Annual Financial Report

RNS Number : 2268R

Monks Investment Trust PLC

25 June 2015

 



The Monks Investment Trust PLC

Annual Financial Report

A copy of the Annual Report and Financial Statements for the year ended 30 April 2015 of The Monks Investment Trust PLC has been submitted electronically to the National Storage Mechanism and will shortly be available for inspection http://www.morningstar.co.uk/uk/NSM.

The Annual Report and Financial Statements for the year ended 30 April 2015 including the Notice of Annual General Meeting is also available on Monks page of the Baillie Gifford website at: www.monksinvestmenttrust.co.uk

The unedited full text of those parts of the Annual Report and Financial Statements for the year ended 30 April 2015 which require to be published by DTR 4.1 is set out on the following pages.

Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

Baillie Gifford & Co Limited

Company Secretaries

25 June 2015

 

Chairman's Statement

Performance

In the year to 30 April 2015 the net asset value (NAV) total return (capital and income), with borrowings at fair value, was 13.0% and the share price total return was 18.8%. Over the same period the total return for the FTSE World Index was 18.0%.

Geographic allocation was a notable detractor to relative performance over the financial year, accounting for 3.6 percentage points of underperformance. Good stock selection in Emerging Markets and Japan was offset by poor relative returns in the UK, North America and Europe (ex UK). The relative overweight to the UK market was also unhelpful, as was our Oil and Gas exposure, with Enquest, Seadrill, North Atlantic Drilling and IGas Energy in particular performing poorly.

Earnings and Dividend

Earnings per share were 4.74p compared with 4.87p the previous year, a decrease of 2.7%. Monks invests with the aim of achieving capital growth rather than income and all costs are charged to the Revenue Account. The Board is recommending a final dividend of 3.45p, which together with the interim (0.50p) already paid, would make the total dividend for the year 3.95p, unchanged from the previous year. At this stage, we are expecting a lower earnings figure for the current year.

Change in Portfolio Management Responsibilities

In 2013, the Board and the Managers undertook a thorough review of the causes of the Company's relative underperformance in recent years. Actions were taken to improve performance, including the strengthening of the team managing the portfolio. Although there were some initial encouraging signs, performance did not improve markedly.

More recently, I have met a number of shareholders who wished to discuss the Company's performance and portfolio management arrangements, independently of the Managers. During the course of these meetings, it became apparent to me that these shareholders supported the Board's view that Baillie Gifford were held in high regard as investment trust managers, but that patience was waning with the existing portfolio management team.

Following further formal review, the Board took the decision to appoint a different portfolio management team within Baillie Gifford. As a result, since 27 March 2015 Monks has been managed by Charles Plowden, supported by Spencer Adair and Malcolm MacColl: they are all members of Baillie Gifford's 'Global Alpha' investment team, which has a well established process and strong performance record. They are all Partners at Baillie Gifford and have been working together since 2005. Charles is one of two joint senior partners.

It is important to note that the Company's investment policy and objective have not altered as a result of this change in portfolio responsibilities. The Company's goal remains long-term capital growth, by investing globally and principally in equities.

Approximately 56% of the Company's portfolio by value was reorganised following the announced changes and as at the end of the Company's year was, with some very minor exceptions, positioned as the new portfolio management team wished. Further details on the Managers' investment approach and the portfolio are set out below and on pages 3 to 11 of the Annual Report and Financial Statements.

Buybacks and Discount

During the year to 30 April 2015 £55.1m was spent buying back 13.9m shares at a discount to NAV, representing 6.1% of the shares in issue at the start of the year.

The discount (at fair value) ended the financial year at 8.6% compared to 13.0% at the prior year end. The narrowing occurred towards the end of the period and reflected the market's reaction following the change in portfolio management responsibilities announced 27 March 2015. The Board monitors the level of discount and has authorised the repurchase of shares when this will be of benefit to continuing shareholders.

Gearing

During the second half of the year the Company made use of its short term loan facilities and at the year end the Company had drawings of ¥15.5bn with National Australia Bank Limited and effective gearing, net of cash, stood at 7.2%. After offsetting bonds, the Company was ungeared to equities at its year end.

The Board and new portfolio managers have held discussions on the use of gearing and concluded that, at present, the gearing range should be 5% net cash to plus 10% invested in equities, achieved through utilising borrowings. The portfolio managers are at liberty to move freely within these parameters without the prior approval of the Board. However, as equity valuations have run hard recently, gearing is not being deployed immediately. Gearing parameters are reviewed at each Board meeting.

Outlook

Charles Plowden and his colleagues are long-term fundamental growth investors. While cognisant of the macroeconomic environment and the impact that market sentiment might have on individual stocks in the short term, it will be company fundamentals that drive longer term portfolio returns. The Board is confident that the portfolio will benefit from this approach.

The Board

Jeremy Tigue joined the Board on 30 September 2014 and was appointed Chairman of the Company's Audit Committee on 1 May 2015. He has extensive experience of the management of investment trusts and his biographical details are set out on page 17 of the Annual Report and Financial Statements. In accordance with the Company's Articles, Mr Tigue will be submitted for election at the forthcoming AGM.

AGM

I encourage shareholders to attend the Annual General Meeting, which will be held on 4 August 2015 at 11.00am at the Institute of Directors. Our portfolio managers will give a short presentation and there will be an opportunity to ask questions and to meet the managers and Directors informally.

James Ferguson

16 June 2015

The Managers' Core Investment Beliefs

We believe the following features of Monks provide a sustainable basis for adding value for shareholders.

Active Management

¾ We invest in attractive companies using a 'bottom-up' investment process. Macroeconomic forecasts are of little interest to us and do not influence the selection of stocks.

¾ High active share* provides the potential for adding value.

¾ We ignore the structure of the index - for example the location of a company's HQ and therefore its domicile are less relevant to us than where it generates sales and profits.

¾ Large swathes of the market are unattractive and of no interest to us.

¾ As index agnostic global investors we can go anywhere and only invest in the best ideas.

¾ As the portfolio is very different from the index, we expect portfolio returns to vary - sometimes substantially and often for prolonged periods.

Committed Growth Investors

¾ In the long run, share prices follow fundamentals; growth drives returns.

¾ We aim to produce a portfolio of stocks with above average growth - this in turn underpins the ability of Monks to add value.

¾ We have a differentiated approach to growth, focusing on the type of growth that we expect a company to deliver. All holdings fall into one of four growth categories - as described in the equity portfolio by growth category table below and set out on pages 6 and 7 of the Annual Report and Financial Statements.

