Scot.American Inv. - Annual Financial Report

Scottish American Investment

03/03/2023 10:42

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230303:nRSC8597Ra&default-theme=true

RNS Number : 8597R  Scottish American Investment Co PLC  03 March 2023

The Scottish American Investment Company P.L.C. (SAIN)

 

Legal Entity Identifier: 549300NF03XVC5IFB447

Regulated Information Classification: Annual Financial and Audit Reports

 

Annual Report and Financial Statements

 

Further to the statement of audited annual results announced to the Stock
Exchange on 10 February 2023, The Scottish American Investment Company P.L.C.
("SAINTS" or "the Company") announces that the Company's Annual Report and
Financial Statements for the year ended 31 December 2022, including the Notice
of Annual General Meeting, has today been posted to shareholders and submitted
electronically to the National Storage Mechanism where it will shortly be
available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .

It is also available on the SAINTS page of the Baillie Gifford website at:
saints-it.com (http://www.saints-it.com) (as is the statement of audited
annual results announced by the Company on 10 February 2023).

 

Responsibility Statement of the SAINTS Directors in respect of the Annual
Financial Report

The SAINTS Directors confirm that, to the best of their knowledge:

¾  the Financial Statements set out in the Annual Report and Financial
Statements, prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company;

¾  the Strategic Report set out in the Annual Report and Financial
Statements includes a fair review of the development and performance of the
business and the position of the issuer, together with a description of the
principal risks and uncertainties that the issuer and business faces (as also
set out below); and

¾  the Annual Report and Financial Statements taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.

 

Principal and Emerging Risks relating to the Company

As explained on pages 32 and 33 of the Annual Report and Financial Statements,
there is an ongoing process for identifying, evaluating and managing the risks
faced by the Company on a regular basis. The Directors have carried out a
robust assessment of the principal and emerging risks facing the Company
including those that would threaten its business model, future performance,
regulatory compliance, solvency or liquidity. There have been no significant
changes to the principal risks during the year other than to move cyber
security risk from emerging to principal risks. A description of these risks
and how they are being managed or mitigated is set out below.

The Board considers the ongoing Covid-19 pandemic implications, geopolitical
tensions, such as those arising from the Russian invasion of Ukraine, tensions
between the USA and China, the re-emergence of inflation and the impact of
Brexit to be factors which exacerbate existing areas of risk as categorised
and further explained below.

 

Financial Risk - the Company's assets consist mainly of listed securities and
its principal and emerging risks are therefore market related and include
market risk (comprising currency risk, interest rate risk and other price
risk), liquidity risk and credit risk. An explanation of those risks and how
they are managed is contained in note 18 to the Financial Statements on pages
59 to 64 of the Annual Report and Financial Statements. The Board has, in
particular, considered the impact of heightened market volatility since the
Covid-19 pandemic, macroeconomic and geopolitical concerns and high inflation.
To mitigate this risk at each Board meeting the Manager provides an investment
policy paper which includes a detailed explanation of significant stock
selection decisions and the overall rationale for holding the current
portfolio. Consideration is given to portfolio movements and the top and
bottom contributors to performance. The investment approach is considered in
detail at the annual Strategy Meeting. The Board has considered the potential
impact on sterling from the remaining Brexit related uncertainties. The value
of the Company's investment portfolio and its income stream would be affected
by any currency movements, but the Board believes the nature and
diversification of the Company's equity portfolio moderates such risks.

 

Investment Strategy Risk - pursuing an investment strategy to fulfil the
Company's objective which the market perceives to be unattractive or
inappropriate, or the ineffective implementation of an attractive or
appropriate strategy, may lead to reduced returns for shareholders and, as a
result, a decreased demand for the Company's shares. This may lead to the
Company's shares trading at a widening discount to their net asset value. To
mitigate this risk, the Board regularly reviews and monitors the Company's
objective and investment policy and strategy; the investment portfolio and its
performance; the level of discount/premium to net asset value at which the
shares trade; and movements in the share register.

 

Climate and Governance Risk - as investors place increased emphasis on
Environmental, Social and Governance (ESG) issues, perceived problems on ESG
matters in an investee company could lead to that company's shares being less
attractive to investors, adversely affecting its share price, in addition to
potential valuation issues arising from any direct impact of the failure to
address the ESG weakness on the operations or management of the investee
company (for example in the event of an industrial accident or spillage).
Environmental factors are also of significant importance in relation to the
property investments as, for example, flood risk or the use of deleterious
materials could reduce the attractiveness of a property and potentially its
valuation and rental income prospects. Repeated failure by the Investment
Manager and Property Manager to identify ESG weaknesses in investee companies
or property investments, could lead to the Company's own shares being less
attractive to investors, adversely affecting its own share price. This is
mitigated by the Investment Managers' strong ESG stewardship and engagement
policies, and the Board's own ESG policy, which is available to view on the
Managers' website: saints-it.com (http://www.saints-it.com) , both of which
have been adopted by the Company, and which are fully integrated into the
investment process as well as the extensive up-front and ongoing due diligence
which the Investment Manager undertakes on each investee company. The due
diligence conducted by the Investment Manager and Property Manager includes
assessment of the risks inherent in climate change (see page 34 of the Annual
Report and Financial Statements).

