Annual Financial Report

RNS Number : 0126Z

Scottish American Investment Co PLC

01 March 2013

 



 

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

 

ANNUAL FINANCIAL REPORT

Copies of the Annual Report and Financial Statements for the year ended 31 December 2012 have been submitted electronically to the National Storage Mechanism (which replaced the UKLA's Document Viewing Facility on 1 September 2010) and will shortly be available for inspection at http://www.hemscott.com/nsm.do.

The Annual Report and Financial Statements for the year ended 31 December 2012 including the Notice of Annual General Meeting is also available on the Company's page of the Baillie Gifford website at:

www.saints-it.com

The unedited full text of those parts of the Annual Report and Financial Statements for the year ended 31 December 2012 which require to be published by DTR 4.1 is set out on the following pages.

Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

Baillie Gifford & Co

Company Secretaries

1 March 2013

Chairman's Statement

Overview

I am pleased to report on a successful year for SAINTS.  Net asset value, investment income and earnings per share all rose.  We are proposing a full year dividend of 9.8p.  This is an increase over the previous year's distribution, well ahead of inflation, and is fully covered by our earnings.

Performance

Equities, which represented on average 71% of invested portfolio, performed well in 2012 despite a slowdown in the global economy.  Many other asset classes also delivered positive returns, particularly those offering higher yields or whose valuations tend to move up or down with investor confidence.  The Managers' Review provides a full description of the economic environment and market developments but, in broad terms, SAINTS was a beneficiary as our portfolio was fully invested through the year.

Net asset value (NAV) per share, with the debenture valued at its fair value, rose from 205.3p to 220.5p.  The net asset value total return (which captures both capital returns and income) was 12.3%.   This compares to a return of 12.2% on SAINTS' comparative index.  Net asset value total return, with the debenture at book value, was 11.7%.

The share price rose from 208.5p to 225.5p and the share price total return was 13%.  At the end of the year, SAINTS' shares traded at a 2.3% premium to the fair value NAV and a 5.1% discount to the book value NAV.

Revenues and Dividend

Total income for the year was £18.6m which compares to £17.3m in 2011, a rise of 7.2%.  This growth was driven by a 9.7% increase in dividend income from our equity portfolio, from £11.3m to £12.4m.  Rental income from our portfolio of directly held properties rose 18% to £3.2m as we received the full year benefit of purchases made in 2011.  Income from the bond portfolio fell by 10% to £3m as a result of disposals.

Net earnings (total income less administrative costs, borrowing costs and tax charges) rose 9.9% to £13.6m.  This equates to 10.22p on a per share basis, 9.7% higher than the 9.32p recorded in 2011.

This improvement in earnings per share allows us to recommend an increased dividend of 9.8p for 2012.  2.4p of this was paid in June and payments of 2.45p each were made in September and December.  We now propose a final dividend of 2.5p which will be paid on 12 April.

The dividend for 2012 is 3.7% higher than the 9.45p paid in 2011.  The rate of dividend growth exceeds the current rates of inflation (the Retail Price Index rose 3.1% in the year to end December 2012).  We are confident that SAINTS' dividend will continue to grow in real terms over the medium to long term.

Borrowings

SAINTS' borrowings take the form of a single debenture due for repayment in April 2022. During 2012, these borrowings mainly funded a range of higher yielding commercial property and bond investments. 

The book value of these borrowed funds is £86.5m which, at the year end, was equivalent to approximately 27% of shareholders' funds.  The estimated market or fair value of the debenture was £109.2m.   We expect the fair value of the debenture to converge on its book value over the remainder of its life but, for now,  the difference gives rise to a significant gap between book value NAV (which was 237.7p per share at year end) and fair value NAV (220.5p per share). 

Outlook

We are cautiously optimistic that the world's economy and financial markets are moving away from the fragility and nervousness that has characterised recent years. 

There are still significant problems to be resolved in various parts of the globe.  In particular, we think the high debt levels present in many developed economies will weigh on growth for some time.  However, central banks are following very supportive policies and seem ready to act boldly if growth prospects were to deteriorate to any great extent.

Stockmarket valuations are not cheap but nor are they greatly expensive.  We believe long term investors can reasonably expect positive returns from current market levels and our current investment positioning, explained more fully on the following pages, reflects this. 

The Board and the AGM

The AGM will be held at 11am on Thursday 4 April at Baillie Gifford's offices at Calton Square, 1 Greenside Row, Edinburgh. The Managers will make a presentation on the investment portfolio. There will also be an opportunity to ask questions and the Directors and Managers look forward to meeting you there.

Sir Brian Ivory, CBE

Chairman

20 February 2013

Managers' Review

Overview

We continue to think current economic and investment conditions are best seen in the context of a world recovering from the financial crisis of 2007-2009.  That episode exposed serious weaknesses in the global economy and financial system.  Although much progress has been made in dealing with these issues, they continue to weigh on growth and affect investment conditions.

2012 was a hesitant year for the global economy but a strong one for most financial markets.  This apparent contradiction is probably best explained by the actions of central banks around the world.  Their efforts to print money and keep interest rates low were an effective countervailing force to the headwind of slower global growth.

Turnover in the portfolio was higher than in recent years but this was a function of stock level changes in the equity portfolio and did not give rise to any significant shift in asset allocation.  Consequently the portfolio remained fully invested throughout the year, mainly in equities but also in higher yielding bonds, commercial property and a small number of investment funds.

With the portfolio fully invested, we benefited from the buoyant market conditions.  NAV per share, using the 'fair value' measure, rose 7.4% to 220.5p and the total return (including income) was 12.3%.  This result saw us scrape ahead of the composite index to which we compare performance, which returned 12.2%.  The portfolio also generated higher income as the companies we invested in paid out higher dividends and we received a full year of rent from properties acquired or re-leased in 2011. 

Equities

On average during the year 71% of the portfolio was invested in equities. Expressed as a percentage of shareholders' funds, the figure was 91.7%. The total return on equity investments for the year was 10.5%.

