Annual Financial Report

RNS Number : 2362O

Securities Trust of Scotland PLC

26 May 2015

 



Securities Trust of Scotland plc (the "company")

Annual Financial Results

Year to 31 March 2015

The financial information set out below does not constitute the company's statutory accounts for the financial year ended 31 March 2015 or financial year ended 31 March 2014 but is derived from those accounts.  Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the company's annual general meeting. 

The auditor's have reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

A copy of the annual report and accounts has also been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do

The annual general meeting of the company will be held at 12.30pm on 31 July 2015, at Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2ES. Full notice of the meeting can be found within the annual report and accounts.

The unedited full text of those parts of the annual report and accounts for the year ended 31 March 2015, which are required to be published are set out on the following pages.

Financial Summary

Key data	As at 31 March 2015	As at 31 March 2014	% change
Net asset value per share (cum income)	152.93p	141.60p	8.0
Net asset value per share (ex income)	151.25p	140.40p	7.7
Share price	144.25p	144.75p	(0.4)
MSCI World High Dividend Yield index	725.63	665.22	9.1
Discount  / (Premium)	5.68%	(2.22%)
Average discount /(premium) *	5.49%	(2.85%)

Total returns ‡ (including reinvested dividends)
	Year ended 31 March 2015	Year ended 31 March 2014
Net asset value per share	12.5%	3.3%
Share price	3.1%	2.2%
Benchmark**	13.4%	5.8%

Income
	Year ended 31 March 2015	Year ended 31 March 2014	% change
Revenue return per share	5.11p	4.72p	8.3
Dividend per share	4.90p	4.80p	2.1

Ongoing charges^
	Year ended 31 March 2015	Year ended 31 March 2014
Ongoing charges	1.0%	1.0%

*           Average discount / (premium) over 12 week period to 31 March (based on capital only net asset value).

‡          The combined effect of any dividend paid, together with the rise or fall in the share price, net asset or benchmark.  † MSCI World High Dividend Yield index.

**          MSCI World High Dividend Yield Index

^{^}               Ongoing charges (as a percentage of shareholders' funds) are calculated using average net assets over the year. The ongoing charges figure has been calculated in line with the AIC's recommended methodology.

Chairman's Statement

Welcome to the annual report and accounts for the financial year ending 31 March 2015.  A positive return has been generated over the period and the net asset value ('NAV') increased 12.5% on a total return basis, marginally below the benchmark that delivered 13.4%. 

Over the year, many of the company's peers in the Association of Investment Companies ('AIC') sector have seen discounts widen and your company was not immune to this.  Although the share price increased 3.1% on a total return basis, the company moved from a premium at the start of the period to trade on a discount of 5.7% at the end.  This triggered a small number of share buy backs, representing less than 1.1% of the shares in issue, through the year.

However, 12 month performance only tells part of the story, and the company has generated a share price total return over five years that continues to be one of the highest in the AIC Global Equity Income sector at 75.1%.

Revenues and dividends

The board believes that the company should now use its authority to distribute some capital profit by way of dividend if so required and use the flexibility allowed by the investment trust structure to enhance the dividend.   As a result of this change of approach, the board has declared a fourth interim dividend of 1.45p, making a total of 4.90p over the year.  The dividend will be paid on 26 June 2015 to shareholders on the register at 5 June 2015.  The board intends to declare three equal interim dividends of 1.45p per share and a fourth interim dividend of at least 1.45p per share for the year end 31 March 2016. The aim is that the annual dividend will be progressive thereafter, in line with the company's investment objective of delivering rising income as well as long-term capital growth.

Payment of dividends from total returns rather than just income will not change the manager's investment philosophy and process. Portfolio yield remains at the core of that process, but it will no longer be the only factor generating a desired dividend. At the margin, this will allow the manager a little more flexibility on stock selection timing over the year.

Based on the company's share price of 141.5p as at 20 May 2015 (the most recent practicable date), the yield on the share price for the year to 31 March 2016 would be 4.1%.

Borrowing

Taking advantage of low interest rates, the loan facility was increased from £10 million to £17 million during the year and is for two years. The facility has been fully utilised through the year.  This strategy has proven successful and has contributed to an enhanced return.

Investment manager

The board fully supports the global remit of the company and believes that this allows the manager to select the best stocks from around the world, unencumbered by geographical constraints.  Martin Currie has a well resourced global active equity research team and income is one of the three central pillars of the investment product proposition.  The investment manager is planning to add to the number of income specialists and the board fully welcomes that commitment and looks forward to this extra capability driving future returns for shareholders. 

As mentioned in the interim report, Martin Currie is now an independently managed investment affiliate of Legg Mason (one of the world's largest asset management groups) and becomes the flagship international active equity business within the Legg Mason Group. The board is delighted that the new owner is strongly supportive of Martin Currie's investment trust business and welcomes the potential access to a wider distribution platform.

Under the Alternative Investment Fund Managers Directive ('AIFMD') the company was required to appoint an external depositary and an external AIFM who is supervised by the Financial Conduct Authority.  As disclosed in the interim report, the company appointed Martin Currie Fund Management Limited on 22 July 2014 as its AIFM, an associated company of Martin Currie Investment Management Limited. No changes are proposed to the way the company's assets are invested as a result of AIFMD.  References to Martin Currie or investment manager within this report refer to the services provided by Martin Currie Investment Management Limited or Martin Currie Fund Management Limited.

Board

On 1 October 2014, Mark Little was appointed to the board as a non-executive director.  Mark is well experienced in financial markets, having previously served as Managing Director of Barclays Wealth Scotland and Northern Ireland.  Prior to this he was global head of automotive research at Deutsche Bank.

Edward Murray will be retiring with effect from the conclusion of the annual general meeting ('AGM'), having served on the board since inception in 2005.  Edward will not immediately be replaced on the board and so the number of directors will reduce to five.  The board would like to thank Edward for his outstanding contribution to the board.  Mark will replace Edward as chairman of the audit committee.    

Keeping in touch

I would like to thank you again for your continued support. As ever, please feel free to contact me if you have any questions regarding your company. Contact details can be found at the back of this report.

I encourage you to visit the company's website at www.securitiestrust.com which is a comprehensive source of detailed information.  You can register for regular email updates that will keep you informed and provide useful information on the company. 