 

Regulatory Risk - failure to comply with applicable legal and regulatory
requirements such as the tax rules for investment companies, the FCA Listing
Rules and the Companies Act could lead to suspension of the Company's Stock
Exchange listing, financial penalties, a qualified audit report or the Company
being subject to tax on capital gains. To mitigate this risk, Baillie
Gifford's Business Risk, Internal Audit and Compliance Departments provide
regular reports to the Audit Committee on Baillie Gifford's monitoring
programmes. Major regulatory change could impose disproportionate compliance
burdens on the Company. In such circumstances representation is made to ensure
that the special circumstances of investment trusts are recognised.
Shareholder documents and announcements, including the Company's published
Interim and Annual Report and Financial Statements, are subject to stringent
review processes, and procedures are in place to ensure adherence to the
Transparency Directive and the Market Abuse Directive with reference to inside
information.

 

Custody and Depositary Risk - safe custody of the Company's assets may be
compromised through control failures by the Depositary, including breaches of
cyber security. To mitigate this risk, the Board receives six monthly reports
from the Depositary confirming safe custody of the Company's assets held by
the Custodian. Cash and portfolio holdings are independently reconciled to the
Custodian's records by the Managers. The Custodian's assured internal controls
reports are reviewed by Baillie Gifford's Business Risk Department and a
summary of the key points is reported to the Audit Committee and any concerns
investigated.

 

Operational Risk - failure of Baillie Gifford's systems or those of other
third party service providers could lead to an inability to provide accurate
reporting and monitoring or a misappropriation of assets. To mitigate this
risk, Baillie Gifford has a comprehensive business continuity plan which
facilitates continued operation of the business in the event of a service
disruption or major disaster. The Audit Committee reviews Baillie Gifford's
Report on Internal Controls and the reports by other key third party providers
are reviewed by Baillie Gifford on behalf of the Board and a summary of the
key points is reported to the Audit Committee and any concerns investigated.
In the year under review, the other key third party service providers have not
experienced significant operational difficulties affecting their respective
services to the Company.

 

Discount Risk - the discount/premium at which the Company's shares trade
relative to its net asset value can change. The risk of a widening discount is
that it may undermine investor confidence in the Company. The Board monitors
the level of discount/premium at which the shares trade and the Company has
authority to buy back its existing shares when deemed by the Board to be in
the best interests of the Company and its shareholders.

 

Leverage Risk - the Company may borrow money for investment purposes
(sometimes known as 'gearing' or 'leverage'). If the investments fall in
value, any borrowings will magnify the extent of this loss. If borrowing
facilities are not renewed, the Company may have to sell investments to repay
borrowings. The Company can also make use of derivative contracts. To mitigate
this risk, all borrowings require the prior approval of the Board and leverage
levels are discussed by the Board and Managers at every meeting. Details of
the Company's current borrowings can be found in notes 11 and 12 on page 57 of
the Annual Report and Financial Statements. The majority of the Company's
investments are in quoted securities that are readily realisable. Further
information on leverage can be found on page 74 and the Glossary of Terms and
Alternative Performance Measures on pages 75 and 76 of the Annual Report and
Financial Statements.

 

Political Risk - political developments will be closely monitored and
considered by the Board and Managers. Following the departure of the UK from
the European Union and the subsequent trade agreement between the UK and the
European Union, the Board continues to assess the potential consequences for
the Company's future activities including those which may arise from further
constitutional change. The Board also remains watchful of broader geopolitical
tensions and the associated potential for armed conflict. The Board considers
the nature and diversification of the Company's investments provides a good
degree of protection against such political risks.

 

Cyber Security Risk - a cyber attack on Baillie Gifford's network or that of a
third party service provider could impact the confidentiality, integrity or
availability of data and systems. To mitigate this risk, the Audit Committee
reviews Reports on Internal Controls published by Baillie Gifford and other
third party service providers. Baillie Gifford's Business Risk Department
report to the Audit Committee on the effectiveness of information security
controls in place at Baillie Gifford and its business continuity framework.
Cyber security due diligence is performed by Baillie Gifford on third party
service providers which includes a review of crisis management and business
continuity frameworks.

 

Emerging Risks - as explained on pages 32 and 33 of the Annual Report and
Financial Statements, the Board has regular discussions on principal risks and
uncertainties, including any risks which are not an immediate threat but could
arise in the longer term. The Board considers that the key emerging risks
arise from three areas: from the global reach of the investment portfolio and
its exposure to external and emerging threats such as the Russia-Ukraine
military conflict, ongoing tensions between the USA and China and new
coronavirus variants or similar public health threats. This is mitigated by
the Investment Manager's close links to the investee companies and their
ability to ask questions on contingency plans. The Investment Manager believes
the impact of such events may be to slow growth rather than to invalidate the
investment rationale.

 

Baillie Gifford & Co Limited

Company Secretaries

3 March 2023

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  ACSUOSRRORUORAR