¾ The use of these four growth categories ensures a diversity of growth drivers within a disciplined framework.

Long Term Perspective

¾ Long term holdings mean that company fundamentals are given time to drive returns.

¾ We prefer companies that are managed with a long term mindset, rather than those that prioritise the management of market expectations.

¾ We believe our approach helps us focus on what is important during the inevitable periods of underperformance.

¾ Short term portfolio results are random.

¾ As longer term shareholders we are able to have greater influence on environmental, social and governance matters.

Dedicated Team with Clear Decision-making Process

¾ Senior and experienced team drawing on the full resources of Baillie Gifford.

¾ Alignment of interests - the investment team responsible for Monks all own shares in the Company.

Portfolio Construction

¾ Stocks are held in three broad holding sizes - as described in the equity portfolio by holding size table below and set out on pages 6 and 7 of the Annual Report and Financial Statements.

¾ This allows us to back our judgement in those stocks for which we have greater conviction, and to embrace the asymmetry of returns through 'incubator' positions in higher risk/return stocks.

¾  'Asymmetry of returns': some of our smaller positions will struggle and their share prices will fall; those that are successful may rise, many fold. The latter should outweigh the former.

Low Cost

¾ Savers should not be penalised by high management fees.

¾ Low turnover and trading costs benefit shareholders.

*         Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index.

Managers' Report

As detailed in the Chairman's Statement above, responsibility for managing the portfolio was moved to Charles Plowden, supported by Spencer Adair and Malcolm MacColl, at the end of March 2015. The portfolio was subsequently realigned to reflect their favoured stocks. The report that now follows, written by the new portfolio managers, introduces their investment process and portfolio.

How We Invest

Our investment approach has three features which together underpin our ability to outperform: a differentiated, active portfolio; a diversified range of growth stocks; and a patient approach. The discipline of applying these features consistently is the key. Taking each in turn:

Active: To deliver superior returns, a portfolio must be distinctive. We select stocks purely on their fundamental attractions, unconstrained by the shackles of the index. The result is a unique, truly differentiated portfolio. At the year end some 93% of Monks equity portfolio differed from its comparative index (as measured by Active Share, which is defined above).

Growth: We choose to harness the powers of growth and long-term compounding. We believe that stock prices are ultimately driven by company fundamentals and that higher than average growth will ultimately be reflected in price outperformance. We target businesses with the ability to compound their earnings and cash flows by at least 10% per annum over a five year period - more than twice the market's long-term average. We buy these stocks when this growth is not fully reflected in their prices.

Patience: We allow compounding to do its work and accept that, in the real world, progress is rarely smooth. We hold stocks for as long as our investment cases stand and ignore short-term noise. This is reflected in low portfolio turnover; in the ten years that we have together managed global equities our average holding period has been more than five years. This has enabled long-term fundamentals to drive portfolio returns, whilst also minimising underlying trading costs.

Diversified Sources of Growth

We classify our stocks into four growth categories: Stalwarts, Rapid, Cyclical and Latent, as detailed on pages 6 and 7 of the Annual Report and Financial Statements. This structure is how we think about the portfolio on a day-to-day basis and is therefore how we will frame our reporting. We have a clear view of the inefficiencies we are exploiting within each growth category and the reasons we expect these to outperform. These provide us with a valuable means of monitoring the operating performance of our investments. Importantly, the framework also encourages diversity: you are not dependent on one flavour of growth.

We have included a short description of each growth category in the equity portfolio by growth category table below. Looking at each in a little more detail:

Growth stalwarts: These stocks have durable franchises and we expect them to deliver robust profits largely independent of the economic backdrop. Within this area we are often drawn to businesses where the competitive advantages include dominant local scale, customer loyalty and strong brands. Examples include the consumer goods business, Colgate-Palmolive, the payment processor, MasterCard, and the global lift and escalator manufacturer, Schindler. We expect our Stalwarts to produce earnings and cash flow growth of around 10% per annum over the long term. These are the types of long-duration businesses where the market fails to appreciate the benefit of compounding, as they may appear unexciting relative to more rapid or cyclical growth stocks.

Rapid growth: Stocks in this category are typically earlier stage businesses growing quickly by developing new markets, often applying innovative technologies and taking market share from incumbents. An example is Schibsted, a Norwegian media stock which is quickly diversifying away from traditional print media towards the fast growing on-line classified sector. Further examples include the financial groups AIA (Asian life insurance and savings) and HDFC (Indian mortgage lending) that operate in emerging economies and which should capitalise on rising levels of disposable consumer incomes. We set the bar high for these businesses, expecting long-term earnings growth of 15-25% per annum. Our rapid growth stocks are often examples of where our long-term perspective allows us to look beyond optically high near term valuations and to focus on the scale of the ultimate opportunity.

Cyclical growth: Stocks in this category have strong secular growth prospects, but are also subject to the influence of macroeconomic or capital cycles, and sometimes both. Here we look for businesses which are adaptable and management teams that we trust to allocate capital skilfully. Examples of holdings which have displayed these attributes over recent years include the cruise line operator, Royal Caribbean, the Taiwanese semiconductor manufacturer, TSMC, and the Swedish based bank, Svenska Handelsbanken. We expect stocks in this segment to increase their earnings by 10-15% per annum over a full business cycle. These businesses most commonly become mispriced due to the market's lack of patience and tendency to extrapolate near term trading conditions. We take advantage of this short-termism and capitalise on the myopic view of others.

Latent growth: These are stocks with often unspectacular recent operating records. The market expects them to shrink or produce very little growth, but our analysis has identified a company-specific catalyst which can allow above average growth to re-emerge. An example is CRH, a building materials supplier, which has struggled for some years against a tough economic backdrop and over supply. There appears to be little growth factored in to current market expectations. However, we are excited about structural improvements within its underlying operations driven by consolidation, most notably CRH's purchase of assets from Lafarge/Holcim. These Latent stocks reflect our time horizon and willingness to embrace change in order to exploit inefficiencies.

Portfolio Construction and Position Sizing

Careful consideration is given to the holding size of individual stocks. We utilise three broad groups of stock weightings: high conviction (c.2%), average sized (c.1%), and incubator (c.0.5%). Current examples of high conviction holdings include the Asian and developed market life insurer, Prudential, and the North American online broker, TD Ameritrade. Incubators are exciting stocks, with a broad range of potential outcomes, where we see the risk/reward skewed towards the upside. These include the Japanese online advertising and media business, CyberAgent, and the biotechnology business, Seattle Genetics. The equity portfolio segmented by these holding sizes, as described in the equity portfolio by holding size table below, can be seen on pages 6 and 7 of the Annual Report and Financial Statements.

