RNS Announcement

The Scottish American Investment Company P.L.C.

Legal Entity Identifier: 549300NF03XVC5IFB447

Regulated Information Classification: Additional regulated information required to be disclosed under the applicable laws and regulations.

The following is the results announcement for the year to 31 December 2023 which was approved by the Board on 14 February 2024.

Results for the year to 31 December 2023 and Board and Manager updates

¾  Dividend - The full year dividend, including a recommended final dividend of 3.80p, is 14.10p per share. This is 2% higher than the 2022 dividend, extending the Company's record of dividend increases to fifty consecutive years. This year's increase is modest when set against last year's 9% increase and, whilst inflation has moderated somewhat since last year, does not match the annual rate of inflation of 4% as measured by CPI over 2023.

¾  Revenues - Income was £30m (2022 - £30m) and earnings per share were 13.48p (2022 - 13.82p).

¾  Total return^* - SAINTS delivered a strong absolute return over the year: its share price total return was 8.2% and the net asset value total return (capital and income with borrowing at fair) was 11.8%. However, SAINTS' returns did not keep up with global equities^† which returned 15.7% over 2023. SAINTS' share price return has, in common with investment trusts generally, been affected by a broadening of discounts.

¾  In a year when the market's returns were driven by a handful of large US technology companies SAINTS' relative performance has been affected by both its focus on equities which pay dividends and its investments in diversifying assets which enhance the portfolio's yield. Both are features which the Board regards as intrinsic strengths of SAINTS in its pursuit of its objectives over the long term.

¾  SAINTS aims to grow its dividend ahead of inflation over the long term. Over the past ten years SAINTS has increased its dividend at an annualised rate of 3.3% per annum, which compares with UK CPI of 2.9%.

¾  SAINTS also aims to deliver attractive returns over the long term - SAINTS' NAV total return (with borrowings at fair value) has exceeded that of both global equities generally and that of the global equity income sector over the past five and ten years.

¾  Outlook - The Board remains of the view that a long-term approach based on investing globally for sustainable growth is the best route to achieving SAINTS' aims. In addition, we are encouraged that the Managers have continued to find new and attractive opportunities. We retain great confidence in the Managers, and this confidence has been further strengthened by the operational performance of SAINTS' holdings over the past year.

Board update

In April 2023, it was announced that Bronwyn Curtis would not be seeking re-election to the Board in 2024. It remains her intention not to do so, and she will step down at the conclusion of this year's AGM. At the Board's request, Dame Mariot Leslie has agreed, subject to her re-election as a Director, to take over as Senior Independent Director following Bronwyn's retirement.

Manager update

Toby Ross is today stepping back from his role as manager of SAINTS to concentrate on his other responsibilities at Baillie Gifford. The Board thanks Toby for his significant contribution to SAINTS in recent years, and looks forward to continuing to work with James Dow as manager and Ross Mathison as deputy manager in the coming years.

*       See Glossary of Terms and Alternative Performance Measures at the end of this announcement.

†      As measured by the total return of the FTSE All-World Index (in sterling terms).

Source: Morningstar/LSEG/Baillie Gifford and relevant underlying index providers

14 February 2024

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 £224 billion under management and advice as at 14 February 2024.

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 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 Ross Mathison, Managers, The Scottish American Investment Company P.L.C.

Tel: 0131 275 2000

James Budden, Baillie Gifford & Co  

Tel: 0131 275 2000

Jonathan Atkins, Director, Four Communications

Tel: 0203 920 0555 or 07872 495396

Chairman's statement

SAINTS' objective is to deliver real dividend growth by increasing capital and growing income. The Board is recommending a final dividend which will bring the total dividends for the year to 14.10p per share, an increase of 2% over the previous year. The Company continues to meet its objective of growing dividends ahead of inflation over the long term, and the recommended dividend will also extend the Company's record of raising its dividend to fifty consecutive years.

Overview

2023 has been a strange year for the world and in investment markets. Macroeconomics and geopolitics have remained to the fore, but the intense focus on inflation and the path of interest rates, and on whether the landing will be hard or soft, has meant that economic news which seems bad has often been taken by the market as good. A war is raging in Europe, yet the vagaries of US and European politics have tested the strength of Western support, even as the crisis in the Middle East has diverted attention elsewhere. Tensions with and challenges within China continue to have far reaching effects, from onshoring in the US to heightened fears over the future of Artificial Intelligence ('AI'). And at the coalface, companies have had to contend with rising debt costs, a banking crisis in the US, customers with falling real wages and the prospect of faltering demand.

However, whilst there have been many causes of concern, as envisaged a year ago economies have continued to grow. Central banks may have been slow to respond to the inflationary threat. But they have subsequently shown admirable independence in doing what is necessary to bring inflation under control. Inflationary pressures have subsided, and interest rate expectations have moved downwards, providing some support in the final months of the year both to equity and property prices.  The market has climbed the proverbial wall of worry, helped by earnings which, collectively and thus far, have continued to rise. But the pattern of performance within the market has been unusual: its gains have been highly concentrated, driven by a handful of very large technology companies in the US which are taken as being in an AI sweetspot, augmented by beneficiaries of strong energy prices and high interest rates.

In this environment, SAINTS' emphasis on steady earnings growth and dependability has stood the Company in good stead in terms of both the operational performance of its holdings and its absolute NAV performance.  But unsurprisingly its NAV returns have not kept pace with the market and, in the context of a widening of discounts across the investment trust sector, SAINTS' share price has not kept pace with its NAV over the year.

For the long term investor, however, it is the underlying growth and the growth prospects of SAINTS' holdings which are of most importance.  And here the Managers' Review (below) tells an encouraging story.

Given the long-term nature of the Company's objectives, it is worth emphasising both SAINTS' successful record of raising its dividend ahead of inflation over the long term, and the strong total returns it has delivered. In particular, as SAINTS' 150th anniversary year draws to a close, the Board and the managers are pleased that 2023 marked the fiftieth successive year of dividend growth for SAINTS' shareholders.

