Final Results
Scottish American Investment Co PLC
10 February 2006
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
Results for the year to 31 December 2005
In its second year under Baillie Gifford's management, SAINTS delivered improved
investment performance, continued to grow its dividend and narrowed its
discount.
• NAV total return1 was 26% compared to a 23% benchmark total return2.
• The proposed total dividend for the year has been increased by 8.8% and is
fully covered by earnings.
• The discount narrowed from 15.0% to 9.3%
The Chairman, Brian Ivory CBE said:
'SAINTS has enjoyed a second successful year under our new managers, Baillie
Gifford - the 2005 results will be welcome news to shareholders.'
The Manager, Patrick Edwardson said:
'During 2005 equity markets around the world were very buoyant with the global
economy growing at a healthy rate despite the very sharp rise in the oil price.
The overseas investments were the main driver of the capital performance while
in the UK higher levels of dividends helped to boost revenue. The directly owned
properties also made a solid contribution. I am optimistic that we will be able
to continue to grow earnings in 2006.'
A final dividend of 1.70p is proposed (1.59p) to give a total of 6.53p (6.00p),
up 8.8% compared to a 2.0% rise in inflation using the government chosen measure
of EU-harmonised CPI. Earnings per share were 6.8p (6.3p).
In the second half the NAV total return1 was 18.5% while the Benchmark total
return2 was 13.9%.
The share price total return for 2005 was 35.0%.
1Net Asset Value with the debenture valued at market price (net income is
reinvested).
2Benchmark - 70% FTSE All-Share Index and 30% FTSE World Index (net income is
reinvested)
The management fee agreed between the Board of the Company and the Managers,
Baillie Gifford & Co, for the two consecutive years to 31 December 2005 was a
fixed annual fee of £1.25m plus an annual secretarial fee of £100,000. This
arrangement expired on 31 December 2005 and the basis of the management fee
going forward has been agreed as follows (there will be no additional
secretarial fee):
• for the year commencing 1 Jan 2006, a fixed fee of £1.55m
• for the year commencing 1 Jan 2007, a fixed fee of £1.75m
• for the year commencing 1 Jan 2008 and subsequent years, 0.45% on total
assets less current liabilities excluding the property portfolio.
Past performance is no guarantee of future performance. The value of an
investment and any income from it is not guaranteed and may go down as well as
up and investors may not get back the amount invested. This is because the share
price is determined by the changing conditions in the relevant stockmarkets in
which the Company invests and by the supply and demand for the Company's shares.
Investment in investment trusts should be regarded as medium to long-term. You
can find up to date performance information about SAINTS on the Baillie Gifford
website at www.bailliegifford.com.
SAINTS invests in a broad range of assets both in the UK and internationally. It
aims to offer private investors a diversified portfolio that achieves a balance
between growth of capital and income and a progressive dividend policy.
Baillie Gifford & Co, the Edinburgh based fund management group with around £42
billion under management and advice, is appointed as investment managers and
secretaries to SAINTS.
10 February 2006
- ends -
For further information please contact:
Patrick Edwardson, Manager,
The Scottish American Investment Company P.L.C. 0131 275 2133
07812 537316
Robert O'Riordan,
Baillie Gifford & Co. 07730 412007
Mike Lord, Director,
Broadgate Marketing 020 7726 6111
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
The following is the unaudited preliminary statement for the year to 31 December
2005 which was approved by the Board on 9 February 2006. 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 30 March 2006 the payment of a
final dividend of 1.70p (1.59p last year) per ordinary share making a total of
6.53p (6.00p last year) paid and proposed for the year ended 31 December 2005.
INCOME STATEMENT
(unaudited and incorporating the revenue account*)
Restated+
For the year ended For the year ended
31 December 2005 31 December 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - securities - 63,771 63,771 - 23,755 23,755
Currency (losses)/gains - (691) (691) - 388 388
Income (note 2) 13,986 - 13,986 13,707 - 13,707
Management fees (812) (812) (1,624) (812) (813) (1,625)
Other administrative expenses (796) - (796) (887) - (887)
Net return before finance costs and
taxation 12,378 62,268 74,646 12,008 23,330 35,338
Finance costs of borrowings (3,035) (3,035) (6,070) (3,045) (3,045) (6,090)
Return on ordinary activities before
taxation 9,343 59,233 68,576 8,963 20,285 29,248
Tax on ordinary activities (343) 205 (138) (584) 441 (143)
Return on ordinary activities after
taxation 9,000 59,438 68,438 8,379 20,726 29,105
Return per ordinary share
(note 3) 6.80p 44.86p 51.66p 6.30p 15.57p 21.87p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
(unaudited )
Restated+
For the year ended For the year ended
31 December 2005 31 December 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Return on ordinary activities after 9,000 59,438 68,438 8,379 20,726 29,105
taxation
Gains on investments - property - 4,728 4,728 - 3,250 3,250
Total recognised gains for the year 9,000 64,166 73,166 8,379 23,976 32,355
Total recognised gains per ordinary
share (note 3) 6.80p 48.43p 55.23p 6.30p 18.01p 24.31p
* The total column of the Income Statement is the profit and loss account of
the Company.
