苏格兰抵押投资信托 — 经理人回顾，截至2003年3月31日年报（詹姆斯·安德森）

I has been a challenging year for equity investors. All major markets have fallen sharply with little apparent difterentiation according to economic prospects or stockmarket valuations. We have tried t naintain a balance between exposure to the more defensive areas of the market that have been les: desire to add to ou holdings in dese the his of world mark ef thai sethn fo us rs have become sing desere ed tad that Selected telecommunication and financial stocks fall into the latter category. This task was complicated by the Iraqi crisis with the year- end of the Company falling at a moment of particular alobal anxiety. Although we offset a substantial part of our gearing through our successful bond investments the chart below makes it clear that the costs and impact of our long-term borrowings were damaging in the Pertormance in UK equities continued to be relatively good but we were disappointed that the Londor market fared no better than its international counterparts.

Concern over the deterioration in British economic fundamentals has led us to trim the UK position but we are encouraged by both the prospects of the companies in our portfolio and their depressed valuations. Our major stock selection problem was in Europe. As noted last year our holdings in this area have ‹ endency to be more volatile and less defensive than elsewhere in the portfolio. We regard this as o reflection of both the best long-term corporate opportunities available to us in Europe (which tend to be n economically sensitive sectors such as automobiles) and of the excessive volatility of many continenta markets. We will be very disappointed if our relative performance in Europe does not improve in any period of better equity returns. justified by either corporate fundamentals or valuation levels. MANAGERS' PORTFOLIO REVIEW United Kingdom A second negative factor has been provided by UK corporate pension schemes.

For some years now, they have been shifting their asset allocation away from UK equities and into either bonds or overseas equities. This has led to the absence from the market of a major historic source of demand for UK equities. These Cornce with this pricy allowed worst osthe declines the soided for and he sell-off was very broadly based and most of the Company's investments declined in value during the year. There were exceptions to this. Once again, the large positions in tobacco companies proved beneficial with the share prices of Gallaher and Imperial Tobacco both posting gains for the year on the back of decent earnings growth and a rerating. Two of the house-building companies, Bovis Homes and Bellway, also saw their 1 Marketing campaigns such as this advertisement for Smirnoff Ice are bolstering share prices rise.

However, these instances are few and far between. Diage's leading position in the global spirits industry. 2 Educational titles are just one part of Reed and Reuters Elsevier's strong portfolio of publishing and the absence of their shares from the portfolio was helpful. activities. One change of view worth highlighting concerns Vodafone, the mobile phone group, which has during the course of the year become the Company's largest single investment. Its profits are growing rapidly as robust sales growth combine of cash permit co litted raistment in investment high levels infrastructure and its sheer scale bring benefits in marketing and procurement. It does no however, signal a change of view on the entire UK telecoms industry. Vodafone remain: our only holding in this sector. Of the other large sectors in the UK market, pharmaceutical, bank and oil stocks all ertormed broadly in line with the market.

We are happy to continue with a large holdin n GlaxoSmithKline on the strengths of its modest rating and early stage research portfoli ut have been reducing the holding in AstraZeneca where the share price appears to ahly rated given uncertainty over new drug launches. Amongst the banks, Royal Bank. Scotland, HSBC and HBOS did relatively well, oftset by a poor performance from Loyds We have reduced the holding in Lloyds. The largest transactions have been in the oil stocks. For much of the period, the prospect of war in Iraq kept the oil price high and we However some scene made to find or ases other convert rospects, notably those operating in emerging markets. A swift prosecution of the Irag wal as now removed any reluctance to sell and further reductions have been made in recen weeks. Whether an end to military operations in Iraq sparks sustained optimism amongst UK companies and investors remains to be seen.