Neil Donaldson

26 May 2015

Manager's Review

Market review

Global equity markets performed well in fiscal year 2015. The MSCI World High Dividend Yield index, our benchmark, was up around 13%. This compares with an increase of around 20% for the broad MSCI World Index and a rise of around 7% for the FTSE All-Share index (all returns in sterling terms). The strongest regions were North America and Japan, and the weakest was Europe. In sector terms, healthcare and technology led the field, while energy and materials brought up the rear.

The end of our fiscal year marks the passing of the sixth anniversary of the current global equity bull market, which has seen global equities increase by over 180%. Once again, there was plenty of macroeconomic and geopolitical noise throughout the year.

Inflation remains low in much of the world, causing some concern among central bankers. The European Central Bank launched a €1.1 trillion asset buying programme aimed at raising inflation. The Bank of Japan has adopted a 2% inflation target and launched a huge programme of bond purchases as Abenomics attempts to deliver price rises. Janet Yellen, the chairwoman of the US Federal Reserve, recently said that US interest rate rises are likely to happen only at a gradual pace, and commented that she would be uncomfortable about increases if core consumer prices or other inflation indicators were to weaken, or if inflation expectations were to drop further.

Currencies have remained volatile throughout the last year. The first quarter of 2015 was particularly active, with a surge in demand for the dollar, the start of quantitative easing in the eurozone and the Swiss Central Bank's dramatic abandonment of the franc's peg to the euro. Against sterling, the dollar has strengthened by around 10% and the euro has weakened by around 14% over the last 12 months. This has boosted the returns and income from our US holdings and had the opposite effect on our European ones. It has also had an impact on many of those that are global in nature and are therefore subject to such currency swings.

The oil price has been the key commodity feature of the year, with Brent crude reaching a 12-month high of around US$115 per barrel in June 2014 before collapsing to less than US$50 per barrel in January 2015. A lower oil price is seen as good for consumer spending as people have more cash in their pockets. The International Monetary Fund ('IMF'), however, believes that this is largely offset by the broader decline in commodities, which has created more uncertainty for corporate capital expenditure.

In geopolitical news, the Russia-Ukraine conflict, the rise of ISIS, the Iran nuclear talks, the Syria crisis and tensions in Yemen are just some of the issues dominating headlines and causing uncertainty for investors.

We try to ensure that our portfolio is insulated as much as possible from macro-factor risk by building a diversified stock-focused portfolio. This does not mean the portfolio is risk-free, but that the risks are stock-driven. This approach is well suited to the current volatile macroeconomic and geopolitical environment.

Portfolio review

Performance

We marginally underperformed our benchmark for the full year. Our North American and UK holdings performed well, but this was not enough to offset our European (ex UK) and Asian performance. In sector terms, weak performances in healthcare and consumer discretionary had the biggest impact.

Our best performing stock was Kraft Foods Group; 3G Capital, Warren Buffett's Berkshire Hathaway Inc., and their Heinz food business announced a merger with Kraft Foods Group in March 2015. The stock rose strongly in response, reflecting approval of the special dividend Heinz will pay on the closure of the deal, and the earnings power of the new joint entity - which will be a 49:51 ownership split between Kraft and Heinz. Our investment case on Kraft was based on a strong set of assets that could be made more relevant and enjoy a lower cost base - the new owners are likely to realise this potential. This merger is particularly pleasing for us as we also owned Heinz prior to its acquisition by 3G Capital and Buffett in 2013. Kinder Morgan, the US energy infrastructure company, was also one of our top performers. Kinder has benefited from executing on its simple strategy of focusing on stable, fee-based assets that are core to North American energy infrastructure, controlling costs and maintaining a strong balance sheet. In addition, the company altered its structure last year which lowered its cost of capital, allowing it to pursue more investment opportunities as well as offering greater dividend growth and visibility.

Our weakest performer was SJM Holdings, the Macau gaming operator. Gaming revenues have been under pressure over several quarters, driven by a weak Chinese macro economy and a changing political climate in China. This has somewhat compromised our investment case which was based on growing revenues. However, we believe that revenues will begin to grow again in the second half of 2015 as they undergo a cyclical rebound. This should put our investment case for SJM Holdings back on track. Swedish media entertainment company Modern Times Group was another poor performer for us last year as a consequence of the Russia-Ukraine conflict. It has impacted both its business in that region as well as its ownership of a Russian media company. We felt that there was no way to predict the outcome of the crisis, so we sold the position.

Activity

Key purchases in the year included Givaudan and Caterpillar.

Givaudan is a global fragrance and flavours company. Our investment case rests on several short-term factors: a switch of some production from Switzerland to Hungary, and operational leverage guidance on which there is no consensus. The most important longer-term factor is dividends. Givaudan has a policy of paying out above 60% of its free cashflow while maintaining a leverage ratio below 25%. At the end of 2013, the leverage ratio was 18% and in March 2014 it paid out a dividend that was just over 50% of its 2013 cashflow. This means that Givaudan has a large margin of safety around its dividend both in terms of free cashflow generation and a balance sheet that is rapidly approaching a net cash position. Consequently, we believe that strong growth (of at least a high single-digit percentage) in the dividend is likely over the next few years, continuing a trend of 13 consecutive annual dividend increases since it was initiated.

Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural-gas engines, industrial-gas turbines and diesel-electric locomotives. It has a large margin of safety around its dividend, given that it is covered approximately 3.0x by free cashflow, and corporate net debt is only around one-third of annual earnings before interest, taxes, depreciation and amortization ('EBITDA'); this is why Caterpillar can afford large buybacks.  Our investment case rests on a couple of short-term factors: a switch of some production from Switzerland and the benefits of operational leverage, neither of which appear to be in consensus estimates.  In spite of the current weak commodity environment, we believe we are close to seeing an acceleration in this demand.

Key sales in the year included Modern Times Group and AbbVie.

Modern Times Group's emerging markets strategy was derailed in the first instance by the Russia/Ukraine conflict and in the second, by the Russian media regulator who changed the rules on foreign ownership of Russian media companies. This has compromised our investment thesis and has taken away our margin of safety around dividend growth.

AbbVie, the US pharmaceutical company, became a much higher-risk investment given the biosimilar (biological copies of original drugs) risk to its key drug Humira, the near-term battle for market share in the hepatitis-C market and the company's recently announced US$21 billion purchase of Pharmacyclics.

