Final Results

RNS Number : 2488H

Scottish American Investment Co PLC

17 February 2010

 



 

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

 

Results for the year to 31 December 2009

SAINTS net asset value total return (income and capital) for 2009 was 49.6% compared to 25.4% for its benchmark. The share price rose from 130.5p to 181p over the year.

§ Gains were enjoyed across the portfolio with the equity, bond and property investments all increasing in value. 

§ Many companies struggled to cope with the effects of the global recession and dividend income was lower. Earnings per share were 9.05p (10.50p in 2008).

§ A final dividend of 2.30p per share is proposed making an increased total of 9.05p per share for the year (8.80p in 2008) representing the 22^nd consecutive annual increase.

§ The expectation is that the global economy will continue to improve even as stimulus measures are withdrawn. Growth is likely to be led by the developing nations and activity in economies such as the UK and the US will be impaired by the need to reduce debt levels.

§ A recovery in corporate profits and a resumption of dividend growth is discounted by stockmarkets. Overall returns in 2010 are likely to be less striking than in 2009.

SAINTS objective is to increase capital and grow income in order to deliver real dividend growth. Its policy is to invest flexibly and actively across a broad range of assets and markets. Listed equities, both UK and overseas, form the largest part of the portfolio. Investments are also made in bonds, property and other asset classes. 

Baillie Gifford & Co, the Edinburgh based fund management group with around £54 billion under management and advice as at 15 February 2010, is appointed as investment managers and secretaries to SAINTS.

17 February 2010

- ends -

For further information please contact:

Patrick Edwardson, Manager,                                                                                      

The Scottish American Investment Company P.L.C.                         0131 275 2133 or

                                                                                                            07812 537316

James Budden,

Baillie Gifford & Co                                                      0131 275 2816 or 07507201208

Roland Cross, Director

Broadgate Mainland                                                     020 7776 0512 or 07831 401309

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

Chairman's Statement

Performance

I am pleased to report that the net asset value total return for 2009 was 49.6%.  This compares to a total return on the benchmark index of 25.4%.  Both the absolute and relative performance are a welcome improvement after the poor investment results of 2008, although we acknowledge that further gains are required in order to restore the long term investment record.

In capital terms, the net asset value per share rose from 145p at the start of the year to 206p at the year end.  Gains were enjoyed across the portfolio with our equity, bond and property investments all increasing in value.  More detail on performance is provided in the Managers' Report.

There was a slight widening in the discount (from 10% to 12%) but, broadly speaking, the share price reflected the strong upturn in net asset value, rising from 130.5p to 181p over the year. 

Revenues and Dividend

In contrast to the strong capital performance, there was a fall in investment income.  The recovery in stockmarkets anticipates an improvement in corporate profits and dividends but the reality during 2009 was that many companies struggled to cope with the effects of the global recession.  As a consequence, dividend income was lower. 

However, we were able to adjust the portfolio towards higher yielding stocks.  The revenue account also benefited from two items which by their nature are non-recurring namely the change announced last year regarding the allocation of costs to capital and income and a recovery of past years' VAT payments (as detailed below). 

The net effect of this was an earnings per share figure of 9.05p (2008: 10.50p), from which we propose to pay a final dividend of 2.30p per share, making a total of 9.05p per share for the year as a whole.

This is an increase of 2.8% on last year's dividend and takes the cumulative increase over the last five years to over 50%. Next year we expect another modest increase in dividend payments, subject to continued recovery in the global economy and corporate profits.  Revenue reserves stand at 10.6p per share.

VAT

In 2008 the Company recovered £807,000 of VAT and £73,000 of associated interest from HMRC in respect of management fees charged by Baillie Gifford. This year the Company recovered a further £962,000 of VAT and £687,000 of associated interest from HMRC in respect of fees charged by the Company's previous investment manager and by its property manager. This benefited the revenue account by approximately 0.89p per share (2008:  0.27p).

Borrowings

SAINTS' borrowings take the form of a single debenture due for repayment in April 2022.  The book value of these borrowed funds is £87.9m although the final repayment amount will be £80m, a function of the debenture having been issued at a premium to its par value.

