Half Yearly Report

RNS Number : 3714X

Securities Trust of Scotland PLC

18 November 2014

 



Securities Trust of Scotland plc

Half-yearly financial report

Six months to 30 September 2014

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

A copy of this half-yearly financial report can shortly be downloaded at www.securitiestrust.com

FINANCIAL SUMMARY

Key data	As at 30 September 2014	As at 31 March 2014	% change
Net asset value per share (cum income)	143.29p	141.60p	1.2
Net asset value per share (ex income)	141.60p	140.40p	0.9
Share price	138.13p	144.75p	(4.6)
Benchmark*	682.93	665.22	2.7
Discount/(premium)	3.60%	(2.22%)

 

Total returns‡	Six months ended 30 September 2014	Six months ended 30 September 2013
Share price	(2.9%)	(1.3%)
Net asset value per share**	2.6%	0.4%
Benchmark*	5.0%	(0.4%)

Income	Six months ended 30 September 2014	Six months ended 30 September 2013
Revenue return per share	2.83p	2.62p

Ongoing charges†	Six months ended 30 September 2014	Year ended 31 March 2014	Six months ended 30 September 2013
Ongoing charges ratio	0.9%	1.0%	0.9%

Source: Martin Currie

* MSCI World High Dividend Yield Index

‡ The combined effect of any dividend paid, together with the rise or fall in the share price, net asset value or benchmark.

** The net asset value is exclusive of income with dividends reinvested.

† Ongoing charges (as a percentage of shareholders' funds) are calculated using average net assets over the period.  The ongoing charges figure has been calculated with the AIC's recommended methodology.

Five year record

Annual total returns with dividends reinvested over 12 month periods to 30 September

	2014	2013	2012	2011	2010
Net asset value per share	5.6%	18.3%	18.3%	3.3%	14.6%
Share price	0.5%	15.2%	27.7%	9.4%	15.8%
Benchmark†	11.5%	17.6%	15.7%	2.6%	12.5%

Source: Martin Currie

† Prior to 1 August 2011, the company's benchmark was the FTSE All-Share index and the MSCI World High Dividend Yield index thereafter.

INTERIM MANAGEMENT STATEMENT

Chairman's Statement

PERFORMANCE

A positive return of 2.6% has been generated on a net asset value (NAV) total return basis over the six-month period, although performance has lagged the benchmark by 2.4%. Stock selection was the predominant reason behind underperformance, particularly within the consumer discretionary sector and in Asia.  Over the same period, the share price has moved from trading at a 2.2% premium to a discount of 3.6%, although many trusts in the sector also moved to discount during this period. 

Of course, we evaluate performance over a longer time frame and on a NAV total return basis the company continues to be the top performer in the Association of Investment Companies (AIC) peer group over five years. 

REVENUES AND DIVIDENDS

The earnings per share for the six-month period is 2.83p, an increase of 8% on the six months to September 2013. The second interim dividend will be 1.15p paid on 19 December 2014 to shareholders on the register on 28 November 2014.

BORROWING

At the end of the period under review, the board increased the loan facility from £10 million to £17 million which is fully utilised.  This has allowed your manager to take advantage of low interest rates with a view to enhancing shareholder returns.

NEW NON-EXECUTIVE DIRECTOR

As we reported in the 2014 annual report, the board recognises the value of succession planning. As part of the phased introduction plan, I am delighted to welcome Mark Little to the board as a non-executive director. Mark has a wealth of experience from across the investment industry and will bring valuable insight to the board. He was previously the managing director of Barclays Wealth Scotland and Northern Ireland. Prior to this, he was global head of automotive research at Deutsche Bank, where he managed and coordinated its global automotive research product.

INVESTMENT MANAGER UPDATE

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.

ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE ('AIFMD')

Under the AIFMD the company is required to appoint an external depositary and an external AIFM who is supervised by the Financial Conduct Authority. On 22 July 2014 the company appointed Martin Currie Fund Management Limited as its AIFM, an associated company of Martin Currie Investment Management Limited (the company's previous investment manager). No changes are proposed to the way the company's assets are invested as a result of AIFMD.

