Interim Results
Scottish American Investment Co PLC
30 July 2007
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C. (SAINTS)
Results for the six months to 30 June 2007
In the first half NAV total return was 7.5% and the dividend was increased by
14%.
• The net asset value total return was 7.5% as was the benchmark index.
The share price total return was 7.2%.
• A second dividend of 2.05p per share has been announced bringing the total
for the first half to 4.05p compared to 3.55p in the corresponding period
last year.
• Increasing caution on the general prospects for stockmarkets resulted in
net sales of equities, mainly from the UK.
• Exposure to directly held UK property was reduced. First-time investments
were made in listed international forestry funds and the allocation to
listed property funds investing in overseas commercial property markets
was increased.
* 70% FTSE All-Share Index and 30% FTSE World Ex UK Index
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 markets 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 £51
billion under management and advice, are investment managers and secretaries to
SAINTS.
27 July 2007
- 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.
Interim Report
Stockmarkets delivered good returns in the first six months of 2007. The main
UK index, the FTSE All-Share, returned 7.6% whilst the return on overseas
markets, as measured by the FTSE World ex-UK Index, was 7.3% in sterling terms.
The Company's performance was similar to these market indices. The net asset
value total return, with the Company's borrowings measured at market value, was
7.5%. This matches the benchmark return. The share price total return was
slightly lower at 7.2%, reflecting a small widening in the discount to net asset
value.
The dividend for the first half is 4.05p per share, consisting of 2p paid in
June and 2.05p to be paid in September. This represents a rise of 14% over the
corresponding period last year and reflects the health of the Company's income
account.
The investment backdrop for the first half was one of continued strong global
economic growth but rising interest rates in many countries. Inflation, though
still low in absolute terms, appears to be an increasing threat and central
banks are responding to it by tightening monetary policy.
In response to this change, we have begun to adopt a more cautious stance in our
asset allocation. The value of our investments in listed equities, as a
percentage of shareholders' funds, was 103% at the half-year end. This is only
marginally lower than at the start of the period covered by this report but five
percentage points of the total is now invested in listed international forestry
funds. We believe these will prove good long term investments but also expect
them to be relatively defensive should stockmarket conditions become more
difficult.
A further six percentage points is invested in listed property funds exposed to
mainly commercial property in continental Europe and Japan. We believe these
markets will see significant capital appreciation reflecting the fact that
rental yields remain well above the cost of debt finance. The same cannot be
said of the UK property market. In the UK, rental yields are now below debt
funding costs and we do not expect capital appreciation over the next few years
despite growth in rents. We have therefore sold down the UK commercial property
portfolio by one-third.
An environment of rising interest rates and incipient inflation is not good for
the valuations of fixed-income securities. We have continued to avoid any
investment in bond markets other than in a handful of very specific situations.
These include what has proven to be a very successful investment in index-linked
bonds issued by the Brazilian government and positions in a small number of
floating rate notes, most of which are insurance industry related.
The underlying assets of these property and forestry funds lie outside the UK.
However, their shares are listed in London and are categorised as UK equities.
The ownership of these funds therefore marks a further evolution of the
Company's portfolio towards a more international set of investments. Adjusting
for the property and forestry fund purchases, our increasing caution on the
general prospects for stockmarkets led us to make net sales from the equity
portfolio. Most of these sales were from the UK portfolio.
We believe this development in the balance of the portfolio is consistent with
the global nature of commercial and investment markets and will be to the long
term benefit of shareholders, both in terms of dividend and capital return.
Past performance is no guarantee of future performance.
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
The following is the interim statement for the six months ended 30 June 2007
which has been neither reviewed nor audited by the auditors. This statement is
being printed and will be sent to all shareholders on 14 August 2007. Copies
will be available for inspection at the Registered Office of the Company or may
be obtained on request from the Managers and Secretaries after that date.
