Annual Financial Report

RNS Number : 3708E

Scottish American Investment Co PLC

09 February 2018

 

RNS Announcement: Preliminary Results

 Results for the year to 31 December 2017

Legal Entity Identifier code: 549300NF03XVC5IFB447

¾  Dividend - the full year dividend, including a recommended final dividend of 2.825p, is 11.1p per share. This is 2.5% higher than the 2016 dividend, extending the Company's record of dividend increases to thirty eight consecutive years. The dividend is fully covered by earnings.

¾  Total return - Net Asset Value total return (capital and income) for the year was 18.8%, some way ahead of the strong total return from global equities of 13.8%. The share price Total return was 17.2%. Returns were assisted by strong operational performance of many of the companies in which SAINTS invests, and also by the performance of the Company's property and bond investments.

¾  Revenues - Investment income was £20.5m (2016 - £18.6m) and earnings per share were 11.33p (2016 - 10.46p).

¾  Outlook - the likelihood of continued economic growth around the world seems strong, although the immediate prospects for both the UK economy and the market are less clear. The Board remains confident in the Company's ability to achieve its objective of delivering real dividend growth by increasing capital and growing income over the long term.          

8 February 2018

SAINTS' objective is to deliver real dividend growth by increasing capital and growing income. Its policy is to invest mainly in equity markets, but other investments may be held from time to time including bonds, property and other asset classes.

The Company is managed by Baillie Gifford, the Edinburgh based fund management group with around £178 billion under management and advice as at 8 February 2018.

Past performance is not a guide to future performance. SAINTS is a listed UK company. As a result, the value of its shares and any income from those shares is not guaranteed and could go down as well as up. You may not get back the amount you invested. As SAINTS invests in overseas securities, changes in the rates of exchange may also cause the value of your investment (and any income it may pay) to go down or up. You can find up to date performance information about SAINTS on the SAINTS page of the Managers' website www.saints-it.com. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

For further information please contact:

James Dow and Toby Ross, Managers, The Scottish American Investment Company P.L.C.

Tel: [phone] and 0131 275 2217

James Budden, Baillie Gifford & Co  

Tel: [phone] or 07507 201208

Roland Cross, Director, Four Broadgate

Tel: [phone] or 07831 401309

 

Chairman's Statement

The Company's objective is to deliver real dividend growth by increasing capital and growing income. An increased dividend of 11.1p (2016: 10.825p) will extend the Company's record of raising its dividend to thirty eight consecutive years.

Overview

Markets made further strong progress during the year, helped by continued and accelerating economic growth in both developed markets and elsewhere. 'Elsewhere' of course has been an important part of the mix, as emerging markets' share of the global economy continued to grow and many markets including China regained their momentum. This positive backdrop helped companies grow their earnings, and the happy combination of economic and earnings growth improved market sentiment.

There have of course been serious concerns in the background, notably geopolitical risk relating to Korea, itself linked to the unpredictability of US policy. Less dramatically, as in recent years two principal concerns have continued to bubble away in the background. The first is what happens when all this growth triggers further interest rate rises. The second is whether ten years of quantitative easing has stretched valuations to the point where a correction is likely to occur.

For investors based in the UK, the continued uncertainties around Brexit have also been prominent, although less so in the context of global markets. It is important to stress the international nature of SAINTS' equity portfolio, both in terms of listing but also economic focus. SAINTS' global approach provides the widest access to opportunities in equity markets and earlier sales of stocks with a domestic UK focus have been helpful.

The principal protection against the broader market concerns lies in the Manager's stock-driven approach which emphasises the importance of both income dependability and real growth. Dependability and quality of income should prove their worth if rising interest rates or an economic wild card cause problems for more indebted companies with less resilient cashflows.  Growing cashflows on the other hand facilitate growing distributions, both from the companies which we own and to you in turn as shareholders of SAINTS.

The Company's investment in property has again made a significant contribution to both income and to overall returns. Within the property portfolio there has been carefully planned progress in reducing exposure to any falls in UK consumer spending.

