The Scottish American Invest Co.

8/3/2019 The Scottish American Invest Co.

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SAINTSF Inc an Gwt

Annual Report and Financial

Statements 31 December 2010
http://www.bailliegifford.com/Default.aspx


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Contents

1CompanySummary 2OneYearSummary 3FiveYearSummary 4ChairmansStatement 6DirectorsandManagement 8 ManagersReview12 PerormanceAttribution12DistributionoPortolio13 ThirtyLargestHoldings13 InvestmentChanges14 ClassifcationoInvestments

15ListoInvestments18 PropertyPortolio19TenYearRecord20DirectorsReport

28DirectorsRemunerationReport30StatementoDirectorsResponsibilities31IndependentAuditorsReport32IncomeStatement32 StatementoTotalRecognisedGainsandLosses33 BalanceSheet34 ReconciliationoMovementsinShareholdersFunds35 CashFlowStatement36 NotestoFinancialStatements49 PlansManagedbyBaillieGiord50 CommunicatingwithShareholders

51 FurtherShareholderInormation51 DividendDatesor201152AnalysisoShareholders53 NoticeoAnnualGeneralMeeting57 AppendixtotheNoticeoAnnualGeneralMeeting

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should takeyou should consult your stockbroker, bank manager, solicitor, accountant or other independent nancial advisor authorised under the FinancialServices and Markets Act 2000 immediately.

If you have sold or otherwise transferred all of your ordinary shares in The Scottish American Investment Company P.L.C., please forward thisdocument and the accompanying form of proxy as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agentthrough whom the sale or transfer was or is being effected for delivery to the purchaser or transferee.


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THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C. 1

CompANy SummAry

Company Summary

Company data at 31 December 2010Total assets Shareholders funds Market capitalisation

418m 331m 325mTotalnetassetsbeoredeductionodebenture.

ObjectiveSAINTSobjectiveistoincreasecapitalandgrowincomeinordertodeliverrealdividendgrowth.

Investment PolicySAINTSpolicyistoinvestexiblyandactivelyacrossabroadrangeoassetsandmarkets.Listedequities,bothUKandoverseas,ormthelargestpartotheportolio.Investmentsarealsomadeinbonds,propertyandotherassetclasses.FulldetailsotheCompanysinvestmentpolicyarecontainedwithintheBusinessReviewonpages20and21.

Company History

SAINTSwasoundedin1873.Around80%otheCompanyssharesareheldbyprivateindividuals.

BenchmarkTheportoliobenchmarkagainstwhichperormancehasbeenmeasuredis50%FTSEAll-ShareIndexand50%FTSEAll-WorldExUKIndex(insterlingterms).

IncomparingNAVperformancetothebenchmarktheCompanysassetsandliabilitiesaremeasuredatfairvalue.

Management DetailsBaillieGiord&CowereappointedasInvestmentManagersandSecretariestotheCompanywitheectrom1January2004.

Themanagementcontractcanbeterminatedonsixmonthsnotice.ThepropertyportolioismanagedbyOLIMLimited.Theagreementcanbeterminatedonthreemonthsnotice.

Management FeesBaillieGiord&Cosannualmanagementeeis0.45%ototalassetslesscurrentliabilities,excludingthepropertyportolio,calculatedonaquarterlybasis.

OLIMLimitedreceivesanannualeeo0.5%othevalueothepropertyportoliosubjecttoaminimumquarterlyeeo6,250.

Capital StructureAttheyearendtheCompanyssharecapitalconsistedo132,485,943ordinaryshareso25peachwhichwereissuedandullypaid.TheCompanyhasbeengrantedtheauthoritytobuybackalimitednumberoitsownshares.Longtermgearinghasbeensecuredby80million(nominalvalue)odebenturestock,whichwasissuedinthreetranchesbetweenApril1997andJanuary2001.

Saving VehiclesSAINTSsharescanbeheldthroughavarietyosavingsvehicles(seepage49ordetails).

AICTheCompanyisamemberotheAssociationoInvestmentCompanies.

NotesNoneotheviewsexpressedinthisdocumentshouldbeconstruedasadvicetobuyorsellaparticularinvestment.

InvestmenttrustsareUKpubliclistedcompaniesandassuchcomply

withtherequirementsotheUKListingAuthority.TheyarenotauthorisedorregulatedbytheFinancialServicesAuthority.

SAINTS aims to be a core investment for private investors seeking income.Its objective is to achieve capital and income growth in order to grow thedividend at a faster rate than ination. The focus of the portfolio is onlisted equities, both UK and overseas, but investments are also made inbonds, property and other asset types.


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2 ANNUAL REPORT 2010

oNe yeAr SummAry

31 December 31 December

2010 2009 % change

Totalassets(beoredeductionodebenture) 418.3m 365.1mDebenture(bookvalue) 87.5m 87.9mShareholdersunds 330.8m 277.2m

Netassetvalueperordinaryshare(debentureatairvalue) 242.5p 206.0p 17.7Netassetvalueperordinaryshare(debentureatbookvalue) 249.7p 209.2p 19.4Shareprice 245.5p 181.0p 35.6FTSEAll-ShareIndex 3,062.8 2,760.8 10.9FTSEAll-WorldExUKIndex(insterlingterms) 207.5 181.4 14.4Benchmarkcompositeindex* 12.7

Premium/(discount)debentureatairvalue 1.2% (12.1%)Discount(debentureatbookvalue) (1.7%) (13.5%)

Revenueearningsperordinaryshare 8.51p 9.05p (6.0)Dividendspaidandpayableinrespectotheyear 9.25p 9.05p 2.2Expenseratio 0.90% 1.02%

Year to Year to

31 December 2010 31 December 2009

Years high and low High Low High Low

Netassetvalue(debentureatairvalue) 247.2p 196.4p 208.3p 125.8pNetassetvalue(debentureatbookvalue) 253.8p 203.3p 211.2p 129.1pShareprice 245.5p 178.7p 185.0p 113.3p

Premium/(discount)debentureatairvalue 2.3% (12.1%) (4.3%) (14.7%)Premium/(discount)debentureatbookvalue (1.4%) (13.5%) (7.7%) (15.9%)

Year to Year to

31 December 2010 31 December 2009

Total return performance

Netassetvalue(debentureatairvalue) 22.8% 49.6%Netassetvalue(debentureatbookvalue) 24.3% 45.5%Shareprice 41.8% 47.3%Benchmarkcompositeindex* 15.8% 25.4%

Pastperormanceisnotaguidetoutureperormance.

One Year Summary

One Year Performance(fguresplottedonamonthlybasisrebasedto100at31December2009)

Share price

NAV (fair value)

Benchmark*

Dividends are not reinvested.

Source: Thomson Reuters Datastream/Baillie Gifford & Co

*The Companys benchmark index is: 50% FTSE All -ShareIndex and 50% FTSE All-World ex UK Index (in sterling terms).

2010

J F M A M J J A S O N2009

80

140

110

100

90

D D

120

130

150


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Five Year Summary

FIve yeAr SummAry

5 Year Total Return Performance(fguresrebasedto100at31December2005)

Relative Annual Net Asset Value andShare Price Total Returns (relative to

the benchmark* total return)

Premium/(discount) to Net Asset Value(plottedonamonthlybasis)

Dividend and RPI Growth Rate(fguresrebasedto100at31December2005)


*Witheectrom1January2009theportoliobenchmarkagainstwhichperormancehasbeenmeasuredis50%FTSEAll-ShareIndexand50%FTSEAll-WorldExUKIndex(insterlingterms).FortheearlieryearscoveredbytheabovegraphstheCompanysbenchmarkwas70%FTSEAll-ShareIndexand30%FTSEWorldExUKIndex(insterlingterms).Forthepurposesotheabovegraphsthereturnsonbothbenchmarksortheirrespectiveperiodshavebeenlinkedtoormasinglebenchmark.

20092005 2006 2007 200840

60

80

120

140

2010

160

100


Share price total return

NAV total return (book value)

Benchmark* total return

(CUMULATIVE TO 31 DECEMBER)


SAINTS premium/(discount) book value

SAINTS premium/(discount) fair value

The discount is the difference between SAINTS quotedshare price and its underlying net asset value.

YEARS TO 31 DECEMBER

2%

(4%)

20092005 2007 2008

(2%)

20102006

0%

(6%)

(8%)

(10%)

(12%)

(14%)

(16%)


NAV total return (fair value) relative tobenchmark* total return

Share price total return relative to benchmark*total return

YEARS TO 31 DECEMBER

20092006 2007 2008

20%

(20%)

(10%)

10%

0%

2010

30%

Source: Thomson Reuters Datastream

RPI

SAINTS dividend

(CUMULATIVE TO 31 DECEMBER)20092006 2007 2008

100

130

120

110

2010

140

150

160


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ChAIrmANS STATemeNT


Overview

Theglobaleconomycontinuedtorecoverduring2010andmostinvestmentmarkets,althoughvolatileromonemonthtothenext,deliveredgoodreturnsovertheyear.Manycompaniesreportedstronggrowthinproftsandstockmarketsaroundtheworldrecordedgains.SAINTSparticipatedullyinthisrally.

Performance

Thenetassetvaluetotalreturn(incomeandcapital),withthedebenturevaluedatitsairvalue,was22.8%.Thiscomparestoabenchmarktotalreturno15.8%.Thenetassetvaluepersharerose

rom206pto242.5p,ariseo17.7%.Theriseinthesharepricewasstrongerstill,rom181pto245.5p.This35.6%gainmeantthatthesharepricefnishedtheyearatasmallpremiumtonetassetvalue.

Revenues and Dividend

Totalincomewas16.4min2010comparedto17.2minthepreviousyear.Thisdeclineisexplainedbyaallinbondincome,itselaunctionotransactionsanddecliningmarketratesointerest.In2009,therevenueaccountalsobeneftedromexceptionalpaymentsrelatingtoVATamountingto1.6m.Thesewerenotrepeatedin2010.Thecombinedeectothesetwoactorshasmeantthat2010earningspersharewas8.51p,some6%lowerthanthe9.05precordedinthepreviousyear.Thisdeclinemasksamorepromisingunderlyingpicture.Strongcorporateproftabilityisencouragingquotedcompaniestoraisetheirdividends.Ourexpectationisthatthistrendwillcontinuein2011.

Thedeclineinearningspersharemeansthatourdividendthisyearwillnotbeullycoveredbyearnings.However,revenuereservesaresubstantial(10.6ppershare)andthis,alongsidetheexpectationorimprovinginvestmentincomeintheyearahead,allowsustoproposeanincreaseddividendor2010.

Threepaymentso2.3phavealreadybeenmadeandweproposetopayafnaldividendo2.35pmakingatotalo9.25portheyearasawhole.Thisisanincreaseo2.2%onlastyearsdividend.

Chairmans Statement

ThisrateoincreaseallsshortothecurrentrateoinationintheUK.However,weareconfdentthattheinvestmentportolioiscapableosupportingrealdividendgrowthinthemediumtermandlonger.Overthelastfveyears,thedividendhasrisen42%whichcomparestoanincreaseintheRetailPriceIndexo18%.

Borrowings

SAINTSborrowingstaketheormoasingledebenturedueorrepaymentinApril2022.Thebookvalueotheseborrowedundsis87.4m.However,sincethedebenturewasissuedatapremiumtoitsparvalue,thefnalrepaymentamountwillbe80m.

Atthestartotheyear,thebookvalueothedebenturewasequivalenttoapproximately32%oshareholdersunds.Formuchotheyear,thisborrowedmoneywasullydeployedinundingarangeoinvestmentsacrossbondmarketsandinUKcommercialproperty.Theseperormedwelland,togetherwithgainsontheequityportolio,contributedtoasignifcantriseinshareholdersundsduringtheyear.Thismeantthatattheyearendthedebenturesbookvaluehadallento26%oshareholdersunds.

Supply and Demand for the Companys Shares

Oneothemostnotableeaturesothelastyearhasbeenthestrongperormanceothesharepricerelativetoournetassetvalue.Atthestarto2010thediscounttonetassetvalue(debentureatairvalue)stoodat12.1%but,bytheendotheyear,a1.2%premiumhademerged.

ThisdevelopmentowesmuchtoSAINTSbeingabletooerarelativelyhighandgrowingdividendwhilstmanyotherormsosavinghaveseenincomereturnsall.TheBoardandtheManagershavealsoputmuchthoughtandeortintopromotingSAINTSasacost-eectivesavingsvehicleorprivateinvestors,particularlythoseseekingagrowingincomestream,whichhasledtoincreasingdemandortheshares.