OUTLOOK

The major global stockmarkets have continued to trend upwards in the face of economic headwinds generated by various political uncertainties.  The board's view of future economic growth remains broadly positive and we continue to believe that the global remit of the company provides your manager with the best range of stockpicking opportunities.

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 the company.

Contact details can be found at the back of this report. I would also encourage you to visit the company's website at www.securitiestrust.com, a comprehensive source of information.

Neil Donaldson

Chairman

18 November 2014

Manager's review

MARKET REVIEW

Global equity markets were, on the whole, strong over the six-month period under review, with the broad MSCI World index up 5.8% in sterling terms. The strongest regions were North America and Japan, with Asia and Europe lagging. By sector, IT was the standout leader, while materials, consumer discretionary and industrials were the weakest and all ended the period in negative territory.

The main drivers for market performance remain the progress, or otherwise, of global growth and policymakers' actions in response. In the US, economic data has been generally positive; the reporting period ended with a strong jobs report for September which saw the unemployment rate fall to 5.9%. However, the picture is not entirely clear, as there was no sign of wage growth. Also, the percentage of US workers participating in the labour market fell to a near 40-year low. So although unemployment is falling rapidly, there is little sign of inflation reaching the Federal Reserve's goal of 2%. This is an interesting conundrum for the US central bank, which ended its quantitative easing programme at its meeting at the end of October.

In the eurozone a very different picture is emerging. The economies of the core countries, Germany, France and Italy, are either at a point close to, or actually, stalling; inflation in the region is at a five-year low, hovering just above 0%. Two years ago, Mario Draghi, the European Central Bank president pledged to do 'whatever it takes' to save the euro. In August this year he promised to use 'all the available instruments' to combat low inflation. This is likely to take the form of some sort of quantitative easing, which the US, ironically, is now ending.

Moving further afield, the financial reform agenda in China is likely to be delayed in favour of stabilising growth close to Beijing's 7.5% target. In early October, the World Bank cut its China growth forecast to 7.4% for 2014 and 7.2% for 2015, reflecting the 'intensified policy efforts to address financial vulnerabilities and structural constraints'.

Investing is all about risk and reward and it is always interesting to note what surveys highlight as the key risks that investors are worried about. Currently the top three are: geopolitical crises, eurozone deflation and China debt defaults. For us, though, the focus remains on the companies operating in the environments described above. We remain focused on finding and owning companies which will continue to allocate capital effectively - both reinvesting to generate attractive returns and rewarding shareholders through generous dividends.

PERFORMANCE

The company's NAV total return was 2.6% for the first half of its fiscal year, but underperformed its benchmark. It was our stock picks, rather than a specific country or other macro-factor exposure, which accounted for the majority of the shortfall. At the sector level, relative returns and stock selection were weakest in consumer discretionary and healthcare. By contrast, stock selection was positive in energy, industrials, consumer staples, telecommunication services and utilities. Regionally, relative return contributions were poorest from North America and Pacific ex Japan; these areas were also where stock selection was weakest.  Gearing was a positive, given that the markets rose over the period.

Our strongest contributors were Kinder Morgan, Direct Line Insurance Group and AbbVie. Kinder Morgan, the US oil and gas pipeline company, performed well on the back of strong results and the announcement that it is planning - subject to shareholder approval - to merge the group companies to help pave the way for superior growth. At the same time, it increased its dividend projections. Direct Line fared well, also because of good results, a 5% increase in its interim dividend, and the announcement of a special interim dividend. US pharmaceutical firm AbbVie also did well over the period. Second-quarter results for the US pharmaceutical firm were good; our investment thesis here is based on AbbVie's attractive growth profile combined with a low valuation.

Key detractors were Modern Times Group and SJM Holdings. Modern Times Group, the Swedish-quoted media group, was weak due to its exposure to the events in Russia and Ukraine, where the company has operations.  We have subsequently sold the holding.  The Macau gaming company SJM Holdings also fared badly. Overall, the Macau gaming sector performed poorly due to continuing concerns about falling mass-market table yields and rising labour costs squeezing margins across the sector. We believe these issues are at least in part cyclical and are manageable; in our view the long-term potential for SJM Holdings, as well as the gaming sector in Macau, is attractive as the market becomes accessible to greater numbers of people, the product offering broadens and additional capacity is added to the market.