Total Return Performance

Your Company's investments have performed well over the year. SAINTS' net asset value total return (capital and income) for the year was 18.8% and the share price total return was 17.2%. The total return from the global equity market was 13.8%.  Whilst it is encouraging that returns have exceeded the very strong returns of equities generally over the year, both the Managers and your Board have a long-term perspective and so we do not believe that it is generally helpful to dwell on the comparison of performance against any equity index over short periods. As stressed last year, the Company's portfolio of investments differs markedly from the make up of the global equity index against which performance is often compared. This differentiated portfolio is necessary and appropriate in order for the Company to deliver a high and growing yield and service its borrowings.

Nonetheless it is worth observing that the equity portfolio has outperformed in a period when other approaches with a different balance between current income and future growth have struggled. As in previous years, returns have been helped by the sound operational performance of the companies in which the portfolio is invested. It is also notable that the Company's equity, property and bond investments all contributed to growth in both income and capital.  The principal contributors to and detractors from performance and the changes to the equity, property and bond investments are explained in more detail in the Managers' Review.

Revenues

Earnings per share have increased by 8% to 11.33p and investment income has risen to £20.5m. Income has been helped by earnings and dividend progression from the Company's equity investments and also by increased revenues from both property and bonds where attractive new opportunities have been identified. In addition roughly half of the Company's earnings come from overseas and in 2017 currency movements boosted the sterling value of these earnings. Both managers (Baillie Gifford and, for the Company's property investments, OLIM) continue at the Board's request to emphasise supporting the dependability and the future growth of the Company's dividend in line with its objective.

Dividend and Inflation

A final dividend of 2.825p is recommended which will take the full year dividend to 11.1p per share, 2.5% higher than the 2016 dividend of 10.825p.

The recommended dividend is fully covered by this year's earnings. The Company has built up revenue reserves in the past and the Board has deemed it prudent to modestly augment those reserves this year, whilst also recommending a dividend which reinforces its progressive dividend policy. The ability to smooth dividend progression is a key advantage of investment trusts and, whilst the Board has great confidence in the long term prospects of the Company's investments, we also believe that a measured approach is appropriate, particularly given uncertainties around exchange rates and the path of the UK economy.

This year's increase, whilst slightly below the annual rate of inflation of 3% as measured by CPI, extends the Company's record of annual dividend increases to thirty eight years. Over the last ten year period the Company's dividends have increased at well over the rate of inflation, as shown on the first chart on page 1 of the Annual Report.

Borrowings

SAINTS' borrowings take the form of a single £80m debenture which is due for repayment in April 2022.  During 2017, the borrowings mainly funded a range of higher yielding commercial property and, to a much lesser extent, some fixed income investments.

The book value of the debenture is £83.4m which, at the year end, was equivalent to approximately 17% of shareholders' funds.  The estimated market or fair value of the debenture was £97.8m, a decrease from the previous year's value of £103.2m.  The market value of the Company's borrowings will continue to fall over the coming years as the redemption date approaches.

Outlook

Last year I suggested that the longer-term implications of both Brexit and President Trump's victory would take a while to emerge and that inflation was likely to pick up in the UK during 2017. Not particularly heroic predictions but as it happens correct thus far. Whether inflation persists at its current level is less clear, due to a combination of some weakness in the domestic economy and action by the Bank of England on the one hand and a strengthening oil price on the other. The likelihood of continued economic growth around the world seems strong, although the outlook for the UK economy is less positive. In addition the concerns relating to valuations and rising interest rates mentioned earlier make share price progress less than certain, as has been demonstrated recently

The Board and the Managers remain alert to both potential opportunities and challenges. It is important that the Company's future income prospects depend principally on the cashflows of our equity investments and the strength of property covenants and length of leases, all of which are explained further in the Managers' report, rather than on the level of markets. As a Board, we remain of the view that an approach anchored in fundamental analysis of growth and dependability of income is a firm foundation for the future. Your Board is fully supportive of and confident in the Managers' approach, and this confidence has been strengthened by another year of encouraging operational performance. We continue to believe that that the portfolio as a whole is well placed to support the growth of the Company's dividend over time.

Issuance

The Company has raised over £9 million from new issuance at a premium to Net Asset value in order to satisfy investor demand over the year. This indicates that the merits of the Company's approach are increasingly appreciated. It also serves the interests of current shareholders by reducing costs per share and helping to further improve liquidity.

The Board and the Managers

There have been no changes to the Board over the year and as Chairman I have been extremely pleased with the manner in which those Board members who have joined more recently have bedded in, combining well with the valued contribution of longer standing members.