The equity allocation was a little below what we would describe as our usual long term position.  This is to have shareholders' funds fully invested in stockmarkets in order to maximise long term income growth.  The fact we have had a lower allocation in recent years reflects a mix of factors including the attractive valuations on many non-equity investments, the need to generate income in order to cover the dividend (our  non-equity investments are generally much higher yielding) and some slight nervousness about equity markets given the tough economic conditions.

Any doubt about equities was clearly misplaced in 2012.  Although slowing global growth brought about a reduction in the rate at which corporate profits were expanding, this had little impact on broad market performance.  Instead, investors were swayed by valuations which were inexpensive and the hope that central banks and governments would generally take the right decisions.  As a result stockmarkets rose the best part of 10%.

The equity portfolio is managed as a single global portfolio by Baillie Gifford's Global Income team.  This team is led by Dominic Neary who was named as Deputy Manager of SAINTS at the start of last year.  Dominic's involvement, and that of his team, has coincided with a slightly higher level of turnover than in recent years but the underlying investment approach is unchanged:  we still seek to own shares for the long term, looking for investee companies that can grow their earnings, cashflow and dividends for many years to come.

During 2012, we bought fourteen new holdings.  Two of these, China Shenhua Energy (a coal producer) and China Resources Enterprise (a conglomerate encompassing brewing and retailing) can be thought of as plays on continued growth in the world's most populous country.  For the other twelve stocks it is harder to identify any collective theme other than an expectation that competitive strengths and talented management teams can bring about a rewarding investment result.  Consequently, the text that follows places them in alphabetical order.

We bought into Apple, the US consumer electronics company, at the start of the year.  Its record of innovation trumps any concerns about rising competition in smart phones and tablet devices.  Aker Solutions is a Norwegian company that provides engineering and technology solutions to the oil and gas industry.  Analog Devices is a US listed company that makes signal processing semiconductors, working closely with customers to produce innovative, proprietary designs.  Brasil Insurance, as the name suggests, is an insurance brokerage in Brazil and is enjoying strong growth through acquisition in a fragmented and immature market.  Dolby Laboratories, another US based company, provides products and technologies to record and playback high quality audio for TV, film and other media.  We particularly like the long term growth potential in online streaming as the number of devices on which one consumes media expand and proliferate.  One of only two UK listed stocks purchased was Experian which provides information for credit checking and consumer profiling.  Three more US listed stocks purchased were General Cable, Harley-Davidson and IHS Inc.  General Cable manufactures copper, aluminium and fibre optic cable and should benefit from infrastructure investment in both developed and developing economies.  Harley-Davidson manufactures the eponymous motorbikes.  IHS provides data and analytical services to governments and to the energy and capital goods sectors.  Konecranes, a Finnish company, manufactures various types of industrial lifting equipment from fork-lift trucks to large gantry cranes.  Provident Financial provides temporary credit in the UK, lending to households who for reasons of their employment situation or credit history are unable to borrow from mainstream banking.  Quanta Services is a leading US contractor for constructing and maintaining electrical, energy industry and telecommunications infrastructure.

Funding for these purchases came from either the complete sale or a reduction of holdings which are performing well operationally but whose share prices leave little room for disappointment.  Swiss consumer goods company Nestlé falls into this category as do the tobacco companies where we made substantial reductions.  We also sold out of holdings where our confidence in their business prospects had weakened.  Falling into this category are:  Canon, Deere, Development Bank of Singapore (DBS), Gazprom, Hero Motocorp, Hitachi High Technologies, Man Group, Nintendo, OGX Petroleo, Reed Elsevier, Standard Bank, Tesco and Walmex.

These transactions left the equity portfolio with 94 holdings at year end distributed across a range of industries and geographies.  There is also a wide spread of dividend yields with some holdings paying little or nothing by way of regular distribution to shareholders and others paying out a very high proportion of their earnings.  We feel this approach, of being agnostic about the level of dividend paid by individual holdings, aids our ability to manage the portfolio in a flexible way and produce good investment returns.

For 2012, the investment returns of the equity portfolio lagged the performance benchmark slightly.  This difference can be attributed in a variety of different ways.  At the geographic level, we had positive contributions from stocks listed in Europe, Japan and Developed Asia but these were outweighed by our positioning in stocks listed in the UK, the Emerging Markets and North America.  Looking at the sectors and industries in which we invested, we benefited particularly from our holdings in mining, technology and telecommunications but lost ground in a number of other areas, notably financial stocks.  The banking sector was particularly costly as it was an area that performed strongly but in which we had relatively little money. 

At the stock level, the range of returns across the portfolio is testimony to the febrile nature of markets and the exciting potential for both profit and loss from equities:  returns ranged from a 61% gain from US internet stock eBay to a 44% loss from Penn West, a Canadian energy company.  However, dividend growth was a more reliable feature with most companies able to pay out higher dividends.  That this was possible despite muted profits growth reflects well on the strength of corporate balance sheets and the modest level of current payout ratios. 

Bonds

Our bond investments performed very strongly in 2012, producing a total return of 25.6%.    These holdings were, on average, 12% of the investment portfolio (or 16% of shareholders' funds) so the result made a significant contribution to overall performance.

Most of the bonds held were lower rated credit market instruments.  Credit markets performed very well in 2012 as investors seeking yield moved out of cash and most government bonds.  We also owned bonds issued by the governments of Brazil and Venezuela and one insurance linked security.  These also performed very well.

The largest holding at year end was the Athena Debt Opportunities Fund. This is a pooled fund managed by a specialist investment company called Prytania.  It invests in structured debt instruments such as securitisations and collateralised loan obligations. These instruments enjoyed a particularly strong year and the capital value of the Athena Fund rose from $96 per unit to $125.   The next largest credit market holding is also a pooled fund, but one managed by Baillie Gifford and investing in high yield corporate bonds.  The price of this holding rose from £1.97 to £2.52 and we also added at a relatively low price in the middle of the year.  Similar gains were achieved on most of the other credit investments.

The Brazilian and Venezuelan bonds benefited from a market wide appetite for emerging market bonds.  The high yields offered by such issuers, the prospect of capital appreciation from currency swings and their perceived diversification benefit stoked enthusiastic buying.

