Interim Management Statement

RNS Number : 5087Y

Securities Trust of Scotland PLC

24 January 2014

 



SECURITIES TRUST OF SCOTLAND PLC

INTERIM MANAGEMENT STATEMENT

COVERING THE PERIOD FROM 1 OCTOBER 2013 TO 31 DECEMBER 2013

Manager's commentary

Global equities finished the year strongly, with the MSCI World index finishing the fourth quarter up by 5.7% in sterling terms. High-yielding stocks underperformed, with the MSCI World High Dividend Yield index rising 4.0%. North America was the strongest regional market and Asia was the weakest. By sector, technology was the best performer and utilities and materials the chief laggards.

The Trust’s NAV rose by 2.9% during the period, but lagged its benchmark. The three largest detractors were the Thai telecoms company Shin Corp, Australian-listed engineering consultancy firm WorleyParsons and Japanese vehicle manufacturer Nissan. Shin Corp suffered as a result of weakness in the results at its affiliate AIS, a mobile operator. Meanwhile, WorleyParsons followed up a lacklustre investor-relations day in October with a profit warning, blaming delayed projects in various areas of its business as well as some problem projects where costs were higher than expected. Lastly, Nissan performed poorly after a profit warning in November about full-year guidance.

 

On the other side, the three biggest positive contributors were US-listed pharmaceutical company AbbVie, Macau casino operator SJM and Prudential, the UK-quoted insurer. AbbVie did well on the positive results of a hepatitis trial for its Humira drug. One of the key parts of our investment thesis is the scope for Humira and the potential of the hepatitis-C franchise. SJM and Prudential also performed strongly on the back of robust results.

 

During the quarter, we exited positions in the US-listed industrial-packaging company International Paper, European pharmaceutical firm Novartis, WorleyParsons (mentioned above) and two North American banks: CIBC and Fifth Third. There were no new purchases.

Alan Porter

PROFILE

Objective            To achieve rising income and long- term capital growth by investment in global equities

Benchmark         MSCI World High Dividend Yield index

Sector                   Global equity income

Launch                  28 June 2005

PORTFOLIO

Asset class

                                                           30 Sep                        31 Dec

Equities                                           104.3%                      104.4%

Cash                                                       1.9%                      1.4%

Gearing                                             (6.2%)                      (5.8%)

Equity allocation

                                                            30 Sep                       31 Dec

Healthcare                                        20.3%                      19.5%

Financials                                          14.5%                      14.2%

Oil & gas                                            14.3%                      13.9%

Consumer Goods                           13.4%                      13.1%

Telecommunications                      9.9%                      11.7%

Consumer services                       11.8%                      11.7%

Industrials                                           7.6%                      7.9%

Basic materials                                  5.2%                      5.0%

Utilities                                                 1.7%                      1.7%

Technology                                         1.3%                      1.3%

Regional allocation

                                                            30 Sep                       31 Dec

Europe                                              52.8%                       55.0%

North America                               37.7%                       36.9%

Asia Pacific ex Japan                      5.4%                       4.4%

Japan                                                    2.8%                       2.4%

Emerging markets                           1.3%                       1.3%

Top 10 equity holdings (40.8% of total portfolio)

Roche	5.6%
Pfizer	5.3%
Chevron	4.7%
AT&T	4.2%
Total	4.0%
Nestlé	3.7%
Sanofi	3.7%
Abbvie	3.4%
Royal Dutch Shell	3.2%
Philip Morris International	3.0%
Number of holdings	44
Number of countries	13

Key facts

Total net assets                                            £173.7m

Share price (p)                                             145.3

Net asset value per share (p)                142.5

Discount (premium)                                  (2.0%)

Historic net yield                                        3.3%

Source for historic yield: State Street as at 31 December 2013. 

The historic yield reflects dividends declared over the past 12 months as a percentage of the mid-market share price, as at the date shown.  Investors may be subject to tax on their dividends.

