Scottish Mortgage prepared for short-term pain

28th Oct 2011 08:15

The first half of the financial year has been a rough one for Scottish Mortgage, with the investment trust's net asset value per share (NAV) falling by 20.5%.The decline in NAV in the six months to the end of September was worse than the 16.1% fall in the FTSE All World index in sterling terms, the index against which the investment trust benchmarks its performance.As is traditional in the investment trust sector, the company prefers to take a longer term view, and notes that over the five years to the end of September 2011, NAV total return (i.e. capital appreciation plus dividends) was 28% and in share price terms, 40%. Both were well ahead of the benchmark index which returned 15%.Earnings per share for the half year were 10.8p, up from 8.6p at the interim state last year. The company proposes to pay an interim dividend of 6.2p, up from 5.8p last year.Performance at the end of the reporting period suffered a reversal when a number of share prices and markets were marked down as short term investors sought shelter in low-risk positions. That gave the trust's investment manager, Baillie Gifford, pause for thought, but after due consideration the manager decided to grin and bear what, hopefully, will be short-term pain, though "a steady eye" will be kept on both the strong individual investment cases and on longer term dynamics and not short term market preoccupations."Painful market conditions may have to be endured for the remainder of the year, and possibly longer, but taking a deliberate long term and unfashionably optimistic view provides succour," the company statement said. --jh