As announced in the summer Dominic Neary has moved on from Baillie Gifford, and the Board would like to reiterate our warm thanks and appreciation to him for his considerable contribution to SAINTS in recent years. The Board is however very pleased to have James Dow and Toby Ross as joint managers of the Company and confident in their ability to continue the investment approach which they helped to develop. The joint appointment reflects Baillie Gifford's team-based approach and the Board looks forward to a continued fruitful and productive working relationship with the Managers.

AGM

The AGM will be held at 11am on Thursday 5 April 2018 at Baillie Gifford's offices at Calton Square, 1 Greenside Row, Edinburgh. The Managers will make a presentation on the investment portfolio and there will also be an opportunity to ask questions. The Directors and the Managers look forward to meeting you there.

Peter Moon

Chairman

8 February 2018

For a definition of terms see Glossary of Terms, note 10.

Past performance is not a guide to future performance.
 

Income Statement

The following is the unaudited preliminary statement for the year to 31 December 2017 which was approved by the Board on 8 February 2018. The Board of The Scottish American Investment Company P.L.C. is recommending to the Annual General Meeting of the Company to be held on 5 April 2018 the payment of a final dividend of 2.825p (2.725p last year) per ordinary share making a total of 11.10p (10.825p last year) paid and proposed for the year ended 31 December 2017.

	For the year ended 31 December 2017			For the year ended 31 December 2016
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Net gains on investments - securities	-	56,191	56,191	-	87,566	87,566
Net gains on investments - property	-	4,845	4,845	-	1,265	1,265
Currency gains/(losses)	-	558	558	-	(1,084)	(1,084)
Income (note 2)	20,484	-	20,484	18,630	-	18,630
Management fees	(893)	(1,659)	(2,552)	(775)	(1,440)	(2,215)
Other administrative expenses	(1,086)	-	(1,086)	(968)	-	(968)
Net return before finance costs and taxation	18,505	59,935	78,440	16,887	86,307	103,194
Finance costs of borrowings	(2,001)	(3,715)	(5,716)	(2,015)	(3,741)	(5,756)
Net return on ordinary activities before taxation	16,504	56,220	72,724	14,872	82,566	97,438
Tax on ordinary activities	(1,291)	515	(776)	(933)	293	(640)
Net return on ordinary activities after taxation	15,213	56,735	71,948	13,939	82,859	96,798
Net return per ordinary share (note 3)	11.33p	42.24p	53.57p	10.46p	62.16p	72.62p

The total column of the Income Statement is the profit and loss account of the Company. The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in this statement derive from continuing operations.

A Statement of Comprehensive Income is not required as there is no other comprehensive income.

 

Balance Sheet

	At 31 December 2017		At 31 December 2016
	£'000	£'000	£'000	£'000
Fixed assets
Investments - securities	495,645		452,554
Investments - property	84,950		61,000
		580,595		513,554
Current assets
Debtors	1,222		1,116
Cash and cash equivalents	2,894		4,174
	4,116		5,290
Creditors
Amounts falling due within one year	(3,345)		(3,222)
Net current assets		771		2,068
Total assets less current liabilities		581,366		515,622
Creditors
Amounts falling due after more than one year		(83,428)		(84,112)
Net assets		497,938		431,510
Capital and reserves
Share capital		33,994		33,349
Share premium account		10,744		2,131
Capital redemption reserve		22,781		22,781
Capital reserve		413,632		356,897
Revenue reserve		16,787		16,352
Shareholders' funds		497,938		431,510
Net asset value per ordinary share (debenture at fair value)		355.6p		309.2p
Net asset value per ordinary share (debenture at book value)		366.2p		323.5p
Ordinary shares in issue (note 6)		135,975,943		133,395,943

Statement of Changes in Equity

For the year ended 31 December 2017

	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2017	33,349	2,131	22,781	356,897	16,352	431,510
Shares issued	645	8,613	-	-	-	9,258
Net return on ordinary activities after taxation	-	-	-	56,735	15,213	71,948
Dividends paid in the year (note 4)	-	-	-	-	(14,778)	(14,778)
Shareholders' funds at 31 December 2017	33,994	10,744	22,781	413,632	16,787	497,938

For the year ended 31 December 2016

	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2016	33,290	1,534	22,781	274,038	16,810	348,453
Shares issued	59	597	-	-	-	656
Net return on ordinary activities after taxation	-	-	-	82,859	13,939	96,798
Dividends paid in the year (note 4)	-	-	-	-	(14,397)	(14,397)
Shareholders' funds at 31 December 2016	33,349	2,131	22,781	356,897	16,352	431,510

 

*      The capital reserve balance as at 31 December 2017 includes investment holding gains of £147,461,000 (31 December 2016 - £128,030,000).