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ChAIrmANS STATemeNT

Demandorregularandgrowingincomewillremainstrong.ShouldSAINTScontinuetobeneftromthisandthepremiumtonetassetvaluepersisttheBoardislikelytosubmitablocklistingapplicationtotheLondonStockExchange.Thiswouldallownewsharestobeissuedtothemarketaswellastomeetdemandorsharesromregularsaversinthevarioussavingsschemes.Shareswouldonlybeissuedatapremiumtonetassetvalue.SuchissuanceisbenefcialtoexistingshareholdersasitenhancesnetassetvalueandtheincreaseinthesizeotheCompany,althoughmodest,spreadstheburdenoitsadministrativecosts.

Notwithstandingtheabove,wealsointendtoseekshareholders

approvalatthisyearsAGMortherenewalotheCompanysauthoritytobuybackitsownsharesatadiscounttonetassetvalue.Althoughthishasnotbeenusedinrecentyears,theBoardbelievesthatbuybackscanbeuseulincertaincircumstancesorreducingvolatilityinthediscountandenhancingnetassetvalueorcontinuingshareholders.

Outlook

Financialmarketvaluationsreachedtheirlowestpointothe2007-2009fnancialcrisisduringthefrstquartero2009.Sincethen,marketshaveralliedstronglyasexceptionalfscalandmonetarypoliciesinmanycountrieshavestimulatedasubstantialrecoveryinglobaleconomicactivityandasignifcantriseininvestorconfdence.

WethinktheyearaheadwillbeoneourtherChinaledgrowthintheworldeconomy.Wealsoexpectthecorporatesectortoshowgoodgrowthinproftswhichshouldallowthecompaniesinwhichweareinvestedtoraisetheirdividends.Onthisbasis,weareexpectingourownrevenuepositiontoimprove.

However,signifcanteconomicriskspersistincludingimbalancesinworldtrade,risinginationandhighdebtlevelsinsomeothematureeconomies.RecentdevelopmentsinanumberoMiddleEastcountriesalsoremindusthatunexpectedeventscan,andwill,happen.Wethereorestartthisnewfnancialyearwithaslightlymorecautiousoutlookthanlastyear.

Annual General Meeting

AttheAGM,underSpecialBusiness,theCompanyisproposingtoadoptnewArticlesoAssociationtoreecttheimplementationothelastpartsotheCompaniesAct2006whichcameintoorceon1October2009.ItisalsoproposedthattheArticlesbeamendedtoincreasethelimitsontheDirectorsees.WhilstitisnottheBoardsintentiontoincreaseDirectorseesor2011,theeesarenearthecurrentlimitwhichallowslittlescopeoranincreaseinutureyears.Furtherinormationonthisresolutioncanbeoundonpage27intheDirectorsReportanddetailsothemainchangesproposedtotheArticlesaresetoutintheAppendixtotheNotice

otheAGMonpage57.AllotheDirectorsareseekingre-electionthisyearandwillcontinuetodosoonanannualbasis.

TheAGMwillbeheldat11amonThursday7AprilatBaillieGiordsofcesatCaltonSquare,1GreensideRow,Edinburgh(seemaponpage53).TheManagerswillmakeapresentationontheinvestmentportolio.TherewillalsobeanopportunitytoaskquestionsandtheDirectorsandManagerslookorwardtomeetingyouthere.

SirBrianIvory,CBEChairman18February2011


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dIreCTorS ANd mANAGemeNT

Directors and ManagementMembers of the Board come from a broad variety of backgrounds. The Board can draw on anextensive pool of knowledge and experience. Baillie Gifford & Co, a leading UK investmentmanagement rm established in 1908, have acted as Managers and Secretaries since 1 January 2004.

Directors

Sir Brian Ivory, CBE, CASirBrianjoinedtheBoardin2000andwasappointedChairmanin2001.HeisalsotheChairmanotheNominationCommittee.HeisadirectoroRemyCointreauSA,InsightInvestmentManagementLtdandoMarathonAssetManagement(Services)LtdandischairmanoRetecDigitalplcandArcusEuropeanInrastructureFundGPLLP.HewasormerlychairmanoHighlandDistillersPlcandotheTrusteesotheNationalGalleriesoScotlandandadirectoroHBOSPlc.

The Rt Hon Sir Menzies Campbell, CBE, QC, MPSirMenziesjoinedtheBoardinDecember2007.HewasLeaderotheLiberalDemocratpartyuntilOctober2007.HewaselectedasanMPin1987,andwasForeignAairsSpokesmanbeorebecomingDeputyLeaderohisparty.HequalifedasanadvocateinScotland,beingadmittedtotheFacultyoAdvocatesin1968andbecomingQueensCounselin1982.

Eric Hagman, CBE, CAMrHagmanjoinedtheBoardin2005andbecametheChairmanotheAuditCommitteeaterthe2009AGM.HejoinedArthurAndersenin1971andbecamethemanagingpartnerinScotlandin1982.Hespentthelastfveyearsuntil2002inLondonasamanagingpartnerontheUKLeadershipTeam.HeisadirectoroBritishPolytheneIndustriesplcandTheRoyalCollegeoArt.

HewasormerlyatrusteeotheNationalGalleriesoScotlandandadirectoroGlenGroupplc,ScottishFinancialEnterpriseandScottishEnterprise.

Lord Kerr of Kinlochard, GCMGLordKerrjoinedtheBoardin2002.HewaschairmanotheAuditCommitteeuntilhesteppeddownaterthe2009AGM.HewasHeadotheDiplomaticServicerom1997to2002,havingpreviouslybeenAmbassadortotheEuropeanUnionandthentotheUnitedStates.HeisdeputychairmanoRoyalDutchShellplc,adirectoroRioTintoPlcandScottishPowerandchairmanoImperialCollegeLondon.

Rachel LomaxMsLomaxjoinedtheBoardin2008.SheservedasDeputyGovernorotheBankoEnglandbetween2003and2008,havingpreviouslybeenPermanentSecretaryattheDepartmentorTransport,theDepartmentorWorkandPensionsandtheWelshOfce.ShewaspreviouslyChieoStatothePresidentotheWorldBank,HeadotheEconomicandDomesticSecretariatattheCabinetOfce.SheworkedormanyyearsatHMTreasury,whereshewasPrincipalPrivateSecretarytotheChancellorotheExchequeranddeputyChieEconomicAdviser.SheisadirectoroHSBCHoldings,BAALimited,theReinsuranceGroupoAmerica(RGS),theRoyal

NationalTheatre,ImperialCollegeLondon,theCentreorEconomicPolicyResearch(CEPR)andtheSupervisoryBoardoArcusEuropeanInrastructureFundGPLLPandisPresidentotheInstituteoFiscalStudies.

Peter MoonMrMoonjoinedtheBoardin2005.HewaschieinvestmentofcerotheUniversitiesSuperannuationSchemeLimitedundrom1992untilAugust2009.HeisadirectoroFirstPropertyplcandArdenPartnersplcandisaormerdirectoroMBNAEuropeandisaormerMemberotheNationalAssociationoPensionFundsInvestmentCommittee.PriortojoiningUniversitiesSuperannuationScheme,MrMoonmanagedinvestmentsattheBritishAirwaysPensionFundandtheNationalProvidentInstitution,whichhejoined

in1978.

David PriceMrPricejoinedtheBoardin1997andistheseniorindependentdirector.HeisadirectoroMelchiorJapanInvestmentTrustplcandStramongateAssetsPlc.HewasormerlydeputychairmanoMercuryAssetManagementGroupplcandchairmanoF&CManagementLimited.

AllDirectorsaremembersotheNominationandAuditCommittees.


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Managers and Secretaries

SAINTSismanagedbyBaillieGiord&Co,aninvestmentmanagementfrmormedin1927outothelegalfrmBaillie&Giord,WS,whichhadbeeninvolvedininvestmentmanagementsince1908.

BaillieGiord&CoareoneothelargestinvestmenttrustmanagersintheUKandcurrentlymanageeightinvestmenttrusts.BaillieGiord&CoalsomanageunittrustsandOpenEndedInvestmentCompanies, togetherwithinvestmentportoliosonbehalopensionunds,charitiesandotherinstitutionalclients,bothintheUKandoverseas.FundsunderthemanagementoradviceoBaillieGiord&Cototalaround70billion.BasedinEdinburgh,theyareoneotheleadingprivatelyownedinvestmentmanagementfrmsintheUK,with35partnersandastaoaround700.

ThemanageroSAINTSportolioisPatrickEdwardson,apartneroBaillieGiord&Co.PatrickisresponsibleorSAINTSequityinvestments,workingcloselywithalloBaillieGiordsequityinvestmentteams.SAINTSbondinvestmentsaremanagedbyspecialistsinBaillieGiordsfxedincometeam.ThepropertyinvestmentsaremanagedseparatelybyOLIMLimited,aspecialistpropertymanager.

ThefrmoBaillieGiord&CoisauthorisedandregulatedbytheFinancialServicesAuthority.

Fromlettoright:DavidPrice,TheRtHonSirMenziesCampbell,RachelLomax,SirBrianIvory,EricHagman,PeterMoon,LordKerroKinlochard

dIreCTorS ANd mANAGemeNT


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mANAGerS revIe

Overview

Theglobaleconomystrengthenedduring2010andmoststockmarketsrosebacktowardsthelevelsprevailingbeorethecollapseoLehmanBrothersandthefnancialcrisisinlate2008.Mostotherinvestmentmarketsalsodeliveredgoodreturnsalthoughgovernmentbondslostsomegroundtowardstheendotheyearasgrowthacceleratedandsomeconcernsemergedaboutination.

SAINTSreturned22.8%,astrongresult.Formostotheyearwewereullyinvested,mainlyinequitiesbutalsoinavarietyobondholdings,indirectlyheldUKcommercialpropertyandinlistedpropertyandorestryunds.Theproportioninvestedinequitieswas

alittlebelowwhatwewouldnormallyhavebutthiswasnotbecausewewerebearishonequities.Insteaditreectedaviewthatanumberoothermarketswerecapableogeneratingequallygoodinotbetterreturns.Creditmarketsinparticularoeredsomeveryappealingopportunities.

Chinawas,onceagain,themainengineogrowthintheworld.Togetherwithrapidgrowthinotherlowerpercapitaincomecountries,thismeantthat2010wasanotheryearinwhichthebalanceoeconomicandpoliticalpowershitedsouthandeast.Therewassomeimprovementinthedevelopedeconomies;ateraalteringrecoveryin2009,thegeneraltrendwasorstrongergrowthparticularlyintheUSandGermany.However,highdebtlevelsandweakbankingsystemsstillweighonmanyothese

economiesandwhatstrengththerewasowedmuchtosupportivemonetarypolicyandheavyborrowingbygovernments.

Thestronginvestmentreturnsmaskwhatwasanotheryearoconsiderablevolatilityinmarkets.Thefrsthalotheyear,andparticularlytheperiodbetweenAprilandJune,wasdominatedbyacrisisinEuropeangovernmentdebtmarketswhichwassufcientlygraveastoundermineconfdenceacrossabroadswatheoglobalmarkets.TheimmediateissuewastheabilityoGreecetorefnancecertainbondissuesbutthebroaderpointwasthedurabilityotheeuro-zoneinitscurrentormandthesustainabilityogovernmentdebtlevelsinsomeothesmallerEuropeancountries.

Inthesecondhalotheyear,economicandcorporatenewsincreasinglysupportedamoreupbeatassessmentoinvestment

prospects.FinancialmarketswerealsobuoyedbythedecisionotheUSFederalReservetoundertakeasecondroundoquantitativeeasingandanextensionogeneroustaxcutsbytheUSgovernment.

AlthoughmuchisrightlymadeothedecliningrelativeimportanceotheUS(aslarger,morepopulousnationssuchasIndiaandChinagrowinwealthandimportance),itremainsinabsolutetermsthesinglelargesteconomyintheworld.Itshealthandvitalitystillhaveaveryimportantbearingontheglobaleconomyandfnancialmarkets.Whilstthelongtermsustainabilityandimpactoitscurrentpoliciesareopentoquestion,theyappearorthetimebeingtohavebolsteredconfdenceinUSgrowthprospectsandaregivinginvestorscauseoroptimism.

LoosemonetarypolicyintheUSalsoboostedgrowthinthedevelopingnations.Thedesireomanyothesecountriestofxor

managetheirexchangerates,principallyagainstthedollar,requiredthemtosetinterestratesatlevelswhich,whilstappropriateoradebt-burdenedUSeconomy,wereinappropriateorthem.Theresultwasoverheatingeconomies,risingdomesticpricesandsignifcantincreasesingloballytradedoodandcommodityprices.