The Brazilian holding is an index linked bond and was, at the start of the year, our largest bond investment.  We have held it since 2006 and have enjoyed capital gains on the bond and a gain on the currency. 

Further gains during 2012 meant that its yield fell below 4 ½%, approximately half the level at which we first bought it.  We felt this was an appropriate point at which to reassess the investment case which resulted in half the holding being sold.

The Venezuelan holdings (we owned two bonds) were much smaller in size and more speculative in nature.  We recognise the considerable uncertainties associated with buying such bonds but felt their price was sufficiently attractive.  Our timing was fortuitous in that Venezuelan bond prices then rallied significantly.  We therefore sold the bonds before year end.

Lastly, we also enjoyed a good gain on the insurance-linked security.  This was issued by Everglades Re, a state insurance pool in Florida in the United States.  We have owned similar instruments in recent years.  They typically pay a high level of interest in return for which the capital of the bond is paid over permanently to the issuer on the occurrence of a specified catastrophic insurance event.  In the case of the Everglades Re bond, we are exposed to major hurricanes making landfall in Florida and causing extreme levels of insurance damage.  Clearly this may happen, but we feel the high interest paid on the bond provides generous compensation for this risk.

Listed Investment Funds

SAINTS owns shares in a number of listed investment funds.  In some cases, we own them as a convenient way of getting exposure to asset classes other than equities.  Where this is the case, we separate them out from the main equity portfolio and report on them separately.  Currently, we own one such forestry fund and several funds that give exposure to various overseas property markets.

The forestry fund is Cambium Global Timberland.  It was approximately 2% of the total portfolio during 2012, a little more than that as a percentage of shareholders' funds.

Cambium has been a disappointment since we first bought shares at its flotation in 2007.  Its net asset value has fallen, the share price has traded at a discount and there has been less progress than we hoped for in the development of its forestry investments.

We spent a lot of time in 2012 engaging with Cambium's board to address this poor performance.  Initially we hoped ways might be found for Cambium to continue in existence whilst delivering better investment results.  However, this did not prove possible and, with our support, Cambium will go into voluntary liquidation.  Its forestry investments will be sold off over the next two years and the proceeds should exceed the current share price.

The listed property funds make up 3% of the portfolio which is approximately 4% of shareholders' funds.  These give us exposure to mainly commercial property markets in Europe, Japan and China.  The one exception to this is a fund investing in Japanese residential property.  In aggregate, these funds returned 4.3% in 2012. 

The two European facing funds, Tamar European Industrial Fund and Invista European Real Estate are selling assets and paying down borrowing.  We expect net realisations from these funds to exceed their current share prices.  The Chinese fund, Treasury China Trust, is performing well at an underlying level but its share price has languished at a very large discount to its net asset value.  There was change to the funds exposed to Japan when we sold Fukuoka Real Estate and bought Industrial and Infrastructure Fund (some of which was subsequently sold after a strong run in its share price).  The Japanese Residential Investment Company was held throughout the year.

Direct Property

The direct property investments are managed by OLIM Property Limited, a specialist property manager.  The total return for 2012 was 6.1%.  There were no purchases or sales during the year.

The portfolio consists of 16 commercial properties in a variety of locations across England and Scotland.  The properties are independently valued every six months by Jones Lang LaSalle.  In 2012, 5 properties rose in value, 2 were unchanged and 9 fell.  The net result of this was that the capital value of the portfolio dropped slightly from £39.4m to £38.7m.  

The economic environment in the UK remains weak and the risks of tenant defaults and stagnant or even falling rents are higher than usual.   Consequently, we do not expect much capital gain on these investments, at least in the next few years.  However, we received £3.2m of rent during 2012 which equates to a yield of 8.2% on the end of year valuations.  This high rental yield suggests the difficult environment is factored into valuations.  It also exceeds our borrowing costs by a large margin (the properties are, in effect, funded by the debenture).

Outlook

We begin a new year in an optimistic frame of mind but with our expectations tempered by our assessment of the economic situation and market valuations. 

Our optimism springs from the belief that substantial progress has been made over the last four years in dealing with the source problems of the last financial crisis.  To cite some of the positive developments, banks have raised capital and strengthened balance sheets, private sector debt is lower, trade imbalances are reduced, regulators no longer follow a light-touch approach, politicians now recognise there are limits on how much markets will lend to governments and central banks act boldly and swiftly when systemic risks threaten.  These developments and the simple passage of time have allowed the financial system and the world economy to heal.

Optimism naturally leads to hopes of strong investment results.  This may happen (the last five years clearly show just how wide the range of possible market moves is, particularly from one year to the next).  However, we would prefer our expectations to be coloured more by objective assessment than emotional hope. 

Our assessment of the economic situation, notwithstanding earlier comments about progress made, is that the full process of healing has some time to run yet.   Banks are stronger, but cannot lend as freely as we might like.  Private sector debt and trade imbalances have fallen, but are still at significant levels.  Tougher regulation of the financial sector, necessary as it was, does not promote growth.  Fiscal austerity is likely to be with us for some years to come.

A reasonable response to this is that, if correct, it applies only to the developed nations.  It ignores the remarkable transformation in living standards that is underway in the low and middle income countries, economies that simply do not face the same obstacles to growth as we do here in the United Kingdom.  We would agree, but suggest it still makes for a global economy that struggles to grow at the rates experienced in the years leading up to the crisis. 

On valuations, our view is that few of the world's stockmarkets appear expensive but nor are they obviously cheap after four years of recovery.  We are more persuaded by their value relative to other asset classes (such as gilts and corporate bonds) than their absolute valuations and it is on this basis that, since year end, we have taken some money out of our credit market investments in order to fund equity purchases.

This combination of reasonable but not cheap valuations and modest rather than spectacular growth in the world economy does not leave much room for outsized investment gains.  If we do enjoy such a result, it seems more likely to come about because of continued pump-priming by central banks.   But it does allow us to think returns should be positive, better in the long run than most other forms of investment and consistent with SAINTS raising its dividend over time.