At the start of the year, the book value of the debenture amounted to 44% of shareholders' funds.  Ordinarily we would not consider operating with gearing at this high level.  However, the Board and the Managers felt that many investment markets were trading at exceptionally low valuations and that a bold investment stance would be rewarded.  We therefore began the year with the borrowed monies fully deployed in a range of investments. 

By year end, the increase in the net asset value meant that the debenture amounted to 32% of shareholders' funds.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

Chairman's Statement (Ctd)

Buy-backs and Treasury Shares

We intend to seek shareholders' approval at this year's AGM for the renewal of buy-back powers.  Although these have not been used in recent years, the Board believes that they can be useful in certain circumstances for reducing volatility in the discount and enhancing net asset value for continuing shareholders. 

Outlook

The financial crisis of 2008 led to the most severe global recession since the 1930s.  It is fortunate that governments and central banks reacted in the way they did because without the stimulus from aggressively loose monetary and fiscal policy it is highly unlikely that the global economy would now be recovering nor would financial markets be anywhere near their current levels.

Our central expectation is that the global economy will continue to improve even as stimulus measures are withdrawn.  Our investment positioning reflects a belief that growth will be led by the developing nations and that activity in economies such as the UK and the US will be impaired by the need to reduce debt levels.

We expect corporate profits to recover this year and dividend growth to resume.  However, large gains in profits are already discounted by stockmarkets, valuations are much less compelling now than a year ago and considerable risks attach to the withdrawal of stimulus measures and the funding of government deficits.  This means that overall returns are likely to be less striking than in 2009.

Annual General Meeting

I would like to invite all shareholders to the AGM which will be held at Baillie Gifford's offices at Calton Square, 1 Greenside Row, Edinburgh on Thursday 8 April at 11.00am.  The Managers will make a presentation on the investment portfolio and they, and the Directors, look forward to meeting you there.

Sir Brian Ivory, CBE

Chairman

16 February 2010

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

Managers' Report

Overview

2009 began with the global banking system severely stressed, economic activity shrinking rapidly and financial markets bracing for the onset of a global depression.  That we avoided this alarming prospect and instead enjoyed very strong investment returns reflects two main factors.  The first is the quite extraordinary measures taken by central banks and governments around the world to provide liquidity to markets and support to economic demand. The second is the low valuation levels to which many investment markets had fallen by the end of 2008, which allowed strong returns to be had once confidence returned.

It is hard to overstate the unprecedented nature of the actions taken to restore confidence.  Governments re-capitalised the banking sector, increased general expenditure and funded it by borrowing massively.  Central banks slashed interest rates to de minimis levels, inflated their balance sheets through market interventions and printed money to buy government bonds.

The impact, so far, has been powerfully positive.  Stockmarkets reached a low point during March but increasingly better economic news from that point onwards and recognition of the efforts being made by governments and central banks to bring stability to the financial system allowed confidence to return and share prices began to move higher.  A similar dynamic was seen in credit markets, with corporate bonds and other credit risky securities falling in value during the first few months before low valuations, better fundamental news and increasing investor confidence began to attract buyers.

When looking back at the events of last year, we also need to recognise the critical role played notably by China but also by other developing nations.  These countries have little of the public or private sector indebtedness which burdens the developed economies and they have been able to recover more strongly and more quickly from the economic seizure of a year ago.  Their swift rebound has pushed global growth higher. 

This shift in economic leadership was underway before the crisis but one of the strongest conclusions we draw from events of the last two years is that the speed of change has accelerated.  It is important that we reflect these developments in the portfolio.  Over the last several years, we have been reducing the proportion of UK listed stocks and increasing the proportion of overseas listed stocks, particularly those exposed to the rapidly developing nations.  These actions, together with the tendency of many UK listed companies to do more business abroad than at home, have brought about a significant change in the nature of the portfolio.  We believe approximately 80% of our equity investments' revenues are now generated outside of the UK and approximately 33% are generated in the developing economies. 