ACTIVITY

Key purchases in the period included Meggitt and Fibra Uno; meanwhile we reduced our healthcare exposure. Meggitt is a British engineering business specialising in aerospace equipment. Aerospace is currently one of our most-favoured sub-sectors in industrials. We feel that the long-term growth potential, high margins, high returns and the sustainability of these factors given the strong market shares and high barriers of entry in Meggitt's segments, are not reflected in the current share price. Fibra Uno is the largest real estate investment trust ('REIT') in Mexico. The Mexican REIT industry is still undeveloped, with REITs accounting for only around 3% of Mexico's total commercial real estate. The sector has strong positive dynamics, including an attractive working-age population, and low commercial rents. Importantly as well, a substantial number of lease agreements contain contractual increases in rent that are tied to inflation, and the bulk of leases for Fibra Uno are US-dollar denominated.

OUTLOOK

Despite being over five years into the stockmarket recovery, I still believe there are a number of supports to global equity markets. The strongest are the relative yield attractions of equities versus other asset classes, as well as the fact that, as mentioned in my last report, global fund manager cash balances remain high. Valuations are still close to historic averages for global high-yielding stocks and remain at a discount to the broader market. The macro environment, as discussed above, remains mixed but the powerhouse of the global economy, the US, is performing well. Key for me, as always, is the state of the corporate sector. Profit margins are high and cash generation is strong. Capital expenditure growth remains muted though and I would like to see management confidence return to see this growing again. If companies do not invest, they will not grow and that also has implications for dividends.

Alan Porter

18 November 2014

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 in the latest annual report. 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 in the latest annual report. The board also carries out a risk workshop as part of its annual strategy meeting. The board has identified the following principal risks to the company:

Ø Loss of s1158-9 status

Ø Failure to manage shareholder relations

Ø Long-term investment underperformance

Ø Foreign exchange risk

Ø Maintaining market liquidity

Further details of these risks and how the board manages them can be found in the 2014 annual report and on the company's website www.securitiestrust.com

Directors' responsibility

In accordance with Chapter 4 of the Disclosure and Transparency Rules, and to the best of their knowledge, each director of the company, confirms that the financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law) and give a true and fair view of the assets, liabilities, financial position and net return of the company. Furthermore, each director certifies that the interim management statement includes an indication of important events that have occurred during the first six months of the financial year, and their impact on the financial statements, together with a description of the principal risks and uncertainties that the company faces. In addition, each director of the company confirms that there have been no related party transactions during the six months to 30 September 2014.

By order of the board

Neil Donaldson, Chairman

Edinburgh

18 November 2014

PORTFOLIO SUMMARY Portfolio distribution as at 30 September 2014
By region (excluding cash)	As at 30 September 2014	As at 31 March 2014
	(%)	(%)
Developed Europe	47.4	52.2
North America	38.8	37.8
Developed Asia Pacific ex Japan	8.3	6.0
Japan	2.8	2.5
Latin America	1.7	-
Global emerging markets	1.0	1.5
	100.0	100.0

By sector (excluding cash)	As at 30 September 2014	As at 31 March 2014
	(%)	(%)
Healthcare	17	20
Consumer goods	16	17
Financials	15	14
Oil & gas	15	14
Consumer services	13	9
Industrials	8	6
Telecommunications	6	9
Basic materials	5	5
Utilities	4	4
Technology	1	2
	100	100

By asset class (including cash and borrowings)	As at 30 September 2014	As at 31 March 2014
	(%)	(%)
Equities	110	106
Less borrowings	(10)	(6)
	100	100