Outlook

Six years into the current bull market, the key positive supports to equity markets remain the relative yield attractions of equities versus other asset classes, and the anecdotal evidence that global fund managers lack conviction and hold high levels of cash. What is clear is that there is a lot of margin of safety around dividends but little around valuations in global equity markets in aggregate. Finding positive insight at the individual stock level is increasingly difficult, which is to be expected at this point of the stockmarket cycle. However, we continue to believe that a diversified portfolio of companies, combining attractive dividend yields and the potential for dividend growth, will stand us in good stead.

Alan Porter

26 May 2015

Portfolio Summary

Portfolio distribution as at 31 March

By region (excluding cash)	2015 %	2014 %
Developed Europe	47.5	52.2
North America	43.2	37.8
Developed Asia Pacific ex Japan	3.7	6.0
Japan	3.0	2.5
Global emerging markets	2.6	1.5
	100.0	100.0

By sector (excluding cash)	2015 %	2014 %
Consumer goods	16	17
Healthcare	15	20
Financials	15	14
Consumer services	14	9
Oil & gas	11	14
Industrials	9	6
Telecommunications	7	9
Basic materials	7	5
Utilities	5	4
Technology	1	2
	100	100

By asset class (including cash and borrowings)	2015 %	2014 %
Equities	109	106
Less borrowings	(9)	(6)
	100	100

Largest 10 holdings
	31 March 2015 Market value £000	31 March 2015 % of total portfolio	31 March 2014 Market value £000	31 March 2014 % of total portfolio
Chevron	8,977	4.5	8,052	4.5
Total	6,819	3.4	7,659	4.3
British American Tobacco	6,774	3.4	5,764	3.2
Verizon Communications	6,768	3.4	-	-
Kraft Foods Group	6,603	3.3	4,099	2.3
Novartis	6,555	3.3	-	-
McDonald's	6,492	3.3	4,779	2.7
Pfizer	6,458	3.3	9,957	5.6
Kinder Morgan	5,951	3.0	3,297	1.8
Roche Holdings	5,772	2.9	10,977	6.1

Portfolio Holdings

	Sector	Country	Market value £	% of total portfolio
Developed Europe			94,394,914	47.51
Total	Oil & Gas	France	6,818,563	3.43
British American Tobacco	Consumer Goods	UK	6,773,795	3.41
Novartis	Healthcare	Switzerland	6,555,076	3.30
Roche Holdings	Healthcare	Switzerland	5,772,189	2.91
BHP Billiton	Basic Materials	UK	5,108,698	2.57
Givaudan	Basic Materials	Switzerland	4,440,756	2.23
SSE	Utilities	UK	4,435,308	2.23
Eutelsat Communications	Consumer Services	France	4,091,341	2.06
BASF	Basic Materials	Germany	4,036,309	2.03
Allianz	Financials	Germany	3,828,552	1.93
Meggitt	Industrials	UK	3,806,315	1.92
Sanofi	Healthcare	France	3,769,601	1.90
Direct Line Insurance	Financials	UK	3,722,325	1.87
TeliaSonera	Telecommunications	Sweden	3,638,330	1.83
Inmarsat	Telecommunications	UK	3,623,379	1.82
Hugo Boss	Consumer Goods	Germany	3,610,935	1.82

HSBC Holdings	Financials	UK	3,401,391	1.71
Prosieben	Consumer Services	Germany	3,316,731	1.67
SKY	Consumer Services	UK	3,229,216	1.63
Kingfisher	Consumer Services	UK	3,084,146	1.55
Prudential	Financials	UK	2,678,327	1.35
SCOR	Financials	France	2,419,693	1.22
Schneider Electric	Industrials	France	2,233,938	1.12

North America			85,846,478	43.20
Chevron	Oil & Gas	United States	8,976,598	4.52
Verizon Communications	Telecommunications	United States	6,767,902	3.41
Kraft Foods Group	Consumer Goods	United States	6,602,639	3.32
McDonald's	Consumer Services	United States	6,491,986	3.27
Pfizer	Healthcare	United States	6,458,332	3.25
Kinder Morgan	Oil & Gas	United States	5,951,297	2.99
Phillip Morris International	Consumer Goods	United States	5,726,752	2.88
Procter & Gamble	Consumer Goods	United States	5,476,879	2.76
Waste Management	Industrials	United States	4,851,289	2.44
Sempra Energy	Utilities	United States	4,713,475	2.37
Paychex	Industrials	United States	4,611,772	2.32
Merck & Co	Healthcare	United States	4,538,783	2.28
Bank Of Montreal	Financials	Canada	4,272,340	2.15
Crown Castle International	Financials	United States	3,771,586	1.90
Johnson & Johnson	Healthcare	United States	3,476,095	1.75
Caterpillar	Industrials	United States	3,158,753	1.59

Developed Asia Pacific ex Japan			7,415,226	3.73
United Overseas Bank	Financials	Singapore	2,883,502	1.45
Woolworths	Consumer Services	Australia	2,870,763	1.44
SJM Holdings	Consumer Services	Hong Kong	1,660,961	0.84

Japan			5,923,052	2.98
Nissan Motor	Consumer Goods	Japan	2,988,156	1.50
Lawson	Consumer Services	Japan	2,934,896	1.48

Global emerging markets			5,129,620	2.58
Fibra Uno	Financials	Mexico	2,863,292	1.44
Intouch Holdings	Technology	Thailand	2,266,328	1.14

Total portfolio

198,709,290

100.00

Principal risks and uncertainties

Risk and mitigation

The company's business model is longstanding and resilient to most of the short term uncertainties that it faces, which the board believes are effectively mitigated by its internal controls and the oversight of the investment manager, as described below. The principal risks and uncertainties are therefore largely longer term and driven by the inherent uncertainties of investing in global equity markets. The board believes that it is able to respond to these longer term risks and uncertainties with effective mitigation so that both the potential impact and the likelihood of these seriously affecting shareholders' interests are materially reduced.

Risks are regularly monitored at board meetings and the board's planned mitigation measures are described below. The board maintains a risk register and also carries out a risk workshop as part of its annual strategy meeting. The board has identified the following principal risks to the company:

Loss of S1158-9 tax status - Loss of S1158-9 tax status would have serious consequences for the attractiveness of the company's shares. The board considers that, given the regular oversight of this risk carried out by the investment manager and reviewed by the board, the likelihood of this risk occurring is minimal.