However, compared to overniaht interest rates Currently set at 3.75% and UK government bonds offering yields between 4 and 42%, the enefits of long term equity investment after such a depressing period. However, commo ense suggests enthusiasm for the market is better rewarded when stocks are bought on los valuations. We believe UK equity valuations are currently cheap. THE SCOTTISH MORTGAGE AND TRUST PLE Continental Europe perennial problem of inadequate profitability in the German banking industry and the igh equity exposure of insurance companies has undermined the solidity of the financial system. These issues will require more vigorous responses than they have yet received if they are not to fester in the years ahead Our exposure to the German market is now modest. In the course of the period under review we sold Deutsche Bank and belatedly, MLP, our only holdings in the financial sector.

Our largest holding in Germany is the business software giant SAP which appears to have coped with a demanding environment in exemplary fashion. This reminders that Germany stingers compenis live considerable oracion drachi, the gloomy economic situation. The French economy has slowed in the last year but it has avoided the stagnation that prevalent in Germany. We retain considerable confidence in several of our long-ter oldings in the Paris market. Sanofi-Synthelabo (pharmaceuticals), L'Oreal (cosmetic and the luxury goods company Hermes all fall into this category. The only new purchases this year have been in the telecommunications industry as we think that France Telecom has finally confronted its balance sheet problems and that its Orange mobile subsidiary has an extremely strong position in the domestic market. 2 etías Copco tunnelling machine at work Picture courtesy of Atlas Conco The telecommunications industry remains critical to European market trends.

This is as true of the Scandinavian equipment suppliers as it is for the operatina companies. Whilst equipment demand remains subdued Nokia's dominance of the global handset narket continues to grow and profitability has remained strikingly high despite th difficult environment. We have added to our holding in the course of the year. We ar We have made net sales of £175m of European equities in the last three years. We now have 8.8% of total assets invested in the region and we would be surprised to see this exposure fall significantly further. We can now find many equities with sustainable business franchises selling at low ratings by historical standards, by MANAGERS' PORTFOLIO REVIEW North America hm use, nas boosted by sly cast and lo per ate rest sure enhe colors omponent, was boosted t Eep sle of dival. We believe in el foot le congres cool tra fronands, dolle see for sher sipend is impied of ree growing renderal budger deceit formerly known as Philip Morris.

Nevertheless the Company's North Americar avestments outperformed their benchmark for the vear as a whole TX in its scale and buying expertise. markets - falling share prices have been more effective I A Tiffany & Co's magazine advertisement. been fully absorbed by Copyright Tiffany & Co., reprinted with companies and pediby fond problems of companio, largely in the fleems doad permission. industrial sectors, with defined benefit schemes. 2 Golden West's World Savings branch in Sebastian, Florida. These issues heavily influenced our sales during the year, which largely involved further reductions to our positions in technology and telecoms. We now have no money invested Japan Elsewhere, Nintendo's share price was very weak as the new Gamecube made little impact on Sony's dominance of the games console market so we The Japanese economy has enjoyed a mild recovery over the last year.

Initial impetus came from a rebound in exports, which encouraged a revival of industrial capital investment, while consumption trends have remained steady despite rising unemployment. Fiscal year 2002 GDP growth seems likely to be reported at around 1.5%, significantly above consensus expectations a year ago of negative growth. Importantly, there is also some evidence that deflationary pressures are easing, with recent consumer and wholesale price data showing lower year on year declines. Japan's growth dynamics remain export-dependent, so the outlook for 2003 is cloudy given question marks over global economic activity, but we expect China to continue its emergence as a major stimulant to Japanese growth. Attention has again been dominated by the travails of the city banks. The appointment of the reform-minded Heizo Takenaka as head of the Financial Services Agency sparked hope that genuine reform of major banks and their problem borrowers was becoming high-end Tostem Inax bathroom. more likely, leading to severe share price weakness for both as perceived bankruptcy risk rose.