This exposure to the developing economies was helpful.  However, the main influence on our investment returns in 2009 was the decision taken towards the end of the previous year to remain fully invested.  This was not an easy decision.  Our investment performance in the second half of 2008 had been very poor and there was a strong temptation to change tack and seek refuge in investments which had proved more defensive.  However, we chose to persevere with the portfolio as it was and this proved to be a profitable decision.

Equities

On average during the year, 65% of the portfolio was invested in equities.  Expressed as a percentage of shareholders' funds, the average figure was 90%.  The total return was 36% which compares to a benchmark total return of 25%.

This level of equity investment is a little below what we would consider to be our usual position.  A central tenet of the investment approach is that achieving a growing income stream is best served by owning shares in successful, growing businesses.  Because of this, our usual position is to hold equity investments equal to at least 100% of shareholders' funds.  We had a lower allocation this year not because we viewed equities as unappealing, but because so many other asset classes were also attractively valued.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

Managers' Report (Ctd)

The largest allocation was still to UK listed stocks which on average made up 38% of the equity portfolio.  This was below the weighting of the UK in our benchmark but still a large allocation in absolute terms.  Because SAINTS pays its dividend in sterling, we are likely always to see some merit in owning UK listed companies that pay dividends in sterling and this year we were also happy to own many companies that, though listed in the UK, do the great majority of their business overseas.  However, the trend in our UK exposure is still down.

Funds raised from any further reduction in UK exposure are likely to be reinvested in the stockmarkets of the developing world.  In 2009  one quarter of the portfolio was in stocks listed on Asian and emerging markets and the return for the year on these investments was more than 60%.  Returns of this magnitude rightly lead investors to question the potential for further gains.  However, it seems to us that the greater long term risk is in having too little exposure to these markets.

A little over 20% of the portfolio was in US listed stocks.  Although the US economy shares many of the same economic challenges as the UK, we are still struck by the number of companies listed in the US that appear to have exciting growth prospects.  The same cannot be said of Japan where we continue to own just a handful of companies.  Our appetite for European listed stocks lies somewhere between the two and we have found enough individual prospects for them to account for 10% of the portfolio.

One of the appealing features of the US market is the number of successful technology businesses.  We own shares in companies such as Google, Amazon, e-Bay, Microsoft and Cisco and these, together with investments in technology companies listed elsewhere in the world, made up one-eighth of the portfolio on average.  It might be argued that our weighting to technology stocks is still too low, but a constraining factor is their low dividend yields.  We make this remark not as a criticism of the companies - it is quite right that they retain most of their earnings for re-investment - but rather to recognise it as a practical constraint on what we can do with the portfolio given our overall income objective.

The income objective had particular influence on our stock transactions this year.  A combination of dividend cuts from formerly high yielding companies, an active decision in 2008 to add to financially strong, well placed businesses that tended to have low dividend yields, and the subsequent outperformance of those low yielding shares, led to the equity portfolio having a low yield overall and some outsized positions in stocks with low yields or which paid no dividend at all.  We decided to cut back on the very lowest yielding holdings and we used the money to buy stocks that, whilst perhaps having a less rapid growth profile, are still very capable of delivering strong long term returns.  Examples of such stocks include lift company Schindler, food producer Nestle (both listed in Switzerland), South African retailer Massmart and two UK listed insurance companies Hiscox and Amlin.

The addition of Schindler increased our exposure to the engineering sector where we also own Deere, the US manufacturer of agricultural equipment, and Atlas Copco which dominates the market for air compressors and various other items of industrial equipment.   Atlas Copco is a good example of a business which has seen a cyclical decline in orders and profits over the last eighteen months but is, we believe, structurally well positioned. More obvious examples still might be companies in the resources sector which have had to contend with sharp falls in commodity prices but which ought to benefit from the long term growth in demand for raw materials from the developing nations.  This has prompted us to buy back in to Rio Tinto this year and to take a holding in BHP Billiton, both of which are large mining conglomerates.  We also have significant investments in the oil product and oil services sectors. 