+ Various changes in accounting policies have had the cumulative effect of
increasing reported net assets for the year ended
31 December 2004 by £265,000 (see note 1).
All revenue and capital items in this statement derive from continuing
operations.
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
SUMMARISED BALANCE SHEET
(unaudited)
Restated+
At 31 December 2005 At 31 December 2004
£'000 £'000
Fixed Assets
Investments - securities 386,748 326,107
Investments - property 38,700 33,725
425,448 359,832
Current Assets
Debtors 1,393 2,076
Cash and deposits 1,095 3,912
2,488 5,988
Creditors
Amounts falling due within one year (1,915) (4,129)
Net Current Assets 573 1,859
Total Assets Less Current Liabilities 426,021 361,691
Creditors
Amounts falling due after more than one year (89,430) (89,760)
336,591 271,931
Share Capital And Reserves
Called up share capital 33,121 33,121
Capital Redemption reserve 22,781 22,781
Capital reserve - realised 172,099 165,912
Capital reserve - unrealised 95,077 37,098
Revenue reserve 13,513 13,019
Equity shareholders' funds 336,591 271,931
Net Asset Value Per Ordinary Share:
(Debenture at market value) 241.2p 197.1p
Net Asset Value Per Ordinary Share:
(Debenture at book value) 254.1p 205.3p
Ordinary Shares In Issue (note 6) 132,485,943 132,485,943
+ See note 1.
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
ASSET ALLOCATION
(unaudited)
Restated+
At 31 December At 31 December
2005 2004
% %
UK Quoted Equities 56.6 56.2
Global (Ex UK) Quoted Equities 28.9 22.4
Unquoted 1.2 1.5
Quoted Fixed Interest 4.1 10.1
Properties 9.1 9.3
Net Liquid Assets 0.1 0.5
100.0 100.0
+ See note 1.
SUMMARISED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited)
Restated+
For the year For the year
ended ended
31 December 31 December
2005 2004
£'000 £'000
Shareholders' funds at 1 January as previously reported 271,666 251,286
Prior year adjustments 265 455
Shareholders' funds at 1 January (restated) 271,931 251,741
Total recognised gains for the year 73,166 32,355
Shares purchased for cancellation - (4,432)
Dividends appropriated in the year (note 4) (8,506) (7,733)
Shareholders' funds at 31 December 336,591 271,931
+ See note 1.
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
SUMMARISED CASH FLOW STATEMENT
(unaudited)
Restated+
Year to Year to
31 December 2005 31 December 2004
£'000 £'000
Net cash inflow from operating activities 11,665 10,943
Net cash outflow from servicing of finance (6,400) (6,400)
Total tax paid (120) (142)
Net cash inflow/(outflow) from financial investment 2,491 (35,085)
Equity dividends paid (10,453) (7,693)
Net cash (outflow)/inflow before use of liquid resources and financing (2,817) (38,377)
Net cash outflow from use of liquid resources - 40,000
Net cash outflow from financing - (4,432)
Decrease in cash (2,817) (2,809)
Reconciliation of net cash flow to movement in net debt
Decrease in cash (2,817) (2,809)
Decrease in short term deposits - (40,000)
Other non-cash charges 330 310
Movement in net debt in the year (2,487) (42,449)
Net debt at 1 January (85,848) (43,349)
Net debt at 31 December (88,335) (85,848)
Reconciliation of net return before finance coats and taxation to net
cash inflow from operating activities
Net revenue before finance costs and taxation 74,646 35,338
Gains on investments - securities (63,771) (23,755)
Currency losses/(gains) 691 (388)
Changes in debtors and creditors 51 (284)
Other non-cash changes 48 32
Net cash inflow from operating activities 11,665 10,943
+ See note 1.