Idea Generation and Decision Making

We harness the full strength of Baillie Gifford's c.90 analysts to generate ideas. They collectively cover all of the world's major equity markets searching for businesses with the potential to deliver superior long-term growth. Recommendations flow to us via a proven process involving a monthly meeting of the Portfolio Review Group, which comprises the three of us and a range of other analysts from across Baillie Gifford. All ideas are tested against three questions: how does the business compare globally?; where do we have insight on the stock?; and will the business bring diversity to the portfolio?. Full responsibility for decision-making rests with the three of us.

Diversification and Current Positioning

We strongly believe in the merits of managing a portfolio which is both distinct in nature and well diversified. Whilst our growth categories ensure a good degree of balance, we also consider the forward-looking risks within the portfolio through regular analysis of underlying thematic drivers. This analysis allows us to look beyond traditional parameters and to consider the real long-term risk concentrations within the portfolio. At present roughly 35% of the Company's portfolio can be classified as economically agnostic, where the primary driver of operating performance is not related to GDP growth. Many of the stocks in this area are innovative businesses creating new markets and attacking incumbent profit pools. Approximately 23% of the portfolio is likely to be a beneficiary of the continued recovery of the United States, and 14% is exposed to potential healing within the European and Japanese economies. A further 15% is thematically exposed to the long-term secular growth trends within developing markets, and Asia in particular. The remaining 13% is predominantly comprised of bonds and net liquid assets. (Further detail and explanation of the thematic exposures is detailed at the top of page 8 of the Annual Report and Financial Statements).

What Does the Future Hold?

We are excited about the stocks we have selected. We believe they offer the prospect of above average growth which should translate over time into attractive returns. This confidence comes from our understanding of their fundamentals and our patient investment approach. There will be periods when fundamentals are not reflected in shareholder returns, such as when our growth style is out of favour. However, we are confident that our process will create significant value for investors over the long term.

Charles Plowden

Spencer Adair

Malcolm MacColl

Past performance is not a guide to future performance.

Equity Portfolio by Growth Category

At 30 April 2015

Category	Company characteristics	% of total equities
Growth Stalwarts (c.10%p.a. earnings growth)	¾    Durable franchise ¾    Deliver robust profitability in most macroeconomic environments ¾    Competitive advantage includes dominant local scale, customer loyalty and strong brands	21.6
Rapid Growth (c.15% to 25% p.a. earnings growth)	¾    Early stage businesses with vast growth opportunity ¾    Innovators attacking existing profit pools or creating new markets	30.8
Cyclical Growth (c.10% to 15% p.a. earnings growth through a cycle)	¾    Subject to macroeconomic and capital cycles with significant structural growth prospects ¾    Strong management teams highly skilled at capital allocation	31.1
Latent Growth (earnings growth to accelerate over time)	¾    Company specific catalyst will drive above average earnings in future ¾    Unspectacular recent operational performance and therefore out of favour	16.5
		100.0

Equity Portfolio by Holding Size

At 30 April 2015

Category	Description	% of total equities
Highest Conviction	Holdings c.2.0% each	25.9
Average Sized	Holdings c.1.0% each	44.7
Incubator Holdings	Holdings c.0.5% each	29.4
		100.0

Total Assets by Thematic Risk Category

At 30 April 2015

Category	% of total assets
Economically Agnostic	35.3
US Re-emergence	22.5
Developing Market Growth	14.7
European and Japanese Healing	14.2
Bonds and Net Liquid Assets	10.9
Other	2.4
	100.0