We maintained our large investments in tobacco companies British American, Imperial, Altria and Philip Morris.  These holdings lagged the rapidly rising market but they paid out substantial dividends and we continue to rate highly their attractions as long term investments.  We had a similar amount of money in bank stocks, though relative to the benchmark these represented an underweight position in contrast to the overweight of our tobacco investments.  Most of the money was in HSBC and Development Bank of Singapore, though we also had holdings in Barclays and UBS. Our investments in mobile telephony and healthcare stocks are also significant whilst at the same time being below the weighting of these sectors in our benchmark.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

Managers' Report (Ctd)

Bonds

Our bond investments represented 19% of the portfolio on average during 2009, or 27% of shareholders funds.  This was a substantial investment but one we felt was justified by the unusually attractive pricing in credit markets.

The collapse in credit markets during 2008 had pushed credit spreads, the additional return offered by credit risky bonds over government bonds, to exceptionally high levels.  Markets appeared to be anticipating a catastrophic level of corporate defaults but we thought this outcome was unlikely given the strenuous reflationary efforts of governments and central banks.  Our view was tested during the first few months of the year when some of the holdings continued to fall in price but for the year as a whole it proved to be the correct judgement and returns were strong at 32%.

The largest investment was in the Athena Debt Opportunities Fund.  This is a pooled fund managed by London based investment firm Prytania and it invests in structured and securitised debt.  We also had holdings in two other pooled funds, the Baillie Gifford High Yield Bond Fund and the Harbourmaster Senior Loan Fund.  The former typically invests in fixed rate bonds issued by more indebted companies, the latter in the senior bank debt of similar issuers.  We sold out of the Harbourmaster Fund towards the end of the year but we remain invested in the Athena and Baillie Gifford High Yield funds. 

In addition to our investments in credit markets, we continue to hold an index-linked bond issued by the government of Brazil.  In our opinion, Brazil's fundamental strengths are not adequately reflected in its credit rating nor the market price of its bonds and we believe the 6% real yields available on Brazilian index linked bonds are very attractive.

Lastly, we reduced the investments in insurance linked securities through the redemption at maturity of the Bay Haven notes.  Insurance linked securities are effectively re-insurance arrangement with the bond investor providing insurance capital in return for a premium.  The terms available on new instruments are not as attractive as those we received on the Bay Haven notes.

Quoted Equity Forestry Investments

SAINTS owns 14% of Cambium Global Timberland, an AIM listed forestry investment fund.  This represented 3% of gross assets, or 4% of shareholders' funds.

The growing and harvesting of timber is necessarily a long term undertaking but we believe one that can generate attractive returns. We made the investment in the first half of 2007 at 100p per share when Cambium was initially listed.  Since then, it has purchased a series of forestry assets around the world and is now fully invested. 

Since listing, Cambium's net asset value has fallen slightly to 91p, reflecting the costs of establishing the portfolio.  Its share price fell much more heavily during 2008 and although it has recovered from its lows it remains, at its year end value of 69p, at a substantial and we believe unjustified discount to net asset value.

Quoted Equity Property Investments

The investments in listed property funds recovered some value this year, recording a 37% total return.  This improvement reflects a brighter mood amongst investors towards such vehicles and improving fundamentals in the markets where the funds have invested. The funds we own are exposed to commercial property in Europe and China and residential property in Japan. 

Direct Property

The direct investments in UK commercial property continue to be managed by OLIM Ltd, a specialist property manager.  The total return for the year was 21%. This was a significantly better result than the return on the broad UK commercial property market which returned 3.4%, as measured by the IPD UK All Property Index.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

Managers' Report (Ctd)

At the start of the year, the properties were valued at just under £24m, representing 8% of gross assets and 12% of shareholders' funds.  The properties were re-valued upward during the year because of increases in rent and a general improvement in sentiment towards UK commercial property. 

We made a net investment of £4m to this area of the portfolio, with OLIM purchasing two new properties and selling one of the lower valued properties. By the end of the year, the value of the enlarged portfolio was £31m.  All of the properties are fully let and the rental income on them represents a yield of 7.5%.