Dividend and Inflation

The Board recommends a final dividend of 3.80p which will take the full year dividend to 14.10p per share, 2% higher than the 2022 dividend of 13.82p. This year's increase is modest when set against last year's 9% increase and, whilst inflation has moderated  since last year, does not match the annual rate of inflation of 4% as measured by CPI over 2023.

It remains the Company's objective to deliver real dividend growth over the long term, and over the last ten years the Company's dividends have in the round increased at a rate (3.3% per annum) which has been above the rate of inflation (2.9% per annum).

Revenues

Whilst investment income has remained steady at £30m, earnings per share dipped to 13.48p over the year, a decrease of 2.5%. Operational performance of the holdings has been generally encouraging. Equity income has fallen a little, due to a reduction in special dividends during the year. Infrastructure dividends grew healthily, while income from bonds dropped back due to a combination of exchange rates and divestments to fund property purchases. Rental income from property was a little lower, as the property managers made a number of sales with a view to reinvesting the proceeds to enhance the quality, dependability and lease length of the portfolio: to this end, the purchase of the M23 Pease Pottage motorway service area, which was completed after the year end, is a welcome addition to the portfolio. Despite all that, and modest share issuance, revenues per share before tax were broadly in line with last year. However, there was an increase in the rate of taxation during the year, which was partly due to withholding taxes on dividends, and partly a function of a higher corporation tax rate in the UK. This increase in taxation largely accounts for the slight drop in earnings per share.

Both managers (Baillie Gifford and, for the Company's property investments, OLIM) continue to focus on supporting the dependability and the future growth of the Company's dividend in line with its objective.

Total Return Performance

SAINTS delivered a strong absolute return over the year: its share price total return was 8.2% and the net asset value total return (capital and income with borrowing at fair) was 11.8%. However, SAINTS' returns did not keep up with global equities (as measured by the total of return of the FTSE All-World Index in sterling terms) which returned 15.7% over 2023. As mentioned above, SAINTS' share price return has, in common with investment trusts generally, been affected by a broadening of discounts.

There were two principal reasons why SAINTS' NAV return did not keep pace with the market, both of which relate to features which the Board regard as intrinsic strengths of SAINTS. The first is the nature of its equity portfolio, which is built for and has delivered dependability and growth in income and capital over the long term. Many of the large technology related companies which have dominated market returns over the year do not sit well with this approach, and so SAINTS has not owned them. Consequently, the equity portfolio, which accounts for the major part of your Company's assets, has lagged the market.

The second reason relates to SAINTS' diversification of assets and in particular to its property investments. These bring benefits in terms of diversifying sources of return, spreading risk and boosting revenues, but will not always keep pace with equities. This year, they have not done so, and the return from the property portfolio has been negative.

The Managers and your Board have a long-term perspective and we would therefore encourage shareholders to assess your Company's performance over the long term. SAINTS has delivered a strong NAV return of 84.5% over the past five years, handsomely outperforming the 72.7% average return of the Global equity income sector and the 77.8% return of global equities as measured by the Company's benchmark. It is noteworthy also that SAINTS' property holdings have returned 39.2% over the past five years, outperforming the property sector more generally.

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.

Borrowings

In recent years SAINTS' long term borrowings have been refinanced and modestly increased at advantageous interest rates. The cost of these borrowings in just under 3% per annum.

The book value of the total borrowings is £94.7m which, at the year end, was equivalent to approximately 10.1% of shareholders' funds. The estimated market or fair value of the borrowings was £68.2m, an increase from the previous year's value of £65.5m.

Environmental, Social and Governance (ESG)

It is important to emphasise that the Board of SAINTS recognises the importance of considering Environmental, Social and Governance (ESG) factors when making investments, and in acting as a responsible steward of capital. We consider that Board oversight of such matters is an important part of our responsibility to shareholders, and SAINTS' ESG Policy is available to view on the Company's website (saints-it.com).

The Board has been strongly supportive of Baillie Gifford's approach and of their constructive engagement with the companies you own, and with potential holdings, in relation to crucially important challenges including climate change. The Board is also supportive of OLIM's approach in relation to property, and in particular of its consideration of environmental factors including climate change in assessing the suitability of SAINTS' investments. I would encourage shareholders to read SAINTS' annual Stewardship Report which can also be accessed on the Company's website (saints-it.com).  There is also further detail in the Managers' Review.

Issuance and buybacks

Over the year the Company has raised £8.3m from new share issuance, at a premium to net asset value prevailing from time to time in order to satisfy investor demand. This is the ninth year in a row when the Company has been able to issue shares. Such issuance serves the interests of existing shareholders by enhancing net asset value, reducing costs per share and helping further to improve liquidity. No shares were bought back during the year.

The Board and the Managers

In April 2023, it was announced that Bronwyn Curtis would not be seeking re-election to the Board in 2024. It remains her intention not to do so, and she will step down at the conclusion of this year's AGM. We thank her for her wise contribution over many years of service as a Director and, more recently, as the Senior Independent Director. At the Board's request, Dame Mariot Leslie has agreed, subject to her re-election as a Director, to take over as Senior Independent Director following Bronwyn's retirement.

The Board, assisted by external consultants, conducted a recruitment exercise during 2023 and in November were pleased to announce Padmesh Shukla will be joining the Board on 20 February 2024. Padmesh is the Chief Investment Officer of the Transport For London Pension Fund, and has over 25 years of investment experience, including 12 years in his current role at TFL. He was formerly head of Climate Change Financing at the London Development Agency, and prior to that he had worked at the World Bank, as a Researcher at Harvard and in real estate. He is currently a member of the Church of England Pensions Investment Committee. His appointment will fall to be ratified by shareholders at the AGM in 2024.