List of Investments

At 30 April 2015

Name	Business	Growth category		Fair value £'000		% of total assets		Cumulative % of total assets
Naspers	Media and e-commerce	Rapid		32,233		2.8
Prudential	International financial services	Stalwart		30,194		2.6
Royal Caribbean Cruises	Cruise line operator	Cyclical		26,150		2.3
Anthem	Healthcare insurer	Stalwart		20,819		1.8
Amazon.com	Online retailer	Rapid		20,614		1.8
TSMC	Semiconductor manufacturer	Cyclical		19,830		1.7
Ryanair	Low cost airline	Rapid		17,929		1.6
TD Ameritrade	Online brokerage	Cyclical		17,849		1.6
MS&AD Insurance	Non-life insurer	Latent		16,475		1.4
AIA	Insurance	Rapid		16,339		1.4			19.0
Google	Online search engine	Rapid		15,632		1.4
Nestle	Food and beverage producer	Stalwart		15,500		1.3
Markel	Speciality insurance	Cyclical		15,221		1.3
First Republic Bank	Retail bank	Cyclical		14,547		1.3
CRH	Diversified building materials	Latent		14,050		1.2
Carmax	Sells and retails new and used cars and light trucks	Cyclical		13,692		1.2
Moody's	Credit rating agency	Stalwart		13,589		1.2
Nanoco	Quantum dot manufacturer	Rapid		13,309		1.2
EOG Resources	Natural gas explorer and producer	Cyclical		12,780		1.1
SAP	Enterprise software	Stalwart		12,734		1.1			31.3
M&T Bank	Retail and commercial bank	Cyclical		12,546		1.1
Inpex	Oil and gas producer	Latent		12,386		1.1
Schindler	Elevator and escalator manufacturer	Stalwart		12,307		1.1
Baidu	Chinese internet search engine	Rapid		12,259		1.1
Samsung Electronics	Consumer and industrial electronic equipment	Latent		12,258		1.1
Wolseley	Building materials distributor	Cyclical		12,173		1.1
MercadoLibre	Latin American e-commerce platform	Rapid		11,901		1.0
Harley-Davidson	Motorcycle manufacturer	Cyclical		11,616		1.0
eBay	Internet auction and payment	Rapid		11,600		1.0
MasterCard	Global electronic payments network	Stalwart		11,084		1.0			41.9
Svenska Handelsbanken	Retail bank	Cyclical		11,007		1.0
Visa	Global electronic payments network	Stalwart		10,983		1.0
Atlas Copco	Industrial compressors and mining equipment producer	Cyclical		10,647		0.9
Martin Marietta Materials	Cement and aggregates producer	Cyclical		10,637		0.9
American Express	Global payment and travel company	Stalwart		10,566		0.9
Fairfax Financial	Financial services holding company	Latent		10,546		0.9
Dragon Oil	Oil and gas exploration and production	Rapid		10,427		0.9
Rolls Royce	Power systems manufacturer	Cyclical		10,051		0.9
Waters	Liquid chromatography products and services	Stalwart		10,009		0.9
TripAdvisor	Online travel review platform	Rapid		9,990		0.9			51.1
Schibsted	Print and online newspapers and classifieds	Rapid		9,775		0.9
Monsanto	Agricultural biotechnology	Stalwart		9,643		0.8
Flir Systems	Infra-red technology	Latent		9,105		0.8
Sumitomo Mitsui Trust Bank	Trust bank and investment manager	Latent		8,881		0.8
SMC	Factory automation equipment producer		Cyclical		8,873	0.8
Dolby Laboratories	Audio noise reduction and encoding/compression		Latent		8,715	0.8
ICICI Bank	Banking and financial services		Rapid		8,636	0.8
IP Group	Intellectual property commercialisation		Rapid		8,631	0.8
Juridica Investments	Litigation financing		Latent		8,607	0.7
Lincoln Electric	Welding equipment manufacturer		Cyclical		8,308	0.7				59.0
Myriad Genetics	Genetic testing		Rapid		8,297	0.7
Colgate-Palmolive	Consumer goods		Stalwart		8,282	0.7
Bank of Ireland	Retail and commercial bank		Latent		8,174	0.7
Brambles	Pallet pool operator		Cyclical		7,935	0.7
Man Group	Hedge fund manager		Cyclical		7,883	0.7
THK	Linear motion systems manufacturer		Cyclical		7,781	0.7
CH Robinson Worldwide	Delivery and logistics		Cyclical		7,561	0.7
Tesla Motors	Electric cars		Rapid		7,524	0.7
Carlsberg	Brewer		Latent		7,517	0.7
Shimano	Cycling component manufacturer		Stalwart		7,462	0.6				65.9
Qualcomm	Semiconductor manufacturer and wireless    patents		Stalwart		7,413	0.6
Yandex	Internet search and other services		Rapid		7,296	0.6
Silk Invest Africa Food    Fund*	Africa-focused private equity fund		Latent		7,292	0.6
Ultra Petroleum	Oil and gas exploration and production		Latent		7,268	0.6
Teradyne	Semiconductor testing equipment manufacturer		Cyclical		7,229	0.6
Victrex	Speciality high-performance chemicals    manufacturer		Cyclical		7,183	0.6
Dia	Discount food retailer		Stalwart		7,059	0.6
Mindray Medical    International	Develops, manufactures and markets medical    devices		Rapid		6,901	0.6
Xilinx	Programmable logic semiconductors		Stalwart		6,897	0.6
Renishaw	Measurement and calibration equipment    manufacturer		Rapid		6,897	0.6				71.9
Richemont	Luxury goods designer and manufacturer		Cyclical		6,694	0.6
Olympus	Optics manufacturer		Stalwart		6,558	0.6
China Resource Enterprises	Chinese conglomerate		Latent		6,492	0.6
Shiseido	Personal and household goods		Stalwart		6,489	0.6
Jardine Matheson	Trading company		Cyclical		6,343	0.6
Deutsche Boerse	Stock exchange operator		Cyclical		6,316	0.6
Fiat Chrysler Autos	Vehicle manufacturer		Latent		6,302	0.5
DistributionNOW	Oilfield drilling equipment distributor		Cyclical		6,220	0.5
Rohm	Semiconductor manufacturer		Latent		6,217	0.5
Praxair	Industrial gas supplier		Stalwart		6,150	0.5				77.5
Volvo	Commercial vehicle manufacturer		Cyclical		6,099	0.5
Toyota Tsusho	Trading company		Latent		5,807	0.5
iRobot	Domestic robots		Rapid		5,772	0.5
Financial Engines	Investment advisory firm		Rapid		5,679	0.5
Hays	Recruitment and human resources		Cyclical		5,581	0.5
Cyberagent	Internet advertising and content		Rapid		5,566		0.5
Softbank	Telecom operator and internet investor		Rapid		5,020		0.4
Doric Nimrod Air One	Aircraft leasing		Latent		4,940		0.4
Facebook	Social networking		Rapid		4,905		0.4
Japan Exchange	Stock exchange operator		Rapid		4,904		0.4			82.1
MarketAxess	Electronic bond trading platform		Rapid		4,812		0.4
Ritchi Bros Auctioneers	Industrial equipment auctioneer		Cyclical		4,763		0.4
Zillow	US online real estate services		Rapid		4,762		0.4
Alnylam Pharmaceuticals	Biotechnology		Rapid		4,456		0.4
SK Hynix	Semiconductor manufacturer		Cyclical		4,437		0.4
Leucadia National	Holding company		Cyclical		4,295		0.4
Qiagen	Biotechnology equipment		Rapid		4,284		0.4
M3	Online medical database		Rapid		4,284		0.4
Howard Hughes	Real estate developer		Latent		4,280		0.4
BMF Bovespa	Stock exchange operator		Rapid		4,258		0.4			86.1
Seattle Genetics	Biotechnology treatments for cancer		Rapid		4,250		0.4
Coca Cola HBC	Soft drink producer and distributor		Stalwart		4,000		0.3
HDFC	Indian mortgage provider		Rapid		3,753		0.3
Tsingtao Brewery	Brewer		Stalwart		3,605		0.3
Alibaba	Online and mobile commerce		Rapid		3,541		0.3
Stratasys	3D printer manufacturer		Rapid		3,083		0.3
Aggreko	Power generation equipment rental		Cyclical		2,838		0.2
Intuitive Surgical	Surgical robots		Rapid		2,744		0.2
Altus Resource Capital	Mining investment fund		Latent		2,434		0.2
Twitter	Social network		Rapid		2,195		0.2			88.8
Ferro Alloy Resources*	Vanadium mining		Cyclical		1,949		0.2
President Energy	Oil and gas exploration and production		Cyclical		1,185		0.1
NBNK Investments	Shell company		Latent		464		-
Total Equity Investments					1,022,230		89.1			89.1
Bonds
US Treasury 0.625%   31/12/16	US sovereign debt				55,123		4.8
Athena Debt      Opportunities Fund*	Fund of asset-backed securities and other structured finance instruments				11,496		1.0
Credit Suisse 0% Swap    Rate Linked Note 2017*	Variable redemption linked to 30 year GBP swap rate				6,606		0.6
K1 Life Settlements 0%    2016*	Bond linked to life insurance policies				1,170		0.1
Total Bonds					74,395		6.5
Total Investments					1,096,625		95.6			95.6
Net Liquid Assets					50,995		4.4
Total Assets at Fair Value					1,147,620		100.0			100.0

*      Denotes an unlisted security

Related Party Transactions

The Directors' fees for the year are detailed in the Directors' Remuneration Report on page 25 of the Annual Report and Financial Statements. No Director has a contract of service with the Company. During the year no Director was interested in any contract or other matter requiring disclosure under section 412 of the Companies Act 2006.