Outlook

The recovery in share prices and other financial assets during 2009 was, we believe, justified by the shift in the economic outlook from impending depression to global recovery.  However, the rally in markets has lifted prices considerably and few if any investment markets can now be described as offering compelling value.

This may not matter much if the global economy continues to gather momentum and the corporate sector enjoys a strong uplift in profits, and this is our central expectation for the year ahead.  However, the US, the UK and some other developed economies still face severe economic challenges, in particular onerous levels of private sector debt and public sectors that rely on the goodwill of bond investors to finance expenditure programmes.  We must also factor in the likely fading of support from monetary and fiscal stimulus and recognise that our optimistic view of the developing nations is one that is increasingly widely held and therefore susceptible to a surprise turn of events.

We judge the balance of these various factors to be favourable and therefore we believe it is right to look forward to  positive investment returns from here.  But those returns are likely to be much more muted than those enjoyed in 2009, and delivered in a more volatile fashion.

Baillie Gifford and Co

16 February 2010

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

The following is the unaudited preliminary statement for the year to 31 December 2009 which was approved by the Board on 16February2010. 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 8 April 2010 the payment of a final dividend of 2.30p (2.25p last year) per ordinary share making a total of 9.05p (8.80p last year) paid and proposed for the year ended 31 December 2009.

INCOME STATEMENT

	For the year ended 31 December 2009 (unaudited)				For the year ended 31 December 2008                        (audited)
	Revenue £'000	Capital £'000		Total £'000	Revenue £'000	Capital £'000	Total £'000
Net gains/(losses) on investments - securities	-	72,678		72,678	-	(160,818)	(160,818)
Currency gains/(losses)	-	3,171		3,171	-	(5,265)	(5,265)
Income (note 2)	17,194	-		17,194	20,901	-	20,901
Management fees	(508)	(944)		(1,452)	(832)	(832)	(1,664)
Recovered VAT (note 3)	945	17		962	419	388	807
Other administrative expenses	(859)	-		(859)	(824)	-	(824)
Net return before finance costs and taxation	16,772	74,922		91,694	19,664	(166,527)	(146,863)
Finance costs of borrowings	(2,093)	(3,887)		(5,980)	(3,002)	(3,002)	(6,004)
Net return on ordinary activities before taxation	14,679	71,035		85,714	16,662	(169,529)	(152,867)
Tax on ordinary activities	(2,690)	2,232		(458)	(2,757)	2,414	(343)
Net return on ordinary activities after taxation	11,989	73,267		85,256	13,905	(167,115)	(153,210)
Net return per ordinary share       (note 4)	9.05p		55.30p	64.35p	10.50p	(126.14p)	(115.64p)

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

	For the year ended 31 December 2009 (unaudited)			For the year ended 31 December 2008 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Net return on ordinary activities after taxation	11,989	73,267	85,256	13,905	(167,115)	(153,210)
Net gains/(losses) on investments - property	-	3,068	3,068	-	(5,875)	(5,875)
Total recognised gains and losses for the year	11,989	76,335	88,324	13,905	(172,990)	(159,085)
Total recognised gains and losses  per ordinary share (note 4)	9.05p	57.62p	66.67p	10.50p	(130.58p)	(120.08p)

 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.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

BALANCE SHEET

	At 31 December 2009		At 31 December 2008
	£'000 (unaudited)		£'000 (audited)
Fixed Assets
Investments - securities	323,949		263,441
Investments - property	31,000		23,950
		354,949		287,391
Current Assets
Debtors	2,086		2,857
Cash and deposits	10,683		2,928
	12,769		5,785
Creditors
Amounts falling due within one year	(2,651)		(4,089)
Net Current Assets		10,118		1,696
Total Assets Less Current Liabilities		365,067		289,087
Creditors
Amounts falling due after more than one year (note 6)		(87,892)		(88,312)
Total Net Assets		277,175		200,775
Share Capital and Reserves
Called-up share capital		33,121		33,121
Capital redemption reserve		22,781		22,781
Capital reserve		204,106		127,771
Revenue reserve		17,167		17,102
Shareholders' funds		277,175		200,775
Net Asset Value Per Ordinary Share:
(Debenture at fair value)		206.0p		145.3p
Net Asset Value Per Ordinary Share:
(Debenture at book value)		209.2p		151.5p
Ordinary Shares In Issue (note 7)		132,485,943		132,485,943