INCOME STATEMENT*
(unaudited)
For the six months ended For the six months ended For the year ended
30 June 2007 30 June 2006 31 December 2006
Revenue Capital Total* Revenue Capital Total* Revenue Capital Total*
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Realised gains on investments - - 19,061 19,061 - 21,607 21,607 - 32,237 32,237
securities
Unrealised (losses)/gains on
investments - securities - (3,233) (3,233) - (14,929) (14,929) - 3,048 3,048
Currency gains/(losses) - 139 139 - (156) (156) - 44 44
Income 9,692 - 9,692 8,534 - 8,534 15,326 - 15,326
Management fees (547) (547) (1,094) (487) (486) (973) (991) (991) (1,982)
Other administrative expenses (437) - (437) (373) - (373) (800) - (800)
Net return before finance costs 8,708 15,420 24,128 7,674 6,036 13,710 13,535 34,338 47,873
and taxation
Finance costs of borrowings (1,582) (1,582) (3,164) (1,513) (1,512) (3,025) (3,027) (3,025) (6,052)
Return on ordinary activities 7,126 13,838 20,964 6,161 4,524 10,685 10,508 31,313 41,821
before taxation
Tax on ordinary activities (693) 572 (121) (285) 241 (44) (506) 412 (94)
Return on ordinary activities 6,433 14,410 20,843 5,876 4,765 10,641 10,002 31,725 41,727
after taxation
Return per ordinary share (note 2) 4.86p 10.87p 15.73p 4.43p 3.60p 8.03p 7.55p 23.95p 31.50p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
(unaudited)
Return on ordinary activities
after taxation 6,433 14,410 20,843 5,876 4,765 10,641 10,002 31,725 41,727
Gains on investments - property - 763 763 - 3,382 3,382 - 4,682 4,682
Total recognised gains for the
period 6,433 15,173 21,606 5,876 8,147 14,023 10,002 36,407 46,409
Total recognised gains
per ordinary share (note2) 4.86p 11.45p 16.31p 4.43p 6.15p 10.58p 7.55p 27.48p 35.03p
Note:
Dividends paid and proposed per
share (note 3) 4.05p 3.55p 7.40p
All revenue and capital items in the above statements derive from continuing
operations.
* The total column of this statement is the profit and loss account of the
Company.
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
SUMMARISED BALANCE SHEET
At 30 June 2007
(unaudited)
At 30 June At 30 June At 31 December
2007 2006 2006
£'000 £'000 £'000
Fixed assets
Investments - securities 435,166 392,154 418,026
Investments - property 30,850 42,400 43,700
466,016 434,554 461,726
Current assets
Debtors 23,093 1,350 1,621
Cash and deposits 10,328 4,604 1,414
33,421 5,954 3,035
Creditors
Amounts falling due within one year (20,643) (5,143) (2,088)
Net current assets 12,778 811 947
Total assets (less current liabilities) 478,794 435,365 462,673
Debenture stock (note 4) (88,894) (89,255) (89,079)
389,900 346,110 373,594
Capital and reserves
Called-up share capital 33,121 33,121 33,121
Capital redemption reserve 22,781 22,781 22,781
Capital reserve - realised 223,857 191,793 200,533
Capital reserve - unrealised 94,899 83,530 103,050
Revenue reserve 15,242 14,885 14,109
Equity shareholders' funds 389,900 346,110 373,594
Net asset value per ordinary share
(Debenture at fair value) 288.9p 251.8p 272.6p
Net asset value per ordinary share
(Debenture at book value) 294.3p 261.2p 282.0p
Ordinary shares in issue (note 5) 132,485,943 132,485,943 132,485,943
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited)
For the six months ended 30 June 2007
Capital Capital Capital Revenue Total
Share redemption reserve - reserve - reserve shareholders'
capital reserve realised unrealised funds
£'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at
1 January 2007 33,121 22,781 200,533 103,050 14,109 373,594
Total recognised gains - - 23,324 (8,151) 6,433 21,606