Investment Management Fee

Details of the Investment Management Agreement are set out on page 18 of the Annual Report and Financial Statements. The annual management fee is 0.45% of the total assets less current liabilities. The management fee is levied on all assets, including any holdings in collective investment schemes (OEICs) managed by Baillie Gifford & Co; however, the class of shares in any such OEICs held by the Company does not attract a management fee. There were no such holdings during the year.

	2015 £'000		2014 £'000
Investment management fee	4,668		4,778

Principal Risks and Uncertainties

As an investment trust, the Company invests in equities and makes other investments so as to secure its investment objective of capital growth. The Company borrows money when the Board and Managers have sufficient conviction that the assets funded by borrowed monies will generate a return in excess of the cost of borrowing. In pursuing its investment objective, the Company is exposed to a variety of risks that cause short term variation in the Company's net assets and could result in either a reduction in the Company's net assets or a reduction in the profits available for dividend.

These risks are categorised here as market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Board monitors closely the Company's exposures to these risks but does so in order to reduce the likelihood of a permanent reduction in the Company's net assets rather than to minimise the short term volatility.

The risk management policies and procedures outlined in this note have not changed substantially from the previous accounting period.

Market Risk

The fair value or future cash flows of a financial instrument or other investment held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - currency risk, interest rate risk and other price risk. The Board reviews and agrees policies for managing these risks and the Company's Investment Manager both assesses the exposure to market risk when making individual investment decisions and monitors the overall level of market risk across the investment portfolio on an ongoing basis.

Details of the Company's investment portfolio are shown in note 9 of the Annual Report and Financial Statements. Details of any derivative financial instruments open at the balance sheet date are shown below.

Currency Risk

Certain of the Company's assets, liabilities and income are denominated in currencies other than sterling (the Company's functional currency and that in which it reports its results). Consequently, movements in exchange rates may affect the sterling value of those items.

The Investment Manager monitors the Company's exposure to foreign currencies and reports to the Board on a regular basis. The Investment Manager assesses the risk to the Company of the foreign currency exposure by considering the effect on the Company's net asset value and income of a movement in the rates of exchange to which the Company's assets, liabilities, income and expenses are exposed. However, the currency in which a company's share price is quoted is not necessarily the one in which it earns its profits.

The movement in exchange rates on overseas earnings may have a more significant impact upon a company's valuation than a simple translation of the currency in which the share price of the company is quoted.

Foreign currency borrowings and forward currency contracts are used periodically to limit the Company's exposure to anticipated future changes in exchange rates which might otherwise adversely affect the value of the portfolio of investments. Where appropriate, they are used also to achieve the portfolio characteristics that assist the Company in meeting its investment objectives.

Exposure to currency risk through asset allocation, which is calculated by reference to the currency in which the asset or liability is quoted, is shown below.

At 30 April 2015	Investments £'000	Cash and deposits £'000	Loans and debentures £'000	Other debtors and creditors* £'000	Net exposure £'000
US dollar	556,795	48,774	-	303	605,872
Euro	65,806	-	-	499	66,305
Japanese yen	106,703	-	(84,284)	629	23,048
Other overseas currencies	209,868	-	(84,284)	117	209,985
Total exposure to currency risk	939,172	48,774	(84,284)	1,548	905,210
Sterling	157,453	2,041	(39,745)	(1,368)	118,381
	1,096,625	50,815	(124,029)	180	1,023,591

*      Includes net non-monetary assets of £41,000.

At 30 April 2014	Investments £'000	Cash and deposits £'000	Loans and debentures £'000	Other debtors and creditors* £'000	Net exposure £'000
US dollar	368,526	36,859	-	290	405,675
Euro	134,441	-	-	226	134,667
Japanese yen	51,358	-	-	124	51,482
Other overseas currencies	180,201	733	-	(265)	180,669
Total exposure to currency risk	734,526	37,592	-	375	772,493
Sterling	239,033	4,000	(39,712)	(2,918)	200,403
	973,559	41,592	(39,712)	(2,543)	972,896

*      Includes net non-monetary assets of £31,000.

Currency Risk Sensitivity

At 30 April 2015, if sterling had strengthened by 5% in relation to all currencies, with all other variables held constant, total net assets and total return on ordinary activities would have decreased by the amounts shown below. A 5% weakening of sterling against all currencies, with all other variables held constant, would have had an equal but opposite effect on the financial statement amounts. The analysis is performed on the same basis for 2014.

	2015 £'000		2014 £'000
US dollar	30,294		20,284
Euro	3,315		6,733
Japanese yen	1,152		2,574
Other overseas currencies	10,499		9,033
	45,260		38,624

Interest Rate Risk

Interest rate movements may affect directly:

¾ the fair value of the investments in fixed interest rate securities;

¾ the level of income receivable on cash deposits;

¾ the fair value of derivative instruments linked to interest rates;

¾ the fair value of the Company's fixed-rate borrowings; and

¾ the interest payable on any variable rate borrowings which the Company may take out.

Interest rate movements may also impact upon the market value of the Company's investments other than its fixed income securities. The effect of interest rate movements upon the earnings of a company may have a significant impact upon the valuation of that company's equity. The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions and when entering borrowing agreements. The Board reviews on a regular basis the amount of investments in cash and fixed income securities and the income receivable on cash deposits, floating rate notes and other similar investments. The Company finances part of its activities through borrowings at approved levels. The amount of such borrowings and the approved levels are monitored and reviewed regularly by the Board.

Movements in interest rates, to the extent that they affect the fair value of the Company's fixed rate borrowings, may also affect the amount by which the Company's share price is at a discount or a premium to the net asset value (assuming that the Company's share price is unaffected by movements in interest rates).

The interest rate risk profile of the Company's financial assets and liabilities at 30 April is shown below.