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

 

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 December 2009 (unaudited)

	Share capital £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at 1 January 2009	33,121	22,781	127,771	17,102	200,775
Total recognised gains and losses for the year	-	-	76,335	11,989	88,324
Dividends paid in the year	-	-	-	(11,924)	(11,924)
Shareholders' funds at 31 December 2009	33,121	22,781	204,106	17,167	277,175

For the year ended 31 December 2008 (audited)

	Share capital £'000	Capital redemption reserve £'000	Capital reserve   £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at 1 January 2008	33,121	22,781	300,761	14,723	371,386
Total recognised gains and losses for the year	-	-	(172,990)	13,905	(159,085)
Dividends paid in the year	-	-	-	(11,526)	(11,526)
Shareholders' funds at 31 December 2008	33,121	22,781	127,771	17,102	200,775

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

CASH FLOW STATEMENT
	For the year ended 31 December 2009 (unaudited)			For the year ended 31 December 2008 (audited)
	£'000	£'000		£'000	£'000
NET CASH INFLOW FROM OPERATING ACTIVITIES (note 8)		17,097			17,707
SERVICING OF FINANCE
Interest Paid	(6,400)			(6,400)
NET CASH OUTFLOW FROM SERVICING OF FINANCE		(6,400)			(6,400)
TAXATION
Overseas tax	(476)			(327)
TOTAL TAX PAID		(476)			(327)
FINANCIAL INVESTMENT
Acquisitions of investments	(103,214)			(179,148)
Disposals of investments	111,217			179,057
Forward currency contracts	1,526			(4,479)
NET CASH INFLOW/(OUTFLOW) FROM FINANCIAL INVESTMENT		9,529			(4,570)
EQUITY DIVIDENDS PAID		(11,924)			(11,526)
INCREASE/(DECREASE) IN CASH		7,826			(5,116)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Increase/(decrease) in cash		7,826			(5,116)
Translation difference		(71)			416
Other non-cash changes		420			396
MOVEMENT IN NET DEBT IN THE YEAR		8,175			(4,304)
NET DEBT AT 1 JANUARY		(85,384)			(81,080)
NET DEBT AT 31 DECEMBER		(77,209)			(85,384)

 

ASSET ALLOCATION

	At 31 December 2009 % (unaudited)		At 31 December 2008 % (audited)
UK Quoted Equities*	28.9		22.1
Overseas Quoted Equities*	39.9		41.4
Total Quoted Equities*	68.8		63.5
Direct property	8.5		8.3
Quoted Equity Property Investments	2.0		2.2
Quoted Equity Forestry Investments	2.8		3.5
Quoted Fixed Interest	14.6		21.2
Unquoted	0.5		0.7
Net Liquid Assets	2.8		0.6
	100.0		100.0

* Excludes quoted equity property and forestry investments.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

 

PERFORMANCE ATTRIBUTION

for the year ended 31 December 2009

(unaudited)

Portfolio Breakdown	Average allocation		Total return
	SAINTS %	Benchmark %	SAINTS %		Benchmark %
Total Quoted Equities*	89.9	100.0	36.1
Direct Property	11.1		20.8
Quoted Equity Property Investments	3.1		37.1
Quoted Equity Forestry Investments	4.9		6.4
Quoted Fixed Interest	26.9		31.9
Unquoted	0.8		(11.0)
Debenture at Book Value	(39.2)		(6.8)
Deposits	2.5		-
Portfolio Total Return (debenture at book value)			43.4	25.4
Other items #			2.1
Fund Total Return (debenture at book value)			45.5	25.4
Adjustment for change in fair value of debenture			4.1
Fund Total Return (debenture at fair value)			49.6	25.4

* Excludes quoted equity property and forestry investments.