Largest 10 holdings	30 September 2014	30 September 2014	31 March 2014	31 March 2014
	Market value	% of total	Market value	% of total
	£000	portfolio	£000	portfolio
Roche Holdings	12,405	6.6	10,977	6.1
Chevron	9,251	4.9	8,052	4.5
Total	8,088	4.3	7,659	4.3
Philip Morris International	7,463	3.9	5,029	2.8
Royal Dutch Shell ('B' shares)	6,926	3.7	5,978	3.3
Sanofi	6,828	3.6	6,513	3.6
British American Tobacco	6,699	3.5	5,764	3.2
AbbVie	6,652	3.5	5,904	3.3
Pfizer	6,415	3.4	9,957	5.6
Verizon	6,312	3.3	-	-

UNAUDITED INCOME STATEMENT

		Six months to 30 September 2014			Six months to 30 September 2013
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£000	£000	£000	£000	£000	£000
Gain/(losses) on investments	6	-	2,085	2,085	-	(1,763)	(1,763)
Currency losses		(25)	(29)	(54)	(34)	(12)	(46)
Income	3	4,418	-	4,418	3,823	-	3,823
Investment management fee		(178)	(331)	(509)	(158)	(294)	(452)
Other expenses		(281)	-	(281)	(271)	-	(271)
Net return before finance costs and taxation		3,934	1,725	5,659	3,360	(2,069)	1,291
Finance costs		(26)	(49)	(75)	(32)	(62)	(94)
Net return on ordinary activities before taxation		3,908	1,676	5,584	3,328	(2,131)	1,197
Taxation on ordinary activities	5	(451)	-	(451)	(384)	-	(384)
Net returns attributable to ordinary redeemable shareholders		3,457	1,676	5,133	2,944	(2,131)	813
Net returns per ordinary redeemable share	2	2,83p	1.37p	4.20p	2.62p	(1.90p)	0.72p

		(Audited)
		Year to 31 March 2014
		Revenue	Capital	Total
	Note	£000	£000	£000
Gain/(losses) on investments	6	-	287	287
Currency losses		(52)	(32)	(84)
Income	3	7,214	-	7.214
Investment management fee		(332)	(617)	(949)
Other expenses		(551)	-	(551)
Net return before finance costs and taxation		6,279	(362)	5,917
Finance costs		(57)	(106)	(163)
Net return on ordinary activities before taxation		6,222	(468)	5,754
Taxation on ordinary activities	5	(723)	-	(723)
Net returns attributable to ordinary redeemable shareholders		5,499	(468)	5,031
Net returns per ordinary redeemable share	2	4.72p	(0.37p)	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.

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.

UNAUDITED BALANCE SHEET

		As at 30 September 2014		As at 30 September 2013		(Audited) year to 31 March 2014
	Note	£000	£000	£000	£000	£000	£000
Non-current assets
Investments at fair value through profit or loss
Listed on Exchanges in the UK			41,702		32,257		37,529
Listed on Exchanges abroad			147,364		136,499		141,518
	6		189,065		168,756		179,047
Current assets
Loans and receivables	7	9,825		614		1,085
Cash at bank		10,114		2,658		3,401
		19,939		3,272		4,486
Creditors
Amounts falling due within one year	8	(33,758)		(10,564)		(10,362)
Net current liabilities			(13,819)		(7,292)		(5,876)
Net assets			175,246		161,464		173,171
Capital and reserves
Called up ordinary share capital			1,223		1,153		1,223
Capital redemption reserve			78		78		78
Share premium account			30,040		19,832		30,040
Special distributable capital reserve			109,299		109,299		109,299
Capital reserve			31,368		28,029		29,692
Revenue reserve			3,238		3,073		2,839
			175,246		161,464		173,171
Net asset value per ordinary redeemable share	2		143.29p		140.04p		141.60p