Howcountriesreacttotheemergenceoinationarypressureswillbeanimportantinuenceoninvestmentreturnsintheyearahead.However,in2010stronggrowthandrisingpriceswereagoodcombinationorourcompanies,bothintermsotradingresultsandshareprices.Mostreportedrisingsalesandmanywereabletoclaimsatisyinglyhighproftmargins.Risingprofts,improvingcashowsandgenerallystrongbalancesheetsalsoencouragedquotedcompaniestostartraisingdividendsagain.Inthe2010revenueaccount,thisencouragingdevelopmentwasoutweighedbyadropinbondincomeandtheimpactodividendcutsannouncedinthepreviousyear.However,weareconfdentthatitwillbenefttherevenueaccountin2011.

Equities

Onaverageduringtheyear69%otheportoliowasinvestedinequities.Expressedasapercentageoshareholdersunds,thefgurewas89%.Thetotalreturnortheyearwas19.3%.

ThedirectionochangeinthegeographicdistributionotheportolioisstillawayromtheUKandtowardsoverseasmarkets,inparticularthedevelopingnations.However,thescaleochangeduring2010wasmodest.WemadereductionstoholdingsinsuchtraditionallyamiliarnamesasVodaone,BP,TescoandGlaxosmithKlineandoutrightsalesoseveralsmallerholdings.Asaresultothese,UKlistedstocksrepresentedlessthan30%oSAINTStotalportoliobytheendotheyear.Becauseotheirrelativelyhighyields,amoresubstantialreductionintheUKlistedholdingswouldhavehadanunhelpulimpactontherevenueaccountthisyear.

Managers Review



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mANAGerS revIe

Weappliedtheproceedsromthosesalestoavarietyoopportunitieslistedelsewhereintheworld.Itisworthrecordingthatthespurtobuyingaparticularstockisinvariablyitsstrengthsandprospectsasabusinessratherthanwhereithappenstobedomiciledorlisted.Nonetheless,theortunesoseveralholdingsthatenteredtheportolioorthefrsttimethisyeararecloselytiedtothelongtermdevelopmentotheemergingnations.ExamplesotheseincludeSouthAricanlistedStandardBank,theHongKongandBrazilianstockexchangesandatollroadoperatorinwesternChina,SichuanExpressway.

Closertohome,wetookholdingsinseveralEuropeanlisted

companies.SvenskaHandelsbankenisaremarkablysuccessulanddisciplinedSwedishbankthathaslongemphasisedorganicgrowthandcapitalstrength.Wethinktheseattributeswillbringitgoodortuneintheyearsahead.Asagoodexampleohowdomicileolistingmatterslittlenowadays,wepurchasedPortugueselistedoodretailerJeronimoMartinsbutdidsobecauseoitslargeandsuccessulPolishbusiness.WealsoboughtRoche,theSwisslistedpharmaceuticalscompany.Ourpositioninginthepharmaceuticalindustryissomewhatcautiousaswearewaryotheindustrysabilitytomaintaincurrentlevelsoproftability.HoweverwethinkRochemaybecapableogrowthandisonanundemandingrating.

MostoourothertransactionswereinUSstocks.TheUSmarketis,inourview,themostsusceptibletoabearishassessmentovaluationsbecausetheratiooUSstockmarketpricestoearnings,onceallowanceismadeortheupsanddownsotheeconomiccycle,issignifcantlyaheadoitslongrunaverage.ThisobservationpromptedageneralreviewoUSholdingswhich,alliedwithsomelossopatienceorconfdenceintheinvestmentcaseledtosalesoseveralstocksincludinginsuranceandinvestmentgroupBerkshireHathaway,vethospitalgroupVCAAntech,documentstoragecompanyIronMountainandswimmingpoolsupplierPoolCorporation.ThetransactionsintheUSwerenotallonewaythough.WeboughtMcDonalds,theeponymousburgerandastoodchain;wethinkitslongtermprospectsareexcellentasitrollsoutitsormatintothemanydevelopingnations.

Inabsoluteterms,virtuallyallpartsotheportoliodeliveredpositivereturnsduring2010.Incomparisontoourbenchmark,onwhichthereturnwas15.8%,webeneftedmostromourEuropeanandNorthAmericaninvestments.

ThesizeoourEuropeaninvestmentswasnotmuchgreaterthanthoseothebenchmarkindex,buttheirperormancewasconsiderablystrongerwitha29%gainduringtheyearcomparedto6%romthebenchmarksEuropeancomponent.TheSwedishengineeringholdingAtlasCopcowasparticularlyimportantbutwealsohadverysignifcantgainsonourholdingsintheaorementionedJeronimoMartins,litscompanySchindlerandSwissbasedprivateequitymanagerPartnersGroup.NorthAmericanstockmarketsenjoyedstronggains,helpedbyrecoveryintheUSeconomyandrisingoverseasearnings.Overall,ourholdingsperormedwell,notablyonlineretailerAmazon,insurancesotwareproviderSoleraandmortgagelenderNewYorkCommunityBank.Canadianlistedoil

companyPennWestalsoperormedwell,reectingstrengthinthepriceocrudeoil.

TheperormanceoourEmergingMarketinvestmentswasactuallylessgoodthantherelevantindicesorthosemarketsbutwehadasubstantiallylargerallocationthancontainedinSAINTSbenchmark(22%against8%).ThemainreasonsortheperormanceshortallweretherelativelylargeallocationtoChinesestocks(whichdespitethatcountryseconomicstrengthdeliveredsomewhatmutedreturns)andaholdinginBrazilianoilcompanyPetrobras(whichellovertheyearonconcernsaboutequityissuanceandgovernmentinvolvement).Morepositively,andincontrasttothegeneralperormanceotheChinesemarket,wehadstrikinggainsromaholdinginChineseinternetsearchcompanyBaidu(whichreturned

over140%).Oneoouremergingmarketretailers,SouthAricanbasedMassmart,alsobeneftedromabidapproach.

Lookingatourindustryexposureovertheyear,thestrongcontributionromindustrialstocksgivesagoodindicationohowthestrengtheningeconomicenvironmentdroveequityreturns.WehavealreadymentionedAtlasCopco,butUSlistedagriculturalmachinerycompanyDeeremadealmostaslargeacontribution.Variouscompaniesinvolvedinthedistributionogoodsthrougheconomiesalsoaredwell,notablyUSdeliveryfrmUPSandAustralianlistedpalletdistributorBrambles.Weownavariedselectionofnancialstocksandthesedidwellascreditmarketsandthewesternbankingsystemcontinuedtoheal.Ourretailingexposureisverymuchocusedonthedevelopingworldwhererisinglivingstandardsand

lowconsumerdebtburdenscontrastsharplywiththesituationacedbywesternconsumers.Wealsocontinuetobeimpressedbytherateotechnologicalchangeinthemodernworldandthewayin


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mANAGerS revIe

whichsomecompaniesareleadingthatchangeinaveryproftableway.Thelowdividendyieldstypicallyoeredbythesecompanieswillpreventusowningtheminaslargeasizeaswewouldideallylike.Theirsharepriceperormancecanalsobevolatileromoneyeartothenext.Nonetheless,ownershipocompaniessuchasinternetsearchcompaniesGoogleandBaiduandelectronicsmanuacturerSamsungElectronicsis,webelieve,likelytoprovearewardingexperienceinthelongrun.

Bonds

Bondmarketsagainpresenteduswithsomeveryappealinginvestmentopportunities,thebestevidenceorwhichisthe35.1%returnwhichourholdingsdeliveredduring2010.Thesewerealsosignifcantinvestmentsorus,onaveragetheymadeupjustover15%otheportolioequivalentto20%oshareholdersunds.

ThelargestsingleholdingwasinapooledundmanagedbyLondonbasedinvestmentfrmPrytania.WeinvestedintheirAthenaDebtOpportunitiesFundduring2008butthestructureddebtinstrumentsinwhichitspecialisessueredbadlyduringthecrisisthatenguledfnancialmarkets,andcreditmarketsinparticular,duringtheclosingmonthsothatyear.Thesemarketshavestagedasignifcantrecoverysincethen,particularlyoverthelasttwelvemonthsduringwhichtheAthenaundgainedover40%.Itsunitpricenowstandsapproximately10%higherthanwhenwemadeouroriginalinvestmentandwehavealsoreceivedsignifcantinterest

payments.

Thenextlargestholdingisinanindex-linkedbondissuedbythegovernmentoBrazil.Wehaveheldthisbondorfveyearsnow,attractedbyitshighrealyieldandtheprospectthatBrazilscurrencywouldappreciateagainststerling.Bothactorscamegoodin2010andthesterlingvalueotheholdingrosealmost30%.

ThesameimprovementincreditmarketswhichbolsteredtheAthenaundalsoledtolargegainsonmanyoourotherbondholdings.ThemostsignifcantothesewastheholdingintheBaillieGiordHighYieldFund.Thisundtypicallyinvestsinbondsissuedbymorehighlyindebtedcompaniesandwasanunsurprisingbenefciaryoimprovingconditionsoncreditmarketsandinthebroadereconomy.

Withtheenvironmentsosupportiveorourholdings,wemadeewchangesduringtheyear.Ourremaininginsurancelinkedsecuritiesmaturedandthistypeobond,whicheectivelyseestheinvestorprovidinginsurancetotheissueragainstspecifednaturalcatastrophes,nolongereaturesintheportolio.Ourexperiencewiththemwasproftableandwemaytakesimilarholdingsintheutureshouldthetermslookattractive.WesoldourholdingoabondissuedbyhedgeundmanagerManGroup(andswitchedthemoneyintoManGroupshares).WealsopurchasedaoatingratenotewhoseortunesaretiedtotherentalincomeonalargeportoliooGermanresidentialandsocialhousingunits.

Listed Investment FundsSAINTSownsanumberolistedinvestmentundswhichweuseasaconvenientwayogettingexposuretosomemarketsandassetclasses.Currentlyweownoneorestryundandseveralundsinvestedinoverseaspropertymarkets.Inaggregate,theserepresented5%otheportolioduring2010oralittleunder7%oshareholdersunds.Thereturnromtheorestryundwasadisappointing1.1%butthepropertyundsreturned42.2%.

TheorestryholdingisaUKlistedundcalledCambiumGlobalTimberland.ThisundownsorestryplantationsinvariouslocationsaroundtheworldincludingtheUnitedStates,BrazilandAustralia.Theinvestmentwasmadeinthefrsthalo2007at100ppershareanditisdisappointingthat,asattheendo2010,theshareprice

andtheundsnetassetvaluewerebothsignifcantlybelowthislevel(68pand80prespectively).

TheinvestmentsinlistedpropertyundsallowustoparticipateincommercialpropertymarketsinEurope,JapanandChina.Toalargeextent,thestrongreturnsdeliveredbythispartotheportolioreectarecoveryromdistressedvaluationsthesesameundslostconsiderablevalueduringthefnancialcrisisandlargegapsemergedbetweentheirsharepricesandtheirunderlyingnetassetvalues.Aswelookorward,webelievethereisscopeorthevaluationotheseundstorise,driveneitherbyanarrowingodiscountsorbygainsontheirunderlyingportolios.


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Direct Property

ThedirectinvestmentsinUKcommercialpropertyaremanagedbyOLIMLtd,aspecialistpropertymanager.Thetotalreturnor2010was12%whichcomparestothereturnontheIPDAllPropertyIndexoapproximately15%.

Twopropertiesweresoldduringtheyearandthreepurchased.Thesetransactions,alongwithasmallcapitalgainonpropertiesheldthroughouttheyear,tookthevalueothepropertyportolioto32mbytheyearend,approximately8%othetotalportolio.Sincetheyearend,anotherpropertyhasbeenpurchasedor3mandwemaymakeurtherinvestmentsisuitablecandidates

canbeound.WeandOLIMbelievethatcommercialpropertyvaluationsintheUKareattractive,bothinabsolutetermsandwhencomparedtoothermajorassetclassessuchasgiltsorequities.TheaverageyieldonthepropertiesthatSAINTSnowownis7.7%andwewouldexpectrentalincometogrowbroadlyinlinewithinationoverthemediumtolongterm.