It was announced at the beginning of August that Ross Mathison had become deputy manager of SAINTS. Toby Ross is today stepping back from his role as manager of SAINTS to concentrate on his other responsibilities at Baillie Gifford. The Board thanks Toby for his significant contribution to SAINTS in recent years, and looks forward to continuing to work with James Dow as manager and Ross Mathison in the coming years.

Outlook

The coming year will be full of political uncertainty, with voters in countries representing half the world's population going to the polls.  However, in my view, commentators tend to overemphasise the role of politics in economic performance.  Of course, there are occasional outliers - France in 1981 and the UK in the autumn of 2022 come to mind - but poor policy choices are generally corrected sooner than later.  And independent central banks, and the rule of law, provide a degree of protection. The recent resilience of the world economy has been encouraging. But the full force of higher interest rates has yet to work its way through the system. As it does, growth could become more challenging and corporate results may fall below expectations. Whether the landing is soft or hard, it is likely to be a year in which pricing power and balance sheet strength are of growing importance.  At the same time, both the changing world and entrenched competitive advantages will continue to present opportunities for secular growth at the company level. And lower valuations will provide buying opportunities across asset classes.

As a Board, we believe a long-term approach based on investing globally for sustainable growth is the best route to achieving SAINTS' aim of growing the dividend ahead of inflation over time. As we look ahead, we also take considerable comfort from the nature of SAINTS' investments, and from the managers' emphasis on quality, on dependability and on growth far out into the future. We are encouraged that, as is outlined further in the Managers' Review, Baillie Gifford have continued to find new and attractive opportunities, and we also believe that both the quality and duration of SAINTS' property portfolio have been enhanced over the past year.

SAINTS has been working for individual investors for 150 years.  It is built to help shareholders' income keep pace with inflation, as well as providing capital growth.  And it is built for resilience.

AGM

The AGM will be held at 11.30am on Thursday 4 April 2024 at Baillie Gifford's offices at Calton Square, 1 Greenside Row, Edinburgh. The meeting will be followed by a presentation from the managers.  Shareholders are cordially invited to attend the meeting and presentation.

I would remind shareholders that they are able to submit proxy voting forms before the applicable deadline and also to direct any questions or comments for the Board in advance of the meeting through the Company's Managers, either by emailing trustenquiries@bailliegifford.com or calling 0800 917 2112 (Baillie Gifford may record your call).

Finally, my fellow Directors and I send you all our very best wishes for the year ahead.

Lord Macpherson of Earl's Court

Chairman

14 February 2024

For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this announcement

Source: LSEG/Morningstar/Baillie Gifford and relevant underlying index providers. See disclaimer at the end of this announcement.

Past performance is not a guide to future performance.

Managers' review

During the past few years it seems that some parts of the media have become, for want of a better word, hysterical. Even the financial press, which used to be renowned for walking a line between dry and tedious, has often joined the fray of shouty headlines and breathless articles. This is understandable. Technology has disrupted the business models of traditional media channels.  In a digital world, whoever conjures the most shocking headlines will gather the most clicks. And whoever accumulates the most clicks might be able to keep their jobs.

The headlines blaring at investors at the start of 2023 were alarming. Inflation was proving "untameable", central banks were hiking "too aggressively", and an economic "hard landing" was certain.  Investor confidence declined, and stock markets fell.  By March, the mood had changed.  Inflation seemed to be peaking. Many of the grim predictions at the start of the year, like crashing house prices and tumbling profits, were swiftly forgotten. In their place appeared two words promising great riches: "Artificial Intelligence".  The stock market began a triumphant rise, which would continue until the summer.

Gloom then returned.  Economic data looked "hot", and inflation seemed persistent. Stocks fell.  By November, behold!  The data looked more friendly.  Fears of war between the US and China, which had generated dire forecasts only months earlier, now receded. The stock market began another charge upwards, buoyed by a new hope: interest rate reductions. Stock indices reached new heights at the dawn of 2024.  "Time to buy!" was the headline.

For the long-term investor, who is earnestly attempting to grow their capital and income over a period of many years, this hysteria is unhelpful.  It is rather like trying to hold a conversation at a dinner-party while being repeatedly interrupted by a drunken guest, who veers endlessly between loud euphoria and wallowing self-pity.  An unfortunate distraction.

Over the multi-year periods that matter to serious savers and investors, stock prices and dividends tend largely to follow company earnings. The key task for portfolio managers, therefore, is to identify companies with strong prospects of growing their earnings over many years. These prospects are unlikely to be affected by the monthly mood swings of the media.  It is a job best done when sober.

We keep this long-term perspective in mind when we look back at 2023.  In the headlines it was a year of enormous ups and downs.  But what about the investments in SAINTS' portfolio?  Did they largely deliver in-line with our long-term expectations for their growth in earnings and dividends? 

The short answer is: yes.  The more nuanced answer is that some grew faster while others saw earnings fall. But in almost every case we are satisfied that their long-term growth remains on-track. We expect this to drive continued compounding in capital and dividends in the years ahead. Here are some of the highlights.

Equity portfolio highlights

The total return from the equity portfolio^† last year was 13.9%.

One of the standouts from the portfolio was Atlas Copco, the global compressor and industrial tool business, based in Sweden.  This well-managed company is religiously focused on innovation to drive growth, and it is always on the look-out for strong niche businesses to acquire. Revenues in 2023 increased 22%, of which 8% came from acquisitions. Operating profit grew 23% and earnings per share rose by more than 30%.  The dividend was raised by 22%, while maintaining a prudent payout ratio below 50%. Some of the strength in Atlas's growth last year was cyclical, and we would not expect the company to continue growing at these rates every single year. But taking a longer-term perspective, we note that over the past five years the company has compounded its earnings higher at an average rate of 10% a year, while the dividend has grown by 12% a year.  This is exactly the sort of inflation-busting growth that drives real capital and dividend appreciation for SAINTS' shareholders, over the long-term. It's exactly the reason we invest almost 100% of SAINTS' NAV in growing companies that pay dividends, and take a long-term mindset amidst the noise of the markets.