UNAUDITED STATEMENT OF CASH FLOW

		Six months to		Six months to		(Audited) Year to
		30 September 2014		30 September 2013		31 March 2014
	Note	£000	£000	£000	£000	£000	£000
Net cash inflow from operating activities	9		3,625		3,032		4,717
Servicing of finance
Finance costs			(75)		(90)		(164)
Taxation
Taxation recovered			(17)		(70)		(105)
Capital expenditure and financial investment
Capital distributions		-		-		548
Payments to acquire investments		(29,469)		(24,645)		(73,452)
Receipts from disposal of investments		28,707		17,865		57,883
Net cash outflow from investing activities			(762)		(6,780)		(15,021)
Dividends paid	4		(3,058)		(2,749)		(5,538)
Net cash outflow before use of liquid resources and financing			(287)		(6,657)		(16,111)
Financing
Cost of ordinary shares issued during the period		-		(100)		(170)
Issue of ordinary share capital		-		7,140		17,407
Net movement in short-term borrowings		7,000		-		-
Net cash inflow from financing			7,000		7,040		17,237
Increase  in cash for the period			6,713		383		1,126
Reconciliation of net cash flow to movements in net debt
Increase in cash as above		6,713		383		1,126
Net movement in short-term borrowings		(7,000)		-		-
Change in net debt resulting from cash flows			(287)		383		1,126
Opening net debt			(6,599)		(7,725)		(7,725)
Closing net debt			(6,886)		(7,342)		(6,599)

 

UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

		Called up ordinary share capital	Capital redemption reserve		Share premium account		Special distributable reserve	Capital reserve		Revenue  reserve		Total
For the six months to 30 September 2014	Note	£000	£000		£000		£000	£000		£000		£000
As at 31 March 2014		1,223	78		30,040		109,299	29,692		2,839		173,171
Return attributable to shareholders		-	-		-		-	1,676		3,457		5,133
Ordinary shares issued during the year		-	-		-		-	-		-		-
Dividends paid	4	-	-		-		-	-		(3,058)		(3,058)
Balance at 30 September 2014		1,223	78		30,040		109,299	31,368		3,238		175,246
For the six months to 30 September 2013
As at 31 March 2013		1,104	78			12,862	109,359	30,160	2,878			156,441
Return attributable to shareholders		-	-			-	-	(2,131)	2,944			813
Ordinary shares issued during the period		49	-			7,151	(60)	-	-			7,140
Cost of ordinary shares issues during the period		-	-			(181)	-	-	-			(181)
Dividends paid	4	-	-			-	-	-	(2,749)			(2,749)
Balance at 30 September 2013		1,153	78			19,832	109,299	28,029	3,073			161,464
For the year ended 31 March 2014 (Audited)
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 year		-	-	(170)			-	-			-	(170)
Dividends paid	4	-	-	-			-	-			(5,538)	(5,538)
Balance at 31 March 2014		1,223	78	30,040			109,299	29,692			2,839	173,171

NOTES TO THE FINANCIAL STATEMENTS

Note 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.

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. The performance fee is wholly allocated to capital. 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 period.

(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 include the amount of consideration paid, including directly attributable costs and are 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.  Returns and net asset value

	Six months to 30 September 2014	Six months to 30 September 2013	Year to 31 March 2014
Revenue Return
Revenue return attributable to ordinary redeemable shareholders	£3,457,000	£2,944,000	£5,499,000
Average number of shares in issue during the period	122,299,148	112,288,626	116,391,681
Revenue return per ordinary redeemable share	2.83p*	2.62p	4.72p
Capital return
Capital return attributable to ordinary redeemable shareholders	£1,676,000	(£2,131,000)	(£426,000)
Average number of shares in issue during the period	122,299,148	112,288,626	116,391,681
Capital return per ordinary redeemable share	1.37p	(1.90p)	(0.40p)
Total return
Total return per ordinary redeemable share	4.20p	0.72p	4.32p
Net asset value per share
Net assets attributable to shareholders	£175,246,000	£161,464,000	£173,171,000
Number of shares in issue at period end	122,299,148	115,299,148	122,299,148
Net asset value per share including income	143.29p	140.04p	141.60p

* During the six months to 30 September 2014 special dividends of £145,000 were received and treated as income.