Patrick Edwardson

Baillie Gifford & Co

20 February 2013

ASSET ALLOCATION

	At 31 December 2012 %		At 31 December 2011 %
UK Quoted Equities*	23.5		26.3
Overseas Quoted Equities*	49.0		45.1
Total Quoted Equities*	72.5		71.4
Bonds	12.8		12.3
Direct property	9.5		10.4
Quoted Equity Property Investments	3.3		3.0
Quoted Equity Forestry Investments	1.6		2.2
Unquoted	-		0.5
Net Liquid Assets	0.3		0.2
	100.0		100.0

* Excludes quoted equity property and forestry investments.

PERFORMANCE ATTRIBUTION

for the year ended 31 December 2012

Portfolio Breakdown	Average allocation		Total return
	SAINTS %	Benchmark %	SAINTS %	Benchmark %
Quoted Equities*	91.7	100.0	10.5	12.2
Bonds	16.1		25.6
Direct Property	12.6		6.1
Quoted Equity Forestry Investments	2.2		(20.0)
Quoted Equity Property Investments	3.3		4.3
Unquoted	0.4		(4.3)
Deposits	1.5		1.3
Debenture at Book Value	(27.8)		6.8
Portfolio Total Return (debenture at book value)			12.8	12.2
Other items #			(1.1)
Fund Total Return (debenture at book value)			11.7	12.2
Adjustment for change in fair value of debenture			0.6
Fund Total Return (debenture at fair value)			12.3	12.2

 

The above returns are calculated on a total return basis with net income reinvested.

Past performance is not a guide to future performance.

Source: Baillie Gifford & Co

* Excludes quoted equity property and forestry investments.

# This includes Baillie Gifford and OLIM management fees.

THIRTY LARGEST HOLDINGS at 31 December 2012
Name	Classification	Business	2012		2011
			Value £'000	% of total assets	Value £'000
Athena Debt Opportunities Fund	Bonds	Structured finance investment fund	15,863	3.9	12,758
Baillie Gifford High Yield Bond Fund	Bonds	High yield bond fund	13,054	3.3	6,642
Progressive	Overseas Quoted Equities	Property and casualty insurance	10,518	2.6	1,367
Brazil CPI Linked 15/05/2045	Bonds	Brazilian government bond	10,061	2.5	17,742
Baillie Gifford Greater China Fund	Overseas Quoted Equities	Chinese equities investment fund	8,734	2.2	7,676
Holiday Village in New Romney	Direct Property	Holiday village	7,750	1.9	7,450
Taiwan Semiconductor Manufacturing	Overseas Quoted Equities	Semiconductor manufacturer	7,478	1.9	5,870
Samsung Electronics	Overseas Quoted Equities	Electronic devices	6,735	1.7	5,096
Rio Tinto	United Kingdom Quoted Equities	Mining	6,600	1.6	5,875
Cambium Global Timberland	Quoted Equity Forestry Investments	Forestry investment fund	6,600	1.6	8,250
Philip Morris International	Overseas Quoted Equities	Cigarette manufacturer	6,162	1.5	7,528
BHP Billiton	United Kingdom Quoted Equities	Mining	6,133	1.5	6,344
Penn West Exploration	Overseas Quoted Equities	Oil exploration and production	5,962	1.5	5,472
Amlin	United Kingdom Quoted Equities	Property and casualty insurance	5,906	1.5	4,886
Nursing home in Kenilworth	Direct Property	Nursing home	5,500	1.4	4,950
Japan Residential Investment Company	Quoted Equity Property Investments	Japanese residential property fund	5,156	1.3	5,063
Scottish & Southern Energy	United Kingdom Quoted Equities	Electricity utility	5,101	1.3	4,644
Jeronimo Martins	Overseas Quoted Equities	Food retailer	5,054	1.3	4,552
Royal Dutch Shell	United Kingdom Quoted Equities	Integrated oil company	4,999	1.2	5,643
Partners Group	Overseas Quoted Equities	Asset management	4,671	1.2	3,722
SAP	Overseas Quoted Equities	Business software developer	4,620	1.2	3,204
Doric Nimrod Air Two	United Kingdom Quoted Equities	Aircraft leasing	4,620	1.2	4,480
Rexam	United Kingdom Quoted Equities	Beverage can manufacturer	4,584	1.1	2,048
Industrial & Infrastructure Fund	Quoted Equity Property Investments	Japanese commercial property fund	4,343	1.1	-
eBay	Overseas Quoted Equities	Online trading and payment	4,163	1.0	1,541
Office and leisure property in Sunderland	Direct Property	Mixed use property	4,100	1.0	4,250
Fleet Street 2 FRN's 2017	Bonds	German commercial mortgage-backed security	4,065	1.0	3,053
Barclays Bank 14% 2019	Bonds	Bank bond	3,998	1.0	3,362
Aviva	United Kingdom Quoted Equities	Investment and life assurance	3,841	1.0	3,092
Vodafone	United Kingdom Quoted Equities	Mobile telecommunication services	3,773	0.9	4,372
			190,144	47.4	160,932

MANAGEMENT FEE ARRANGEMENTS

Baillie Gifford & Co were appointed as Investment Managers and Secretaries with effect from 1 January 2004. The management contract can be terminated on six months' notice. Baillie Gifford & Co's fee is 0.45% of total assets less current liabilities, excluding the property portfolio. Although holdings in collective investment schemes (OEICs) managed by Baillie Gifford & Co are subject to this fee the OEIC share class held by the Company does not itself attract a fee, thereby avoiding any duplication of fees. The property portfolio is managed by OLIM Property Limited. This agreement can be terminated on three months' notice. OLIM Property Limited's annual fee is 0.5% of the value of the property portfolio, subject to a minimum quarterly fee of £6,250.

The details of the management fees are as follows:

	2012 £'000		2011 £'000
Investment management fee	1,597		1,609
Property management fee	194		181
	1,791		1,790

PRINCIPAL RISKS AND UNCERTAINTIES

As an investment trust, the Company invests in equities and makes other investments so as to secure its investment objective of increasing capital and growing income in order to deliver real dividend growth. The Company borrows money when the Board and Managers have sufficient conviction that the assets funded by borrowed monies will generate a return in excess of the cost of borrowing. In pursuing its investment objective, the Company is exposed to a variety of risks that cause short term variation in the Company's net assets and could result in either a reduction in the Company's net assets or a reduction in the profits available for dividend.