Financial Assets

	2015			2014
	Fair value £'000	Weighted average interest rate	Weighted average period until maturity	Fair value £'000	Weighted average interest rate	Weighted average period until maturity
Fixed rate:
European bonds	-	-	-	1,954	28.8%	1 year
US bonds	55,123	0.5%	2 years	3,975	12.9%	12 years
UK swap rate linked note*	6,037	7.2%	2 years	5,825	7.2%	3 years
Floating rate:
European bonds (interest rate linked to Euro LIBOR)	-	-	-	8,047	8.2	1 year
UK swap rate linked note*	569	n/a	2 years	3,240	n/a	3 years
Fixed interest collective investment schemes:
US dollar denominated funds	12,666	0.9%	n/a	18,409	0.3%	n/a

*      This instrument comprises a zero coupon note issued by Credit Suisse and an option on sterling interest rate swaps. The zero coupon element has a redemption value of £6.25m (fair value - £6,037,000) and the redemption value of the interest rate swap element (fair value - £569,000) is based on a formula linked to thirty year sterling interest swap rates with higher amounts payable as rates rise. Prior to redemption, the value of the interest rate swap element will vary depending on several factors such as the level of swap rates and the implied volatility of interest rate swap options.

Financial Liabilities

The interest rate risk profile of the Company's bank loans and debentures (at amortised cost) and the maturity profile of the undiscounted future cash flows in respect of the Company's contractual financial liabilities at 30 April are shown below.

Interest Rate Risk Profile

	2015 £'000	2014 £'000
Floating rate - yen	84,284	-
Fixed rate - sterling	39,745	39,712
	124,029	39,712

Maturity Profile

	2015 Within 1 year £'000	2015 Between 1 And 5 years £'000	2015 More than 5 years £'000	2014 Within 1 Year £'000	2014 Between 1 And 5 years £'000	2014 More than 5 years £'000
Repayment of loans and debentures	84,284	-	40,000	-	-	40,000
Interest on loans and debentures	2,720	10,200	8,925	2,550	10,200	11,475
	87,004	10,200	48,925	2,550	10,200	51,475

Interest Rate Risk Sensitivity

An increase of 100 basis points in bond/swap yields as at 30 April 2015 would have increased total net assets and total return on ordinary activities by £6,184,000 (2014 - £10,749,000) and would have increased the net asset value per share (with borrowings at fair value) by 4.2p (2014 - 5.6p). A decrease of 100 basis points would have increased total net assets and total return on ordinary activities by £553 (2014 - decreased by £2,579,000) and would have decreased net asset value per share (with borrowings at fair value) by 1.0p (2014 - 2.0p).

Other Price Risk

Changes in market prices other than those arising from interest rate risk or currency risk may also affect the value of the Company's net assets. The Board manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant information from the Investment Manager. The Board meets regularly and at each meeting reviews investment performance, the investment portfolio and the rationale for the current investment positioning to ensure consistency with the Company's objective and investment policy.

Other Price Risk Sensitivity

A full list of the Company's investments is shown above. In addition, a geographical analysis of the portfolio, an analysis of the portfolio by broad industrial or commercial sector are contained in the Strategic Report section of the Annual Report and Financial Statements. Details of any derivative financial instruments open at the balance sheet date are shown below. 99% of the Company's net assets are invested in quoted equities (2014 - 95%). After taking into account the impact of any equity index options open at the balance sheet date, a 5% increase in quoted equity valuations at 30 April 2015 would have increased total assets and total return on ordinary activities by £50,649,000 (2014 - £45,824,000). A decrease of 5% would have had an equal but opposite effect.

Liquidity Risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not significant as the majority of the Company's assets are investments in quoted securities that are readily realisable. The Board also sets parameters for the degree to which the Company's net assets are invested in quoted equities. The Company has the power to take out borrowings, which give it access to additional funding when required. The Company's current borrowing facilities are detailed below and the maturity profile of its borrowings is set out above.

Borrowings falling due within one year:

	2015 £'000	2014 £'000
National Australia Bank Limited floating rate loan	84,284	-

Borrowing facilities

At 30 April 2015 the Company had a 1 year ¥18,500 million floating rate loan facility with National Australia Bank Limited and an uncommitted 1 year £40 million floating rate loan facility with The Bank of New York Mellon.

At 30 April 2015 drawings were as follows:

¾ National Australia Bank Limited: ¥15,500 million at an interest rate of 0.71918% (2014 - nil)

¾ The Bank of New York Mellon: nil (2014 - nil)

The main covenants relating to the above loans are that total borrowings shall not exceed 30% of the Company's adjusted net asset value and the Company's minimum adjusted net asset value shall be £450 million.

There were no breaches of loan covenants during the year.

Borrowings falling due after more than one year:

	Repayment date	Nominal rate	Effective rate	2015 £'000	2014 £'000
£40 million 6 3/8% debenture stock 2023	1/9/2023	6.375%	6.5%	39,745	39,712

Debenture Stock

The debenture stock is stated at amortised cost (see note 1 on page 35 of the Annual Report and Financial Statements); the cumulative effect is to decrease the carrying amount of borrowings by £255,000 (2014 - £288,000). The debenture stock is secured by a floating charge over the assets of the Company. Under the terms of the Debenture Agreement, total borrowings should not exceed net assets and the Company cannot undertake share buy-backs if this would result in total borrowings exceeding 66.67%.

Credit Risk

This is the risk that a failure of a counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss. This risk is managed as follows:

¾ where the Investment Manager makes an investment in a bond or other security with credit risk, that credit risk is assessed and then compared to the prospective investment return of the security in question;

¾ the Depositary is liable for the loss of financial instruments held in custody. The Depositary will ensure that any delegate segregates the assets of the Company. The Depositary has delegated the custody function to Bank of New York Mellon SA/NV London Branch. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed. The Investment Manager monitors the Company's risk by reviewing the custodian's internal control reports and reporting their findings to the Board;

¾ investment transactions are carried out with a large number of brokers whose creditworthiness is reviewed by the Investment Manager. Transactions are ordinarily done on a delivery versus payment basis whereby the Company's custodian bank ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations before any transfer of cash or securities away from the Company is completed;

¾ the creditworthiness of the counterparty to transactions involving derivatives, structured notes and other arrangements, wherein the creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained interest, are subject to rigorous assessment by the Investment Manager; and

¾ cash is only held at banks that have been identified by the Managers as reputable and of high credit quality.

Credit Risk Exposure

The amount that best represents the Company's maximum exposure to direct credit risk at 30 April was:

	2015 £'000	2014 £'000
Fixed interest investments	74,395	41,450
Cash and short term deposits	50,815	41,592
Debtors and prepayments*	2,032	2,139
	127,242	85,181

*      Includes non-monetary assets of £41,000 (2014 - £31,000).