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
PERFORMANCE ATTRIBUTION
for the year ended 31 December 2005
(unaudited)
Average allocation Total return* Contribution
SAINTS Benchmark SAINTS Benchmark to total return
% % % % %
UK Quoted Equities 74.6 70.0 17.2 22.0 12.8
Global (ex UK) Quoted Equities 32.8 30.0 42.9 24.8 14.0
Quoted Fixed Interest 7.7 - 9.9 - 0.8
Properties 11.5 - 21.3 - 2.4
Unquoted 1.7 - 16.0 - 0.3
Deposits 1.8 - 8.1 - 0.2
Forward contracts - - (4.0) - (0.3)
Portfolio Total Return 30.2
Finance costs (30.1) - (7.1) - (2.0)
Management fees and other expenses - - - - (0.9)
NAV Total Return
(debenture at book value) 27.3
Change in market value of debenture (1.3)
NAV Total Return
(debenture at market value) 26.0
* The above returns are calculated on a total return basis with net income
reinvested.
Past performance is no guarantee of future performance.
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
THIRTY LARGEST HOLDINGS
at 31 December 2005
(unaudited)
Market % of Restated
value total 2004
£'000 assets Market
Value
Name Region Sector £'000
GlaxoSmithKline United Kingdom Pharmaceuticals and biotechnology 14,989 3.5 12,467
Royal Bank of Scotland United Kingdom Banks 14,598 3.4 13,040
Vodafone United Kingdom Telecommunication services 14,460 3.4 15,259
Barclays United Kingdom Banks 13,004 3.1 11,583
HBOS United Kingdom Banks 10,637 2.5 3,018
Petrobras Brazil Oil and gas 10,612 2.5 3,218
HSBC United Kingdom Banks 9,472 2.2 9,962
BP United Kingdom Oil and gas 9,117 2.1 4,311
Imperial Tobacco United Kingdom Tobacco 8,888 2.1 7,291
Moody's US Speciality and other finance 8,050 1.9 5,086
Aviva United Kingdom Life assurance 8,030 1.9 7,144
Royal Dutch United Kingdom Oil and gas 7,642 1.8 -
Golden West Financial US Speciality and other finance 7,225 1.7 3,909
Standard Chartered United Kingdom Banks 7,144 1.7 3,208
Diageo United Kingdom Beverages 6,937 1.6 6,132
Altria US Tobacco 6,489 1.5 4,742
Atlas Copco Sweden Engineering and machinery 6,117 1.4 3,695
Rio Tinto United Kingdom Mining 6,093 1.4 -
Man Group United Kingdom Speciality and other finance 5,839 1.4 4,501
Samsung Electronics South Korea Electronic and electrical equipment 5,730 1.3 3,420
Wichford United Kingdom Real estate 5,085 1.2 3,145
Hilton Group United Kingdom Leisure and hotels 5,023 1.2 4,779
Prudential United Kingdom Life assurance 4,878 1.1 4,014
Gazprom Russia Oil and gas 4,643 1.1 2,030
Amazon.com United Kingdom General retailers 4,448 1.0 -
Northern Rock United Kingdom Banks 4,383 1.0 2,454
SAP Germany Software and computer services 4,280 1.0 2,271
Lukoil Russia Oil and gas 4,203 1.0 1,974
Teva Pharmaceuticals Israel Pharmaceuticals and biotechnology 4,095 1.0 1,897
RHM United Kingdom Food producers and processors 4,092 1.0 -
226,203 53.0 144,550
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
NOTES
1. A number of new UK Financial Reporting Standards have been introduced with which the Company must comply
by its 31 December 2005 financial year end. These standards are part of the UK convergence programme
with International Accounting Standards and as such have required most UK listed companies to restate
prior year figures to reflect the new accounting treatment. These financial statements have been
prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements at
31 December 2004 except as detailed below:
a) investments have been valued at fair value through profit or loss in accordance with FRS 26
'Financial Instruments: Measurement'. The effect is to move from a mid to a bid basis of valuation,
resulting in a reduction in the value of investments and unrealised capital reserves of £940,000 (2004 -
£834,000);
b) debentures are held at amortised cost in accordance with FRS 25 'Financial Instruments:
Disclosure and Presentation' and FRS 26 and finance costs have been charged 50:50 to capital and revenue
using the effective interest rate method. The effect is to increase the carrying amount of the debenture
by £1,184,000 (2004 - £1,007,000) and to reduce realised capital reserves by £807,000 (2004 - £718,000)
and revenue reserves by £377,000 (2004 - £289,000) respectively; and
c) in compliance with FRS 21 'Events after the Balance Sheet Date', dividends declared after the
period end are no longer treated as a liability at the period end. The effect is to reduce creditors and
increase revenue reserves by £2,252,000 (2004 - £2,106,000).