Outlook

Atthistimelastyear,wewrotethatewinvestmentmarketsoeredcompellingvaluebutcontinuedimprovementintheglobaleconomyandstrengthincorporateproftsmightyetallowgoodinvestmentreturns.Itispossibletoargueasimilarcasenowandindeedour

centralexpectationisthatstockmarketswillfnishtheyearhigherthantheycurrentlyare.

Intheverynearterm,worldGDPgrowthislikelytobestrong.ThestructuralactorsunderpinninggrowthinChinaandtheotherdevelopingnationsremainfrmlyinplaceandtheircyclicalmomentumissubstantial.Growthinthedevelopedeconomiesmaybemorevariedbutshouldstillbepositive.

Webelievethiseconomicbackdropwillallowmanycompaniestoreportrisingproftsoverthenextyear.Thisshouldbeaccompaniedbyurthergrowthindividendpaymentsandmayalsoencourageapick-upinacquisitionactivityandincorporateinvestment.

However,theriseinstockmarketlevelsoverthelastyearhascapturedatleastsomeothisprospect.Wealsothinkthesustainabilityocurrenteconomicstrengthisopentoquestion.Anincreasingnumberothedevelopingnationsnowacerisinginationandsomehavealreadybeguntotightenmonetarypolicyinresponse.Asorthedevelopedeconomies,itisnotclearwhatunderlyingstrengthwillbeletoncethevariousfscalandmonetarystimulusprogrammesdeployedduringthefnancialcrisisarewithdrawn.

Wesuspectwearestillinwhatwillprovealongperiodoadjustmentandchangeintheworldeconomy.Thedevelopednationsborrowedtoomuchortoolongandmustnowadjustto

consuminglessandsavingmore.Thedevelopingnationswillcontinuetheirlongmarchtoeconomicdominancebasedontheiroverwhelmingpopulationadvantage,buttheymayhavetoproceedataslowerpacethantheywouldlikeitheyaretoavoidaseriousinationprobleminthenextewyears.

Adjustmentandchange,onthisglobalscaleatleast,rarelyproceedinastraight,orderlyashion.Asthisreportisbeingprepared,wearebeingservedapowerulreminder(inEgyptandotherMiddleEasterncountries)thatunexpectedeventshappen.Sometimestheirimpactwillbebenign,positiveeven.Onotheroccasions,theirimpactcanbemorecostly.Eitherway,theytendtoinvokevolatilityinmarketsandcanleadtolargeswingsininvestorconfdenceandmarketlevels.

Astohowthisimpactsourinvestmentstrategy,wethinkaslightlymorecautioustoneiswarranted.Westillexpectpositivereturns,butwouldbepleasantlysurpriseditheyapproachthelevelsenjoyedinthelasttwelvemonths.

PatrickEdwardsonBaillieGiord&Co.18February2011


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perFormANCe ATTrIBuTIoN ANd dISTrIBuTIoN oF porTFolIo

Distribution of Portfolio

Asset Allocation as at 31 December 2010 (2009) Quoted Equities* by Sector as at 31 December 2010 (2009)

Quoted FixedInterest

15.4% (14.6%)

Net Liquid Assets 1.2% (2.8%)

Quoted

Equities*70% (68.8%)

Unquoted0.4% (0.5%)

Quoted Equity

PropertyInvestments

2.9% (2.0%)

Direct Property7.7% (8.5%)

Quoted Equity ForestryInvestments2.4% (2.8%)

Basic Materials8.9% (7.4%)

Health Care4.1% (4.9%)

ConsumerGoods10.4% (10.9%)

Industrials13.9% (12.6%)

Financials23.8% (23.2%)

Telecommunications 2.4% (3.3%)

Consumer Services8.4% (6.7%)

Technology10.7% (11.2%)

Oil and Gas15.4% (17.6%)

Utilities2.0% (2.2%)

* Excludesquotedequitypropertyandorestryinvestments.

Average allocation Total returnSAINTS Benchmark SAINTS Benchmark

Portfolio breakdown % % % %

QuotedEquities* 89.3 100.0 19.3 15.8QuotedFixedInterest 20.1 35.1

DirectProperty 10.0 12.0QuotedEquityForestryInvestments 3.6 1.1QuotedEquityPropertyInvestments 3.2 42.2Unquoted 0.6 3.1Deposits 2.5 Debentureatbookvalue (29.3) (6.8)Portfolio Total Return (debenture at book value) 24.2 15.8Otheritems 0.1Fund Total Return (debenture at book value) 24.3 15.8Adjustmentorchangeinairvalueodebenture (1.5)Fund Total Return (debenture at fair value) 22.8 15.8

Theabovereturnsarecalculatedonatotalreturnsbasiswithnetincomereinvested.

Pastperormanceisnotaguidetoutureperormance.Source:BaillieGiord&Co.

* Excludesquotedequitypropertyandorestryinvestments.ThisincludesBaillieGiordandOLIMmanagementees,othercostsorunningthetrustsuchasmarketingexpenditureandaresidualitemwhicharisesbecauseoadisparitybetweentheNAVtotalreturnfgureandtheindividualassetclassportolioreturnnumbersascalculatedbyBaillieGiordsperormancemeasurementsystem(providedbyStatpro).

Performance Attribution for the Year to 31 December 2010


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ThIrTy lArGeST holdINGS ANd INveSTmeNT ChANGeS

2010 2009

Value % of Value

Name Classication Business 000 total assets 000

AthenaDebtOpportunitiesFund FixedInterest Debtopportunitiesund 22,063 5.3 14,501

BrazilCPILinked15/05/2045 FixedInterest Braziliangovernmentbond 18,780 4.5 14,487

BaillieGiordHighYieldBondFund FixedInterest Highyieldbondund 13,545 3.2 9,663BaillieGiordGreaterChinaFund Overseas Equityinvestmentund 10,338 2.5 9,075

CambiumGlobalTimberland QuotedEquityForestryInv Forestryinvestmentund 9,975 2.4 10,350

AtlasCopco Overseas Engineering 8,061 1.9 3,653

BritishAmericanTobacco UnitedKingdom Cigarettemanuacturer 7,459 1.8 6,104

RioTinto UnitedKingdom Mining 7,089 1.7 4,509

HolidayVillageinNewRomney DirectProperty Holidayvillage 6,800 1.6 6,500

BHPBilliton UnitedKingdom Mining 6,735 1.6 5,267

PennWestEnergyTrust Overseas Oilandnaturalgasincometrust 6,584 1.6 4,704

DBS Overseas Banking 6,158 1.5 5,851

Deere Overseas Farmmachinery 6,142 1.5 3,874

TaiwanSemiconductorManuacturing Overseas Semiconductormanuacturer 5,669 1.4 5,013

PhilipMorrisInternational Overseas Cigarettemanuacturer 5,574 1.3 4,444HSBC UnitedKingdom Banking 5,491 1.3 7,118

NewYorkCommunityBank Overseas Banking 5,466 1.3 4,079

CVRD Overseas Mining 5,428 1.3 4,318

NursinghomeinKenilworth DirectProperty Nursinghome 5,200 1.2 5,000

SamsungElectronics Overseas Electronicdevices 5,032 1.2 3,541

Canon Overseas Imagingdevices 4,907 1.2 3,849

RoyalDutchShell UnitedKingdom Integratedoil 4,865 1.2 4,165

Petrobras Overseas Integratedoil 4,817 1.2 5,789

ManGroup UnitedKingdom Hedgeundmanager 4,644 1.1 3,282

QuorumOilandGas UnitedKingdom Oilindustrytechnologyund 4,250 1.0 6,255

Massmart Overseas Foodretailer 4,249 1.0 2,255

JapanResidentialInvestmentCompany QuotedEquityPropertyInv Japaneseresidentialpropertyund 4,172 1.0 1,600

JeronimoMartins Overseas Discountretailer 4,169 1.0

Vodaone UnitedKingdom Mobiletelecommunicationservices 4,052 1.0 5,463

Aviva UnitedKingdom Lieassurance 4,048 1.0 4,079

211,762 50.8 168,788

Thirty Largest Holdings

Thefguresaboveortotalassetsaremadeupototalnetassetsbeoredeductionothedebenture.

*Excludesquotedequitypropertyandorestryinvestments.

Investment Changes

Valuation at Net acquisitions/ Appreciation/ Valuation at

31 Dec 2009 (disposals) (depreciation) 31 Dec 2010

000 000 000 000

UnitedKingdomQuotedEquities* 106,147 (12,296) 9,026 102,877OverseasQuotedEquities* 144,926 13,338 31,755 190,019

TotalQuotedEquities* 251,073 1,042 40,781 292,896DirectProperty 31,000 (172) 1,122 31,950QuotedEquityPropertyInvestments 7,548 1,750 3,015 12,313QuotedEquityForestryInvestments 10,350 (375) 9,975QuotedFixedInterest 53,198 (3,684) 14,705 64,219Unquoted 1,780 56 1,836

TotalInvestments 354,949 (1,064) 59,304 413,189NetLiquidAssets 10,118 (4,339) (699) 5,080

TotalAssets 365,067 (5,403) 58,605 418,269


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lIST oF INveSTmeNTS AS AT 31 deCemBer 2010

Value

Classication Name 000 %

UnitedKingdomQuotedEquities*

Oilandgasproducers BGGroup 3,033 BP 2,928 RoyalDutchShell 4,865 TullowOil 1,513

12,339 3.0Oilequipment,servicesanddistribution Amec 2,246 QuorumOilandGas 4,250 WellstreamHoldings 1,345 WoodGroup 2,792

10,633 2.5

Chemicals Victrex 2,924 0.7

Mining BHPBilliton 6,735 RioTinto 7,089

13,824 3.3

Generalindustrials Rexam 2,803 0.7

Industrialengineering LupusCapital 440 0.1Supportservices Capita 1,750 Hays 1,791

3,541 0.8

Tobacco BritishAmericanTobacco 7,459 ImperialTobacco 3,720

11,179 2.7

Pharmaceuticalsandbiotechnology GlaxoSmithKline 3,050 0.7

Foodanddrugretailers Tesco 2,584 0.6

Media ReedElsevier 1,983 0.5

Mobiletelecommunications Vodaone 4,052 1.0

Electricity Scottish&SouthernEnergy 3,185 0.8

Gas,waterandmulti-utilities NationalGrid 2,710 0.6

Banks Barclays 2,092 HSBC 5,491

7,583 1.8

Nonlieinsurance Amlin 2,307 Hiscox 1,135

3,442 0.8

Lieinsurance Aviva 4,048 1.0

Realestate TerraCatalystFund 3,302 0.8

Generalfnancial ManGroup 4,644 1.1

Equityinvestmentinstruments BlackrockLatinAmerican 1,724 DamilleInvestments 978 LevelEMayaFund 1,909

4,611 1.1

Total United Kingdom Quoted Equities* 102,877 24.6

*Excludesquotedequitypropertyandorestryinvestments.Comprisesaholdinginaconvertiblesecurity.


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Value


OverseasQuotedEquities*

Oilandgasproducers Gazprom 3,132 Lukoil 2,011 OGXPetroleo 1,228 PennWestEnergyTrust 6,584 Petrobras 4,817 Total 3,567

21,339 5.3

Chemicals Monsanto 1,401 0.3

Mining CVRD 5,428ImpalaPlatinum 2,328

7,756 1.9

Electronicandelectricalequipment Canon 4,907 1.2

Industrialengineering AtlasCopco 8,061 Deere 6,142 Schindler 3,789

17,992 4.3

Industrialtransportation SichuanExpressway 1,783 UnitedParcelService 2,549 ZhejiangExpressway 3,187

7,519 1.8

Supportservices Brambles 2,457 Meitec 1,026

3,483 0.8

Automobilesandparts HeroHondaMotors 2,479 0.6

Foodproducers Nestl 3,534 0.8

Leisuregoods Nintendo 2,121 0.5

Personalgoods LOral 2,520 0.6

Tobacco Altria 3,523 PhilipMorrisInternational 5,574

9,097 2.1

Pharmaceuticalsandbiotechnology JohnsonandJohnson 2,607 Novozymes 1,706 RocheHoldings 2,653 TevaPharmaceuticals 2,309

9,275 2.2

Foodanddrugretailers JeronimoMartins 4,169 Massmart 4,249 McDonalds 2,696 Walgreen 2,006

13,120 3.1Generalretailers Amazon.com 2,298 DutyFreeShops 930 eBay 1,403 Walmex 2,758

7,389 1.7

Mobiletelecommunications ChinaMobile 3,067 0.7

Banks DBS 6,158 ItauUnibanco 2,074 NewYorkCommunityBank 5,466 StandardBankGroup 2,632 SvenskaHandelsbanken 3,342

19,672 4.7

Nonlieinsurance Progressive 1,382 0.3

*Excludesquotedequitypropertyandorestryinvestments.