3. Income from listed investments

	Six months to 30 September 2014 £000	Six months to 30 September 2013 £000	Year to 31 March 2014 £000
From listed investments
Franked income - equities	885	655	1,808
Unfranked income - equities	3,529	3,167	5,401
	4,414	3,822	7,209
Other income
Interest on deposits	4	1	5
	4,418	3,823	7,214

4. Dividends

	Six months to 30 September 2014 £000	Six months to 30 September 2013 £000	Year to 31 March 2014 £000
Year ended 31 March 2013 - fourth interim dividend of 1.30p	-	1,447	1,447
Year ended 31 March 2014 - first interim dividend of 1.15p	-	1,301	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	1,407	-	-
	3,058	2,749	5,538

5. Taxation on ordinary activities

	Six months to 30 September 2014 £000			Six months to 30 September 2013 £000			Year to 31 March 2014 £000
Foreign tax			451			384			723

6. Investments

	As at 30 September 2014 £000	As at 30 September 2013 £000	As at 31 March 2014 £000
Investments at fair value through profit or loss
Opening valuation	179,047	163,684	163,684
Opening investment holding gains	(20,650)	(31,152)	(31,152)
Opening cost	158,397	132,532	132,532
Add: acquisitions at cost	38,760	23,362	72,169
Disposal proceeds	(30,827)	(16,527)	(56,545)
Less: net gain on disposal of investments	1,977	3,543	10,241
Disposals at cost	(28,850)	(12,984)	(46,304)
Closing cost	168,307	142,910	158,397
Add: investment holding gains	20,758	25,846	20,650
Closing valuation	189,065	168,756	179,047
Gains on investments
Net gain on disposal of investments	1,977	3,543	10,241
Movement in investment holdings unrealised (losses)/gains	108	(5,306)	(10,502)
Capital distributions	-	-	548
	2,085	(1,763)	287

Transaction costs

During the period 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:

	Six months to 30 September 2014 £000	Six months to 30 September 2013 £000	Year to 31 March 2014 £000
Acquisitions	82	61	196
Disposals	48	30	81
	130	91	277

7. Loans and receivables

	As at 30 September 2014 £000	As at 30 September 2013 £000	As at 31 March 2014 £000
Dividends receivable	357	301	819
Interest accrued	1	-	-
Due from brokers	2,120	-	-
VAT receivable	-	6	-
Tax recoverable	270	218	253
Prepayments and other debtors	7,077	89	13
	9,825	614	1,085

8. Creditors - amounts falling due within one year

	As at 30 September 2014 £000	As at 30 September 2013 £000	As at 31 March 2014 £000
Interest accrued	1	6	1
Due to brokers	9,291	-	-
Sterling bank revolving loan	17,000	10,000	10,000
Other creditors	7,466	558	361
	33,758	10,564	10,362

The company has a £17,000,000 revolving loan facility with State Street Bank and Trust Company which expires on 25 September 2016.  Under this agreement £17,000,000 was drawn down at 30 September 2014, £10,000,000 at a rate of 1.36444% and £7,000,000 at a rate of 1.36413%, both with a maturity date of 29 December 2014.

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.

9. Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities

	Six months to 30 September 2014 £000	Six months to 30 September 2013 £000	Year to 31 March 2014 £000
Net return before finance costs	5,659	1,291	5,917
(Increase)/decrease in accrued income and other debtors	(6,603)	860	424
Increase/(decrease) in creditors	7,105	(498)	(614)
Net (gains)/losses on investments	(2,085)	1,763	(287)
Taxation withheld from income on investments	(451)	(384)	(723)
Net cash inflow from operating activities	3,625	3,032	4,717

10.  Analysis of net debt

	As at 31 March 2014 £000	Cash flow £000	As at 30 September 2014 £000
Cash at bank	3,401	6,713	10,114
Bank borrowings - sterling revolving loan	(10,000)	(7,000)	(17,000)
Net debt	(6,599)	(287)	(6,886)

11. Half yearly financial report

The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in s434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 September 2014 and 30 September 2013 has not been audited.

The information for the year ended 31 March 2014 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under s498 (2), (3) or (4) of the Companies Act 2006.

12. Post balance sheet events

There were no shares issued or bought back between 1 October 2014 and 18 November 2014.

 

END

 

 

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