#          This includes Baillie Gifford and OLIM management fees, other costs of running the trust such as marketing expenditure, the VAT refund and a residual item which arises because of a disparity between the NAV total return figure and the individual asset class portfolio return numbers as calculated by Baillie Gifford's performance measurement system (provided by Statpro).

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

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

 

THIRTY LARGEST HOLDINGS at 31 December 2009 (unaudited)
Name	Classification	Business	2009		2008
			Value £'000	% of total assets	Value £'000
Athena Debt   Opportunities Fund	Fixed interest	Debt opportunities fund	14,501	4.0	13,908
Brazil CPI Linked   15/05/2045	Fixed interest	Brazilian government bond	14,487	4.0	10,190
Cambium Global   Timberland	Quoted Equity   Forestry Inv	Forestry investment fund	10,350	2.8	10,050
Baillie Gifford High Yield   Bond Fund	Fixed interest	High yield bond fund	9,663	2.6	6,310
Baillie Gifford Greater   China Fund	Overseas	Equity investment fund	9,075	2.5	6,010
HSBC	United Kingdom	Banking	7,118	1.9	-
Holiday Village in New   Romney	Direct Property	Holiday village	6,500	1.8	5,450
Quorum Oil and Gas	United Kingdom	Oil industry technology fund	6,255	1.7	5,565
British American Tobacco	United Kingdom	Cigarette manufacturer	6,104	1.7	5,435
DBS	Overseas	Banking	5,851	1.6	-
Petrobras	Overseas	Integrated oil	5,789	1.6	9,641
GlaxoSmithKline	United Kingdom	Pharmaceuticals	5,606	1.5	-
Vodafone	United Kingdom	Mobile telecommunication services	5,463	1.5	5,294
Imperial Tobacco	United Kingdom	Tobacco	5,373	1.5	5,027
BHP Billiton	United Kingdom	Mining	5,267	1.4	-
Prudential 10.75% 2010†	United Kingdom	Life assurance	5,204	1.4	-
Taiwan Semiconductor   Manufacturing	Overseas	Semiconductor manufacturer	5,013	1.4	-
Nursing home in   Kenilworth	Direct Property	Nursing home	5,000	1.4	4,000
Penn West Energy Trust	Overseas	Oil and natural gas income trust	4,704	1.3	3,275
Rio Tinto	United Kingdom	Mining	4,509	1.2	1,626
Philip Morris International	Overseas	Cigarette manufacturer	4,444	1.2	4,511
BP	United Kingdom	Integrated oil company	4,374	1.2	-
Man Group 11% Perpetual	Fixed interest	Financial bond	4,353	1.2	4,173
CVRD	Overseas	Iron ore mining	4,318	1.2	3,774
Total	Overseas	Integrated oil	4,199	1.2	-
Royal Dutch Shell	United Kingdom	Integrated oil	4,165	1.1	-
New York Community   Bank	Overseas	Banking	4,079	1.1	-
Aviva	United Kingdom	Life assurance	4,079	1.1	3,237
Deere	Overseas	Farm machinery	3,874	1.1	4,019
Canon	Overseas	Imaging devices	3,849	1.1	3,146
			183,566	50.3	114,641

 

^†This investment is a structured note, the capital performance of which is dependent upon the price of the named company.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

NOTES (unaudited)