These risks are categorised here as market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Board monitors closely the Company's exposures to these risks but does so in order to reduce the likelihood of a permanent reduction in the Company's net assets or its profits available for dividend rather than to minimise the short term volatility.

The risk management policies and procedures outlined in this note have not changed substantially from the previous accounting period.

Market Risk

The fair value or future cash flows of a financial instrument or other investment held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - currency risk, interest rate risk and other price risk. The Board reviews and agrees policies for managing these risks and the Company's Investment Manager both assesses the exposure to market risk when making individual investment decisions and monitors the overall level of market risk across the investment portfolio on an ongoing basis.  Details of the Company's investment portfolio and of its derivative financial instruments outstanding at the balance sheet date are shown below.

Currency Risk

Certain of the Company's assets, liabilities and income are denominated in currencies other than sterling (the Company's functional currency and in which it reports its results). Consequently, movements in exchange rates may affect the sterling value of those items. The Investment Manager monitors the Company's exposure to foreign currencies and reports to the Board on a regular basis.

The Investment Manager assesses the risk to the Company of the foreign currency exposure by considering the effect on the Company's net asset value and income of a movement in the rates of exchange to which the Company's assets, liabilities, income and expenses are exposed. However, the country in which a company is listed is not necessarily where it earns its profits. The movement in exchange rates on overseas earnings may have a more significant impact upon a company's valuation than a simple translation of the currency in which the company is quoted.

Forward currency contracts are used periodically to limit the Company's exposure to anticipated future changes in exchange rates which might otherwise adversely affect the value of the portfolio of investments. Where appropriate, they are used also to achieve the portfolio characteristics that assist the Company in meeting its investment objectives. Cash amounts received in foreign currencies are generally converted to sterling on a daily basis.

Exposure to currency risk through asset allocation, which is calculated by reference to the currency in which the asset or liability is quoted, is shown below.

At 31 December 2012	Investments £'000	Cash and deposits £'000	Forward currency contracts £'000	Debentures £'000	Other debtors and creditors* £'000	Net exposure £'000
US dollar	119,790	31	(11,074)	-	124	108,871
Euro	27,649	139	(9,734)	-	112	18,166
Brazilian real	19,222	-	-	-	66	19,466
Japanese yen	9,222	-	-	-	89	9,311
Other overseas currencies	60,445	(63)	-	-	190	60,572
Total exposure to currency risk	236,484	129	(20,808)	-	(581)	216,386
Sterling	164,170	1,891	21,010	(86,467)	(1,677)	98,927
	400,654	2,020	202	(86,467)	(1,096)	315,313

*      Includes net non-monetary assets of £36,000.

At 31 December 2011	Investments £'000	Cash and deposits £'000	Forward currency contracts £'000	Debentures £'000	Other debtors and creditors* £'000	Net exposure £'000
US dollar	99,298	54	(7,722)	-	388	92,018
Euro	22,666	83	(5,430)	-	(1,081)	16,238
Brazilian real	22,502	1,094	-	-	152	23,748
Japanese yen	14,985	-	(13,385)	-	78	1,678
Other overseas currencies	58,629	-	-	-	62	58,691
Total exposure to currency risk	218,080	(1,231)	(26,537)	-	(401)	192,373
Sterling	162,325	1,934	26,482	(86,972)	(1,948)	101,821
	380,405	3,165	(55)	(86,972)	(2,349)	294,194

*      Includes net non-monetary assets of £42,000.

Currency Risk Sensitivity

At 31 December 2012, if sterling had strengthened by 5% in relation to all currencies, with all other variables held constant, total net assets and total return on ordinary activities would have decreased by the amounts shown below. A 5% weakening of sterling against all currencies, with all other variables held constant, would have had an equal but opposite effect on the financial statement amounts. The analysis is performed on the same basis for 2011.

	2012 £'000		2011 £'000
US dollar	5,443		4,601
Euro	908		812
Brazilian real	973		1,187
Japanese yen	466		84
Other overseas currencies	3,029		2,935
	10,819		9,619

Interest Rate Risk

Interest rate movements may affect directly:

• the fair value of the investments in fixed interest rate securities;

• the level of income receivable on cash deposits;

• the fair value of the Company's fixed-rate borrowings; and

• the interest payable on any variable rate borrowings which the Company may take out.

Interest rate movements may also impact upon the market value of the Company's investments other than its fixed income securities. The effect of interest rate movements upon the earnings of a company may have a significant impact upon the valuation of that company's equity.

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions and when entering borrowing agreements.

The Board reviews on a regular basis the amount of investments in cash and fixed income securities and the income receivable on cash deposits, floating rate notes and other similar investments.

The Company finances part of its activities through borrowings at approved levels. The amount of such borrowings and the approved levels are monitored and reviewed regularly by the Board. Where fixed rate borrowings are not being used to fund active investments, the borrowed funds are invested in a diversified portfolio of fixed income securities in order to provide a hedge against movements in interest rates.

Movements in interest rates, to the extent that they affect the fair value of the Company's fixed rate borrowings, may also affect the amount by which the Company's share price is at a discount or a premium to the net asset value.

The interest rate risk profile of the Company's financial assets and liabilities at 31 December is shown below.

Financial Assets	2012			2011
	Fair value £'000	Weighted average interest rate	Weighted average fixed rate period	Fair value £'000	Weighted average interest rate	Weighted average fixed rate period
Fixed rate:
UK bonds	3,998	7.2%	6 years	3,362	11.3%	7 years
US bonds*	3,023	6.6%	2 years	1,287	3.3%	4 years
Floating rate:
Brazilian bonds (interest rate linked to Brazilian CPI)	10,061	8.4%	n/a	17,742	10.0%	n/a
Euro bonds (interest rate linked to Euroibor)	6,425	12.9%	n/a	5,485	19.3%	n/a
Fixed Interest Collective Investment Funds:
UK funds	7,424	6.9%	n/a	7,424	6.9%	n/a
US dollar denominated fund	15,470	1.7%	n/a	12,758	0.9%	n/a

* Includes a convertible security which has been classified as an equity holding.