Other strong performers in the equity portfolio last year included Watsco, the heating, ventilation and air conditioning distributor, and Fastenal, the industrial equipment distributor.  Again, both are companies with terrific track records of entrepreneurship and growth, which have compounded their earnings and dividends at inflation-beating rates for many years. They continued to deliver in 2023, and we remain optimistic about their potential for continued growth in the years to come.

Novo Nordisk, the Danish pharmaceutical company, was another highlight of the year.  Its pioneering medicine for appetite control, which its scientists have spent years investigating, whilst running clinical trials of thousands of patients to establish that it is both effective and safe, has resulted in significant earnings growth at the company.  Since our investment in 2016 for SAINTS, it has been a strong performer.  Earnings have broadly doubled, as has its dividend, meaning compound growth of about 10% per year.   In 2023 there was a continued flow of good data from its clinical trials, showing reduced risk of heart attacks for patients. This data is likely to drive continued uptake of its new medicine, and revenue and profit growth in the years ahead. 

Our natural inclination is to let winners run, to capture the true benefits of compounding. But we are also mindful of diversification, so we trimmed the Novo Nordisk holding a little during the year, to prevent it from dominating the portfolio.  It remains a large holding however, and we look forward with optimism to its continued growth.

Of the almost 60 holdings in the equity portfolio, we estimate that about a dozen saw a reduction in profits compared with 2022.  In most of these cases our investigations suggest the root cause was cyclical and short-term in nature.  For example, Sonic Healthcare, the lab testing company, and Roche, the pharmaceutical company, both saw their earnings drop in 2023. In both cases this was due partly to the wind-down of emergency COVID testing, which had lifted their profits in the past couple of years. The waning of this temporary boost does not undermine our view that both companies have good long-term potential for earnings and dividends growth over the next 10 years.

Not all of our investments will, of course be successful.   We try hard to be patient, as long-term managers, but sometimes it becomes apparent that our investment case is simply wrong, and that growth is not materialising to the extent we hoped.  In these cases we will divest, and put the capital to work in better companies. A small number of holdings had a weak 2023 that could not be excused by any cyclical headwind. In some cases our review of them led to a re-evaluation of their future prospects. During the year we divested from six holdings. 

One of them was Want Want, the Chinese rice cracker and soft drink manufacturer. It had been a disappointing investment, with low earnings growth over a number of years. At first we thought this was due to temporary input cost pressure, impacting margins, and we patiently maintained our investment while the company put in place a number of actions to restore profits and growth. Over time, however, we recognised a more concerning issue.  The Board seemed to have become too focused on short-term profits, which had made the company slow to recognise changing consumer preferences in China. It had resisted a shift towards modern distribution channels, and had failed to develop key new products. After visiting the company in China during 2023, and seeing limited prospects for change, we sold the position.

We also sold SAINTS' holding in Cullen Frost, the US regional bank.  When we invested several years ago our hope had been that continued growth in the population of Texas, which like most 'SunBelt' states is experiencing steady inflows of people, combined with the bank's huge deposit base and strong brand, would allow Cullen Frost to grow its loan book and earnings substantially.  But progress has been frustratingly slow, with intense competition in the local market.  At the start of 2023 the fragility of the US banking system was highlighted by a series of local bank runs. Cullen Frost was not directly affected, but it changed our view of the risk-reward ratio: limited growth, with the potential for the equity to be wiped out.  We moved on.

National Instruments was the third complete sale.  This followed a very attractive bid for the company, which caused the share price to shoot up.  We saw little advantage in waiting for the deal to complete, so divested from the shares.  It was a similar story at Silicon Motion, where the share price rose following an acquisition approach. The bid then became mired in regulatory issues and we decided to divest, even though the share price was somewhat below the bid price.  The bid was later withdrawn and the share price fell, so this has turned out to be a profitable decision.

The fifth divestment was Linea Directa, the Spanish insurance company. The shares have proven to be highly illiquid since we invested two years ago, which meant we struggled to make this into the size of holding we envisaged. With no plan in sight from the company to help improve liquidity, we decided to divest the holding.

Finally, Rio Tinto. This has been a longstanding holding, even by SAINTS' standards, dating back to the days of RTZ in the 1980s.  The company has a terrific competitive position in its core business, built around the low-cost iron ore mines of western Australia.  The past decade has been especially strong for its earnings and dividend growth, with rising demand from Chinese customers combined with limited new supply, driving the price of iron ore higher.  But in the past few years we have started to see the outlook deteriorate.  Mining companies, including Rio Tinto, are starting to invest huge sums to bring on new mines, while demand in China risks plateauing as parts of its economy mature.  At the same time, the cost of mining is starting to rise sharply.  Iron ore is used in steel mills, and the production of steel unfortunately results in huge emissions of carbon dioxide.  As steel mills are changing to meet environmental goals, iron ore mines need to follow suit.  A prime example is Rio Tinto's investment in a new mine in Guinea, where the output is more suited to low-carbon steel production.  Following a series of governance failings over the years, we are concerned about the company's ability to manage this investment, in a country that is fraught with political, environmental and social risks. Our expectation is that the next decade is likely to see the company's margins, profits and dividend growth all put under serious pressure.  We divested from the shares.

New purchases

The great attraction of long-term equity investing, at least when done with sobriety, is the endless stream of opportunities to invest shareholders' funds in companies with strong prospects for growth.  During the year we looked at many different names, each with its own attractions.  In five cases we took the opportunity to invest in a new holding where we believe the long-term results could be very rewarding. Often we invested at a time when the markets felt miserable and others were selling the shares and driving the price lower.