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Value


OverseasQuotedEquitiescont.*

Generalfnancial BM&FBovespa 1,687 HongKongExchangesandClearing 2,135 Moodys 1,514 PartnersGroup 4,003

9,339 2.3Equityinvestmentinstruments BaillieGiordGreaterChinaFund 10,338 VisionOpportunitiesChinaFund 958

11,296 2.7

Sotwareandcomputerservices Baidu.com 2,232 Exact 2,261 Google 1,517 InspurInternational 793 Microsot 2,423 SAP 3,057 SoleraHoldings 2,092 TaiwanSemiconductorManuacturing 5,669

20,044 4.8

Technologyhardwareandequipment AsustekComputer 1,036 CiscoSystems 1,083 LinearTechnology 3,714 Pegatron 422 SamsungElectronics 5,032

11,287 2.7

Total Overseas Quoted Equities* 190,019 45.4

Total Quoted Equities* 292,896 70.0

DirectProperty

Directproperty Seetableoverlea 31,950 7.7

QuotedEquityPropertyInvestments

FukuokaREIT 3,506 InvistaEuropeanRealEstateTrust 909 JapanResidentialInvestmentCompany 4,172 TamarEuropeanIndustrialFund 1,050 TreasuryChinaTrust 2,676

Total Quoted Equity Property Investments 12,313 2.9

QuotedEquityForestryInvestments

CambiumGlobalTimberland 9,975 2.4

*Excludesquotedpropertyandorestryinvestments.Includesaholdinginpreerenceshares


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Value


lIST oF INveSTmeNTS ANd properTy porTFolIo AS AT 31 deCemBer 2010

2010 2009

Value % of Value

Location Type Tenant 000 total assets 000

Dundee PublicHouse JDWetherspoonPlc 1,050 0.3 1,100

Dunermline Shop WHSmithRetailHoldingsLtd 2,300 0.5 2,300Earley PublicHouse PunchPubCompany(Pubs)Ltd 2,800 0.7 2,800Kenilworth NursingHome TrinityCareLtd 5,200 1.2 5,000

MarketDeeping Warehouse AdvancedHandling 900 0.2 NewRomney HolidayVillage ParkResortsLtd 6,800 1.6 6,500Nottingham Soldin2010 3,500Oban Shop WHSmithRetailHoldingsLtd 1,600 0.4 1,550Otord PublicHouse PunchPubCompany(Pubs)Ltd 1,900 0.5 1,850Perth Bank BankoScotland 2,650 0.6 Portsmouth PublicHouse JDWetherspoonPlc 2,200 0.5 2,250Reading Restaurant BellaItaliaRestaurantsLtd 1,150 0.3 1,200

Redditch Warehouse WestonBodyHardware 1,150 0.3 Torquay PublicHouse Mitchells&ButlerRetailLtd 1,100 0.3 1,100Weybridge Soldin2010 700Winchester PublicHouse FullerSmith&TurnerPlc 1,150 0.3 1,150

31,950 7.7 31,000

Property Portfolio

QuotedFixedInterest

Sterlingdenominated BaillieGiordHighYieldBondFund 13,545 BarclaysBank14%2019 3,593 CQSRigFinanceFundC 612 Resolution6.5864%2016 2,657

20,407 4.8Eurodenominated GermanResidentialDFRN2016 1,502 SemperFinanceFRNSLP2015 1,467

2,969 0.8

USdollardenominated AthenaDebtOpportunitiesFund 22,063 5.3

Brazilianrealdenominated BrazilCPILinked15/05/2045 18,780 4.5

Total Quoted Fixed Interest 64,219 15.4

Unquoted 1,836 0.4

Net Liquid Assets 5,080 1.2

Total Assets 418,269 100.0


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Debenture Net asset Net asset Premium/ Premium/At Total stocks Shareholders value per value per Share (discount ) (discount) 31 December assets and loans funds share (book) * share (fair) * price (book) (fair)

000 000 000 p p p % %

2000 543,251 78,471 464,780 296.8 254.5 (14.3) 2001 422,850 90,274 332,576 225.7 192.3 (14.8)

2002 312,634 89,767 222,867 161.9 132.8 (18.0) 2003 340,546 89,260 251,286 185.8 181.9 149.3 (19.6) (17.9)2004 361,691 89,760 271,931 205.3 197.1 167.5 (18.4) (15.0)2005 426,021 89,430 336,591 254.1 241.2 218.8 (13.9) (9.3)2006 462,673 89,079 373,594 282.0 272.6 241.3 (14.4) (11.5)2007 460,094 88,708 371,386 280.3 272.7 240.0 (14.4) (12.0)2008 289,087 88,312 200,775 151.5 145.3 130.5 (13.9) (10.2)2009 365,067 87,892 277,175 209.2 206.0 181.0 (13.5) (12.1)2010 418,269 87,446 330,823 249.7 242.5 245.5 (1.7) 1.2

Capital

* Netassetvalueperordinarysharehasbeencalculatedaterdeductingthedebentureateitherbookvalueorairvalue. Premium/(discount)isthedierencebetweenSAINTSquotedsharepriceanditsunderlyingnetassetvalueateitherbookvalueorairvalue.

Available Earnings DividendYear to Gross for ordinary per ordinary per ordinary Expense Actual Potential31 December revenue shareholders share share (net) ratio gearing gearing

000 000 p p %

2000 13,346 7,794 4.87 5.53 0.41 103 1172001 12,551 8,337 5.46 5.57 0.20 100 1272002 12,075 7,932 5.64 5.61 0.23 99 1402003 11,412 7,913 5.82 5.65 0.13 103 1362004 13,707 8,379 6.30 6.00 0.96 106 1332005 13,986 9,000 6.80 6.53 0.80 110 1272006 15,326 10,002 7.55 7.40 0.78 105 1242007 17,751 11,345 8.56 8.25 0.80 105 1242008 20,901 13,905 10.50 8.80 0.84 100 144

2009 17,194 11,989 9.05 9.05 1.02 97 1322010 16,379 11,271 8.51 9.25 0.90 96 126

ThecalculationoearningsperordinaryshareisbasedontherevenuecolumnothereturnonordinaryactivitiesatertaxationintheIncomeStatementandtheweightedaveragenumberoordinarysharesinissue.

Ratioototaloperatingcoststoaverageshareholdersunds. Totalassets(includingalldebtusedorinvestmentpurposes)lesscash,fxedinterestsecurities(exconvertibles)andpropertydividedbyshareholdersunds. Totalassets(includingalldebtusedorinvestmentpurposes)dividedbyshareholdersunds.

Revenue Gearing Ratios

BaillieGiord&CowasappointedasInvestmentManagersandSecretariesotheCompanywitheectrom1January2004.OnthesamedatetheCompanyalsochangeditsbenchmarkrom65%FTSEAll-ShareIndexand35%FTSEWorldExUKIndexto70%FTSEAll-ShareIndexand30%FTSEWorldExUKIndex.Witheectrom1January2009,theCompanysbencharkbecame50%FTSEAll-ShareIndexand50%FTSEAll-WorldexUKIndex.Forthepurposesotheabovetablesthereturnsonthesebenchmarksortheirrespectiveperiodshavebeenlinkedtoormasinglebenchmark. Thefgurespriorto2004havenotbeenrestatedorthechangesinaccountingpoliciesimplementedin2005.


Net asset Net asset Share Benchmark Earnings Dividend per Retail

At value value Share price total total per ordinary ordinary price31 December per share total return price return Benchmark return share share (net) index

2000 100 100 100 100 100 100 100 100 1002001 76 78 76 77 85 86 112 101 1012002 55 57 52 55 62 65 116 101 1042003 63 68 59 65 73 79 120 102 1072004 69 78 66 76 79 88 129 108 1102005 86 99 86 103 94 108 140 118 1132006 95 112 95 117 104 123 155 134 1182007 94 115 94 120 108 131 176 149 1222008 51 64 51 68 77 97 216 159 1242009 70 94 71 101 93 121 186 164 1272010 84 118 96 143 105 140 175 167 133

Compound annual returns

5year (0.4%) 3.6% 2.3% 6.8% 2.1% 5.4% 4.6% 7.2% 3.3%10year (1.7%) 1.7% (0.4%) 3.6% 0.5% 3.5% 5.8% 5.3% 2.9%

Cumulative Performance (taking 2000 as 100)

TeN yeAr reCord


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Directors Report

TheDirectorshavepleasureinsubmittingtheirAnnualReporttogetherwiththeresultsotheCompanyortheyearto31December2010.

Business Review

Business and StatusTheCompanyisaninvestmentcompanywithinthemeaningosection833otheCompaniesAct2006.

TheCompanycarriesonbusinessasaninvestmenttrust.ItwasapprovedbyHMRevenue&Customsasaninvestmenttrustundersection842otheIncomeandCorporationTaxesAct1988ortheyearended31December2009,subjecttoanymattersthatmay

ariseromanysubsequentenquirybyHMRevenue&CustomsintotheCompanystaxreturn.IntheopinionotheDirectorstheCompanyhassubsequentlyconducteditsaairssoastoenableittocontinuetoseekapprovalundersection1158otheCorporationTaxAct2010(ormerlysection842ICTA1988)eachyear.

Objective and PolicySAINTSobjectiveistoincreasecapitalandgrowincomeinordertodeliverrealdividendgrowth.

SAINTSpolicyistoinvestexiblyandactivelyacrossabroadrangeoassetsandmarkets.Listedequities,bothUKandoverseas,ormthelargestpartotheportolio.Investmentsarealsomadeinbonds,propertyandotherassetclasses.

TheBoardbelievesthataexibleapproachtoinvestmentisimportant.Asmarketvaluationsacrossandwithindierentassetclassesvaryovertime,theabilitytoadjustassetallocationandportoliopositioninginresponsetothesevariationsisimportant.Therearenopre-defnedmaximumorminimumexposurelevelsorassetclasses,sectorsorregions.

TheBoardalsobelievesthatamediumtolongtermapproachislikelytoleadtothebestinvestmentreturns.SAINTSperormanceinanyoneyearislikelytodierromthatoitsbenchmarkindex,sometimesbyasignifcantamount.Financialmarketsarevolatile,particularlyovershorttimeperiods,buttheManagerisencouragedtoviewsuchvolatilityasgivingrisetoinvestmentopportunitiesrather

thanasarisktobeavoided.

Inordertoachieverealgrowthinthedividend,theincomegeneratedromSAINTSassetsneedstogrowoverthemediumtolongertermataasterratethanination.Consequently,theocusotheportolioisonlistedequities.Investmentsareregularlyconsideredandmadeinabroadrangeootherassettypesandmarkets.DerivativeandstructuredinstrumentsmayalsobeusedwithpriorBoardapproval,eithertohedgeanexistinginvestmentoracurrencyexposureortoexploitaninvestmentopportunity.

TheequityportolioconsistsoshareslistedbothintheUKandinoverseasmarkets.Theportolioisdiversifedacrossarangeoholdingswithlittleregardpaidtotheweightingoindividual

companiesinthecompositebenchmarkindex.Thenumberoindividualcompanieswillvaryovertimeandtheportolioismanagedonaglobalbasisratherthanasaseriesoregionalsub-portolios.

InvestmentsaremadeinmarketsotherthanlistedequitymarketswhenprospectivereturnsappeartobesuperiortothoseromequitymarketsorareconsideredlikelytoexceedSAINTSborrowingcosts.Thelistotheseotherinvestmentswillvaryromtimetotimeasopportunitiesareidentifedbutincludeinvestmentgradebonds,highyieldbonds,property,orestry,privateequityandotherassettypes.

Asaninvestmenttrust,SAINTSisabletoborrowmoneyanddoessowhentheBoardandManagershavesufcientconvictionthatthe

assetsundedbyborrowedmonieswillgenerateareturninexcessothecostoborrowing.Wheneverlongtermborrowingscannotbeullyinvestedinsuchmanner,theborrowedundsareusedtopurchaseadiversifedportolioosimilarmaturitybondstotheborrowings.Thishastheeectohedgingoutmuchotheinterestrateriskandremovingthemismatchbetweenborrowingcostsandassociatedinvestmentreturns.GearinglevelsarediscussedbytheBoardandManagersateveryBoardmeetingandmonitoredbetweenmeetings.TheBoardwillnottakeoutadditionalborrowingsithistakestheleveloeectivegearingbeyond130%.

dIreCTorS reporT


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Thestartingpositionorinvestmentoshareholderundsis100%exposuretoequitymarkets.TheallocationtoequitymarketsatanypointintimewillreecttheBoardsandManagersviewson

prospectivereturnsromequitiesandtheullrangeoalternativeinvestmentopportunitiesbut,inbroadterms,SAINTSwillgearupthroughtheuseoborrowingsiequitymarketslookundervaluedandwillholdcashorinvestinnon-equityassetswhenequitymarketslookovervalued.

