Edison issues review on Scottish Investment Trust

London, UK, 20 December 2018

Edison issues review on The Scottish Investment Trust (SCIN)

The Scottish Investment Trust (SCIN) seeks to provide investors with capital growth and a growing income, by investing in companies around the globe that are unloved by the majority of investors. The core of its portfolio (74% at 31 October 2018) is in 'ugly ducklings' - stocks that are both out of favour and operationally challenged - as lead manager Alasdair McKinnon says these can generate higher than average returns over the longer term. Because of its contrarian style, SCIN has no benchmark, and generally is not exposed to 'hot money' investments like US and Chinese internet stocks, instead focusing on areas such as bricks-and-mortar retail (where the manager sees the perceived threat from online competition as overdone), European and Japanese banks, 'big pharma' (which McKinnon sees as having stronger long-term prospects than they are currently being given credit for) and gold miners. SCIN recently announced its 35th consecutive annual dividend rise and offers one of the highest yields in its peer group, at 3.2% (2.7% excluding special dividends).

At 19 December 2018, SCIN's shares traded at an 8.0% discount to cum-income NAV (with debt at fair value). This was close to both the short- and longer-term averages, which range from 8.6% to 9.9% over one, three, five and 10 years. The trust has an active discount management policy, using share buybacks when the discount to cum-income NAV exceeds 9.0% in normal market conditions. SCIN's discount is above the average of its peers in the AIC Global sector, even though it has one of the highest dividend yields at 3.2% (2.7% excluding the special dividend).

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