Financial Liabilities	2012 £'000	2011 £'000
The interest rate risk profile of the Company's financial liabilities at 31 December was:
Fixed rate - sterling	86,467	86,972

The maturity profile of the Company's financial liabilities at 31 December was:
In more than five years - 11 years (2011 - 12 years)	86,467	86,972

Interest Rate Risk Sensitivity

An increase of 100 basis points in bond yields as at 31 December 2011 would have decreased total net assets and total return on ordinary activities by £1,865,000 (2011 - £2,758,000) and would have increased the net asset value per share (with debentures at fair value) by 4.5p (2011 - 3.8p). A decrease of 100 basis points would have had an equal but opposite effect.

Other Price Risk

Changes in market prices other than those arising from interest rate risk or currency risk may also affect the value of the Company's net assets. The Board manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant information from the Investment Manager. The Board meets regularly and at each meeting reviews investment performance, the investment portfolio and the rationale for the current investment positioning to ensure consistency with the Company's objectives and investment policies.

Other Price Risk Sensitivity

A full list of the Company's investments is shown on pages 15 to 18 of the Annual Report. In addition, a list of the 30 largest holdings (shown above) together with various analysis of the portfolio by assets class and industrial sector are contained in the Managers' Review section of the Annual Report. 92.3% of the Company's net assets are invested in quoted equities (excluding quoted property and forestry investments). A 5% increase in quoted equity valuations at 31 December 2012 would have increased total assets and total return on ordinary activities by £14,553,000 (2011 - £13,622,000). A decrease of 5% would have had an equal but opposite effect.

Liquidity Risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not significant as the majority of the Company's assets are investments in quoted securities that are readily realisable. The Company's holdings in direct property and unlisted investments, which are not considered to be readily realisable, amount to 9.5% of total assets at 31 December 2012. The Company has the power to take out borrowings, which give it access to additional funding when required.

The Board gives guidance to the Investment Managers as to the maximum amount of the Company's resources that should be invested in any one holding and to the maximum aggregate exposure to any one entity (see investment policy on pages 20 and 21 of the Annual Report). The Board also sets parameters for the degree to which the Company's net assets are invested in quoted equities.  

Credit Risk

This is the risk that a failure of a counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss. This risk is managed as follows:

·    where the Investment Manager makes an investment in a bond or other security with credit risk, that credit risk is assessed and then compared to the prospective investment return of the security in question;

·    the Board regularly receives information from the Investment Manager on the credit ratings of those bonds and other securities in which the Company has invested;

·    the Company's listed investments are held on its behalf by Bank of New York Mellon, the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed. The Investment Manager monitors the Company's risk by reviewing the custodian's internal control reports and reporting its findings to the Board;

·    investment transactions are carried out with a large number of brokers whose creditworthiness is reviewed by the Investment Manager. Transactions are ordinarily done on a delivery versus payment basis whereby the Company's custodian bank ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations before any transfer of cash or securities away from the Company is completed;

·    transactions involving derivatives, structured notes and other arrangements, wherein the creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained interest are subject to rigorous assessment by the Investment Manager of the creditworthiness of that counterparty. The Company's aggregate exposure to each such counterparty is monitored regularly by the Board; and

·    cash is only held at banks that have been identified by the Managers as reputable and of high credit quality.

Credit Risk Exposure

The exposure to credit risk at 31 December was:

	2012 £'000	2011 £'000
Bonds	51,287	46,771
Cash and short term deposits	2,020	3,165
Debtors and prepayments	1,735	1,552
	55,042	51,488

None of the Company's financial assets are past due or impaired.

Fair value of financial assets and financial liabilities

The Directors are of the opinion that the financial assets and liabilities of the Company are stated at fair value in the balance sheet with the exception of the long term borrowings which are stated at amortised cost in accordance with FRS 26. The fair value of the debenture stock is shown below.

	2012			2011
	Nominal £'000	Book £'000	Fair £'000	Nominal £'000	Book £'000	Fair £'000
8% debenture stock 2022	80,000	86,467	109,248	80,000	86,972	108,848

Gains and losses on hedges

The following forward currency contracts were open at 31 December:

At 31 December 2012 Currency sold	Currency amount sold	Currency bought	Currency amount bought	Settlement date	Fair value £'000
US dollar	$18,000,000	Sterling	£11,291,000	09/01/13	217
Euro	€12,000,000	Sterling	£9,719,000	09/01/13	(15)
					202

At 31 December 2011 Currency sold	Currency amount sold	Currency bought	Currency amount bought	Settlement date	Fair value £'000
US dollar	$12,000,000	Sterling	£7,715,000	11/01/12	(7)
Euro	€6,500,000	Sterling	£5,587,000	11/01/12	157
Japanese yen	¥1,600,000,000	Sterling	£13,180,000	11/01/12	(205)
					(55)

Realised currency gains/(losses) are taken to the capital reserve and are not reflected in the revenue account unless they are of a revenue nature.

Capital Management

The Company does not have any externally imposed capital requirements. The capital of the Company is the ordinary share capital (see note 13 on page 42 of the Annual Report) which is managed in accordance with its investment policy in pursuit of its investment objective, both of which are detailed on pages 20 and 21 of the Annual Report. Shares may be issued and/or repurchased as explained on pages 26 and 27 of the Annual Report.

Investments

At 31 December 2012	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Securities
Listed equities	307,779	1,713	-	309,492
Listed convertible securities	1,138	-	-	1,138
Bonds	17,052	10,061	24,174	51,287
Unlisted equities	-	-	87	87
Total financial asset investments	325,969	11,774	24,261	362,004
Property
Freehold                                                                                                                                                                            38,650
Long  leasehold				-
				38,650
Total investments				400,654

At 31 December 2011	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Securities
Listed equities	289,257	1,840	-	291,097
Listed convertible securities	1,287	-	-	1,287
Bonds	10,786	17,742	18,243	46,771
Unlisted equities	-	-	1,850	1,850
Total financial asset investments	301,330	19,582	20,093	341,005
Property
Freehold                                                                                                                                                                            39,400
Long  leasehold				-
				39,400
Total investments				380,405

Investments in securities are financial assets designated at fair value through profit or loss on initial recognition. In accordance with Financial Reporting Standard 29 'Financial Instruments: Disclosures', the above table provides an analysis of these investments based on the fair value hierarchy described below which reflects the reliability and significance of the information used to measure their fair value. Property investments are not financial assets and therefore the fair value hierarchy does not apply to these assets.