PERFORMANCE

Discrete performance over 12 months to 31 December

                            2013       2012       2011       2010       2009

Share price       19.4%    14.8%    10.4%    21.3%    19.6%

NAV                     20.8%    8.1%     5.0%      18.4%    29.9%

Benchmark       20.6%     8.3%     3.5%      14.5%    30.1%

Cumulative performance over periods to 31 December 2013

One month

Three months

Six months

One year

Three years

Five years

Share Price             (1.1%)         3.1%          (0.4%)       19.4%        51.2%       119.3%

NAV                          0.0%            2.9%          3.6%          20.8%        37.2%       110.9%

Benchmark             0.5%            4.0%          4.6%          20.6%        35.3%       101.6%

Source: Martin Currie and Morningstar. Bid to bid basis with net income reinvested over the periods shown in sterling terms. These figures donot include the costs of buying and selling shares in an investment trust. If these were included, performance figures would be reduced.

Prior to 1 August 2011, the Trust's benchmark was the FTSE All-Share index and the MSCI World High DividendYield index thereafter.

Past performance is not a guide to future returns.

Capital structure

Ordinary shares 121,899,148*

*Source: Martin Currie as at 31 December 2013.

Board of Directors

Neil Donaldson (chairman)                               

Andrew Irvine

Edward Murray                                                       

Rachel Beagles

Angus Gordon Lennox

Material events

The second interim dividend for the year to 31 March 2014 of 1.15p per share was paid on 13 December 2013 to shareholders on the register on 22 November 2013. The Trust issued 6,600,000 new shares during the period.

Angus Gordon Lennox was appointed as a non-executive director of the company with effect from 1 November 2013.

Website

The trust has its own website at www.securitiestrust.com. There you will find further details about the trust, information on Martin Currie, daily share prices (and associated risks), and you can access regular webcasts by the manager.

Key information

Year end                                                                              31 March

Annual general meeting                                                              July

Interim dividends paid                                                 March, June, September, December

Annual management fee as at 31 March 2013†   0.6%

Ongoing charges ratio 31 March 2013*                   1.0%

TIDM code                                                                          STS

Reuters code                                                                     STS.L

†Percentage of net assets.

*Percentage of shareholders' funds. Includes annual management fee.

Net asset value and dividend history

As at	Share	NAV	Discount/	Dividend
31 March	price	per share	(premium)	per share

2006                   125.5p         135.6p            7.4%                   2.85p

2007                   141.3p         148.4p            4.8%                   5.05p

2008                   116.0p         121.5p            3.8%                   5.45p

2009                   66.3p           75.4p              12.2%                5.45p

2010                   99.0p           109.4p            9.5%                   4.65p

2011                   108.0p         117.4p            8.0%                   4.65p

2012                   122.0p         119.8p            (1.9%)               4.70p

2013                   146.3p         141.8p            (3.2%)               4.75

Past performance is not a guide to future returns.

Risk factors

Please note that, as the shares in investment trusts are traded on a stockmarket, the share price will fluctuate in accordance with supply and demand and may not reflect the underlying net asset value of the shares.  Depending on market conditions and market sentiment, the spread between the purchase and sale price can be wide. As with all stock exchange investments the value of investment trust shares purchases will immediately fall by the difference between the buying and selling prices, the bid-offer spread.

The value of investments and the income from them may go down as well as up and is not guaranteed. An investor may not get back the amount originally invested.

Investment trusts may also borrow money in order to make further investments. This is known as 'gearing' and can enhance shareholder returns in rising markets but, conversely, can reduce them in falling markets.

The majority of charges will be deducted from the capital of the trust. This will constrain the capital growth of the trust in order to maintain the income streams.

High exposure to a single country market increases potential volatility. Changes in the rates of exchange may cause the value of investments to go up or down.

The trust invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down. In some circumstances the underlying investments may become illiquid which may constrain the investment manager's ability to realise some or the entire portfolio. The registration and settlement arrangements in emerging markets may be less developed than in more mature markets so the operational risks of investing are higher. Political risks and adverse economic circumstances are more likely to arise putting your investment at risk.

Funds which invest in smaller and/or medium sized companies are specialist funds and as such are likely to carry higher risks than a more widely invested fund.

 

END

 

 

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