Scottish Investment Trust first half income up, but returns fall

Scottish Investment Trust said first half net asset value per share total return was 4% and share price total return 4.4%.

Total income was up 15.7% to £13.7m due to sterling weakness. The board has declared an interim dividend of 5.25p per share, an increase of 5%. Return on ordinary activities before tax fell to £25.5m from for £75.5m.

While the company does not have a formal benchmark it said that total return was 4.8% against the FTSE All-World Index and 0% against the FTSE All-Share Index.

The trust said it's largest loss of £2.3m came from British Land as the company suffered from a change in perception towards the London property market and the potential threat of 'Brexit'.

“The majority of other losses in the period came from our financial holdings, which reacted to both the actual or speculated imposition of negative interest rates as well as the prospect of losses from loans to commodity backed ventures,” the company said

“Most impacted were Japanese banks...but European holdings were also affected. Standard Life likewise reacted to the threat of negative interest rates and 'Brexit' and also a concern about the prospects for the flagship GARS fund.”

Scottish said the slowdown in the Chinese economy, despite some recent signs of stability, remained a source of concern while the outcome of the June 23 UK referendum on EU membership was “likely to influence sterling and has the potential to impact markets more generally”.

“In this environment, while equities are not obviously cheap, they appear to offer attractions over many other asset classes, given the prospect for dividend income and the inherent modicum of inflation protection,” the company said.

“We have a portfolio of companies which we believe offers the prospect of good long‑term returns but we have retained £36m (5% of shareholders' funds) of uninvested borrowings which can be deployed at an opportune time.”