider 29,232 1.2 0.7* 0.6*
Man Group Hedge fund manager 27,650 1.2 0.8 (6.2)
1,542,393 65.1
+ Absolute and relative total return performance has been calculated over the
period 1 April 2007 to 30 September 2007. Absolute performance is in sterling
terms; relative performance is against the benchmark: FTSE All World Index (in
sterling terms).
* Figures relate to part-period returns.
Source: Baillie Gifford & Co/StatPro.
Past performance is no guarantee of future performance.
DISTRIBUTION OF ASSETS
(unaudited)
At At At
30 September 2007 30 September 2006 31 March 2007
% % %
Equities: United Kingdom 16.3 34.4 24.8
Continental Europe 23.9 11.2 16.0
North America 22.1 24.5 23.9
Japan 3.6 3.8 3.2
Asia Pacific 11.0 8.5 11.8
Emerging Markets 18.6 11.6 15.8
Total equities 95.5 94.0 95.5
Sterling denominated bonds 0.6 1.5 0.4
Euro denominated bonds 0.3 1.2 0.8
US$ denominated bonds 0.2 0.5 0.2
Brazilian real denominated bonds 2.5 1.6 2.4
Net liquid assets 0.9 1.2 0.7
Total assets (before deduction of loans and 100.0 100.0 100.0
debentures)
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
Notes to the condensed set of financial statements (unaudited)
1. The financial information contained within this half-yearly financial
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 2007 has been extracted from the statutory accounts which have been
filed with the Registrar of Companies. The Auditors' Report on those
accounts was not qualified and did not contain statements under the
sections 237(2) or (3) of the Companies Act 1985.
2. The condensed set of financial statements have not been audited or reviewed
by the Auditors pursuant to the Auditing Practices Board guidance on
'Review of Interim Financial Information'.
3. The condensed set of financial statements has been prepared on the basis of
the same accounting policies as set out in the Company's Annual Financial
Statements at 31 March 2007 and in accordance with the Accounting Standards
Board's statement 'Half-Yearly Financial Reports'.
4. The management agreement is terminable on not less than 12 months' notice,
or on shorter notice in certain circumstances. The fee in respect of each
quarter is 0.08% of total assets less current liabilities (excluding short
term borrowings for investment purposes) and is subject to VAT at the
appropriate rate.
Six months to Six months to Year to
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
5. Net return per ordinary share
Revenue return 15,264 14,705 27,817
Capital return 282,770 (91,415) 48,820
Total return 298,034 (76,710) 76,637
Weighted average number of ordinary shares in 278,197,516 284,699,668 283,953,088
issue
Net return per ordinary share figures are based on the above totals of
revenue and capital and the weighted average number of ordinary shares in
issue during each period.
There are no dilutive or potentially dilutive shares in issue.
Six months to Six months to Year to
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
6. Dividends
Amounts recognised as distributions in the
period:
Previous year's final dividend of 5.00p (2006
- 4.65p), paid 4 July 2007 13,984 13,222 13,222
Interim dividend for the year ended 31 March
2007 of 4.50p, paid 24 November 2006 - - 12,772
13,984 13,222 25,994
Dividends paid and proposed in the period:
Interim dividend for the year ending 31 March
2008 of 5.00p (2007 - 4.50p) 13,772 12,773 12,772
Final dividend for the year ended 31 March - - 14,073
2007
Adjustment to provision for previous year's
final dividend re shares bought back (89) (173) (173)
13,683 12,600 26,672
SCOTTISH MORTGAGE INVESTMENT TRUST PLC
Notes to the condensed set of financial statements (unaudited) (Ctd)
6. Dividends (Ctd)
The interim dividend was declared after the period end date and has
therefore not been included as a liability in the balance sheet. It is
payable on 23 November 2007 to shareholders on the register at the close of
business on 9 November 2007. The ex dividend date is 7 November 2007.
7. The bank loans falling due within one year comprise Y7,840 million and
CHF35.5 million (30 September 2006 - Y5,900 million and €73 million; 31
March 2007 - Y13,740 million and CHF35.5 million).
The bank loans falling due in more than one year comprise €73 million,
Y8,500 million, US$30 million and CHF121 million drawn down under
facilities which are repayable June 2009 and June 2010 (30 September 2006
and 31 March 2007 - €73 million).
During the period a bank loan of Y5,900 was repaid and bank loans of
Y8,500 million, US$30 million and CHF121 million were drawn down.
8. The fair value of borrowings at 30 September 2007 was £408,369,000 (30
September 2006 - £345,949,000; 31 March 2007 - £336,735,000).
Six months to Six months to Year to
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
9. Share capital: Ordinary shares of 25p each
Allotted, called-up and full paid 275,440,243 283,836,176 281,461,176
Treasury shares 8,905,933 510,000 2,885,000
In the six months to 30 September 2007 a total of 6,020,933 ordinary shares
with a nominal value of £1,505,000 were bought back at a total cost of
£36,038,000 and held in treasury. At 30 September 2007 the Company had
authority to buy back a further 38,359,104 ordinary shares.
10. Transaction costs incurred on the purchase and sale of the investments are
added to the purchase cost or deducted from the sale proceeds, as
appropriate. During the period, transaction costs on purchases amounted to
£733,000 (30 September 2006 - £635,000; 31 March 2007 - £1,549,000) and
transaction costs on sales amounted to £543,000 (30 September 2006 -
£207,000; 31 March 2007 - £653,000).
11. The half-yearly financial report is available on the Managers' website
www.bailliegifford.com and will be posted to shareholders on or around 5
November 2007.
12. Risks and Uncertainties
Other risks facing the Company include the following; currency risk
(investments are subject to movements in exchange rates), gearing risk (the
use of borrowing can magnify the impact of falling markets), the risk that
the discount can widen and regulatory risk (that the loss of investment
trust status or a breach of the UKLA Listing Rules could have adverse
financial consequences and cause reputational damage). These risks are
monitored and assessed by the Managers and reported on regularly
to the Board and the Audit Committee.
13. None of the views expressed in this document should be construed as advice
to buy or sell a particular investment.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 1 hour ago Galileo Resources
- 1 hour ago HICL Infrastructure
- 14 hours ago Sage Group
- 14 hours ago Utilico Emerging Markets Ltd (DI)
- 15 hours ago Howden Joinery Group