Although Takenaka's policies in practice have not proved as radical as initially 2 Yamada Denki's scale allows it to reap purchasing economies on high volume expected, there has been limited progress in improving the condition of the banks. A new dectronics lines. body called the Industrial Revitalisation Corporation has been created to remove problem loans from balance sheets, and the Bank of Japan has started buying banks' equity cross- holdings. Meanwhile the banks themselves have become more proactive in raising new tier i capital and cutting costs. Still, it is fair to say that Japan's malfunctioning financial system remains one of the major factors in the country's economic problems, and a final We continue to be more impressed by the actions of industrial Japan to improve it efficiency and shareholder returns. Despite meagre economic nargins, balance sheet accelerated markedly.

We are seeing merger and acquisition activity becoming a key element of several important industries, such as semiconductors han double over the next few years given the potential for sypecies ari gos to mong inhan dore lieutenant end yeaging ben the po. Asia Pacific and Other Emerging Markets During the year to 31 March we have made a net investment of £10m into the markets of the developed Asia Pacific region and f11m into the emerging markets. These both reflect two broad themes, the increasing relative attraction of stocks. in these markets on a case-by-case basis, and the emergence benefit these markets outsourced goods and services, while volumes and prices for certain commodity-producing companies may be on an improving trend. These provide favourable industry backgrounds for Asia which has seen significant appreciation over the year. as increasing our holding ir 3HP, we have made substantial changes to our other holdings.

Both Brambles and Coles Mye continued to produce disappointing operating performances, and we made complete sales. We bought a new holding in the successful beer and wines company Foster's Group. We also sold that its wealth holding Commonwealth Bank of Australia as we grew concerned management business was vulnerable to market conditions, and replaced it with the more conservative ANZ Bank. These changes have been helpful to performance. 1 Hong Kong our portfolio is virtually unchanged. Companies like supply chain manager Li & Fun ind PC producer Legend have coped satisfactorily with difficult market conditions, and we have rade small additions here, but we have been disappointed with the performance of Hutchisor Vhampoa, whose European telecoms businesses have been slow to make headway. We made c change in Singapore, where we sold Singapore Press, whose growth prospects appear to have been disabled by a persistently feeble local economy, and bought Singapore Exchange, a high- yielding stock with more opportunity to increase its earnings.

We have maintained our relatively large position in Samsung Electronics, although we have some concerns about cyclicality of demand for some of its products. Elsewhere in Korea we as the momentum of outsourcing appeared to be improving. After the year- 1 Norilsk Nickel's Nadezda smelting facility in and, however, Intosys reported a worrying loss of pricing power, prompting us to sell out even Siberia. after a steep fall in the price. We took a new holding Hero Honda, a producer of Picture courtesy of Norilsk Nickel. motorcycles which benefits particularly from the increase in middle class purchasing power. 2 Samsung Electronics is one of the leading global brands in cellular devices Picture courtesy of Samsung Electronics expiries from the proprietary pharmaceutical companies. Latin America was disappointing last year, Although our holding about the new left-of-centre government. Fixed Interest As of 31 March 2003 the Company held 29 fixed interest securities and one bond nd with an aggregate value of £94.4m.

The average redemption yield on th artfolio is 7.0% and its average expected maturity is 9.8 years. The portfolio At the beginning of the review period the Company had significant exposure to bonds issued by European banks. This approach has prospered: as the sophistication of financial markets has grown and regulatory oversight tightened, wellrun banks have better managed exposure to corporate credit risk than in previous cycles. We have now taken profits on much of this position. We subsequently bought a position in investment grade telecom companies through France Telecom. The company laid out a The outlook for interest rates is unclear. The world economy is pulling out of recession more slowly than we were expecting a year ago but real interest rates are already af abnormally low levels and would be likely to move sharply higher if trend growth is re established.

The outlook for corporate bonds is similarly balanced. There are high expectations of corporate deleveraging allowing over-indebted companies to improv heir credit standings. While we see some good examples of this las in the case o France Telecom), many other companies are struggling to improve operating cash flow and are falling prey to the consequences of past strategic errors. Within such an ambiguous market environment, successful credit selection and monitoring will be vital. 1 Barry Callebaut is the world's largest independent chocolate maker. copular demand for new services such as dicture messagine translates into rapid growth for Vodafone.