Cash Flow Statement

	Year Ended 31 December 2017		Year Ended 31 December 2016
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Net return on ordinary activities before taxation	72,724		97,438
Net gains on investments - securities	(56,191)		(87,566)
Net gains on investments - property	(4,845)		(1,265)
Currency (gains)/losses	(558)		1,084
Finance costs of borrowings	5,716		5,756
Overseas withholding tax	(810)		(625)
Changes in debtors and creditors	51		233
Other non-cash changes	(25)		(65)
Cash from operations		16,062		14,990
Interest paid		(6,400)		(6,400)
Net cash inflow from operating activities		9,662		8,590
Cash flows from investing activities
Acquisitions of investments	(129,531)		(83,824)
Disposals of investments	123,551		91,034
Forward currency contracts	469		(1,691)
Net cash (outflow)/inflow from investing activities		(5,511)		5,519
Cash flows from financing activities
Equity dividends paid	(14,778)		(14,397)
Shares issued	9,258		656
Net cash outflow from financing activities		(5,520)		(13,741)
(Decrease)/increase in cash and cash equivalents		(1,369)		368
Exchange movements		89		407
Cash and cash equivalents at 1 January		4,174		3,399
Cash and cash equivalents at 31 December*		2,894		4,174

*      Cash and cash equivalents represent cash at bank and short term money market deposits repayable on demand.

 

Asset Allocation

	At 31 December 2017 %		At 31 December 2016 %
Quoted equities	79.6		82.8
Bonds	5.7		5.0
Direct property	14.6		11.8
Net liquid assets	0.1		0.4
Total assets	100.0		100.0

Performance Attribution

Portfolio Breakdown	Average allocation		Total return
	SAINTS %	Benchmark %	SAINTS %	Benchmark %
Global equities	93.2	100.0	15.5	13.8
Bonds	6.8		30.1
Direct property	16.3		13.7
Deposits	1.6		-
Debenture at book value	(17.8)		6.8
Portfolio total return (debenture at book value)			17.6	13.8
Other items*			(0.8)
Fund total return (debenture at book value)			16.8	13.8
Adjustment for change in fair value of debenture			2.0
Fund total return (debenture at fair value)			18.8	13.8

* Includes Baillie Gifford and OLIM management fees.

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

 