None of the Company's financial assets are past due or impaired.

Fair value of financial assets and financial liabilities

The Directors are of the opinion that there is no difference between the amounts at which the financial assets and liabilities of the Company are carried in the balance sheet and their fair values, with the exception of fixed rate borrowings. The fair values of the Company's borrowings are shown below.

	2015			2014
	Nominal value £'000	Book value £'000	Fair value £'000	Nominal value £'000	Book value £'000	Fair value £'000
Bank loans due within one year	84,284	84,284	84,284	-	-	-
6 3/8% debenture stock 2023*	40,000	39,745	44,800	40,000	39,712	43,600
	124,284	124,029	129,084	40,000	39,712	43,600

*      Financial liabilities stated in the balance sheet at amortised cost (book value).

Gains and Losses on Purchased Equity Index Options

There were no purchased equity index options in position at 30 April 2015. The following purchased equity index options were in position at 30 April 2014:

At 30 April 2014 Description	Number of contracts	Strike price	Expiration date	Premium paid  £'000	Fair value £'000
Hang Seng China Enterprises put	500	8,400	29/6/15	1,394	976

Hedge accounting has not been adopted for the Company's derivative holdings.

Capital Management

The capital of the Company is its share capital and reserves as set out in note 14 of the Annual Report and Financial Statements together with its borrowings (see above). The objective of the Company is to invest globally to achieve capital growth, which takes priority over income and dividends. The Company's investment policy is set out on page 15 of the Annual Report and Financial Statements. In pursuit of the Company's objective, the Board has a responsibility for ensuring the Company's ability to continue as a going concern and details of the related risks and how they are managed are set out on page 22 of the Annual Report and Financial Statements. The Company has the ability to buy back its shares (see page 19 of the Annual Report and Financial Statements) and changes to the share capital during the year are set out in note 13 of the Annual Report and Financial Statements. The Company does not have any externally imposed capital requirements other than the covenants on its loans and debentures which are detailed above.

Investments

As at 30 April 2015	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Listed equities	1,012,525	464	-	1,012,989
Listed debt securities	55,123	-	-	55,123
Other unlisted equities	-	-	9,241	9,241
Unlisted debt securities	-	-	19,272	19,272
Total financial asset investments	1,067,648	464	28,513	1,096,625

As at 30 April 2014	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Listed equities	912,744	449	-	913,193
Listed equity index options	976	-	-	976
Listed debt securities	3,975	1,954	-	5,929
Unlisted equities quoted on an   investment exchange	-	9,121	-	9,121
Other unlisted equities	-	-	8,819	8,819
Unlisted debt securities	-	-	35,521	35,521
Total financial asset investments	917,695	11,524	44,340	973,559

Investments in securities are financial assets designated at fair value through profit or loss on initial recognition. In accordance with FRS 29 'Financial Instruments: Disclosures', the above tables provide an analysis of these investments based on the fair value hierarchy described below, which reflects the reliability and significance of the information used to measure their fair value.

Fair Value Hierarchy

The fair value hierarchy used to analyse the fair values of financial assets is described below. The levels are determined by the lowest (that is the least reliable or least independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows:

Level 1 - investments with quoted prices in an active market;

Level 2 - investments whose fair value is based directly on observable current market prices or is indirectly being

               derived from market prices; and

Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not

   supported by observable current market prices or are not based on observable market data.

Other Risks

Other risks faced by the Company include the following:

Regulatory Risk

Failure to comply with applicable legal and regulatory requirements such as the tax rules for investment companies, the UKLA Listing Rules and the Companies Act could lead to the Company being subject to tax on capital gains, suspension of the Company's Stock Exchange Listing, financial penalties or a qualified audit report. 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.

Operational Risk

Failure of the Baillie Gifford's accounting 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. Baillie Gifford have a comprehensive business continuity plan which facilitates continued operation of the business in the event of a service disruption or major disaster. The Board reviews the Baillie Gifford's Report on Internal Controls and the reports by other third party providers are reviewed by Baillie Gifford on behalf of the Board.

Discount Volatility

The discount at which the Company's shares trade can widen. The Board monitors the level of discount and the Company has authority to buy back its own shares.

Leverage Risk

The Company may borrow money for investment purposes. 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.

All borrowings require the prior approval of the Board and leverage levels are discussed by the Board and Managers at every meeting. The majority of the Company's investments are in quoted securities that are readily realisable.

Statement of Directors' Responsibilities in Respect of the Annual Report and Financial Statements

The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

¾ select suitable accounting policies and then apply them consistently;

¾ make judgements and accounting estimates that are reasonable and prudent;

¾ state whether applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

¾ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors have delegated responsibility to the Managers for the maintenance and integrity of the Company's page on the Managers' website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed within the Directors and Management section of the Annual Report and Financial Statements, confirm that, to the best of their knowledge:

¾ the financial statements, which have been prepared in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) give a true and fair view of the assets, liabilities, financial position and net return of the Company;

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 performance, business model and strategy; and

¾ the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

On behalf of the Board

JGD Ferguson

Chairman

16 June 2015

Income statement

	For the year ended 30 April 2015			For the year ended 30 April 2014
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on investments	-	99,275	99,275	-	31,448	31,448
Currency gains/(losses)	-	4,892	4,892	-	(2,799)	(2,799)
Income	20,215	-	20,215	21,585	-	21,585
Investment management fee	(4,668)	-	(4,668)	(4,778)	-	(4,778)
Other administrative expenses	(1,087)	-	(1,087)	(903)	-	(903)
Net return before finance costs and taxation	14,460	104,167	118,627	15,904	28,649	44,553
Finance costs of borrowings	(2,846)	-	(2,846)	(3,783)	-	(3,783)
Net return on ordinary activities before taxation	11,614	104,167	115,781	12,121	28,649	40,770
Tax on ordinary activities	(1,065)	-	(1,065)	(940)	-	(940)
Net return on ordinary activities after taxation	10,549	104,167	114,716	11,181	28,649	39,830
Net return per ordinary share (note 2)	4.74p	46.84p	51.58p	4.87p	12.49p	17.36p
Note: Dividends per share paid and payable in respect of the year (note 3)	3.95p			3.95p

The total column of this statement represents the profit and loss account of the Company.

All revenue and capital items in this statement derive from continuing operations.

A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.