Theexposuretolistedequitiesissetwithinarangeo75%to125%oshareholdersundsinnormalcircumstances.Thenumberoindividualequitiesheldwillvaryovertimebut,inordertodiversiyrisk,willtypicallybeinarangebetween50and100.

TheBoardmonitorstheaggregateexposuretoanyoneentityacrossthewholeinvestmentportolio.Themaximumexposureattimeoinvestmenttoanyoneentityis15%ototalassets.TheBoardis

notifedinadvanceoanytransactionthatwouldtakeanindividualequityholdingabove5%oshareholdersunds.SAINTSdoesromtimetotimeinvestinotherUKlistedinvestmentcompanies.Themaximumpermittedinvestmentinsuchcompaniesis15%ogrossassets.

AdetailedanalysisotheCompanysinvestmentportolioissetoutonpages12to18.

Board OversightWhenassessingtheperormanceotheCompanyandtheManagers,theBoardlooksatdividendgrowthandatnetassetvaluetotalreturnsrelativetothebenchmarktotalreturn.TheBoardbelievesitisappropriatetomakethisassessmentoveramediumto

longtermtimerame,atleastthreetofveyears,inaccordancewiththemediumtolongtermapproachtakentoinvestment.

TheBoardmonitorscloselytheactivitiesotheManagers,thecompositionotheinvestmentportolioandthelevelogearingtoensuretheseexposuresareidentifedandtojudgewhetherornotprospectiveinvestmentreturnsarecommensuratewiththenatureandsizeotheseexposures.

TheBoardsetsanumberoguidelinesandplaceslimitsandrestrictionsontheManagersinordertominimisetheriskopermanentlossocapital.Withintheseconstraints,theBoardencouragestheManagertomaximiselongtermcapitalandincomegrowthratherthanminimiseshorttermvolatilityinthecapitalvalue

otheinvestmentportolio.ThemainsourceobothlongtermreturnandshorttermvolatilityintheSAINTSportolioislikelytobetheinvestmentsinlistedequities.

TheBoardalsomonitorsSAINTSrevenuepositionandreceivesregularestimatesromtheManagersolikelyincomegrowth.Thelevelodividendinanyoneyearissetaterassessingtheincomegeneratedbytheportoliointhatyear,thelevelorevenuereservesandlongtermtrendsinincome.

Discount/PremiumTheBoardhaspowerstobuybackitsownsharesatadiscounttonetassetvalueandtoholdsuchsharesintreasuryaswellastoissuenewsharesandre-issuetreasurysharesatapremiumtonetassetvalue.

Buy-backpowershavebeenusedinthepastincircumstanceswhenlargelinesostockcannotbeabsorbedbythemarket.Thediscount,inabsolutetermsandrelativetoothersimilarinvestmenttrustcompanies,andthecompositionotheshareregisterisdiscussedateveryBoardmeeting.WhilethereisnodiscounttargettheBoardisawarethatdiscountvolatilityisunwelcometomanyshareholdersandthatsharepriceperormanceisthemeasureusedbymostinvestors.TheBoardoverseestheManagersmarketingprogrammewhichisdesignedtostimulatedemandortheCompanysshares,provideeectivecommunicationtoexistingandpotential

shareholdersandmaintaintheprofleotheCompany.PerformanceAteachBoardmeeting,theDirectorsconsideranumberoperormancemeasurestoassesstheCompanyssuccessinachievingitsobjectives.

Thekeyperormanceindicators(KPIs)usedtomeasuretheprogressandperormanceotheCompanyovertimeareestablishedindustrymeasuresandareasollows:

themovementinnetassetvalueperordinaryshare(aterdeductingdebenturesatairvalue)comparedtothebenchmark;

themovementintheshareprice;

thediscount(aterdeductingdebenturesatairvalue);

thetotalexpenseratio;

earningspershare;and

dividendpershare.

Ahistoricalrecordothesemeasuresisshownonpages2,3and19.

Inadditiontotheabove,theBoardconsiderspeergroupcomparativeperormance.

ResultsThenetassetvaluepersharerose17.7%,comparedtoariseinthebenchmarko12.7%,dividendsincreasedby2.2%to9.25ppershareandtheCompanyssharepricemovedromadiscounto12.1%toapremiumo1.2%.

DividendsTheBoardrecommendsafnaldividendo2.35pperordinarysharewhich,togetherwiththeinterimdividendsalreadypaid,makesatotalo9.25portheyear.

Iapproved,therecommendedfnaldividendontheordinaryshareswillbepaidon11April2011toshareholdersontheregisteratthecloseobusinesson11March2011.Theex-dividenddateis9March2011.TheCompanysRegistraroersaDividendReinvestmentPlan(seepage52)andthefnaldateorelectionsorreinvestmentothisdividendis21March2011.

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Review of the Year and Future TrendsAreviewotheyearandtheinvestmentoutlookiscontainedintheChairmansStatementandtheManagersReview.

Principal Risks and UncertaintiesTheCompanysassetsconsistmainlyolistedsecuritiesanditsprincipalrisksarethereoremarketrelatedandincludemarketrisk(comprisingcurrencyrisk,interestrateriskandotherpricerisk),liquidityriskandcreditrisk.Anexplanationothoserisksandhowtheyaremanagediscontainedinnote19tothefnancialstatementsonpages44to48.

OtherrisksacedbytheCompanyincludetheollowing:

Regulatory RiskailuretocomplywithapplicablelegalandregulatoryrequirementscouldleadtosuspensionotheCompanysStockExchangeListing,fnancialpenaltiesoraqualifedaudit

report.Breachosection1158otheCorporationTaxAct2010(ormerlysection842ICTA1988)couldleadtotheCompanybeingsubjecttotaxoncapitalgains.TheManagersmonitorinvestmentmovementsandtheleveloorecastincomeandexpendituretoensuretheprovisionsosection1158arenotbreached.BaillieGiordsHeadsoBusinessRisk&InternalAuditandRegulatoryRiskprovideregularreportstotheAuditCommitteeonBaillieGiordsmonitoringprogrammes.

Operational/Financial Risk ailureotheManagersaccountingsystemsorthoseootherthirdpartyserviceproviderscouldleadtoaninabilitytoprovideaccuratereportingandmonitoringoramisappropriationoassets.TheBoardreviewstheManagersReportonInternalControlsandthereportsbyotherkeythirdpartyproviders

arereviewedbytheManagersonbehalotheBoard.Discount VolatilitythediscountatwhichtheCompanyssharestradecanwiden.TheBoardmonitorsthelevelodiscountandtheCompanyhasauthoritytobuybackitsownshares.

Gearing RisktheCompanymayborrowmoneyorinvestmentpurposes(sometimesknownasgearing).Itheinvestmentsallinvalue,anyborrowingswillmagniytheextentothisloss.Iborrowingacilitiesarenotrenewed,theCompanymayhavetosellinvestmentstorepayborrowings.

AllborrowingsrequirethepriorapprovalotheBoardandgearinglevelsarediscussedbytheBoardandManagersateverymeeting.ThemajorityotheCompanysinvestmentsareinquotedsecurities

thatarereadilyrealisable.

EmployeesTheCompanyhasnoemployees.TheexecutiveresponsibilityorinvestmentmanagementhasbeendelegatedtoBaillieGiord&Co.

Social and Community IssuesAsaninvestmenttrust,theCompanyhasnodirectsocialorcommunityresponsibilities.TheCompanyhoweverbelievesthatitisinshareholdersintereststoconsiderenvironmentalsocialandgovernanceactorswhenselectingandretaininginvestments.DetailsotheCompanyspolicyonsociallyresponsibleinvestmentcanbeoundunderCorporateGovernanceandStewardshiponpage25.

Corporate Governance

TheBoardiscommittedtoachievinganddemonstratinghigh

standardsoCorporateGovernance.ThisstatementoutlineshowtheprinciplesoTheCombinedCodeonCorporateGovernance,publishedin2008(theCombinedCode)wereappliedthroughoutthefnancialyear.

ComplianceTheBoardconfrmsthattheCompanyhascompliedthroughouttheyearunderreviewwiththerelevantprovisionsotheCombinedCode.TheAssociationoInvestmentCompanies(AIC)haspublisheditsownCodeoCorporateGovernancewhichprovidesarameworkobestpracticeorinvestmentcompanies.TheBoardisotheopinionthattheCompanyhascompliedwiththerecommendationsotheAICCode.

The BoardTheBoardhasoverallresponsibilityortheCompanysaairsandithassetoutanumberomattersthataresubjecttoBoardapprovalincludingstrategy,investmentpolicy,currencyhedging,gearing,treasurymatters,dividendandcorporategovernancepolicy.Aseparatemeetingdevotedtostrategyisheldeachyear.TheBoardalsoreviewsthefnancialstatements,investmenttransactions,revenuebudgetsandperormance.FullandtimelyinormationisprovidedtotheBoardtoenabletheBoardtounctioneectivelyandtoallowDirectorstodischargetheirresponsibilities.

TheBoardcurrentlycomprisessevenDirectorsallowhomarenon-executive.TheexecutiveresponsibilityorinvestmentmanagementhasbeendelegatedtotheCompanysManagersandSecretaries,

BaillieGiord&Co,and,inthecontextoaBoardcomprisedentirelyonon-executiveDirectors,thereisnochieexecutiveofcer.TheseniorindependentdirectorisDavidPrice.

TheDirectorsbelievethattheBoardhasabalanceoskillsandexperiencewhichenablesittoprovideeectivestrategicleadershipandpropergovernanceotheCompany.InormationabouttheDirectors,includingtheirrelevantexperience,canbeoundonpage6.

ThereisanagreedprocedureorDirectorstoseekindependentproessionaladviceinecessaryandattheCompanysexpense.

Terms of AppointmentLetterswhichspeciythetermsoappointmentareissuedtonew

Directors.Thelettersoappointmentareavailableorinspectiononrequest.

ADirectorappointedduringtheyearisrequiredtoretireandseekelectionbyshareholdersatthenextAnnualGeneralMeeting.TheBoardhasagreedtogobeyondtheminimumrequirementsotheCompanysArticlesoAssociationandTheCombinedCodeandhasresolvedthatallotheDirectorswillretireateachAnnualGeneralMeetingand,iappropriate,oerthemselvesorre-election.

Independence of DirectorsAllDirectorsareconsideredbytheBoardtobeindependentotheManagersandreeoanybusinessorotherrelationshipwhichcouldintererewiththeexerciseotheirindependentjudgement.

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SirBrianIvoryandMrDavidPricehaveservedontheBoardormorethannineyears,althoughtherehasonlybeenarelationshipwiththeManagersorsevenyearsasBaillieGiordwereappointed

in2004.TheDirectorsrecognisetheimportanceosuccessionplanningorcompanyboardsandreviewtheBoardcompositionannually.HowevertheBoardisotheviewthatlengthoservicewillnotnecessarilycompromisetheindependenceorcontributionoDirectorsoaninvestmenttrustcompany,wherecontinuityandexperiencecanbeabenefttotheBoard.TheBoardconcurswiththeviewexpressedintheAICCodethatlong-servingDirectorsshouldnotbepreventedrombeingconsideredindependent.Followingaormalperormanceevaluation,theBoardhasconcludedthat,notwithstandingtheirlengthoserviceSirBrianIvoryandMrDavidPriceremainindependent.TheiractionsanddecisionshaveconfrmedtheirindependenceandtheDirectorsbelievetheirlengthoservicehasbeenabenefttotheBoard.

MeetingsThereisanannualcycleoBoardmeetingswhichisdesignedtoaddress,inasystematicway,overallstrategy,reviewoinvestmentpolicy,investmentperormance,marketing,revenuebudgets,dividendpolicyandcommunicationwithshareholders.TheBoardconsidersthatitmeetssufcientlyregularlytodischargeitsdutieseectively.ThetableonthispageshowstheattendancerecordortheBoardandCommitteemeetingsheldduringtheyear.AllDirectorsattendedtheAnnualGeneralMeeting.