List of Investments at 31 December 2017

Name	Business		Value £'000	% of total assets
Coca Cola	Beverage manufacturer		11,968	2.1
Johnson and Johnson	Pharmaceuticals and healthcare products		11,946	2.1
Prudential	Life insurer		10,874	1.9
CH Robinson	Delivery and logistics		10,850	1.9
Deutsche Boerse	Securities exchange owner/operator		10,563	1.8
Procter & Gamble	Household product manufacturer		10,511	1.8
Partners Group	Asset management		10,319	1.8
Fastenal	Distribution and sales of industrial supplies		9,942	1.7
Sonic Healthcare	Laboratory testing		9,475	1.6
Anta Sports Products	Sportswear manufacturer and retailer		9,378	1.6
Hiscox	Property and casualty insurance		9,239	1.6
AVI	Staple foods manufacturer		8,995	1.5
Admiral	Car insurance		8,625	1.5
Analog Devices	Integrated circuits		8,620	1.5
Cochlear	Hearing aids		8,357	1.4
Pepsico	Snack and beverage manufacturer		8,354	1.4
Microsoft	Computer software		8,289	1.4
McDonald's	Fast food restaurants		8,222	1.4
Edenred	Voucher programme outsourcer		8,150	1.4
Total	Integrated oil company		8,101	1.4
Taiwan Semiconductor Manufacturing	Semiconductor manufacturer		8,014	1.4
United Parcel Service	Courier services		7,868	1.4
Experian	Credit scoring and marketing services		7,614	1.3
Scottish & Southern Energy	Electricity utility		7,603	1.3
WPP	Advertising agency		7,547	1.3
Kering	Luxury brand conglomerate		7,441	1.3
Rio Tinto	Mining		7,321	1.3
British American Tobacco	Cigarette manufacturer		7,299	1.3
Atlas Copco	Engineering		7,241	1.2
China Mobile	Mobile telecommunication services		7,075	1.2
Nestlé	Food producer		6,940	1.2
National Instruments	Electronic test and measurement systems		6,885	1.2
Dia	Discount supermarkets		6,844	1.2
Apple	Computer technology		6,547	1.1
Kimberly-Clark de México	Paper-based household products		6,403	1.1
Bankinter	Corporate and retail bank		6,211	1.1
Pandora	Manufactures handmade jewellery		6,075	1.0
Alphabet Class A	Online search engine		5,984	1.0
United Overseas Bank	Commercial banking		5,980	1.0
Dolby Laboratories	Multimedia software		5,696	1.0
Sumitomo Mitsui Trust Holdings	Trust bank and investment manager		5,692	1.0
Brambles	Pallet pool operator		5,685	1.0
Continental	Tyres and automotive parts manufacturer		5,635	1.0
Sandvik	Engineering		5,632	1.0
Want Want	Snacks and milk-based products		5,548	1.0
SAP	Business software developer		5,496	0.9
Novo Nordisk	Pharmaceutical company		5,487	0.9
Wolters Kluwer	Information services and solutions provider		5,466	0.9
Svenska Handelsbanken	Banking		5,435	0.9
B3 S.A.	Securities exchange owner/operator		5,313	0.9
Hong Kong Exchanges and Clearing	Securities exchange owner/operator		5,299	0.9
MTN Group	South African wireless telecom company		5,286	0.9
Albemarle	Producer of speciality and fine chemicals		5,244	0.9
Man Wah	Sofa designer and manufacturer		5,182	0.9
Ambev	Brewing		5,157	0.9
Pearson	Educational publisher		5,065	0.9
Roche Holdings	Pharmaceuticals		4,806	0.8
Zenkoku Hosho	Speciality finance		4,782	0.8
Challenger	Investment management company		4,677	0.8
Greencoat UK Wind	UK wind farms		4,548	0.8
Aberforth Split Level Income Trust	UK small-cap equities fund		4,434	0.8
Arthur J Gallagher	Insurance broker		4,428	0.8
Apache	Oil exploration and production		4,157	0.7
Philips Lighting	Light manufacturing company		4,041	0.7
Doric Nimrod Air Two	Aircraft leasing		3,801	0.6
Li & Fung	Supply chain management services company		3,237	0.6
WPP Aunz	Advertising agency		2,562	0.4
Cambium Global Timberland	Forestry investment fund		1,146	0.2
Terra Catalyst Fund	Fund of European property funds		265	-
D Carnegie	Swedish housing developer		1	-
Total Equities			462,873	79.6
Direct Property
Direct Property	See table below		84,950	14.6
Bonds
Euro denominated	Aryzta Finance 4.5% 2019 Perpetual		4,731	0.8
US dollar denominated	Alibaba Convertible 5.75% 2019	6,963
	Athena Debt Opportunities Fund	12,130	19,093	3.3
Argentinian peso denominated	Argentina 15.5% 17/10/2026		1,556	0.3
Brazilian real denominated	Brazil CPI Linked 15/05/2045		7,392	1.3
Total Bonds			32,772	5.7
Total Investments			580,595	99.9
Net Liquid Assets			771	0.1
Total Assets
(before deduction of debenture)			581,366	100.0