In addition to finance costs, income from fixed interest securities has also been calculated using the
effective interest rate method. The allocation of the tax charge between revenue and capital has been
amended to reflect the revised income and capital returns. The effect of these changes is to reduce
realised capital reserves by £93,000 (2004 - £101,000) and to increase unrealised capital reserves by
£31,000 (2004 - £32,000) and revenue reserves by £62,000 (2004 - £69,000) respectively.
The implementation of FRS 21 and the 2005 Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies' has resulted in changes in the presentation of total returns. Previously
dividend distributions in respect of a year were disclosed on the face of the Statement of Total Return
and the revenue column of that statement was deemed to be the profit and loss account of the Company. We
now present an Income Statement which does not show on its face the distribution in respect of equity
shares and whilst it still shows the information on capital and revenue returns it is the total return
column which is regarded as the profit and loss account of the company. This change also means that
unrealised gains/(losses) on property investments, which are not permitted to be included in the profit
and loss account, are now shown in the Statement of Total Recognised Gains and Losses. Dividend
distributions are now shown in the Reconciliation of Movements in Shareholders' Funds and in the Notes to
the Accounts.
The overall effect of these changes on shareholders' funds and reserves is detailed below:
At 31 December At 31 December
2005 2004
£'000 £'000
Effect on shareholders' funds:
Investments (940) (834)
Creditors: dividends payable 2,252 2,106
Debenture stock (1,184) (1,007)
128 265
Effect on reserves:
Capital reserve - realised (900) (819)
Capital reserve - unrealised (909) (802)
Revenue reserve 1,937 1,886
128 265
Restated
31 December 2005 31 December 2004
£'000 £'000
2. Income
Income from investments 11,326 11,050
Rental income 2,491 2,486
Other income 169 171
13,986 13,707
3. Return per ordinary share
Return per ordinary share in the Income Statement is based on the return on ordinary activities after
taxation figures and on 132,485,943 (2004 - 133,075,233) ordinary shares, being the weighted average
number of ordinary shares in issue during the year.
Total recognised gains per ordinary share in the Statement of Total Recognised Gains is based on the
total recognised gains for the year figures and on 132,485,943 (2004 - 133,075,233) ordinary shares,
being the weighted average number of ordinary shares in issue during the year.
4. Ordinary dividends
Restated
2005 2004 2005 2004
£'000 £'000
Amounts recognised as distributions in the period:
Previous year's final (paid 4 April 2005) 1.59p 1.42p 2,106 1,891
First interim (paid 1 July 2005) 1.59p 1.47p 2,106 1,948
Second interim (paid 3 October 2005) 1.62p 1.47p 2,147 1,947
Third interim (paid 30 December 2005) 1.62p 1.47p 2,147 1,947
6.42p 5.83p 8,506 7,733
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 by way of dividend for the year is £9,000,000 (2004
- £8,379,000).
2005 2004
2005 2004 £'000 £'000
Dividends paid and proposed in the period:
Adjustment to previous year re shares bought back - - - (30)
First interim (paid 1 July 2005) 1.59p 1.47p 2,106 1,948
Second interim (paid 3 October 2005) 1.62p 1.47p 2,147 1,947
Third interim (paid 30 December 2005) 1.62p 1.47p 2,147 1,947
Current year's proposed final dividend
(payable 31 March 2006) 1.70p 1.59p 2,252 2,106
6.53p 6.00p 8,652 7,918
If approved the final dividend of 1.70p will be paid on 31 March 2006 to all shareholders on the register at
the close of business on 10 March 2006.
5. The market value of the 8% Debenture Stock 2022 at 31 December 2005 was £106.4m (2004 - £100.6m)
6. At 31 December 2005, the Company had the authority to buy back 19,859,642 of its own shares. No shares
were bought back during the period under review.
7. The financial information set out above does not constitute the Company's statutory accounts for the year
ended
31 December 2005. The financial information for 2004 has been extracted from the statutory accounts for
2004, as restated for the changes to accounting policies detailed in note 1 above. The statutory accounts
for 2004 have been delivered to the Registrar of Companies. The Auditors have reported on the 2004
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 2005 are unaudited, however it is expected that the Auditors
will issue an unqualified opinion. The statutory accounts for 2005 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.
8. None of the view expressed in this document should be construed as advice to buy or sell a particular
investment.
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