Nomination CommitteeTheNominationCommitteeconsistsothewholeBoardandtheChairmanotheBoardisChairmanotheCommittee.

TheCommitteemeetsonanannualbasisandatsuchothertimesasmayberequired.TheCommitteehaswrittentermsoreerencewhichincludereviewingtheBoard,identiyingandnominatingnewcandidatesorappointmenttotheBoard,Boardappraisal,successionplanningandtraining.TheCommitteealsoconsiderswhetherDirectorsshouldberecommendedorre-electionbyshareholders.TheCommitteeisresponsibleorconsideringDirectorspotentialconictsointerestandormakingrecommendationstotheBoardonwhetherornotthepotentialconictsshouldbeauthorised.TheCommitteestermsoreerenceareavailableonrequestromtheCompanyandromtheSAINTSpageontheManagerswebsitewww.saints-it.com.

Performance EvaluationAnappraisalotheChairman,eachDirectorandaperormanceevaluationandreviewotheBoardasawholeanditsCommitteeswascarriedoutduringtheyear.TheChairmanandeachDirectorcompletedaperormanceevaluationquestionnaireandeachDirectorhadaninterviewwiththeChairman.TheappraisalotheChairmanwasledbyMrDavidPrice.Theappraisalsandevaluationsconsidered,amongstothercriteria,thebalanceoskillsotheBoard,thecontributionoindividualDirectorsandtheoveralleectivenessotheBoardanditsCommittees.FollowingthisprocessitwasconcludedthattheperormanceoeachDirector,theChairman,theBoardanditsCommitteescontinuestobeeectiveandeachDirectorandtheChairmanremainscommittedtotheCompany.

AreviewotheChairmansandotherDirectorscommitmentswascarriedoutandtheNominationCommitteeissatisfedthattheyarecapableodevotingsufcienttimetotheCompany.TherewerenosignifcantchangestotheChairmansothercommitmentsduringtheyear.

Induction and TrainingNewDirectorsareprovidedwithaninductionprogrammewhichistailoredtotheparticularcircumstancesotheappointee.RegularbriefngsareprovidedonchangesinregulatoryrequirementsthatcouldaecttheCompanyandtheDirectors.Directorsreceiveotherrelevanttrainingasnecessary.

RemunerationAsalltheDirectorsarenon-executive,theprovisionsotheCombinedCodeinrespectoDirectorsremunerationarenotrelevanttotheCompanyexcepttotheextentthattheyrelatespecifcallytonon-executivedirectors.ConsequentlythereisnorequirementoraseparateRemunerationCommittee.DirectorseesareconsideredbytheBoardasawholewithinthelimitsapprovedbyshareholders.

TheCompanyspolicyonremunerationissetoutintheDirectorsRemunerationReportonpages28and29.

Internal Controls and Risk ManagementTheDirectorsacknowledgetheirresponsibilityortheCompanyssystemointernalcontrolsandorreviewingitseectiveness.Thesystemointernalcontrolsisdesignedtomanageratherthaneliminatetheriskoailuretoachievebusinessobjectivesandcanonlyprovidereasonableandnotabsoluteassuranceagainstmaterialmisstatementorloss.

TheBoardconfrmsthatthereisaprocessoridentiying,evaluatingandmanagingthesignifcantrisksacedbytheCompanyinaccordancewiththeguidanceInternalControl:RevisedGuidance

orDirectorsontheCombinedCode.TheDirectorsconfrmthattheyhavereviewedtheeectivenessothesystemointernalcontrolandtheyhaveproceduresinplacetoensureregularuturereviews.

Thepracticalmeasurestoensurecompliancewithregulationandcompanylaw,andtoprovideeectiveandefcientoperationsandinvestmentmanagement,havebeendelegatedtotheManagersandSecretaries,BaillieGiord&Co,underthetermsotheManagementAgreement.Thepracticalmeasuresinrelationtothedesign,implementationandmaintenanceocontrolpoliciesandprocedurestosaeguardtheassetsotheCompanyandtomanageitsaairsproperly,includingthemaintenanceo

eectiveoperationalandcompliancecontrolsandriskmanagementhavealsobeendelegatedtoBaillieGiord&Co.TheBoardacknowledgesitsresponsibilitiestosuperviseandcontrolthedischargebytheManagersandSecretariesotheirobligations.

Directors Attendance at Meetings

Audit Nomination

Board Committee Committee

Number of meetings 6 2 1

SirBrianIvory 6 2 1TheRtHonSirMenziesCampbell 6 2 1EricHagman 6 2 1LordKerroKinlochard 6 2 1RachelLomax 6 2 1PeterMoon 6 2 1DavidPrice 6 2 1
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TheBaillieGiord&CoHeadsoBusinessRisk&InternalAuditandRegulatoryRiskprovidetheAuditCommitteewithregularreportsonBaillieGiord&Cosmonitoringprogrammes.Thereporting

proceduresorthesedepartmentsaredefnedandormalisedwithinaservicelevelagreement.BaillieGiord&CoconductsanannualreviewoitssystemointernalcontrolswhichisdocumentedwithinaninternalcontrolsreportwhichcomplieswithTechnicalReleaseAAF01/06AssuranceReportsonInternalControlsoServiceOrganisationsmadeavailabletoThirdParties.ThisreportisindependentlyreviewedbyBaillieGiord&CosauditorsandacopyissubmittedtotheAuditCommittee.

TheCompanysinvestmentsaresegregatedromthoseoBaillieGiord&CoanditsotherclientsthroughtheappointmentoTheBankoNewYorkMellonasindependentcustodianotheCompanysinvestments.

Adetailedriskmapispreparedwhichidentifesthesignifcantrisks

acedbytheCompanyandthekeycontrolstomanagetheserisksareconfrmedasinplaceandoperatingeectively.

TheseproceduresensurethatconsiderationisgivenregularlytothenatureandextentotherisksacingtheCompanyandthattheyarebeingactivelymonitored.Wherechangesinriskhavebeenidentifedduringtheyeartheyalsoprovideamechanismtoassesswhetherurtheractionisrequiredtomanagetherisksidentifed.TheBoardconfrmsthattheseprocedureshavebeeninplacethroughouttheCompanysfnancialyearandcontinuetobeinplaceuptothedateoapprovalothisReport.

Internal AuditTheAuditCommitteecarriesoutanannualreviewotheneedoran

internalauditunction.TheCommitteecontinuestobelievethatthecomplianceandinternalcontrolsystemsandtheinternalauditunctioninplacewithintheInvestmentManagersprovidesufcientassurancethatasoundsystemointernalcontrol,whichsaeguardsshareholdersinvestmentandtheCompanysassets,ismaintained.Aninternalauditunction,specifctotheCompany,isthereoreconsideredunnecessary.

Accountability and AuditTherespectiveresponsibilitiesotheDirectorsandtheAuditorsinconnectionwiththeFinancialStatementsaresetoutonpages30and31.

Going Concern

InaccordancewithTheFinancialReportingCouncilsguidanceongoingconcernandliquidityriskissuedin2009,theDirectorshaveundertakenarigorousreviewotheCompanysabilitytocontinueasagoingconcern.

TheCompanysprincipalrisksaremarketrelatedandincludemarketrisk,liquidityriskandcreditrisk.Anexplanationotheserisksandhowtheyaremanagediscontainedinnote19tothefnancialstatements.TheCompanysassets,themajorityowhichareinvestmentsinquotedsecuritieswhicharereadilyrealisable,exceeditsliabilitiessignifcantly.AllborrowingsrequirethepriorapprovalotheBoard.GearinglevelsandcompliancewithborrowingcovenantsarereviewedbytheBoardonaregularbasis.TheCompanyhasnoshorttermborrowingsandtheredemption

dateortheCompanysDebentureisApril2022.Accordingly,thefnancialstatementshavebeenpreparedonthegoingconcernbasisasitistheDirectorsopinionthattheCompanywillcontinueinoperationalexistenceortheoreseeableuture.

Audit CommitteeAnAuditCommitteehasbeenestablishedconsistingoallDirectors.ItsauthorityanddutiesareclearlydefnedwithinitswrittentermsoreerencewhichareavailableonrequestromtheCompanyandontheSAINTSpageotheManagerswebsitewww.saints-it.com.EricHagmanischairmanotheAuditCommittee.TheCommitteesresponsibilities,whichweredischargedduringtheyear,include:

monitoringandreviewingtheintegrityothehal-yearlyand

annualfnancialstatementsandanyormalannouncementsrelatingtotheCompanysfnancialperormance;

reviewingstandardsointernalcontrolandriskmanagement;

makingrecommendationstotheBoardinrelationtotheappointmentotheexternalauditorsandapprovingtheremunerationandtermsotheirengagement;

developingandimplementingpolicyontheengagementotheexternalauditorstosupplynonauditservices;

reviewingandmonitoringtheindependence,objectivityandeectivenessotheexternalauditors;

reviewingthetermsotheInvestmentManagementAgreement;

reviewingthearrangementsinplacewithinBaillieGiord&Cowherebytheirstamay,inconfdence,raiseconcernsaboutpossibleimproprietiesinmattersofnancialreportingorothermattersinsoarastheymayaecttheCompany;and

consideringannuallywhetherthereisaneedortheCompanytohaveitsowninternalauditunction.

KPMGAuditPlcwereappointedtheCompanysAuditorsin2004.Havingconsideredtheexperienceandtenureotheauditpartnerandstaandtheleveloserviceprovided,theCommitteeremainssatisfedwiththeAuditorseectiveness.Theauditpartnersresponsibleortheauditarerotatedeveryfveyearsandthecurrentleadauditpartnerhasbeeninplaceortwoyears.TherearenocontractualobligationsrestrictingtheCompanyschoiceoexternalauditor.

dIreCTorS reporT

Directors Interests

Nature Ordinary 25p shares

Name of interest 2010 2009

SirBrianIvory Benefcial 31,000 31,000TheRtHonSirMenziesCampbell Benefcial 2,315 2,194EricHagman Benefcial 2,000 2,000LordKerroKinlochard Benefcial 59,991 54,187RachelLomax Benefcial 17,057 5,864PeterMoon Benefcial 10,000 10,000DavidPrice Benefcial 10,000 10,000

TheDirectorsattheyearend,andtheirinterestsintheCompanyat31December,wereasshownabove.Duringtheperiodrom1January2011to17February2011RachelLomaxadded247sharestoherbenefcialholdingasaresultomonthlyinvestmentintheBaillieGiordsavingsvehicles.

TherehavebeennootherchangesintimatedintheDirectorsinterestsupto17February2011.
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TheCommitteereceivesconfrmationromtheAuditorsthattheyhavecompliedwiththerelevantUKproessionalandregulatoryrequirementsonindependence.Nonauditeesortheyearto

31December2010were1,000andrelatedtothecertifcationofnancialinormationorthedebenturetrustee.TheCommitteedoesnotbelievethatthishasimpairedtheAuditorsindependence.

Relations with ShareholdersTheBoardplacesgreatimportanceoncommunicationwithshareholders.TheCompanysManagersmeetregularlywithshareholdersandreportshareholdersviewstotheBoard.TheChairmanisavailabletomeetwithshareholdersasappropriate.ShareholderswishingtocommunicatewithanymembersotheBoardmaydosobywritingtothemattheCompanysregisteredofce.

TheCompanysAnnualGeneralMeetingprovidesaorumorcommunicationwithallshareholders.Theleveloproxieslodgedor

eachresolutionisannouncedatthemeetingandispublishedontheSAINTSpageotheManagerswebsitesubsequenttothemeeting.ThenoticeperiodortheAnnualGeneralMeetingisatleasttwentyworkingdays.Shareholdersandpotentialinvestorsmayobtainup-to-dateinormationontheCompanyromtheSAINTSpageotheManagerswebsite,www.saints-it.com.

Corporate Governance and StewardshipTheCompanyhasgivendiscretionaryvotingpowerstotheinvestmentmanagers,BaillieGiord&Co.TheManagersvoteagainstresolutionstheyconsidermaydamageshareholdersrightsoreconomicinterests.

TheCompanybelievesthatitisintheshareholdersintereststo

considerenvironmental,socialandgovernance(ESG)actorswhenselectingandretaininginvestmentsandhaveaskedtheManagerstotaketheseissuesintoaccount.TheManagersdonotexcludecompaniesromtheirinvestmentuniversepurelyonthegroundsoESGactorsbutadoptapositiveengagementapproachwherebymattersarediscussedwithmanagementwiththeaimoimprovingtherelevantpoliciesandmanagementsystemsandenablingtheManagerstoconsiderhowESGactorscouldimpactlongterminvestmentreturns.TheManagersstatementocompliancewiththeUKStewardshipCodecanbeoundontheManagerswebsiteatwww.bailliegifford.com .TheManagerspolicyhasbeenreviewedandendorsedbytheBoard.