Long-term investment underperformance - The board manages the risk of investment underperformance by relying on good manager stock selection skills within a framework of diversification and other investment restrictions and guidelines.

The board monitors the implementation and results of the investment process with the manager (who attends all board meetings) and reviews data that shows statistical measures of the company's risk profile.

Market, financial and interest rate risk - A significant proportion of the company's investment portfolio is invested in overseas securities and the balance sheet can be significantly affected by movements in foreign exchange rates. It is not the company's policy to hedge this risk on a continuing basis but the company may, from time to time, match specific overseas investment with foreign currency borrowings.

As a consequence of investing in overseas securities the revenue account is subject to currency fluctuation arising on overseas income.

In order to retain its place in the FTSE All-Share, the company must satisfy the liquidity test criteria set by the FTSE at each annual review.

The liquidity of the company is monitored by the board, the investment manager and the company's broker with a report being reviewed at every board meeting. The board regularly discusses ways to improve the liquidity position of the company.

Statement of directors' responsibilities

The directors are responsible for preparing the annual 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 elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law). The financial statements are required by law to 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 year. In preparing these financial statements, the directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable and prudent;

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

·      prepare the financial statements on the going concern basis unless it is inappropriate to assume that the company will continue in business.

The directors are responsible for keeping proper accounting records that are sufficient to disclose the company's transactions and that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements 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.

The financial statements are published on the www.securitiestrust.com website, which is maintained by the investment manager. The maintenance and integrity of the website maintained by Martin Currie is, so far as it relates to the company, the responsibility of Martin Currie.

Each of the directors of the company confirms that the financial statements have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the company. Furthermore each director certifies that the strategic report, the report of the directors and the manager's review 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 the company faces.

Going concern status

The company's business activities, together with the factors likely to affect its future development, performance and position are set out in the chairman's statement, manager's review, strategic report and the report of the directors.

The financial position of the company as at 31 March 2015 is shown on the balance sheet set out below. The cash flows of the company are also set out below. Note 14 sets out the company's risk management policies, including those covering market net risk, liquidity risk and credit risk.

The company has a loan facility of £17,000,000 which expires on 25 September 2016, which was fully drawn down at the year-end date. The purpose of the facility is to enable the manager to enhance the return for shareholders by borrowing and investing where the return is expected to exceed the cost of borrowing. The company has adequate financial resources in the form of readily realisable listed securities and as a result the directors assess that the company is able to continue in operational existence without the facility.

In accordance with the Financial Reporting Council's guidance on going concern and liquidity risk issued in October 2009, the directors have undertaken a rigorous review of the company's ability to continue as a going concern. The company's assets consist of a diverse portfolio of listed equity shares which, in most circumstances, are realisable within a very short timescale. The directors are mindful of the principal risks and uncertainties disclosed above and have reviewed revenue forecasts and they believe that the company has adequate financial resources to continue its operational existence for the foreseeable future, and at least one year from the date of the company's annual report. Accordingly, the directors continue to adopt the going concern basis in preparing these accounts.

Neil Donaldson

Chairman

26 May 2015

Income Statement

		Year to 31 March 2015			Year to 31 March 2014
	Note	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Gains on investments	8	-	14,119	14,119	-	287	287
Currency losses		(10)	7	(3)	(52)	(32)	(84)
Income	3	8,003	-	8,003	7,214	-	7,214
Investment management fee		(366)	(679)	(1,045)	(332)	(617)	(949)
Other expenses	4	(526)	-	(526)	(551)	-	(551)
Net return before finance costs and taxation		7,101	13,447	20,548	6,279	(362)	5,917
Finance costs	5	(64)	(119)	(183)	(57)	(106)	(163)
Net return on ordinary activities before taxation		7,037	13,328	20,365	6,222	(468)	5,754
Taxation on ordinary activities	7	(784)	-	(784)	(723)	-	(723)
Net return attributable to ordinary redeemable shareholders		6,253	13,328	19,581	5,499	(468)	5,031
Return per ordinary redeemable share	2	5.11p	10.90p	16.01p	4.72p	(0.40p)	4.32p

The total columns of this statement are the income statement of the company.

The revenue and capital items are presented in accordance with The Association of Investment Companies (AIC) SORP 2009.

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

No operations were acquired or discontinued in the year.

The notes form part of these financial statements.

A statement of total recognised gains and losses is not required as all gains and losses of the company have been reflected in the income statement.

Balance sheet

		As at 31 March 2015		As at 31 March 2014
	Note	£000	£000	£000	£000
Non-current assets
Investments at fair value through profit or loss
Listed on Exchanges in the UK			39,863		37,529
Listed on Exchanges abroad			158,846		141,518
	8		198,709		179,047
Current assets
Loans and receivables	9	2,310		1,085
Cash at bank		3,762		3,401
		6,072		4,486
Creditors
Amounts falling due within one year	10	(19,749)		(10,362)
Net current liabilities			(13,677)		(5,876)
Net assets			185,032		173,171
Capital and reserves
Called up ordinary share capital	11		1,223		1,223
Capital redemption reserve			78		78
Share premium account			30,040		30,040
Special distributable capital reserve			107,448		109,299
Capital reserve	11		43,020		29,692
Revenue reserve			3,223		2,839
			185,032		173,171
Net asset value per ordinary redeemable share	2		152.93p		141.60p

The company is registered in Scotland, no 283272.

The aggregate amount of called up share capital as at 31 March 2015 is £1,222,991 (2014: £1,222,991).

