9th May 2014 11:40
LONDON (Alliance News) - Scottish Mortgage Investment Trust PLC Friday said its net asset value total return was 23.1% in its last financial year, surpassing the 6.8% of its benchmark, the FTSE All-World Index, while it also announced proposals to amend its investment policy.
The trust's share price total return was 28.9% in the year ended March 31. The bulk of the trust's total return was driven by gains on investments, as opposed to income. Over a five-year period, the trust's net asset value total return was 196%, while the Association of Investment Companies Global Sector average was 109%.
In a statement, Scottish Mortgage, which is actively managed by Baillie Gifford & Co, said the strong total return was achieved in spite of the pound's appreciation, as nearly 90% of its portfolio investments are held in other currencies.
Over the year Scottish Mortgage shares moved from a discount of 4.1% to close the year at a premium of 0.4% and, at one point, the premium rose to 4.2%.
At the end of March, Scottish Mortgage's top three holdings as a percentage of its total assets were Amazon.com, Illumina, and Baidu, with 38.4% of its assets held in North America, 38.4% in Europe, 20.4% in Asia, 0.9% in South America, and 0.3% in Africa and the Middle East.
"I will restrict myself to noting that there has been continued progress at economic and company level. Political factors as always act as a de-stabilising element in the short term; the impact of the withdrawal of monetary stimulus may not be straightforward and there will be upsets as the Chinese economy adjusts towards an increasing domestic focus," John Scott, chairman, said in a statement.
"However, overall the commercial and trading environment for companies is broadly benign. This, coupled with an outstanding and accelerating pace of technological advance across so many fronts, makes for an environment where well-managed companies with sound strategies and an eye on the long term should be capable of making sustained and attractive returns. Scottish Mortgage's business is to back such companies and what is important is that our managers see no lack of such opportunities," Scott added.
In addition, Scottish Mortgage is seeking to remove the current investment restriction whereby individual holdings of over 3% of total assets must together be less than 40% of total assets. It said the restriction has meant that "successful investments with the potential for further growth have had to be reduced."
The trust will also propose a change to its objective and policy to remove the provision that it must aspire to increase its dividend ahead of inflation. The change is being proposed because Scottish Mortgage said it is primarily a growth trust. Although it wants to target dividend increases, though not necessarily ahead of inflation, the trust said it doesn't want to be constrained by chasing income when constructing a portfolio.
"This runs counter to the way the portfolio is now managed whereby companies are backed for the long term and turnover of investments is low. It also contradicts the managers' core investment beliefs and, we feel, could limit shareholders' long-term returns," the chairman said.
"Should the new objective and investment policy be approved, we will nonetheless retain the current restriction whereby the maximum investment in any one holding at time of purchase must be less than 8% of total assets," Scott added.
The trust also wants to take the axe to a provision that prohibits the distribution of any surplus made when selling off investments. No "immediate" plans exist to make use of the new provision, but the trust said the change will give "greater flexibility" in its distribution policy in the long term.
Scottish Mortgage Investment Trust shares were Friday quoted at 951.27 pence, down 0.5%.
By Samuel Agini; [email protected]; @samuelagini
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