TheManagersaresignatoriestotheUnitedNationsPrinciplesor

ResponsibleInvestmentandtheCarbonDisclosureProject.

Conicts of InterestEachDirectorsubmitsalistopotentialconictsointeresttotheNominationCommitteeonanannualbasis.TheCommitteeconsidersthemcareully,takingintoaccountthecircumstancessurroundingthemandmakesarecommendationtotheBoardonwhetherornotthepotentialconictsshouldbeauthorised.Boardauthorisationisoraperiodooneyear.HavingconsideredthelistsopotentialconictstherewerenosituationswhichgaverisetoadirectorindirectinterestoaDirectorwhichconictedwiththeinterestsotheCompany.

Investment Managers

AnInvestmentManagementAgreementbetweentheCompanyand

BaillieGiord&CosetsoutthemattersoverwhichtheManagershaveauthorityinaccordancewiththepoliciesanddirectionso,andsubjecttorestrictionsimposedby,theBoard.TheManagementAgreementisterminableonnotlessthansixmonthsnotice.CareulconsiderationhasbeengivenbytheBoardastothebasisonwhichthemanagementeeischarged.TheBoardconsidersthatmaintainingarelativelylowtotalexpenseratioisinthebestinterestoallshareholders.TheBoardisalsootheviewthatcalculatingtheeewithreerencetoperormancewouldbeunlikelytoexertapositiveinuenceoverthelongtermperormance.

DetailsotheeearrangementswithBaillieGiord&Coareshownonpage37.

TheBoardconsiderstheCompanysinvestmentmanagementand

secretarialarrangementsortheCompanyonanongoingbasisandaormalreviewisconductedannually.TheBoardconsiders,amongstothers,theollowingtopicsinitsreview:thequalityopolicyguidance;successoinvestmentstrategyandinvestmentperormance;theadministrativeservicesprovidedbytheSecretaries;qualityandcoverageoBoardpapers;themarketingeortsundertakenbytheManagers;comparativecosts;andcommunicationwithshareholders.FollowingthemostrecentreviewitistheopinionotheDirectorsthatthecontinuingappointmentoBaillieGiord&CoasManagers,onthetermsagreed,isintheinterestsoshareholdersasawhole.

Underaormalmanagementagreement,OLIMLimitedisappointed

managerotheCompanyspropertyportolio.Detailsoitseesareshownonpage37.Theagreementcanbeterminatedonthreemonthsnotice.Ontermination,OLIMisentitledtoaprorataproportionoitseestothedateotermination.ItistheBoardsviewthatthecontinuationoOLIMsappointmentonthetermsagreedisintheinterestoshareholdersasawhole.

Substantial Holdings in the Companys Shares

No. of ordinary

Name 25p shares held % of issue

BrewinDolphinLimited 6,660,412 5.0Legal&GeneralGroupPlc 5,240,223 3.9DCThomson&CoLtd 4,100,000 3.1

TheaboveinormationhasbeenintimatedtotheCompanyasat17February2011.
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Directors

InormationabouttheDirectors,includingtheirrelevantexperience,

canbeoundonpage6.AsexplainedintheTermsoAppointmentsectiononpage22,theBoardhasagreedtogobeyondtheminimumrequirementsotheCompanysArticlesoAssociationandtheCombinedCodeandhasdecidedthatallDirectorsshouldseekre-electionannually.

AllDirectorswillthereoreberetiringattheAnnualGeneralMeetingandtheyalloerthemselvesorre-election.Followingormalperormanceevaluation,theirperormancecontinuestobeeectiveandtheyremaincommittedtotheCompany.TheBoardrecommendstheirre-electiontoshareholders.

Deeds of Indemnity and Insurance

TheCompanyhasenteredintodeedsoindemnityinavouroeach

oitsDirectors.Thedeedscoveranyliabilitiesthatmayarisetoathirdparty,otherthantheCompany,ornegligence,deaultorbreachotrustorduty.TheDirectorsarenotindemnifedinrespectoliabilitiestotheCompany,anyregulatoryorcriminalfnes,anycostsincurredinconnectionwithcriminalproceedingsinwhichtheDirectorisconvictedorcivilproceedingsbroughtbytheCompanyinwhichjudgementisgivenagainsthim.Inaddition,theindemnitydoesnotapplytoanyliabilitytotheextentthatitisrecoveredromanotherperson.

TheCompanymaintainsDirectorsandOfcersLiabilityInsurance.

Share Capital

Capital structureTheCompanyscapitalstructureconsistso132,485,943ordinaryshareso25peach(2009132,485,943ordinaryshares).TherearenorestrictionsconcerningtheholdingortranserotheCompanysordinarysharesandtherearenospecialrightsattachingtoanyotheshares.

DividendsTheordinarysharescarryarighttoreceivedividends.InterimdividendsaredeterminedbytheDirectors,whereastheproposedfnaldividendissubjecttoshareholderapproval.

Capital entitlementOnawindingup,atermeetingtheliabilitiesotheCompany,thesurplusassetswillbepaidtoordinaryshareholdersinproportion

totheirshareholdings.

VotingEachordinaryshareholderpresentinpersonorbyproxyisentitledtoonevoteonashowohandsand,onapoll,toonevoteoreveryshareheld.

Inormationonthedeadlinesorproxyappointmentscanbeoundonpage55.

Purchase of Own Shares

TheCompanysbuy-backauthoritywaslastrenewedattheAGMon8April2010inrespecto19,859,642shareso25peach(equivalentto14.99%oitsthenissuedsharecapital).Noshares

wereboughtbackduringtheyearunderreviewandnosharesareheldintreasury.

Theprincipalreasonsorsharebuy-backsare:

(i) toenhancethenetassetvalueorcontinuingshareholdersby

purchasingsharesatadiscounttotheprevailingnetassetvalue;and

(ii) toaddressanyimbalancebetweenthesupplyoanddemandortheSAINTSsharesthatresultsinadiscountothequotedmarketpricetothepublishednetassetvaluepershare.

TheDirectorsareseekingshareholdersapprovalattheAnnualGeneralMeetingtorenewtheauthoritytomakemarketpurchasesoupto14.99%otheCompanysordinarysharesinissueatthedateopassingotheresolution,suchauthoritytoexpireattheAnnualGeneralMeetingotheCompanytobeheldin2012.Anysuchsharespurchasedshalleitherbecancelledorheldintreasury.InaccordancewiththeListingRulesotheUKListingAuthority,themaximumprice(excludingexpenses)thatmaybepaidontheexerciseotheauthoritymustnotexceedthehighero:

(i) 5percentabovetheaverageclosingpriceontheLondonStockExchangeoanordinaryshareoverthefvebusinessdaysimmediatelyprecedingthedateopurchase;and

(ii) thehigherothepriceothelastindependenttradeandthehighestcurrentindependentbidontheLondonStockExchange.

Theminimumpricethatmaybepaidwillbe25ppershare.Purchasesoshareswillbemadewithinguidelinesestablished,romtimetotime,bytheBoard.TheCompanydoesnothaveanywarrantsoroptionsinissue.YourattentionisdrawntoResolution15intheNoticeoAnnualGeneralMeeting.

Share Issuance Authority

Resolution13intheNoticeoAnnualGeneralMeetingseekstorenewtheDirectorsgeneralauthoritytoissuesharesuptoanaggregatenominalamounto11,040,495.Thisamountrepresents33.33%otheCompanystotalordinarysharecapitalcurrentlyinissueandmeetsinstitutionalguidelines.NoissueoordinaryshareswillbemadepursuanttotheauthorisationinResolution13whichwouldeectivelyalterthecontrolotheCompanywithoutthepriorapprovaloshareholdersingeneralmeeting.

Resolution14,whichisproposedasaspecialresolution,seekstorenewtheDirectorsauthoritytoissuesharesorsellsharesheldin

treasuryonanon-pre-emptivebasisorcash(i.e.withoutfrstoeringsuchsharestoexistingshareholderspro-ratatotheirexistingholdings)uptoanaggregatenominalamounto3,312,148(representing10%otheissuedordinarysharecapitalotheCompanyasat17February2011).TheauthoritiessoughtinResolutions13and14willcontinueuntiltheconclusionotheAnnualGeneralMeetingtobeheldin2012orontheexpiryo15monthsromthepassingothisresolution,iearlier.

Suchauthoritieswillonlybeusedtoissuesharesorre-sellsharesromtreasuryatapremiumtonetassetvalueandonlywhentheDirectorsbelievethatitwouldbeinthebestinterestsotheCompanytodoso.

TheDirectorsconsiderthattheauthoritytoissue/sellsharesis

advantageousshouldthesharestradeatapremiumtothenetassetvalueandnaturalliquidityisunabletomeetdemand.

Noshareswereissuedduringtheyearto31December2010andnoshareswereheldintreasuryon17February2011.


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Amendment to the Articles of Association

ItisproposedinResolution16toadoptnewarticlesoassociation

(theNewArticles)inordertoupdatetheCompanyscurrentarticlesoassociation(theArticles)totakeaccountotheimplementationon1October2009othelastpartsotheCompaniesAct2006(the2006Act)inrespecto,amongstotherthings,theCompanysauthorisedsharecapital,itsmemorandumoassociationandtheabilityotheCompanytochangeitsname.TheCompaniesAct1985was,orallpracticalpurposesrepealedon1October2009.ItisalsoproposedtoamendtheArticlestoincreasethelimitsontheDirectorsees.WhilsttheBoardisnotproposinganincreaseineesor2011,theeesarenearthecurrentlimitwhichleaveslittlescopeoranincreaseinutureyears.

AsummaryothematerialchangesproposedtobebroughtaboutbytheadoptionotheNewArticlesissetoutintheAppendixtothe

NoticeotheAnnualGeneralMeetingonpage57.AcopyotheNewArticleswillbeavailableorinspectionattheofcesoDicksonMintoW.S.,BroadgateTower,20PrimroseStreet,LondonEC2A2EWduringnormalbusinesshoursonanyweekday(Saturdays,Sundaysandpublicholidaysexcepted)romthedateothenoticeotheAGMuntiltheconclusionotheAGM.AcopywillalsobeavailableattheplaceotheAGMor15minutesbeoreandduringtheAGM.

Creditor Payment Policy

ItistheCompanyspaymentpolicytoobtainthebesttermsorallbusiness.Ingeneral,theCompanyagreeswithitssuppliersthe

termsonwhichbusinesswilltakeplaceanditisitspolicytoabidebytheseterms.TheCompanyhadnotradecreditorsateither31December2009or31December2010.

dIreCTorS reporT

Disclosure of Information to Auditors

TheDirectorsconfrmthatsoaraseachotheDirectorsisaware

thereisnorelevantauditinormationowhichtheCompanysauditorsareunawareandtheDirectorshavetakenallthestepsthattheyoughttohavetakenasDirectorsinordertomakethemselvesawareoanyrelevantauditinormationandtoestablishthattheCompanysauditorsareawareothatinormation.

Independent Auditors

Theauditors,KPMGAuditPlc,arewillingtocontinueinofceandinaccordancewithsection489andsection491(1)otheCompaniesAct2006resolutionsconcerningtheirre-appointmentandremunerationwillbesubmittedtotheAnnualGeneralMeeting.

Recommendation

TheBoardunanimouslyrecommendsyoutovoteinavourotheresolutionstobeproposedattheAnnualGeneralMeeting.

ByorderotheBoardSIRBRIANIVORY18February2011


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dIreCTorS remuNerATIoN reporT

Directors Remuneration Report

TheBoardhaspreparedthisreport,inaccordancewiththerequirementsotheCompaniesAct2006.AnordinaryresolutionortheapprovalothisreportwillbeputtothemembersattheorthcomingAnnualGeneralMeeting.

ThelawrequirestheCompanysauditorstoauditcertainothedisclosuresprovided.Wheredisclosureshavebeenaudited,theyareindicatedassuch.Theauditorsopinionisincludedintheirreportonpage31.

Remuneration Committee

TheCompanyhassevenDirectors,allowhomarenon-executive.

ThereisnoseparateremunerationcommitteeandtheBoardasawholeconsiderschangestoDirectorseesromtimetotime.BaillieGiord&Co,whohavebeenappointedbytheBoardasManagersandSecretaries,provideadvicean

The Scottish American Invest Co.

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