The financial statements were approved by the board and signed on its behalf by Neil Donaldson, Chairman

Reconciliation of movements in shareholders' funds

	Note	Called-up ordinary share capital £000	Capital redemption reserve £000	Share premium account £000	Special distributable reserve £000	Capital reserve £000	Revenue reserve £000	Total £000
As at 31 March 2014		1,223	78	30,040	109,299	29,692	2,839	173,171
Return attributable to shareholders		-	-	-	-	13,328	6,253	19,581
Ordinary shares bought back during the year	11	-	-	-	(1,851)	-	-	(1,851)
Dividends paid	6	-	-	-	-	-	(5,869)	(5,869)
Balance at 31 March 2015		1,223	78	30,040	107,448	43,020	3,223	185,032
As at 31 March 2013		1,104	78	12,862	109,359	30,160	2,878	156,441
Return attributable to shareholders		-	-	-	-	(468)	5,499	5,031
Ordinary shares issued during the year		119	-	17,348	(60)	-	-	17,407
Cost of ordinary shares issued during the period	11	-	-	(170)	-	-	-	(170)
Dividends paid	6	-	-	-	-	-	(5,538)	(5,538)
Balance at 31 March 2014		1,223	78	30,040	109,299	29,692	2,839	173,171

Statement of cashflow

		Year to 31 March 2015		Year to 31 March 2014
	Note	£000	£000	£000	£000
Net cash inflow from operating activities	12		5,613		4,717
Servicing of finance
Finance costs			(184)		(164)
Taxation
Taxation suffered			31		(105)
Capital expenditure and financial investment
Capital distributions		47		548
Payments to acquire investments		(77,094)		(73,452)
Receipts from disposal of investments		72,668		57,883
Net cash outflow from investing activities			(4,379)		(15,021)
Dividends paid			(5,869)		(5,538)
Net cash outflow before use of liquid resources and financing			(4,788)		(16,111)
Financing
Cost of ordinary shares issued during the year		-		(170)
Repurchase of ordinary share capital during the year		(1,851)		-
Shares issued for cash		-		17,407
Net movement in short-term borrowings		7,000		-
Net cash inflow from financing			5,149		17,237
Increase in cash for the year			361		1,126
Reconciliation of net cash flow to movements in net debt
Increase in cash as above		361		1,126
Net movement in short-term borrowings		(7,000)		-
Change in net debt resulting from cash flows			(6,639)		1,126
Opening net debt			(6,599)		(7,725)
Closing net debt	13		(13,238)		(6,599)

1.        Accounting policies

(a)        The financial statements have been prepared on a going concern basis and in accordance with UK Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice for Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('SORP'), issued in January 2009. 

            The disclosures on going concern set out above form part of the financial statements.

            Dividends - In accordance with FRS 21: 'Events after the balance sheet date', dividends are included in the financial statements in the period in which they are paid.

            Functional currency - In accordance with FRS 23: 'The effects of changes in foreign currency', the company is required to nominate a functional currency, being the currency in which the company predominately operates. The board has determined that sterling is the company's functional currency, which is also the currency in which these financial statements are prepared.

(b)        Income from equity investments is determined on the date on which the investments are quoted ex-dividend, or where no ex-dividend date is quoted, when the company's right to receive payment is established. Income from fixed interest securities is recognised on an effective yield basis. UK dividends received are accounted for at the amount receivable and are not grossed up for any tax credit. Other income includes any taxes deducted at source. Gains and losses arising from the translation of income denominated in foreign currencies are recognised in the revenue reserve. Scrip dividends are treated as unfranked investment income; any excess in value of shares received over the amount of the cash dividend is recognised in capital reserve. Income from underwriting commission and traded options is recognised as earned.

(c)        Interest receivable and payable and management expenses are treated on an accruals basis.

(d)        The management fee and interest costs are allocated 65% to capital and 35% to revenue in accordance with the board's expected long-term split of returns in the form of capital gains and income, respectively. With effect from 1 April 2015 the allocation has been amended to 75% to capital and 25% to revenue.  All other expenses are wholly allocated to revenue.

(e)        Gains and losses on the realisation of investments and changes in the fair value of investments which are readily convertible to cash, without accepting adverse terms, together with exchange adjustments to overseas currencies are taken to capital reserve.

(f)         Transactions in foreign currencies are recorded in the operational currency of the company at the prevailing exchange rate on the date of the transaction and re-translated at the rates of exchange ruling on the balance sheet date. Investments are recognised initially as at the trade date of a transaction. Subsequent to this, the disposal of an investment is accounted for once again as at the trade date of a transaction.

(g)        Revenue received and interest paid in foreign currencies are translated at the rates of exchange on the transaction date. Any exchange differences between the recognition and settlement both for revenue transactions are taken to the revenue account.

(h)        The company's investments are classified as 'financial assets at fair value through profit or loss' and are valued at fair value. For listed investments this is deemed to be bid market prices. Gains and losses arising from changes in fair value are included in the capital return for the year.

(i)         All financial assets and liabilities are recognised in the financial statements.

(j)         Deferred tax is recorded in accordance with Financial Reporting Standard 19 (Deferred tax). Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date. A deferred tax asset is only recognised to the extent that it is regarded as recoverable. Due to the company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the company has not provided for deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

(k)        Transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the income statement.

(l)         The cost of share buybacks includes the amount of consideration paid, including directly attributable and deducted from the special distributable reserve until the shares are cancelled.

(m)       The company uses derivative financial instruments to manage the risk associated with foreign currency fluctuations arising on dividends received in currencies other than sterling. This is achieved by the use of forward foreign currency contracts. The company does not hold or issue derivative financial instruments for speculative purposes. Derivative financial instruments are recognised initially at fair value on the contract date and subsequently remeasured to the fair value at each reporting date. The resulting gain or loss is recognised as revenue or capital in the income statement depending on the nature and motive of each derivative transaction.  Derivative financial instruments with a positive fair value are recognised as financial assets and derivative financial instruments with a negative fair value are recognised as financial liabilities. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months.

2. 

	Year to 31 March 2015	Year to 31 March 2014
Returns and net asset value
Revenue return
Revenue return attributable to ordinary redeemable shareholders	£6,253,000	£5,499,000
Average number of shares in issue during the year	122,262,535	116,391,681
Revenue return per ordinary redeemable share	5.11p	4.72p
Capital return
Capital return attributable to ordinary redeemable shareholders	£13,328,000	(£468,000)
Average number of shares in issue during the year	122,262,535	116,391,681
Capital return per ordinary redeemable share	10.90p	(0.40p)
Total return
Total return per ordinary redeemable share	16.01p	4.32p
Net asset value per share
Net assets attributable to shareholders	£185,032,000	£173,171,000
Number of shares in issue at year end	120,991,377	122,299,148
Net asset value per share	152.93p	141.60p

3. 