1.	The financial statements for the year to 31 December 2009 have been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements to 31 December 2008.
2.	Income
				2009						2008
				£'000						£'000
	Franked investment income			2,983						6,986
	UK unfranked investment income			1,601						1,214
	Overseas dividends			4,664						6,215
	Overseas interest			4,610						4,106
				13,858						18,521
	Deposit interest			19						222
	Interest on VAT recovered			687						73
	Rental income			2,037						1,835
	Other income			593						250
				3,336						2,380
	Total income			17,194						20,901
3.	Recovered VAT
	In 2007 the European Court of Justice ruled that investment trust management fees should be exempt from VAT. Since then HMRC have accepted the Investment Managers' repayment claims for the periods from 2004 to 2007 and the Company has received a reimbursement of £807,000 of VAT, together with interest thereon of £73,000 during the year. In 2009 the Company received further refunds of VAT from HMRC in respect of investment management fees for the periods 1990 to 1996 (£893,000) and from 2001 to 2004 (£52,000) together with a refund of VAT on property management fees for the period from 2004 to 2007 of £17,000. Interest received on these refunds amounted to £687,000 in total. In accordance with guidance from the AIC, the VAT recovered has been allocated between revenue and capital on the same basis as the VAT expense was originally charged and the interest received has been allocated wholly to revenue.
4.	Returns per ordinary share
		2009						2008
		Revenue	Capital			Total		Revenue			Capital		Total
	Net return per ordinary share (Income Statement)	9.05p	55.30p			64.35p		10.50p			(126.14p)		(115.64p)
	Total recognised gains and losses per ordinary share	9.05p	57.62p			66.67p		10.50p			(130.58p)		(120.08p)
	Net return per ordinary share is based on the return on ordinary activities after taxation figures in the Income Statement and on 132,485,943 ordinary shares of 25p, being the 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 132,485,943 ordinary shares of 25p, being the number of ordinary shares in issue during each year. There are no dilutive or potentially dilutive shares in issue.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

NOTES (unaudited) (cont'd)

5.	Ordinary dividends
						2009		2008
		2009		2008		£'000		£'000
	Amounts recognised as distributions in the year:
	Previous year's final (paid 15 April 2009)	2.25p		2.15p		2,981		2,848
	First interim (paid 30 June 2009)	2.25p		2.15p		2,981		2,848
	Second interim (paid 30 September 2009)	2.25p		2.20p		2,981		2,915
	Third interim (paid 31 December 2009)	2.25p		2.20p		2,981		2,915
		9.00p		8.70p		11,924		11,526
	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 842 of the Income and Corporation Taxes Act 1988 are considered.  The revenue available for distribution out of current year profits by way of dividend for the year is £11,989,000 (2008 - £13,905,000).
		2009		2008		2009 £'000		2008 £'000
	Dividends paid and payable in respect of the year:
	First interim (paid 30 June 2009)	2.25p		2.15p		2,981		2,848
	Second interim (paid 30 September 2009)	2.25p		2.20p		2,981		2,915
	Third interim (paid 31 December 2009)	2.25p		2.20p		2,981		2,915
	Current year's proposed final dividend (payable 12 April 2010)	2.30p		2.25p		3,047		2,981
		9.05p		8.80p		11,990		11,659
	If approved the final dividend of 2.30p will be paid on 12 April 2010 to all shareholders on the register at the close of business on 5 March 2010. The ex-dividend date is 3 March 2010. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for elections for this dividend is 18 March 2010.
6.	The market value of the 8% Debenture Stock 2022 at 31 December 2009 was £92.2m  (2008 - £96.6m)
7.	At 31 December 2009, the Company had the authority to buy back 19,859,642 of its own shares. No shares were bought back during the year under review.
8.	Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
					2009 £'000			2008 £'000
	Net return before finance costs and taxation				91,694			(146,863)
	(Gains)/losses on investments - securities				(72,678)			160,818
	Currency (gains)/losses				(3,171)			5,265
	Increase/(decrease) in accrued income				1,447			(1,207)
	Increase in other debtors				(16)			(21)
	Increase in creditors and prepaid income				278			477
	Other non-cash changes				(457)			(762)
	Net cash inflow from operating activities				17,097			17,707
9.	The Report and Accounts will be available on the SAINTS page of the Managers' website www.saints-it.com on or around 5 March 2010.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

NOTES (unaudited) (cont'd)

10.

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2009.  The financial information for 2008 has been extracted from the statutory accounts for 2008.  The statutory accounts for 2008 have been delivered to the Registrar of Companies.  The Auditors have reported on the 2008 accounts, their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.  The statutory accounts for 2009 are unaudited and will be finalised on the basis of the financial information presented in this preliminary announcement. They will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

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

 

END

 

 

FR UNSBRRNAUAAR