US-listed Home Depot is a DIY retailer with a very strong culture of service and innovation. It has a well-established brand with consumers and is building out its service in the professional trade, which we expect to grow earnings and dividends over the next 5 to 10 years. The stock market has been fretting about the impact of high interest rates on the US housing market, and by implication the company's sales. But having followed the company for over 20 years, we know this is easily over-played.  Most US homeowners take 30-year fixed rate mortgages, so the housing market is less sensitive to rates than one might think. We see this as an opportunity to invest in long-term growth at an attractive share price, and accordingly took a holding in the shares.

Coloplast is a Danish manufacturer of ostomy, incontinence, urology and wound care products, with significant European and global market shares. Its product engineering strengths in adhesives technology, combined with a mindset of continuous innovation, have enabled the company to develop profitable niche positions in markets with good prospects of continued compounding: we are hopeful that earnings and dividends will grow at an attractive rate for a very long time. A strong commitment to the dividend alongside this growth make it a good fit for the portfolio.

French-listed Eurofins Scientific is a global lab business focused on testing related to food and the environment. Over the past three decades, the company has invested relentlessly in an industry-leading, internally developed technology platform and created a global network of labs. Combined with structural market growth, due to factors such as regulation, we expect this to provide solid foundations for its earnings and dividend growth, with rising returns on capital, during the next decade and beyond.

Texas Instruments is the world's largest supplier of 'analog chips': the semiconductors that deal with real-world inputs such as sound, temperature and power. Its dominant position is built on its low-cost business model, which allows it to produce these chips at scale and price them competitively. Over the years it has built up a huge library of designs and many of these chips are still in production after decades on the market, providing the company with very long-lived and profitable revenue streams. In the decade ahead, we expect growth to be driven by secular trends such as the digitisation of industrial and automotive functions, the ongoing building of datacenters and the energy transition. The company is well-managed, it has a strong balance sheet, and is committed to paying a progressive dividend. The market has been worrying about the short-term impact on margins of the company's planned capacity expansion, which has led to a decline in the valuation multiple applied to the earnings. We took this as an opportunity to invest SAINTS' capital.

UK-listed Diageo is the world's largest spirits maker, with a dominant position in the US market, and a broad portfolio of brands that are recognised and sold globally including Johnnie Walker, Gordon's and Smirnoff. Our research over the years has highlighted its world-leading marketing and brand-building capabilities. We expect global consumption of spirits to grow steadily in the next decade as consumers modify their behaviour to drink 'less but better'. And thanks to Diageo's expertise in marketing and brand-building, we believe the company should be able to capture a large share of this growth. Combined with a clear commitment to pay a resilient and steadily growing dividend, we believe it can deliver many years of steady compound growth. The shares have de-rated due to fears of a short-term inventory overhang in the spirits industry, following post-COVID restocking by bars and restaurants.  We took this as an opportunity to invest in the company.

Challenges

Although the equity portfolio performed well operationally in 2023, in two respects it fell short.  First, we must acknowledge that the total return was behind global equity markets, as measured by the FTSE All-World Index (in sterling terms).  This can be explained by the large weight in the index of a small number of technology-related companies, which delivered very large share price appreciation during 2023.  An example is Nvidia, the semiconductor manufacturer, which has a strong position in the market for AI ('Artificial Intelligence') computing and whose share price rose dramatically last year. 

SAINTS' strategy is focused on the steady, long-term compounding of earnings and dividends.  Some of these large technology companies, such as Microsoft and Apple, are an excellent fit with this philosophy.  We also have a number of investments which should benefit from the growth expected in Artificial Intelligence, including Microsoft but also names such as TSMC, the semiconductor manufacturer that produces most of Nvidia's chips. However, some of the largest tech companies see wild swings in profits from year to year, and many of them do not pay dividends.  We do not invest in such companies, even if this means that in some years we miss out on their share price appreciation.  We believe that over the long-term SAINTS' approach will still perform well in terms of its core objective: growing shareholders capital and income ahead of inflation, with resilience across cycles.

Secondly, we must also observe that dividends from the equity portfolio were broadly unchanged during last year.  Of the £23.0m of dividend revenue in the year, revenue from the equity portfolio was essentially flat at £21.5m. (The remaining £1.5m of dividends was from the infrastructure equity portfolio.)  Of course, we would prefer it if revenue grew every year.  But in 2023 there was a notable absence of special dividends paid by the portfolio's holdings.  Typically, these account for about 5% of equity portfolio revenue, with the other 95% coming from 'ordinary' regular dividends. In 2023 there were remarkably few special dividends paid out, perhaps a function of economic uncertainty.  The result was that, although the portfolio's ordinary dividends grew at a mid-single digit rate, the absence of special dividends resulted in total dividends remaining flat, year-over-year.  Our expectation is that, going forward, normal growth will resume.  Indeed, it may even accelerate a touch in 2024, assuming special dividends return.

In summary, as headlines blared and markets gyrated in 2023, the vast majority of the holdings in SAINTS' equity portfolio continued to deliver solid compounding of earnings.  We made five new investments during the year, while divesting from six others. Total return performance fell a little short of global markets during the year, although it remained strong in absolute terms. Dividend income was flat, but we are sanguine about this one-year pause given that the principal underlying cause was the timing of special dividends. 

We continue the sober, but ultimately very rewarding work of searching the world for exceptional companies where we see strong prospects for long-term growth. 

Other investments

One of the advantages of the investment trust structure is the ability, certainly for SAINTS, to borrow at attractive, fixed rates over long periods of time.  We can then invest this funding in low-risk assets where we expect the return to substantially beat the cost of borrowing.  This generates additional capital returns and income for shareholders. 