	Year to 31 March 2015 £000	Year to 31 March 2014 £000
Income
From listed investments:
Franked income - equities	1,883	1,808
Unfranked income - equities	6,110	5,401
	7,993	7,209
Other income
Interest on deposits	10	5
	8,003	7,214
Total income comprises:
Dividends from investments	7,993	7,209
Interest	10	5
	8,003	7,214
Dividends from investments:
Listed in the UK	1,883	1,808
Listed overseas	6,110	5,401
	7,993	7,209

Capital dividend received

During the year ended 31 March 2015, the company received a capital dividend of £47,000 from Direct Line Insurance Group as shown in note 8. During the year ended 31 March 2014, the company received a capital dividend of £548,000 from Vodafone Group.

4.

	Year to 31 March 2015 £000	Year to 31 March 2014 £000
Other expenses
Bank charges	5	15
Directors' fees	139	116
Employers' national insurance contributions	13	11
Irrecoverable VAT	49	12
Legal fees	14	17
Depositary fees	27	-
Printing and postage	30	19
Registrar's fees	49	49
Savings plan administration and advertising	22	27
Secretarial fee	101	98
Other	61	171
	510	535
Auditors' remuneration:
- audit services	16	16
- non-audit services	-	-
	526	551

Details of the contract between the company and Martin Currie for the provision of the investment management and secretarial arrangements are set out in the company's annual report.

5.

	Year to 31 March 2015			Year to 31 March 2014
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Finance costs
Interest payable on bank loans and overdrafts	64	119	183	57	106	163

6.

	Year to 31 March 2015 £000	Year to 31 March 2014 £000
Dividends
Year ended 31 March 2013 - fourth interim dividend of 1.30p	-	1,447
Year ended 31 March 2014 - first interim dividend of 1.15p	-	1,301
Year ended 31 March 2014 - second interim dividend of 1.15p	-	1,388
Year ended 31 March 2014 - third interim dividend of 1.15p	-	1,402
Year ended 31 March 2014 - fourth interim dividend of 1.35p	1,651	-
Year ended 31 March 2015 - first interim dividend of 1.15p	1,406	-
Year ended 31 March 2015 - second interim dividend of 1.15p	1,406	-
Year ended 31 March 2015 - third interim dividend of 1.15p	1,406	-
	5,869	5,538

Set out below are the total dividends payable in respect of the period, which forms the basis on which the requirements of sections 1158-1159 of the Corporation Tax Act 2010 are considered.

	Year to 31 March 2015 £000	Year to 31 March 2014 £000
First interim dividend of 1.15p for the year ended 31 March 2015 (2014: 1.15p)	1,406	1,301
Second interim dividend of 1.15p for the year ended 31 March 2015 (2014: 1.15p)	1,406	1,388
Third interim dividend of 1.15p for the year ended 31 March 2015 (2014: 1.15p)	1,406	1,402
Proposed fourth interim dividend of 1.45p for the year ended 31 March 2015 (2014: 1.35p)	1,754	1,651
	5,972	5,742

During the year the directors received dividends of 4.80p (2014: 4.70p) per share. Directors' shareholdings are disclosed in the company's annual report. The revenue reserves as at 31 March 2015 are £3,223,000.  None of this will be used to fund the fourth interim dividend. At the AGM held on 16 May 2012, the board received shareholder approval to amend the articles of association of the company to enable dividends to be paid out of capital.

7.

	Year to 31 March 2015 £000	Year to 31 March 2014 £000
Taxation on ordinary activities
Foreign tax	784	723

In accordance with the SORP issued in 2009, the company has adopted the marginal method for allocating tax relief between income and capital. The revenue account tax charge for the year was lower than the standard rate of corporation tax in the UK for an investment trust company 21% (2014: 23%). The differences are explained below.

	Year to 31 March 2015 £000	Year to 31 March 2014 £000
Net return on ordinary activities before taxation	20,365	5,754
Corporation tax at standard rate of 21% (2014: 23%)	4,277	1,323
Effects of:
Gains on investments not taxable	(2,965)	(66)
UK dividends not taxable	(396)	(416)
Overseas dividends not taxable	(1,283)	(1,242)
Overseas tax suffered	784	723
Currency losses not taxable	1	19
Excess management expenses not utilised	366	382
Current tax charge	784	723

As of 1 April 2014, the UK Corporation tax rate fell from 23% to 231%.

At the year end, the company has, for taxation purposes only, accumulated unrelieved management expenses and loan relationship deficits of £12,372,000 (2014: £10,375,000).  A deferred tax asset in respect of this has not been recognised and these expenses will only be utilised if the company has profits chargeable to corporation tax in the future.

During the year, as a result of the change in UK corporation tax from 23% to 21% and subsequent provision in the Finance Act 2013 to reduce the main rate of corporation tax to 20% for the financial year 2015, that was substantively enacted on 2 July 2013 and that will be effective from 1 April 2015, the unrecognised deferred tax asset has been remeasured to 20%.

Further reductions to the main rate are proposed to reduce the rate by 1% to 20% by 1 April 2015. These changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements.

8.

	Year to 31 March 2015 £000	Year to 31 March 2014 £000
Investments at fair value through profit or loss
Opening valuation	179,047	163,684
Opening investment holding gains	(20,650)	(31,152)
Opening cost	158,397	132,532
Add: acquisitions at cost	78,258	72,169
Disposal proceeds	(72,668)	(56,545)
Less: net gain on disposal of investments	8,212	10,241
Disposal at cost	(64,456)	(46,304)
Closing cost	172,199	158,397
Add: investment holding gains	26,510	20,650
Closing valuation	198,709	179,047

There were no fixed interest securities as at 31 March 2015 (2014: £nil).

An analysis of the investment portfolio by sector, and a list of all the investments and their market value is detailed above.

	Year to 31 March 2015 £000	Year to 31 March 2014 £000
Gains on investments
Net gain on disposal of investments	8,212	10,241
Movement in investment holdings unrealised gains / (losses)	5,860	(10,502)
Capital distributions	47	548
	14,119	287

Transaction costs

During the year, expenses were incurred in acquiring or disposing of investments classified as fair value though profit or loss.  These have been expensed through capital and are included within gains on investments in the income statement. The total costs were as follows:

	Year to 31 March 2015 £000	Year to 31 March 2014 £000
Acquisitions	151	196
Disposals	94	81
	245	277

9. 

