Investors in beleaguered Scottish Investment Trust (SCIN) breathed a sigh of relief after the company’s final set of full year results showed a bounce in NAV (net asset value) total returns as the global economy recovered from the pandemic.
The trust, which is set to combine with JPMorgan Income & Growth (JGGI) next year following a strategic review and shareholder vote, reported a 15.9% increase in its NAV total return for the 12 months to October and a 24.3% total share price return.
That was behind the MSCI All-Countries World Index return in sterling of 29.5% but was still a major improvement over the average performance of the last five years, when the firm adopted a strongly contrarian view. The shares eased 1% to 809p, reflecting the wider market weakness.
The board recommended a final dividend of 7p per share, bringing the total pay-out for the year to 24.4p, an increase of 5% on 2020. The revenue reserve for the year was 66.1p, consistent with the company’s conservative approach of salting away excess profits in good years.
A NEW ERA BECKONS
Given the complexity of integrating a self-managed vehicle like ‘the Scottish’ into JPMorgan Income and Growth, shareholders approved a two-stage process which to begin with will see JP Morgan Asset Management UK take over the management of the fund, ‘adopting a new investment strategy substantially identical to that of JGGI’.
The second stage, combining the two entities, will take place as and when ‘the Scottish’ has taken ‘all steps necessary to allow it to be placed into liquidation in an orderly fashion’. The combination is expected to happen by the end of the first quarter next year.
JP Morgan said shareholders can expect to benefit from a re-rating of their investment post completion. In the three months prior to the strategic review, shares of ‘the Scottish’ traded at an average discount to NAV of over 10% while shares in JGGI traded at an average 2.5% premium over the same period.
In fairness, since the announcement of the merger proposal the discount to NAV on shares in ‘the Scottish’ has narrowed from 12.6% to just 3.8%.
Shareholders can also look forward to greater liquidity due to the increased size of the company, a dividend yield of at least 4% of NAV and a low ongoing charge fee due to the increase in assets.