Dividends paid (note 3) - - - - (5,300) (5,300)
Shareholders' funds at 30
June 2007 33,121 22,781 223,857 94,899 15,242 389,900
For the six months ended 30 June 2006
Capital Capital Capital Revenue Total
Share redemption reserve - reserve - reserve shareholders'
capital reserve realised unrealised funds
£'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at
1 January 2006 33,121 22,781 172,099 95,077 13,513 336,591
Total recognised gains - - 19,694 (11,547) 5,876 14,023
Dividends paid (note 3) - - - - (4,504) (4,504)
Shareholders' funds at 30
June 2006 33,121 22,781 191,793 83,530 14,885 346,110
For the year ended 31 December 2006
Capital Capital Capital Revenue Total
Share redemption reserve - reserve - reserve shareholders'
capital reserve realised unrealised funds
£'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at
1 January 2006 33,121 22,781 172,099 95,077 13,513 336,591
Total recognised gains - - 28,434 7,973 10,002 46,409
Dividends paid (note 3) - - - - (9,406) (9,406)
Shareholders' funds at 31
December 2006 33,121 22,781 200,533 103,050 14,109 373,594
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
SUMMARISED CASH FLOW STATEMENT
(unaudited)
Six months to Six months to Year to
30 June 30 June 31 December
2007 2006 2006
£'000 £'000 £'000
Net cash inflow from operating activities 9,470 7,486 12,629
Net cash outflow from servicing of finance (3,350) (3,200) (6,402)
Total tax paid (109) (35) (94)
Net cash inflow from financial investment 8,203 3,762 3,592
Equity dividends paid (5,300) (4,504) (9,406)
Increase in cash 8,914 3,509 319
Reconciliation of net cash flow to movement in
net debt
Increase in cash in the period 8,914 3,509 319
Other non-cash changes 185 175 351
Movement in net debt in the period 9,099 3,684 670
Net debt at start of the period (87,665) (88,335) (88,335)
Net debt at end of the period (78,566) (84,651) (87,665)
Reconciliation of net return before finance costs and
taxation to net cash inflow from operating activities
Net return before finance costs and taxation 24,128 13,710 47,873
Gains on investments - securities (15,828) (6,678) (35,285)
Currency (gains)/losses (139) 156 (44)
Changes in debtors and creditors 1,314 309 187
Other non-cash changes (5) (11) (102)
Net cash inflow from operating activities 9,470 7,486 12,629
ASSET ALLOCATION
At 30 June 2007
(unaudited)
30 June 2007 30 June 2006 31 December 2006
% % %
UK Quoted Equities 56.7 55.3 56.4
Global (ex UK) Quoted Equities 28.0 28.2 28.2
Unquoted 0.6 0.8 0.6
Quoted Fixed Interest 5.6 5.8 5.3
Properties 6.4 9.7 9.3
Net Liquid Assets 2.7 0.2 0.2
100.0 100.0 100.0
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
PERFORMANCE ATTRIBUTION FOR THE SIX MONTHS TO 30 JUNE 2007
(unaudited)
Average allocation Total return
Portfolio Breakdown SAINTS Benchmark SAINTS Benchmark Contribution Stock Asset
% % % % to relative Selection Allocation
return % %
%
UK Quoted Equities 70.8 70.0 3.6 7.6 (2.7) (2.7) -
Global (ex UK) Quoted
Equities 33.5 30.0 7.5 7.3 0.1 0.1 -
Quoted Fixed Interest 6.1 - 26.9 - 0.8 - 0.8
Properties 10.4 - 5.3 - (0.3) - (0.3)
Unquoted 0.8 - (0.4) - (0.1) - (0.1)
Deposits and other items 2.4 - - - 0.2 - 0.2
Debenture at book value (24.0) - 3.6 - 0.9 - 0.9
Portfolio Total Return
(debenture at book value) 6.3 7.5 (1.1) (2.6) 1.5
Adjustment for change in
fair value of debenture 1.6
Portfolio Total Return
(debenture at fair value) 7.9 7.5 0.4
Expenses (0.4)
Fund Total Return
(debenture at fair value) 7.5
The above returns are calculated on a total return basis with net income
reinvested.
Past performance is no guarantee of future performance.