	As at 31 March 2015 £000	As at 31 March 2014 £000
Receivables
Dividends receivable	859	819
Special dividends to capital receivable	47	-
Tax recoverable	222	253
Prepayments and other debtors	1,182	13
	2,310	1,085

10.

	As at 31 March 2015 £000	As at 31 March 2014 £000
Creditors: amounts falling due within one year
Interest accrued	-	1
Due to brokers	1,164	-
Sterling bank revolving loan	17,000	10,000
Other creditors	1,585	361
	19,749	10,362

The company has a £17,000,000 revolving loan facility with State Street which expires on 25 September 2015. Under this agreement £17,000,000 was drawn at 31 March 2015 at a rate of 1.26775% with a maturity date of 29 June 2015.

The fair value of the sterling loan is not materially different from its carrying value. The interest rate is set at each roll-over date at LIBOR plus a margin

11. 

	Number of shares	As at 31 March 2015 £000	Number of shares	As at 31 March 2014 £000
Called-up share capital
Ordinary shares of 1p
Ordinary shares in issue at the beginning of the year	122,299,148	1,223	110,359,771	1,104
Ordinary shares bought back to Treasury during the year	(1,307,771)	(13)	-	-
Ordinary shares issued during the year	-	-	11,939,377	119
Ordinary shares in issue at the end of the year	120,991,377	1,210	122,299,148	1,223
Treasury shares (Ordinary shares 1p)
Treasury shares in issue at the beginning of the year	-	-	-	-
Ordinary shares bought back to Treasury during the year	1,307,771	13	-	-
Treasury shares in issue at end of the year	1,307,771	13	-	-
Total ordinary shares in issue and in Treasury at the end of the year	122,299,148	1,223	122,299,148	1,223

There were 1,307,771 shares bought back during the year to 31 March 2015 (2014: nil). During the year, the company issued no shares (2014: 11,939,377 shares at an average price of 146.28p per share, the total proceeds were £17,407,000) The share premium represents the surplus amount over the nominal value of the issued share capital excluding costs, with any related issuance cost allocated to the special distributable capital reserve.           

The analysis of the capital reserve is as follows:

	Realised capital reserve £000	Investment holding gains £000	Total capital reserve £000
As at 31 March 2014	9,042	20,650	29,692
Gains on realisation of investments at fair value	8,212	-	8,212
Realised currency gains during the year	7	-	7
Movement in fair value gains	-	5,860	5,860
Capitalised expenses	(798)	-	(798)
Capital distributions	47	-	47
As at 31 March 2015	16,510	26,510	43,020

The above split in capital reserve is shown in accordance with provisions of the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts.

12. 

	Year to 31 March 2015 £000	Year to 31 March 2014 £000
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs	20,548	5,917
(Increase) / decrease in accrued income and other debtors	(1,256)	424
Increase / (decrease) in  creditors	1,224	(614)
Net gains on investments	(14,119)	(287)
Taxation withheld from income on investments	(784)	(723)
Net cash inflow from operating activities	5,613	4,717

13.

	As at 31 March 2014 £000	Cash flow £000	As at 31 March 2015 £000
Analysis of net debt
Cash at bank	3,401	361	3,762
Bank borrowings - sterling revolving loan	(10,000)	(7,000)	(17,000)
Net debt	(6,599)	(6,639)	(13,238)

14.  Derivatives and other financial instruments

The company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income.  The company also has the ability to enter into derivative transactions in the form of forward foreign currency contracts, futures and options, for the purpose of managing currency and market risks arising from the company's activities.

The main risks the company faces from its financial instruments are (i) market price risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk and (iii) credit risk.

The board regularly reviews and agrees policies for managing each of these risks. The manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term receivables and creditors.          

(i)         Market price risk

The fair value or future cash flows of a financial instrument held by the company may fluctuate because of changes in market prices.  This market risk comprises three elements - interest rate risk, currency risk and other price risk. 

Interest rate risk

Interest rate movements may affect:

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

·      the level of income receivable on cash deposits; and

·      the level of interest payable on borrowings.

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 and borrowing decisions.

The board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. The company has a revolving loan with State Street Bank and Trust Company which provides flexibility to finance opportunities in the short term. Current guidelines state that the total borrowings will not exceed 15% of the total assets of the company. Details of borrowings at 31 March 2015 are shown in note 10.

Interest risk profile

The interest rate risk profile of the portfolio of financial assets (comprising cash balances only) at the balance sheet date was as follows:

As at 31  March 2015	Weighted average period for which rate is fixed Years	Weighted average interest rate %	Fixed rate £000	Floating rate £000	Non-interest bearing £000
Assets
Sterling - undated	-	0.25	-	3,762	198,709
Liabilities
Bank loan - sterling	0.3	1.27	17,000	-	-

As at 31 March 2014	Weighted average period for which rate is fixed Years	Weighted average interest rate %	Fixed rate £000	Floating rate £000	Non-interest bearing £000
Assets
Sterling - undated	-	0.27	-	3,401	179,047
Liabilities
Bank loan - Sterling	0.3	1.32	10,000	-	-

The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on the bank loan is based on the interest rate payable on each tranche drawn down, which is set at each tranche drawn down, weighted by its value. The maturity date of the company's loan is shown in note 10.

The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.

The non-interest bearing assets represent the equity element of the portfolio.

Interest rate sensitivity

The sensitivity analysis below has been determined based on the exposure to interest rates at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.

The following table illustrates the sensitivity of the return after taxation to an increase or decrease of 100 basis points in interest rates. This is mainly attributable to the company's exposure to the interest rate on its bank loan.

	Year to 31 March 2015		Year to 31 March 2014
	Increase in rate £000s	Decrease in rate £000	Increase in rate £000s	Decrease in rate £000
Effect on revenue return	(60)	60	(35)	35
Effect on capital return	(111)	111	(65)	65
Effect on total return and on net assets	(171)	171	(100)	100

In the opinion of the directors, the above sensitivity analysis is not representative of the year as a whole, since exposure changes as investments are made, borrowings are drawn down and repaid throughout the year.

Foreign currency risk

A significant proportion of the company's investment portfolio is invested in overseas securities and the balance sheet can be significantly affected by movements in foreign exchange rates. It is not the company's policy to hedge this risk on a continuing basis but the company may, from time to time, match specific overseas investment with foreign currency borrowings.

