The Scottish Investment Trust PLC – creating prosperity for over a century
The Scottish Investment Trust has been working to provide solid returns for investors for over 125 years – through a number of bull and bear markets and the most volatile conditions.
The Scottish Investment Trust Company Limited was incorporated in Edinburgh on 27 July 1887, with a capital of £250,000, equally divided between preferred and deferred shares. It was the second investment trust company (but not the second investment trust) to be launched in Scotland(1). SIT’s founder and first chairman was John Dick Peddie, a well-known Edinburgh architect and a Liberal Member of Parliament.
The company’s prospectus stated “the object of the Scottish Investment Trust is to apply the principles of co-operation to the investment of money so that investors may, by uniting their means, spread their investment over a wider field, thus obtaining a higher rate of interest with greater security and exemption from liability than if the amount subscribed by each shareholder were independently invested.” and the same principle holds true today.
In the original list of shareholders were, predictably, professional men – mostly lawyers, stockbrokers, accountants, doctors and church ministers. However, there were also a number of ordinary working people – women as well as men – including a baker, a grocer, a house painter, a school mistress and a butler – and the company continues to attract a diverse range of investors today.
Like the other early investment trusts, the Scottish Investment Trust was an outward-facing adventurous investment vehicle, investing in the emerging markets of the time, principally the Americas. The company’s first annual report and accounts list such investments as:
- Chicago, Milwaukee and St Paul Railroad
- Denver and Rio Grande Railroad Company
- San Paulo (Brazilian) Railway Company
- London and River Plate Bank
- Midland Railway of Uruguay
- Costa Rica Government Bonds
- Havana Railways Company
- Monte Video Gas Company Limited
- Brazilian Submarine Telegraph Company Limited
Britain was at the height of its days of Empire and this could be seen in other, sometimes rather esoteric sounding, investments:
- Indiarubber, Gutta Percha and Telegraph Works Company
- Phospho-Guano Company Limited
- Luckimpore Tea Company of Assam Limited
- Irrawaddy Flotilla Company Limited
- Kimberley Waterworks Company Limited
- Chartered Bank of India, Australia and China
While closer to home was investment in:
- Glasgow Tramway and Omnibus Company
- London and Westminster Bank
- Birkenhead Brewery Company Limited
- Prices Patent Candle Company Limited
And, some familiar names:
- Hong Kong and Shanghai Banking Corporation (HSBC)
- Peninsular and Oriental Steam Navigation Company (P & O)
- Standard Life Assurance
- Rio Tinto Company Limited
The Company currently holds investments in HSBC and Rio Tinto (although not consecutively since 1887!).
In 1889, the Scottish Investment Trust bought 6 Albyn Place, a substantial Edinburgh New Town house, which, the directors were pleased to note, it acquired at ‘a very moderate price’ and the Company is still run from this building today.
Second Scottish Investment Trust
From its early days, the Scottish Investment Trust had a companion trust – the Second Scottish Investment Trust – which was active in the growing US market. The Second Scottish Investment Trust amalgamated with The Scottish Investment Trust in 1976 swelling assets from £32.8 million to £92.4 million.
The Company’s first board members believed investment at home seldom matched the prospects for economic expansion which existed overseas. By the turn of the 20th century, the Scottish Investment Trust had placed the majority of its investment overseas and, with the exception of the Second World War (when the Treasury requisitioned virtually all overseas investments to help pay for the war effort) and its immediate aftermath, this has been the position ever since with the focus primarily on equity investment. The principal aim, then as now, was to invest in well-managed companies which were likely to achieve a good increase in earnings and dividends.
Technology apart, the biggest change over the years has been in research. In the 1930s, it was a major event when the manager decided to go to America, even though the Company was at that time investing fairly heavily in a wide range of American companies. Now, along with regular visits overseas, the Scottish Investment Trust embraces the latest technologies to aid its investment research.
On the personnel side, the Company operated with only directors and a secretary until 1925, when it appointed a member of the board, R G Simpson, to be manager as well. That appointment ran until 1934 when the then secretary, R J Edgar, became manager and secretary combined. Edgar was only the third secretary in fifty years, following Holmes Ivory and W H Ivory and there have been just six secretaries since – D C Reid (1937-43), George Smith (1943-51), Albert Black (1951-79), Iain Harding (1979-2007), Steven Hay (2007-2016) and R&H Fund Services Ltd (2016 to present).
In 1987, to mark its centenary year, the Scottish Investment Trust issued warrants to all its ordinary shareholders on the basis of one warrant for every five ordinary shares held. Each warrant entitled the holder to purchase one ordinary share at a fixed price of 484p at any time until 15 February 1995.
Since January 2006, the Company has operated an active share buyback policy with the aim of keeping the discount to ex-income net asset value at or below 9% (with borrowings at market value).
Unlike many other investment trust companies and managers which over the years developed into fund management houses running a variety of investment trusts and other funds such as unit trusts and OEICs, the Scottish Investment Trust continues as it began, a single-purpose organisation. It is independently managed by its own employees; its independence providing a clear focus and goal.
(1) ‘Put Not Your Trust In Money’, John Newlands
Other investment trusts were launched as legal trusts, whereas the Scottish Investment Trust was structured as a limited liability company from the outset.