SAINTS currently has borrowings totalling £95m. We believe this is prudent within the context of the gross assets of the Company, which are around £1bn.  The average cost of borrowing is 3%, and the borrowings on average will not mature until some time in the 2040s.  The proceeds are invested in a mixture of property, fixed income and infrastructure-related assets where over time we expect returns to significantly beat the cost of borrowing.

Infrastructure portfolio

SAINTS invests in infrastructure assets through listed equity vehicles. In the short-term these investments sometimes behave like equities, but over the long-term we expect their performance to be dominated by the performance of the underlying infrastructure assets. The portfolio proved resilient in 2023, despite the headwind of sharply rising interest rates. The total return during the year was 3%. 

One notable standout was Greencoat UK Wind, the windfarm owner and operator, which raised its distribution by 12% thanks to elevated power prices. The portfolio's holding in Terna, the Italian grid operator, was another highlight: its ongoing capital investments to connect renewable energy sources formed a bedrock for growth in its regulated asset base, leading to rising earnings and in turn to dividend growth of 8%.  We see a similar growth opportunity at Exelon, a new purchase for the infrastructure portfolio, which owns grid infrastructure in mostly left-leaning States in the northeast of the US: renewable upgrades should drive growth in its regulated asset base and its future dividends.

The year was more challenging for Chinese toll road operator Jiangsu Expressway, which owns most of the major routes north of Shanghai.  Over time we expect traffic growth in and out of Shanghai to drive revenue and earnings growth at the company. But last year it faced a slowing local economy, and it merely held its dividend flat rather than delivering the growth we were hoping for. 

Broadly-speaking, however, it was a solid year for the infrastructure portfolio.  

Property portfolio

The property portfolio invests in a small number of directly held assets. The portfolio had a challenging year.  The total return was -1.8%.

Given the circumstances - a combination of rising interest rates and a weakening economy - it is perhaps not surprising that property prices generally fell last year. SAINTS' portfolio has not been immune from this, and the performance of the portfolio has been comparable to that of the broader commercial property sector. This is due in part to its focus on strong covenants, long leases and inflation linked rents. The manager, OLIM, has rightly steered clear of many of the structurally-challenged areas of the market, notably the office market, which has faced both cyclical challenges as well as over-supply due to changing working practices.

Over the course of the year, the manager made a number of sales and new purchases to avoid the worst of these headwinds and further bolster the resilience and rental growth prospects of the portfolio going forward.  It is worth noting that by the end of 2023, SAINTS' property portfolio was essentially spread across three sectors, all of whose prospects appear structurally sound:  hotels and holiday homes; supermarkets; and industrials.  The tenants in these properties are the likes of Aldi, Tesco and Premier Inn (Whitbread), and the leases and covenants are of good quality.  We remain optimistic that long-term returns from this portfolio will beat the cost of borrowing.

Bond portfolio

The bond portfolio had a strong year.  The total return was 9.5%.

Readers may wonder how bond holdings can play a role in SAINTS, given the Company's focus on inflation-beating growth.  However, as the almost 10% return from the bond portfolio showed last year, the right names can deliver good real returns, substantially beating the cost of SAINTS' borrowings, as well as being as a useful diversifier.

The highlight here was the strength of SAINTS' emerging market sovereign bond holdings.  The history of defaults among many emerging market countries is surprisingly good.  Large economies such as Brazil are sufficiently diverse and robust that, as long as their institutions manage them with sufficient fiscal prudence, which of course we monitor, there is unlikely to be any serious risk of the government defaulting on its debt.  Despite this, these sovereign bonds often trade at very high yields, far in excess of the risk of default and SAINTS' cost of borrowing.

In our view, the real risk with these bonds is not defaults, but inflation.  Emerging markets are prone to bouts of rising prices, which can devalue their currency significantly. Which in turn can mean that a (say) 8% yield in local currency can over time become much less valuable in Sterling.  For this reason, we often prefer to invest in US dollar or Euro-denominated sovereign bonds from these countries. These still pay attractive yields but without the same currency risk.

In 2023, SAINTS earned attractive yields from its portfolio of these bonds, whilst also enjoying some capital appreciation. At the start of the year markets had been worrying about inflation in many emerging economies. But central banks in these countries often proved far swifter to raise rates during 2022 than, by comparison, the Bank of England and US Federal Reserve.  Perhaps their history of inflation made EM central banks a little more alert at the wheel, when inflation started to rise. This drove good results in 2023 as inflation was tamed, and their sovereign bond prices rose accordingly.

ESG

In previous years we have written about the importance of environmental, social and governance factors when investing in companies for the long-term.  The odds of returns compounding are significantly reduced if companies ignore their impacts on wider stakeholders.  Companies whose operations result in significant damage to the environment, for example, run a real risk of regulation hurting their future earnings, or some of their customers simply abandoning them.  We pay close attention to this for every SAINTS' holding, indeed we evaluate these risks using our own in-house developed framework, to help avoid such problems and to maximise the odds of long-term growth.

Earlier, we mentioned the case of Rio Tinto. One of the factors influencing our decision to divest was a lack of confidence in its ability to deal with the many risks of investing large sums in Guinea, a country with many governance challenges, for a project with significant reputational risk if its environmental and social impacts are not well-managed.  We also noted the significant cost of changing its products, which currently result in large carbon emissions by its customers.

On the positive side, our research into Novo Nordisk continues to suggest it is a company which operates with very high standards, and well-equipped to manage its impacts on stakeholders.  As a healthcare company producing a new drug that is in high demand, Novo Nordisk will undoubtedly be subject to a high level of scrutiny in the years ahead.  For it to deliver the growth we expect of it, we are keen to see the management and Board continuing to operate to the highest standard. Speaking to observers of the company in the healthcare industry, this certainly appears to be the case.  We will continue to engage with the senior management team to stress the importance of setting a very high bar in terms of business practices - for example around pricing, and data privacy of patients - so that the company maximises the odds of delivering its potential growth in the years ahead.