The revenue account is subject to currency fluctuation arising on overseas income.

Foreign currency risk profile

Foreign currency risk exposure by currency of denomination:

	As at 31 March 2015			As at 31 March 2014
	Investments £000	Net monetary assets £000	Total currency exposure £000	Investments £000	Net monetary assets £000	Total currency exposure £000
US dollar	81,574	204	81,778	64,122	200	64,322
Euro currency	34,126	81	34,207	39,223	71	39,294
Swiss franc	16,768	141	16,909	10,977	182	11,159
Canadian dollar	4,272	-	4,272	3,640	-	3,640
Australian dollar	2,871	65	2,936	6,205	97	6,302
Japanese yen	5,923	75	5,998	4,442	63	4,505
Swedish krona	3,638	-	3,638	5,781	-	5,781
Hong Kong dollar	1,661	-	1,661	2,156	-	2,156
Singapore dollar	2,884	-	2,884	2,359	-	2,359
Thailand baht	2,266	59	2,325	2,613	-	2,613
Mexican peso	2,863	-	2,863	-	-	-
Total overseas investments	158,846	625	159,471	141,518	613	142,131
Pound Sterling	39,863	(14,302)	25,561	37,529	(6,489)	31,040
Total	198,709	(13,677)	185,032	179,047	(5,876)	173,171

The asset allocation between specific markets can vary from time to time based on the manager's opinion of the attractiveness of the individual markets.

Foreign currency sensitivity

There were minimal foreign currency denominated monetary items at the year end.

Other price risk

Other price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.

It is the board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. The allocation of assets and the stock selection process, as set out above, both act to reduce market risk. The manager actively monitors market prices throughout the year and reports to the board, which meets regularly in order to review investment strategy.  The investments held by the company are listed on the London Stock Exchange.

Other price risk sensitivity

The following table illustrates the sensitivity of the return after taxation and the net asset value to an increase or decrease of 15% in the fair value of the company's equities. The calculations are based on the portfolio valuations, as at the respective balance sheet dates, and are not representative of the year as a whole.

	Year to 31 March 2015		Year to 31 March 2014
	Increase in rate £000s	Decrease in rate £000	Increase in rate £000s	Decrease in rate £000
Effect on revenue return	(63)	63	(56)	56
Effect on capital return	29,690	(29,690)	26,752	(26,752)
Effect on total return and on net assets	29,627	(29,627)	26,696	(26,696)

(ii) Liquidity risk

This is the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities.

Liquidity risk is not considered to be significant as the company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of loan and overdraft facilities (note 10).

The contractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be required are as follows:

	As at 31 March 2015			As at 31 March 2014
	Three months or less £000	More than three months £000	Total £000	Three months or less £000	More than three months £000	Total £000
Creditors: amounts falling due within one year
Interest accrued	-	-	-	1	-	1
Due to brokers	1,164	-	1,164	-	-	-
Sterling bank revolving loan	17,000	-	17,000	10,000	-	10,000
Other creditors	1,585	-	1,585	361	-	361
	19,749	-	19,749	10,362	-	10,362

(iii) Credit risk

This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the company suffering a loss.

The risk is not considered to be significant by the board, and is managed as follows:

·      investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the investment manager, and limits are set on the amounts that may be due from any one broker; and

·      cash is held only with reputable banks with high quality external credit ratings.

None of the company's financial assets is secured by collateral.

The maximum credit risk exposure as at 31 March 2015 was £6,072,000 (2013: £4,486,000).  This was due to debtors and cash as per notes 9 and 13.

Fair values of financial assets and financial liabilities

All financial assets and liabilities of the company are included in the balance sheet at fair value or the balance sheet amount is a reasonable approximation of fair value.

15.  Capital management policies and procedures

The company's capital management objectives are:

·      to ensure that the company will be able to continue as a going concern; and

·      to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt.

The capital of the company consists of equity, comprising issued capital, reserves and retained earnings.

The board monitors and reviews the broad structure of the company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the manager's views on the market and the extent to which revenue in excess of that which is required to be distributed should be retained.

16.  Fair value hierarchy

Under FRS 29 'Financial Instruments: Disclosures' an entity is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:

·      Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

·      Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and  

·      Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The financial assets and liabilities measured at fair value in the balance sheet are grouped into the fair value hierarchy as follows:

		As at 31 March 2015
		Level 1	Level 2	Level 3	Total
	Note	£000	£000	£000	£000
Financial assets at fair value through profit or loss
Quoted equities	a)	198,709	-	-	198,709
Total		198,709	-	-	198,709

		As at 31 March 2014
	Note	Level 1 £000	Level 2 £000	Level 3 £000	Total £000
Financial assets at fair value through profit or loss
Quoted equities	a)	179,047	-	-	179,047
Total		179,047	-	-	179,047

a) Quoted equities

The fair value of the company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in fair value level 1 are actively traded on recognised stock exchanges.

Note 17 Post balance sheet events

On 26 May 2015 the board declared a fourth interim dividend of 1.45p per share. Between 1 April and 20 May 2015, the company had bought back 1,258,617 shares to be held in treasury.

Note 18 AIFMD disclosures

In accordance with the AIFM Directive, information in relation to the company's leverage and the remuneration of the company's AIFM, Martin Currie Fund Management Limited ('MCFM'), is required to be made available to investors.  In accordance with the Directive, the AIFM's remuneration policy is available from MCFM on request (see contact details on the back cover).  The numerical remuneration disclosures in relation to the AIFMs' first relevant accounting period (year ended 31 March 2016) will be made available in due course.

The company's maximum and actual leverage levels at 31 March 2015 are show below:  

Leverage Exposure	Gross Method	Commitment Method
Maximum permitted limit	150%	150%
Actual	108%	109%

The leverage limits are set by the AIFM and approved by the board and are in line with the maximum leverage levels permitted in the company's articles of association.  The AIFM is also required to comply with the gearing parameters set by the board in relation to borrowings.

Website

Securities Trust of Scotland Trust has its own dedicated website at www.securitiestrust.com.

This offers shareholders, prospective investors and their advisers a wealth of information about the trust. Updated daily, it includes the following: latest prices, manager videos, performance data, portfolio information, latest monthly update, research, press releases and articles, annual and half yearly reports.

 

END

 

 

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