Scottish Inv Regulatory News (SCIN)

Results for the six months to 30 April 2012

·    NAV total return 7.0%

·    Share price total return 7.1%

·    NAV and share price total return ahead of UK and global comparator indices

·    Investment portfolio outperforms over the 6 months, 1, 2 and 3 years

·    Interim dividend maintained at 4.60p

·    Significant uninvested borrowings available for deployment

The Scottish Investment Trust PLC invests internationally and is independently managed.  It is categorised as a global growth trust by the Association of Investment Companies.

Commenting on the results, Chairman, Douglas McDougall said:-

"In the six months to 30 April 2012, the net asset value per share (NAV) total return was 7.0% (with borrowings at market value). This was ahead of both the company's global and UK comparator indices.  The FTSE All-World Index™ total return was 6.6% and the UK FTSE All-Share Index™ total return was 6.2%.  The share price discount to ex-income NAV (with borrowings at market value) ended the period at 8.6%.

"The listed equity portfolio rose by 8.2% in total return terms. There was a strong absolute and relative contribution from North American holdings which produced a total return of 16.3%, compared with 11.3% for the regional index. UK, Latin American and Asia Pacific (ex Japan) holdings also performed well on a relative basis.  By industry group, the largest capital gains came from Technology (+£13.1m) with strong contributions from the company's largest holding, Apple (US), Chinese internet service group Tencent and telephony semiconductor group Qualcomm (US).   Consumer Services holdings appreciated by £8.7m with good contributions from another internet-related company, eBay (US), as well as retailer Ross Stores (US) and US cable media group Comcast.  Consumer Goods appreciated by £6.1m boosted by Philip Morris International (US)and a new holding in Brazilian brewer Ambev.  Gains in Health Care holdings were led by the appreciation in Aspen Pharmacare (South Africa).  Oil & Gas holdings depreciated by £3.6m.

"Net additions to the equity portfolio amounted to £16.5m reflecting investment in a small number of higher dividend yielding equities, the aggregate yield on which is above the annual interest rate on the company's long-term fixed rate borrowings.  The £15.1m added to Industrials included some of these investments such as Sydney Airport (Australia) and Swedish construction group NCC as well as new holdings in US agricultural equipment manufacturer Deere and Mexican airport operator Aeroportuario del Sureste.  Higher yield investments also featured within the modest additions to Financials (+£8.3m) and Oil & Gas (+£6.8m).  Significant exposure to the Telecommunications industry was reduced by £15.4m with reductions to América Móvil (Mexico) and complete sales of KDDI (Japan) and China Mobile (Hong Kong). 

 "Effective equity gearing rose modestly from 94% at the last year end to 99% (with borrowings at market value). At the period end, potential gearing stood at 122% with borrowings at market value.

"The main issues preoccupying stockmarket investors over the period were the developments within the eurozone and the fate of the most indebted countries on the region's periphery.  After a weak start, global stockmarkets rallied between December and mid-March as concerns over the eurozone government finances and banking system subsided, following central bank actions to provide monetary stimulus and liquidity support.  Economic rescue measures for Greece were coordinated eventually although worries about the Greek and other economies persist.  General signs of improvement from US economic data releases also helped lift sentiment although worries about the slowdown in the important Chinese economy were a recurring feature. 

"Dividend income generated from the portfolio was robust and total income increased by 18.8%, while expenses remained under control.  The board has declared an interim dividend of 4.60p per share (2011: 4.60p) which will be payable on 13 July 2012. 

 "At the AGM in January, shareholders voted to renew the company's authority to repurchase its own shares for cancellation.  These powers are used as part of the share buyback policy which is intended to keep the discount to ex-income NAV at or below 9% (with borrowings at market value).  Over the first half of the financial year, the company repurchased for cancellation 1.4m shares (2011: 3.2m) accounting for 1.2% of the outstanding shares in issue at the start of the period, at an average discount of 9.6% and a cost of £6.7m inclusive of dealing expenses. The average discount over the first half of the year was 9.4% and the average estimated discount since the introduction of the scheme was 8.6%. 

"The company is retaining all of its long-term gearing in cash and short term treasury bonds, which together with other cash to hand, leaves net current assets of £138.3m.   

"Over the past six months, there has been relatively little change in the investment outlook. While valuations appear reasonable, the outlook for the eurozone remains extremely difficult to predict, with clear risks from further deterioration.  Consequently, we prefer to keep most of the company's long-term borrowings liquid with a view to deploying them at more attractive levels as and when opportunities arise."

Principal risks and uncertainties

The principal risks and uncertainties facing the business are: investment and market price risk, interest rate risk, liquidity risk, foreign currency risk and credit risk.  These are unchanged from the previous financial year.

Responsibility statement

The board of directors confirms that to the best of its knowledge:

a)   the condensed set of financial statements, which has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, gives a true and fair view of the assets, liabilities, financial position and return of the company;

b)   the interim report includes a fair review of the development and performance of the business and the position of the company together with a description of the principal risks and uncertainties the company faces; and

c)   no transactions with related parties took place during the first six months of the financial year other than fees payable to the directors.

For and on behalf of the board

Douglas McDougall

Chairman

25 May 2012

Copies of the Interim Report will be posted to shareholders in June 2012 and will be available on the company's website (www.sit.co.uk).

For further information, please contact:-

John Kennedy, Manager                                              0131 225 7781