Fair Value Hierarchy

The fair value hierarchy used to analyse the fair values of financial assets is described below. The levels are determined by the lowest (that is the least reliable or least independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows:

Level 1 - investments with quoted prices in an active market;

Level 2 - investments whose fair value is based directly on observable current market prices or is indirectly being derived from market prices; and

Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or are not based on observable market data.

Other Risks

Other risks faced by the Company include the following:

Regulatory Risk

Failure to comply with applicable legal and regulatory requirements could lead to suspension of the Company's Stock Exchange Listing, financial penalties or a qualified audit report. Breach of section 1158 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on capital gains. The Managers monitor investment positions and the level of forecast income and expenditure to ensure the provisions of section 1158 are not breached. Baillie Gifford's Heads of Business Risk & Internal Audit and Regulatory Risk provide regular reports to the Audit Committee on Baillie Gifford's monitoring programmes.

Major regulatory change could impose disproportionate compliance burdens on the Company. In such circumstances representation is made to ensure that the special circumstances of investment trusts are recognised.

Operational/Financial Risk 

Failure of the Managers' accounting systems or those of other third party service providers could lead to an inability to provide accurate reporting and monitoring or a misappropriation of assets. The Managers have a comprehensive business continuity plan which facilitates continued operation of the business in the event of a service disruption or major disaster. The Board reviews the Managers' Report on Internal Controls and the reports by other key third party providers are reviewed by the Managers on behalf of the Board.

Premium/Discount Volatility

The premium/discount at which the Company's shares trade can change. The Board monitors the level of premium/discount and the Company has authority to issue new shares and to buy back its existing shares.

Gearing Risk

The Company may borrow money for investment purposes. If the investments fall in value, any borrowings will magnify the extent of this loss. If borrowing facilities are not renewed, the Company may have to sell investments to repay borrowings.

All borrowings require the prior approval of the Board and gearing levels are discussed by the Board and Managers at every meeting. The majority of the Company's investments are in quoted securities that are readily realisable.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

·    select suitable accounting policies and then apply them consistently;

·    make judgements and accounting estimates that are reasonable and prudent;

·    state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements respectively; and

·    prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors have delegated responsibility to the Managers for the maintenance and integrity of the Company's page on the Managers' website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed within the Directors and Management section on page 6 of the Annual Report, confirm that, to the best of their knowledge:

•     the financial statements, which have been prepared in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice), give a true and fair view of the assets, liabilities, financial position and net return of the Company; and

•     the Directors' Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

By order of the Board

SIR BRIAN IVORY

20 February 2013

 

INCOME STATEMENT

	For the year ended 31 December 2012				For the year ended 31 December 2011
	Revenue £'000	Capital £'000		Total £'000	Revenue £'000	Capital £'000	Total £'000
Net gains/(losses) on investments - securities	-	25,178		25,178	-	(31,679)	(31,679)
Currency gains/(losses)	-	288		288	-	(840)	(840)
Income (note 2)	18,556	-		17,316	17,316	-	17,316
Management fees	(627)	(1,164)		(1,791)	(627)	(1,163)	(1,790)
Other administrative expenses	(881)	-		(881)	(1,000)	-	(1,000)
Net return before finance costs and taxation	17,048	24,302		41,350	15,689	(33,682)	(17,993)
Finance costs of borrowings	(2,063)	(3,832)		(5,895)	(2,074)	(3,852)	(5,926)
Net return on ordinary activities before taxation	14,985	20,470		35,455	13,615	(37,534)	(23,919)
Tax on ordinary activities	(1,421)	705		(716)	(1,269)	698	(571)
Net return on ordinary activities after taxation	13,564	21,175		34,739	12,346	(36,836)	(24,490)
Net return per ordinary share       (note 3)	10.22p		15.96p	26.18p	9.32p	(27.80p)	(18.48p)

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

	For the year ended 31 December 2012			For the year ended 31 December 2011
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Net return on ordinary activities after taxation	13,564	21,175	34,739	12,346	(36,836)	(24,490)
Net losses on investments - property	-	(750)	(750)	-	(86)	(86)
Total recognised gains and losses for the year	13,564	20,425	33,989	12,346	(36,922)	(24,576)
Total recognised gains and losses  per ordinary share (note 3)	10.22p	15.39p	25.61p	9.32p	(27.86p)	(18.54p)

 The total column of the Income Statement is the profit and loss account of the Company.

All revenue and capital items in these statements derive from continuing operations.

 

BALANCE SHEET

	At 31 December 2012		At 31 December 2011
	£'000	£'000	£'000	£'000
Fixed Assets
Investments - securities	362,004		341,005
Investments - property	38,650		39,400
		400,654		380,405
Current Assets
Debtors	1,735		1,552
Cash and deposits	2,020		3,165
	3,755		4,717
Creditors
Amounts falling due within one year	(2,629)		(3,956)
Net Current Assets		1,126		761
Total Assets Less Current Liabilities		401,780		381,166
Creditors
Amounts falling due after more than one year (note 5)		(86,467)		(86,972)
Total Net Assets		315,313		294,194
Capital and Reserves
Called up share capital		33,169		33,169
Share premium		357		357
Capital redemption reserve		22,781		22,781
Capital reserve		242,174		221,749
Revenue reserve		16,832		16,138
Shareholders' funds		315,313		294,194
Net Asset Value Per Ordinary Share:
(Debenture at fair value)		220.5p		205.3p
Net Asset Value Per Ordinary Share:
(Debenture at book value)		237.7p		221.7p
Ordinary Shares In Issue (note 6)		132,675,943		132,675,943