Balance sheet

	At 30 April 2015 £'000	At 30 April 2014 £'000
Fixed assets
Investments held at fair value through profit or loss	1,096,625	973,559
Current assets
Debtors	2,032	2,139
Cash and deposits	50,815	41,592
	52,847	43,731
Creditors
Amounts falling due within one year (note 4)	(86,136)	(4,682)
Net current (liabilities)/assets	(33,289)	39,049
Total assets less current liabilities	1,063,336	1,012,608
Creditors
Amounts falling due after more than one year (note 4)	(39,745)	(39,712)
Net assets	1,023,591	972,896
Capital and reserves
Called up share capital	10,698	11,394
Share premium	11,100	11,100
Capital redemption reserve	8,700	8,004
Capital reserve	943,958	894,882
Revenue reserve	49,135	47,516
Shareholders' funds	1,023,591	972,896
Net asset value per ordinary share (after deducting borrowings at fair value)	476.0p	425.2p
Net asset value per ordinary share (after deducting borrowings at par)	478.3p	426.8p
Ordinary shares in issue (note 5)	213,963,859	227,887,859

Reconciliation of movements in shareholders' funds

For the year ended 30 April 2015

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 May 2014	11,394	11,100	8,004	894,882	47,516	972,896
Net return on ordinary activities after taxation	-	-	-	104,167	10,549	114,716
Shares purchased for cancellation (note 5)	(696)	-	696	(55,091)	-	(55,091)
Dividends paid during the year (note 3)	-	-	-	-	(8,930)	(8,930)
Shareholders' funds at 30 April 2015	10,698	11,100	8,700	943,958	49,135	1,023,591

For the year ended 30 April 2014

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 May 2013	12,017	11,100	7,381	910,342	45,387	986,227
Net return on ordinary activities after taxation	-	-	-	28,649	11,181	39,830
Shares purchased for cancellation	(623)	-	623	(44,109)	-	(44,109)
Dividends paid during the year (note 3)	-	-	-	-	(9,052)	(9,052)
Shareholders' funds at 30 April 2014	11,394	11,100	8,004	894,882	47,516	972,896

Condensed cash flow statement

	Year ended 30 April 2015		Year ended 30 April 2014
	£'000	£'000	£'000	£'000
Net cash inflow from operating activities		13,454		15,903
Servicing of finance
Interest paid	(2,809)		(3,743)
Net cash outflow from servicing of finance		(2,809)		(3,743)
Taxation
Overseas tax incurred	(987)		(955)
Total tax paid		(987)		(955)
Financial investment
Acquisitions of investments	(956,481)		(280,577)
Disposals of investments	930,889		375,942
Net cash (outflow)/inflow from financial investment		(25,592)		95,365
Equity dividends paid		(8,930)		(9,052)
Net cash (outflow)/inflow before financing		(24,864)		97,518
Financing
Shares purchased for cancellation	(55,089)		(51,718)
Borrowings drawn down/(repaid)	84,382		(40,000)
Net cash inflow/(outflow) from financing		29,293		(91,718)
Increase in cash		4,429		5,800
Reconciliation of net cash flow to movement in net (debt)/funds
Increase in cash in the year		4,429		5,800
Translation difference		4,892		(2,799)
Net cash (inflow)/outflow from borrowings (drawn down)/repaid		(84,382)		40,000
Other non-cash changes		(33)		(33)
Movement in net (debt)/funds in the year		(75,094)		42,968
Net funds/(debt) at 1 May		1,880		(41,088)
Net (debt)/funds at 30 April		(73,214)		1,880
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation		118,627		44,553
Gains on investments		(99,275)		(31,448)
Currency (gains)/losses		(4,892)		2,799
Amortisation of fixed interest book cost		(444)		(974)
(Increase)/decrease in accrued income		(309)		574
Increase in debtors		(373)		(78)
Increase in creditors		120		477
Net cash inflow from operating activities		13,454		15,903

Notes to the condensed financial statements

1.	The financial statements for the year to 30 April 2015 have been prepared on the basis of the same accounting policies set out in the Company's Annual Financial Statements at 30 April 2014.
2.	Net Return per Ordinary Share		2015				2014
	Revenue return		4.74p				4.87p
	Capital return		46.84p				12.49p
	Total return		51.58p				17.36p
	Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation of £10,549,000 (2014 - £11,181,000) and on 222,374,615 (2014 - 229,470,589) ordinary shares of 5p, being the weighted average number of ordinary shares in issue during the year. Capital return per ordinary share is based on the net capital gain for the financial year of £104,167,000 (2014 - £28,649,000) and on 222,374,615 (2014 - 229,470,589) ordinary shares, being the weighted average number of ordinary shares in issue during the year. There are no dilutive or potentially dilutive shares in issue.
3.	Ordinary Dividends			2015	2014			2015 £'000	2014 £'000
	Amounts recognised as distributions in the year:
	Previous year's final (paid 8 August 2014)			3.45p	3.45p			7,824	7,911
	Interim (paid 30 January 2015)			0.50p	0.50p			1,106	1,141
				3.95p	3.95p			8,930	9,052
	We also set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £10,549,000 (2014 - £11,181,000).
		Ordinary Dividends		2015	2014			2015 £'000	2014 £'000
		Amounts paid and payable in respect of the financial year:
		Adjustment to previous year's final dividend re shares bought back		-	-			(38)	(380)
		Interim (paid 30 January 2015)		0.50p	0.50p			1,106	1,141
		Proposed final (payable 7 August 2015)		3.45p	3.45p			7,382	7,862
				3.95p	3.95p			8,450	8,623
		If approved the recommended final dividend will be paid on 7 August 2015 to shareholders on the register at the close of business on 10 July 2015. The ex-dividend date is 9 July 2015. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for elections for this dividend is 17 July 2015.

Notes to the condensed financial statements (ctd)

4.	At 30 April 2015 the book value of the Company's borrowings amounted to £124m (2014 - £40m), comprising a £40m      6 3/8% debenture stock repayable in 2023 (2014 - £40m) and a short-term bank loan of ¥15.5bn (2014 - nil).  The fair value of borrowings at 30 April 2015 was £129m (2014 - £44m).
5.	In the year to 30 April 2015 the Company bought back 13,924,000 ordinary shares with a nominal value of £696,000 at a total cost of £55,091,000. At 30 April 2015 the Company had authority to buy back a further 21,894,085 ordinary shares, being 10.2% of the shares in issue at the year end.
6.	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

‡      Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

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