Property Portfolio

Location	Type	Tenant	2017 Value £'000		2017 %  of total assets		2016 Value £'000
Basingstoke	Warehouse	G4S Cash Solutions (UK) Ltd	3,450		0.6		3,300
Beccles†	Restaurant	Prezzo Limited	-		-		1,300
Biggleswade	Warehouse	Quest Automotive Products UK Limited	4,800		0.8		4,400
Bishop's Stortford	Restaurant	Prezzo Limited	1,250		0.2		1,500
Blandford Forum†	Restaurant	Prezzo Limited	-		-		1,100
Cleethorpes	Public House	Stonegate Pub Company Limited	900		0.2		750
Crawley	Petrol Station and Convenience Store	Co-operative Food Stores Limited	3,750		0.6		3,600
Denbigh*	Supermarket	Aldi Stores Limited Peacocks Stores Limited Poundland Retail Limited	5,900		1.0		-
Dundee	Public House	JD Weatherspoon Plc	1,300		0.2		1,250
Earley	Public House	Spirit Pub Company (Managed) Limited	3,250		0.6		3,000
Inverness†	Warehouse	Brake Brothers Limited	-		-		2,750
Kenilworth	Nursing Home	Care UK Community Partnerships Limited	7,200		1.2		6,800
Leicester†	Car Showroom	Sytner Properties Limited	-		-		3,450
Luton	Public House	Stonegate Pub Company Limited	3,150		0.5		2,500
Milton Keynes*	Data Centre	TalkTalk Communications Limited	16,000		2.8		-
New Romney	Holiday Village	Park Resorts Ltd	11,500		2.0		10,000
Newport Pagnell	Car Showroom	Pendragon Plc	4,000		0.7		4,150
Otford	Public House	Spirit Pub Company (Managed) Limited	2,250		0.4		2,100
Pagham*	Convenience Store	Co-operative Food Stores Limited	1,300		0.2		-
Portsmouth	Public House	JD Weatherspoon Plc	2,600		0.5		2,500
Prestatyn	Public House	Stonegate Pub Company Limited	1,600		0.3		1,450
Redditch†	Warehouse	Weston Body Hardware Ltd	-		-		1,500
Sale	Public House	Stonegate Pub Company Limited	750		0.1		650
Southend-on-Sea*	Warehouse	Giant Booker Limited	8,600		1.5		-
Torquay	Public House	Mitchells & Butlers Retail Limited	1,400		0.2		1,350
Winchester†	Public House	Fuller Smith & Turner Plc	-		-		1,600
			84,950		14.6		61,000

*       Property purchased during the year.

†      Property sold during the year.

Notes

1.	The Financial Statements for the year to 31 December 2017 have been prepared in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland and on the basis of the accounting policies set out in the Annual Report and Financial Statements for the year ending 31 December 2017.
2.	Income	2017 £'000	2016 £'000
	Income from investments
	UK dividends	3,243	3,176
	UK interest	-	157
	Overseas dividends	10,648	10,316
	Overseas interest	1,426	873
		15,317	14,522
	Other income
	Deposit interest	10	64
	Rental income	5,120	4,021
	Other income	37	23
		5,167	4,108
	Total income	20,484	18,630
	Total income comprises
	Dividends from financial assets designated at fair value through profit or loss	13,891	13,492
	Interest from financial assets designated at fair value through profit or loss	1,426	1,030
	Interest from financial assets not at fair value through profit or loss	10	64
	Other income not from financial assets	5,157	4,044
		20,484	18,630

 