SAINTS in the year ahead

Shareholders may well have noted that SAINTS' earnings in 2023 did not quite cover the recommended full-year dividend.  The earnings per share were 13.48p while the dividend is to be 14.10p, meaning the coverage ratio is 96%.  One of the factors in the Board's thinking, gaining comfort with paying a slightly uncovered dividend, was the outlook for 2024 and beyond.

In the equity portfolio, we expect continued steady compounding in earnings and dividends from the vast majority of SAINTS' equity investments.  It is difficult to predict the exact figure in any one year, but as a rule of thumb we seek companies which have the prospect of growing their earnings and dividends, on average over long periods of time, by 10% a year. Of course, some do better and some do worse, and sometimes we will make portfolio upgrades which weigh on near-term income: our experience has been that for long-term success it is far better to swap a troubled 5% yielder for a strong 2% yielder, and swallow the short-term hit to income in pursuit of the long-term gain. All of this said and done, we believe the equity portfolio should be able to deliver dividend growth well ahead of UK inflation.

The macroeconomic outlook for 2024 is opaque.  There are hopes that Chinese consumer spending will bounce back at some point, but that was the hope at the start of 2023, and in fact sentiment deteriorated last year.  The US economy looks stronger, but sceptics are warning that we have yet to see the full impact of inflation and rate rises on business and households.  Europe meanwhile looks sluggish, but trading may well improve if rates show clearer signs of peaking. 

SAINTS' holdings have been selected for their structural growth potential across cycles, not as 'plays' on the economy. So whatever the economic outcomes in 2024, we are hopeful of continued growth in the earnings of the portfolio.  Microsoft for example has just reported very strong growth year on year, driven by uptake of its AI products. Novo Nordisk has just upgraded its growth estimate for 2024.  And so on.  Even if the global economy proves troublesome in 2024, it is worth remembering that our equity holdings have prudent payout ratios, meaning they should have still ample capacity to deliver dividend growth, even if their earnings growth proves a bit soggy.

In conclusion we are optimistic that revenues will grow in 2024, and that moving forward earnings growth will restore coverage of the dividend while supporting continued growth in returns to shareholders. Whatever the next set of headlines in the media, euphoric or despondent, we believe SAINTS owns a diverse portfolio of strong, well-managed, growing companies, with the potential to help the Company meet its core objectives:  growing capital and income ahead of inflation, and extending its record of 50 consecutive years of increases in the dividend.

James Dow

Toby Ross      

Ross Mathison

Baillie Gifford & Co

14 February 2024

* NAV per share with borrowings at fair value

† The equity portfolio here corresponds to the global equity portfolio noted below.

Source: Baillie Gifford and LSEG

List of investments as at 31 December 2023

Property portfolio

^† Purchased during the year.

* Sold during the year.

Performance attribution

For the year to 31 December 2023

*    Alternative performance measure - see Glossary of Terms and Alternative Performance Measures at the end of this announcement.

†   Includes Baillie Gifford and OLIM Property Limited management fees.

Source: Baillie Gifford and relevant underlying index providers. See disclaimer at the end of this announcement.

Past performance is not a guide to future performance.

Income statement

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 these statements derive from continuing operations.

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

The accompanying notes below are an integral part of the Financial Statements.

Balance sheet

*    See Glossary of Terms and Alternative Performance Measures at the end of this announcement.

The accompanying notes below are an integral part of the Financial Statements.

Statement of changes in equity

For the year ended 31 December 2023

For the year ended 31 December 2022

* The capital reserve as at 31 December 2023 includes unrealised investment holding gains of £339,191,000 (31 December 2022 - gains of £280,732,000).

The accompanying notes below are an integral part of the Financial Statements.

Cash flow statement

The accompanying notes below are an integral part of the Financial Statements.

Notes to the Financial Statements

1.  Basis of Accounting

The Financial Statements for the year to 31 December 2023 have been prepared in accordance with FRS 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 ended 31 December 2023.

2.  

3.  Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed as the Company's Alternative Investment Fund Manager ('AIFM') and Company Secretary. Baillie Gifford & Co Limited has delegated investment management services to Baillie Gifford & Co. Dealing activity and transaction reporting have been further sub-delegated to Baillie Gifford Overseas Limited and Baillie Gifford Asia (Hong Kong) Limited. The management of the property portfolio has been delegated to OLIM Property Limited.

The Investment Management Agreement between the AIFM and the Company sets out the matters over which the Managers have authority in accordance with the policies and directions of, and subject to restrictions imposed by, the Board. The Investment Management Agreement is terminable on not less than six months' notice. Compensation fees would only be payable in respect of the notice period if termination were to occur within a shorter notice period. The annual management fee is 0.45% of the first £500 million of total assets and 0.35% of the remaining total assets, total assets being the value of all assets held (excluding the property portfolio) less all liabilities, other than any liability in the form of debt intended for investment purposes, calculated on a quarterly basis. The Board is of the view that calculating the fee with reference to performance would be unlikely to exert a positive influence on performance.

The Property Management Agreement sets out the matters over which OLIM Property Limited has discretion and those matters which require Board approval. The Property Management Agreement is terminable on three months' notice. The annual fee is 0.5% of the value of the property portfolio, subject to a minimum quarterly fee of £6,250.

4. 

Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £23,960,000 (2022 - £24,345,000) and on 177,707,094 (2022 - 176,207,530) 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 £81,078,000 (2022 - net capital loss of £89,926,000), and on 177,707,094 (2022 - 176,207,530) 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.

5.  

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 £23,960,000 (2022 - £24,345,000).

If approved, the recommended final dividend on the ordinary shares will be paid on 11 April 2024 to shareholders on the register at the close of business on 1 March 2024. The ex-dividend date is 29 February 2024. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for the receipt of elections for reinvestment of this dividend is 19 March 2024.