Source: Baillie Gifford & Co
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
TWENTY LARGEST INVESTMENTS
At 30 June 2007
(unaudited)
Market
value % of
£'000 total
Name Business assets
Royal Bank of Scotland Banking 18,423 3.8
Petrobras Integrated oil 18,099 3.8
Brazil CPI Linked 15/05/2045 Brazilian government bond 16,292 3.4
Cambium Global Timberland Forestry investment fund 15,900 3.3
Barclays Banking 15,115 3.2
GlaxoSmithKline Pharmaceuticals 14,974 3.1
HBOS Banking 10,589 2.2
British American Tobacco Tobacco 8,570 1.8
Diageo Branded spirits 8,559 1.8
Aviva Life assurance 8,539 1.8
Vodafone Mobile telecommunication services 8,488 1.8
Man Group Hedge fund manager 7,236 1.5
Atlas Copco Engineering 6,748 1.4
Hays Recruitment agency 6,679 1.4
Wolseley Builders merchant 6,646 1.4
* BHP Billiton 6% 2007 Diversified resources 6,494 1.4
Royal Dutch Shell Integrated oil 6,394 1.3
* Lonmin 6.15% 2008 Platinum mining 6,071 1.3
Holiday village in New Romney Property 5,800 1.2
Amazon.com Online retailer 5,524 1.1
201,140 42.0
* Structured note linked to share price of equity stock.
THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.
NOTES
1. The financial statements for the six months to 30 June 2007 have been
prepared on the basis of the accounting policies set out in the Company's
Annual Financial Statements at 31 December 2006.
2. 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 weighted average number of ordinary shares in
issue during each period. Total recognised gains per ordinary share is
based on the total recognised gains for the period figures in the Statement
of Total Recognised Gains and Losses and on 132,485,943 ordinary shares of
25p, being the weighted average number of ordinary shares in issue during
each period.
3. Dividends
Six months to 30 Six months to Year to
June 30 June 31 December
2007 2006 2006
£'000 £'000 £'000
Amounts recognised as distributions in the
period:
Previous year's final of 2.00p (2006 - 1.70p),
paid 10 April 2007 2,650 2,252 2,252
First Interim of 2.00p (2006 - 1.70p), paid 29
June 2007 2,650 2,252 2,252
Second Interim (2006 - 1.85p) - - 2,451
Third Interim (2006 - 1.85p) - - 2,451
5,300 4,504 9,406
Amounts paid and proposed in the period:
First Interim of 2.00p (2006 - 1.70p), paid 29
June 2007 2,650 2,252 2,252
Second Interim of 2.05p (2006 - 1.85p) 2,716 2,451 2,451
Third Interim (2006 - 1.85p) - - 2,451
Final dividend (2006 - 2.00p) - - 2,650
5,366 4,703 9,804
The second interim dividend was declared after the period end date and
therefore has not been included as a liability in the balance sheet. It
is payable on 28 September 2007 to shareholders on the register at the
close of business on 7 September 2007. The ex-dividend date is 5 September
2007.
4. The market value of the 8% Debenture Stock 2022 at 30 June 2007 was £96.0m
(30 June 2006 - £101.8m; 31 December 2006 - £101.6m).
5. At 30 June 2007, 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.
6. Transaction costs incurred on the purchase and sale of investments are
added to the purchase costs or deducted from the sales proceeds, as
appropriate. During the period, transaction costs on purchases amounted to
£191,000 (30 June 2006 - £270,000; 31 December 2006 - £373,000) and
transaction costs on sales amounted to £83,000 (30 June 2006 - £85,000;
31 December 2006 - £136,000).
7. The financial information contained within this Interim Report does not
constitute statutory accounts as defined in section 240 of the Companies
Act 1985. The financial information for the year ended 31 December 2006
has been extracted from the statutory accounts which have been filed
with the Registrar of Companies and which contain an unqualified Auditor's
Report and do not contain a statement under section 237 (2) or (3) of the
Companies Act 1985.
8. The Interim Report was approved by the Board on 27 July 2007.
None of the views expressed in this document should be construed as advice
to buy or sell a particular investment.
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