Notes

3.	Net return per ordinary share	2017			2016
		Revenue	Capital	Total	Revenue		Capital	Total
	Net return per ordinary share	11.33p	42.24p	53.57p	10.46p		62.16p	72.62p
	Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £15,213,000 (2016 - £13,939,000) and on 134,296,614 (2016 - 133,291,026) ordinary shares of 25p, being the weighted average number of ordinary shares in issue during the year. Capital return per ordinary share is based on the net capital gain for the financial year of £56,735,000 (2016 - net capital gain of £82,859,000), and on 134,296,614 (2016 - 133,291,026) ordinary shares, being the weighted average number of ordinary shares in issue during the year. There are no dilutive or potentially dilutive shares in issue.
4.	Ordinary Dividends			2017	2016		2017 £'000		2016 £'000
	Amounts recognised as distributions in the year:
	Previous year's final (paid 12 April 2017)			2.725p	2.70p		3,635		3,595
	First interim (paid 23 June 2017)			2.725p	2.70p		3,644		3,598
	Second interim (paid 22 September 2017)			2.75p	2.70p		3,694		3,602
	Third interim (paid 18 December 2017)			2.80p	2.70p		3.805		3,602
				11.00p	10.80p		14,778		14,397
	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 £15,213,000 (2016 - £13,939,000).
				2017		2016	2017 £'000		2016 £'000
	Dividends paid and payable in respect of the year:
	First interim (paid 23 June 2017)			2.725p		2.70p	3,644		3,598
	Second interim (paid 22 September 2017)			2.75p		2.70p	3,694		3,602
	Third interim (paid 18 December 2017)			2.80p		2.70p	3,805		3,602
	Current year's proposed final dividend (payable 12 April 2018)			2.825p		2.725p	3,841		3,635
				11.10p		10.825p	14,984		14,437
	If approved the final dividend of 2.825p will be paid on 12 April 2018 to all shareholders on the register at the close of business on 9 March 2018. The ex-dividend date is 8 March 2018. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for the receipt of elections for reinvestment of this dividend is 20 March 2018.
5.	The fair value of the 8% Debenture Stock 2022 at 31 December 2017 was £97.8m (2016 - £103.2m).
6.	During the year, 2,580,000 (2016 - 235,000) shares were issued at a premium to net asset value raising proceeds of £9,258,000 (2016 - £656,000). At 31 December 2017 the Company had authority to buy back 19,996,051 ordinary shares and to allot 10,759,592 ordinary shares without application of pre-emption rights in accordance with the authorities granted at the AGM in April 2017. No shares were bought back during the year.
7.	Transaction costs incurred on the purchase and sale of investments are added to the purchase cost or deducted from the sale proceeds, as appropriate. During the year, transaction costs on purchases amounted to £2,027,000 (2016 -£390,000) and transaction costs on sales amounted to £254,000 (2016 - £47,000).
8.	The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2016. The financial information for 2016 is derived from the statutory accounts for 2016 which have been delivered to the Registrar of Companies. The auditor has reported on the 2016 accounts; the report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and (iii) did not contain a statement under sections 498 (2) or 498(3) of the Companies Act 2006. The statutory accounts for 2017 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
9.	The Report and Accounts will be available on the SAINTS page of the Managers' website www.saints-it.com‡ on or around 1 March 2018
10.	Glossary of Terms Total Assets Total assets less current liabilities, before deduction of all borrowings. Net Asset Value Net Asset Value (NAV) is the value of total assets less liabilities (including borrowings). The NAV per share is calculated by dividing this amount by the number of ordinary shares in issue. Net Asset Value (Debentures at Fair Value) Borrowings are valued at an estimate of their market worth. Net Asset Value (Debentures at Par Value) Borrowings are valued at adjusted net issue proceeds. 31 December 2017 31 December 2016 Shareholders' funds (debenture at book value) £497,938  £431,510  Add: book value of debenture £83,428  £84,112  Less: fair value of debenture (£97,832) (£103,200) Shareholders' funds (debenture at fair value) £483,534  £412,422  Shares in issue at year end 135,975,943  133,395,943  Net Asset Value per ordinary share (debenture at fair value) 355.6p 309.2p Discount/Premium As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium. Total Return The total return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend. Ongoing Charges The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average net asset value (with debt at fair value). The ongoing charges have been calculated on the basis prescribed by the Association of Investment Companies. The percentage is lower than the ongoing charges stated in the Company's Key Information Document which has been calculated as prescribed by relevant regulation and are required to include the cost of borrowings.
	Gearing At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets. Gearing represents borrowings at book less cash and cash equivalents expressed as a percentage of shareholders' funds. Potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds. Equity gearing is the Company's borrowings adjusted for cash, bonds and property expressed as a percentage of shareholders' funds. Leverage For the purposes of the Alternative Investment Fund Managers (AIFM) Directive, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as ratio between the Company's exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company's positions after the deduction of sterling cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other. Active Share Active share, a measure of how actively a portfolio is managed, is the percentage of the listed equity portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index.

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Automatic Exchange of Information In order to fulfil its legal obligations under UK tax legislation relating to the automatic exchange of information, The Scottish American Investment Company P.L.C. is required to collect and report certain information about certain shareholders. The legislation requires investment trust companies to provide personal information to HMRC on certain investors who purchase shares in investment trusts. Accordingly, The Scottish American Investment Company P.L.C. will have to provide information annually to the local tax authority on the tax residencies of a number of non-UK based certificated shareholders and corporate entities. All new shareholders, excluding those whose shares are held in CREST, who come on to the share register with effect from 1 January 2016 will be sent a certification form for the purposes of collecting this information.

For further information, please see HMRC's Quick Guide: Automatic Exchange of Information - information for account holders https://www.gov.uk/government/publications/exchange-of-information-account-holders

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‡    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.

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

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