6.   Creditors - amounts falling due after more than one year

The main covenants for the loan notes which are tested monthly are that net tangible assets shall not fall below £120,000,000 and gross borrowings shall not exceed 40% of the Company's adjusted assets.

7.   During the year, 1,565,000 (2022 - 1,150,000) shares were issued at a premium to net asset value raising proceeds of £8,302,000 (2022 - £5,901,000). At 31 December 2023 the Company had authority to buy back 26,494,966 ordinary shares and to allot 16,110,094 ordinary shares without application of pre-emption rights in accordance with the authorities granted at the AGM in April 2023. No shares were bought back during the year.

8.   During the year, transaction costs on purchases amounted to £985,000 (2022- £551,000) and £189,000 (2022 - £174,000) respectively.

9.  

*Cost of issuance includes carried forward deferred expenses of £207,000.

10. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2023 or 2022 but is derived from those accounts. Statutory accounts for 2022 have been delivered to the registrar of companies, and those for 2023 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

11. The Report and Accounts will be available on the SAINTS page of the Managers' website saints-it.com^‡ on or around 27 February 2024.

Glossary of Terms and Alternative Performance Measures ('APM')

An alternative performance measure is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.

Total Assets

This is the Company's definition of Adjusted Total Assets, being the total value of all assets held less all liabilities (other than liabilities in the form of borrowings).

Net Asset Value

Net Asset Value (NAV) is the value of total assets less liabilities (including borrowings). Net asset value can be calculated on the basis of borrowings stated at book value and fair value. An explanation of each basis is provided below. The net asset value per share is calculated by dividing this amount by the number of ordinary shares in issue excluding any shares held in treasury.

Net Asset Value (Borrowings at Book Value)

Borrowings are valued at adjusted net issue proceeds. Book value approximates amortised cost.

Net Asset Value (Borrowings at Fair Value) (APM)

Borrowings are valued at an estimate of their market worth. This indicates the cost to the Company of repaying its borrowings under current market conditions. It is a widely reported measure across the investment trust industry.

Premium/(discount) (APM)

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.

Ongoing Charges (APM)

The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average net asset value (with borrowings at fair value). The ongoing charges have been calculated on the basis prescribed by the Association of Investment Companies.

A reconciliation from the expenses detailed in the Income Statement above is provided below.

Total Return (APM)

The total return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend.

* The dividend adjustment factor is calculated on the assumption that the dividends paid out by the Company are reinvested into the shares of the Company at the cum income NAV/share price at the ex-dividend date.

Gearing (APM)

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.

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 (APM)

For the purposes of the Alternative Investment Fund Managers (AIFM) Regulations, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a 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 (APM)

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.

Sustainable Finance Disclosure Regulation ('SFDR')

The EU Sustainable Finance Disclosure Regulation ('SFDR') does not have a direct impact in the UK due to Brexit, however, it applies to third-country products marketed in the EU. As SAINTS is marketed in the EU by the AIFM, Baillie Gifford & Co Limited, via the National Private Placement Regime ('NPPR') the following disclosures have been provided to comply with the high-level requirements of SFDR.

The AIFM has adopted Baillie Gifford & Co's ESG Principles and Guidelines as its policy on integration of sustainability risks in investment decisions.

Baillie Gifford & Co believes that a company cannot be financially sustainable in the long run if its approach to business is fundamentally out of line with changing societal expectations. It defines 'sustainability' as a deliberately broad concept which encapsulates a company's purpose, values, business model, culture, and operating practices.

Baillie Gifford & Co's approach to investment is based on identifying and holding high quality growth businesses that enjoy sustainable competitive advantages in their marketplace. To do this it looks beyond current financial performance, undertaking proprietary research to build up an in-depth knowledge of an individual company and a view on its long-term prospects. This includes the consideration of sustainability factors (environmental, social and/or governance matters) which it believes will positively or negatively influence the financial returns of an investment.

The likely impact on the return of the portfolio from a potential or actual material decline in the value of investment due to the occurrence of an environmental, social or governance event or condition will vary and will depend on several factors including but not limited to the type, extent, complexity and duration of an event or condition, prevailing market conditions and existence of any mitigating factors.

Whilst consideration is given to sustainability matters, there are no restrictions on the investment universe of the Company, unless otherwise stated within in its Investment Objective & Policy. Baillie Gifford & Co can invest in any companies it believes could create beneficial long-term returns for investors. However, this might result in investments being made in companies that ultimately cause a negative outcome for the environment or society.

More detail on the Investment Managers' approach to sustainability can be found in the ESG Principles and Guidelines document, available publicly on the Baillie Gifford website bailliegifford.com.

The underlying investments do not take into account the EU criteria for environmentally sustainable economic activities established under the EU Taxonomy Regulation.

Third Party Data Provider Disclaimer

No third party data provider ('Provider') makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data.

No Provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the index data included in this

document, regardless of cause, or for any damages (whether direct or indirect) resulting therefrom. No Provider has any obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently  becomes inaccurate.

Without limiting the foregoing, no Provider shall have any liability whatsoever to you, whether in contract (including under an indemnity), in tort (including negligence), under a warranty, under statute or otherwise, in respect of any loss or damage suffered by you as a result of or in connection with any opinions, recommendations, forecasts, judgements, or any other conclusions, or any course of action determined, by you or any third party, whether or not based on the content, information or materials contained herein.

FTSE Index Data

Source: London Stock Exchange Group plc and its group undertakings (collectively, the 'LSE Group'). © LSE Group 2024. FTSE Russell is a trading name of certain of the LSE Group companies. 'FTSE®' 'Russell®', 'FTSE Russell®', is/are a trade mark(s) of the relevant LSE Group companies and is/are used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company's express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

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.

Shareholders, excluding those whose shares are held in CREST, who come on to the share register 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 gov.uk/government/publications/exchange-of-information-account-holders.

‡ 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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