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 December 2012

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2012	33,169	357	22,781	221,749	16,138	294,194
Total recognised gains and losses	-	-	-	20,425	13,564	33,989
Dividends paid in the year (note 4)	-	-	-	-	(12,870)	(12,870)
Shareholders' funds at 31 December 2012	33,169	357	22,781	242,174	16,832	315,313

For the year ended 31 December 2011

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2011	33,121	-	22,781	258,671	16,250	330,823
Total recognised gains and losses	-	-	-	(36,922)	12,346	(24,576)
Shares issued (note 6)	48	357	-	-	-	405
Dividends paid in the year (note 4)	-	-	-	-	(12,458)	(12,458)
Shareholders' funds at 31 December 2011	33,169	357	22,781	221,749	16,138	294,194

CASH FLOW STATEMENT
	For the year ended 31 December 2012			For the year ended 31 December 2011
	£'000	£'000		£'000	£'000
Net cash inflow from operating activities		15,832			14,253
Servicing of finance
Interest paid	(6,400)			(6,400)
Net cash outflow from servicing of finance		(6,400)			(6,400)
Taxation
Overseas tax incurred	(720)			(564)
Income tax refunded	-			9
Total tax paid		(720)			(555)
Financial investment
Acquisitions of investments	(75,401)			(51,733)
Disposals of investments	78,382			54,225
Forward currency contracts	292			(782)
Net cash inflow from financial investment		3,273			1,710
Equity dividends paid		(12,870)			(12,458)
Net cash outflow before financing		(885)			(3,450)
Financing
Shares issued	-			405
Net cash inflow from financing		-			405
Decrease in cash		(885)			(3,045)
Reconciliation of net cash flow to movement in net debt
Decrease in cash		(885)			(3,045)
Translation difference		(260)			56
Other non-cash changes		505			474
Movement in net debt in the year		(640)			(2,515)
Net debt at 1 January		(83,807)			(81,292)
Net debt at 31 December		(84,447)			(83,807)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation		41,350			(17,993)
(Gains)/losses on investments - securities		(25,178)			31,679
Currency (gains)/losses		(288)			840
Decrease /(increase) in accrued income and prepaid expenses		193			(128)
Decrease in other debtors		4			43
(Decrease)/increase in creditors and prepaid income		(30)			43
Other non-cash changes		(219)			(231)
Net cash inflow from operating activities		15,832			14,253

 

NOTES

1.	The financial statements for the year to 31 December 2012 have been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements to 31 December 2011.
2.	Income
				2012						2011
				£'000						£'000
	Income from investments
	Franked investment income			3,995						3,989
	UK unfranked investment income			1,198						1,114
	Overseas dividends			8,357						7,272
	Overseas interest			1,793						2,215
				15,343						14,590
	Other income
	Deposit interest			9						6
	Rental income			3,153						2,670
	Other income			51						50
				3,213						2,726
	Total income			18,556						17,316
3.	Returns per ordinary share
		2012						2011
		Revenue	Capital			Total		Revenue			Capital		Total
	Net return per ordinary share (Income Statement)	10.22p	15.96p			26.18p		9.32p			(27.80p)		(18.48p)
	Total recognised gains and losses per ordinary share	10.22p	15.39p			25.61p		9.32p			(27.86p)		(18.54p)
	Net return per ordinary share is based on the return on ordinary activities after taxation figures in the Income Statement and on 132,675,943 (2011 - 132,533,834) ordinary shares of 25p, being the weighted average number of ordinary shares in issue during each year. Total recognised gains and losses per ordinary share is based on the total recognised gains and losses for the year in the Statement of Total Recognised Gains and Losses and on 132,675,943 (2011 - 132,533,834) ordinary shares of 25p, being the weighted average number of ordinary shares in issue during each year. There are no dilutive or potentially dilutive shares in issue.

4.	Ordinary dividends
						2012		2011
		2012		2011		£'000		£'000
	Amounts recognised as distributions in the year:
	Previous year's final (paid 13 April 2012)	2.40p		2.35p		3,184		3,113
	First interim (paid 29 June 2012)	2.40p		2.35p		3,184		3,113
	Second interim (paid 28 September 2012)	2.45p		2.35p		3,251		3,114
	Third interim (paid 27 December 2012)	2.45p		2.35p		3,251		3,118
		9.70p		9.40p		12,870		12,458
	We also set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution out of current year profits by way of dividend for the year is £13,564,000 (2011 - £12,346,000).
		2012		2011		2012 £'000		2011 £'000
	Dividends paid and payable in respect of the year:
	First interim (paid 29 June 2012)	2.40p		2.35p		3,184		3,113
	Second interim (paid 28 September 2012)	2.45p		2.35p		3,251		3,114
	Third interim (paid 27 December 2012)	2.45p		2.35p		3,251		3,118
	Current year's proposed final dividend (payable 12 April 2013)	2.50p		2.40p		3,317		3,184
		9.80p		9.45p		13,003		12,529
	If approved the final dividend of 2.50p will be paid on 12 April 2013 to all shareholders on the register at the close of business on 8 March 2013. The ex-dividend date is 6 March 2013. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for elections for reinvestment of this dividend is 20 March 2013.
5.	The fair value of the 8% Debenture Stock 2022 at 31 December 2012 was £109.2m (2011 - £108.8m).
6.	The Company allotted no ordinary shares in the year to 31 December 2012 (2011 - allotted 190,000 ordinary shares with a nominal value of £47,500 for a total consideration of £405,000). At 31 December 2012 the Company had authority to buy back 19,888,123 ordinary shares and to allot 13,267,592 ordinary shares without application of pre-emption rights in accordance with the authorities granted at the AGM in April 2012. No shares were bought back during the year.
7.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2012. The financial information for 2011 is derived from the statutory accounts for 2011 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2011 and 2012 accounts; their reports for both years were unqualified and did not contain a statement under sections 495 to 497 of the Companies Act 2006.  The statutory accounts for 2012 will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held at 11am on Thursday 4 April 2013.

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

- ends -

 

END

 

 

FR UAARROOAORAR