Annual Financial Report

RNS Number : 5283W

British Empire Sec & Gen Tst PLC

10 November 2014

 



BRITISH EMPIRE SECURITIES AND GENERAL TRUST PLC

Annual Financial Report for the year to 30 September 2014

A copy of the Company's Annual Report for the year ended 30 September 2014 will shortly be available to view and download from the Company's website, www.british-empire.co.uk. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement.

Printed copies of the Annual Report will be sent to shareholders shortly. Additional copies may be obtained from the Corporate Secretary, Capita Company Secretarial Services Limited, on 01392 477500. 

The Annual General Meeting of the Company will be held on Wednesday, 17 December 2014 at 12 noon at Grocers' Hall, Princes Street, London EC2R 8AD.

The Directors have proposed the payment of a final dividend of 8.50p per Ordinary share which, if approved by shareholders at the forthcoming Annual General Meeting, will be payable on 6 January 2015 to shareholders whose names appear on the register at the close of business on 5 December 2014 (ex-dividend 4 December 2014).

The following text is copied from the Annual Report & Accounts:

Strategic Report / Company Performance

Financial Highlights

-     Net asset value ('NAV') per share on a total return basis increased by 6.8%

-     Benchmark index increased by 5.1%

-     Total ordinary dividends maintained at 10.5p

-     Share price total return 8.9%

-     Year end net liquidity 1.7%

Performance Summary

Link to graphs and tables in relation to the performance summary:

http://www.rns-pdf.londonstockexchange.com/rns/5283W_-2014-11-7.pdf 

Strategic Report / Chairman's Statement

This report covers the period from 1 October 2013 to 30 September 2014 and is the second which we have produced under the UK's "narrative reporting" framework. As last year, we have elected to include the Chairman's Statement within the Strategic Report in order to minimise duplication. You will also find enclosed with this Annual Report a letter asking whether you would prefer to receive future communications in electronic form rather than printed. I encourage you to consider the electronic option in the interests of efficiency.

Overall, the year has again been one of progress, the NAV total return being 6.8% and with some outperformance against our core benchmark. There has been substantial change in the portfolio, with 19 new investments purchased at wide discounts to NAV. The Company has also continued to buy back its own shares. The discount has reduced over the year from 11.8% to 10.3%. There has been much work done, and costs incurred, in completing the transition to the new regulatory framework and in refreshing the investment information provided to existing and potential investors through the various channels now available.

Regulation

With effect from 17 July 2014, the Company entered into the arrangements necessary to ensure compliance with the European Union's Alternative Investment Fund Managers' Directive. The Company's Board approved the appointment of our existing Investment Manager, AVI, as the Company's Alternative Investment Fund Manager under the terms of a new investment management agreement between the Company and AVI; key commercial terms, including the management fee and notice period, remained unchanged. AVI has been approved as an AIFM by the UK's Financial Conduct Authority. The Board has also appointed J.P. Morgan Europe Limited to act as the Company's Depositary (a new function required by the AIFMD). JPMorgan Chase Bank, NA will remain as the Company's Custodian. In common with other investment trusts, we incurred substantial costs in implementing these regulatory changes. The net effect of the new regulations will unfortunately add some additional annual costs from now on, primarily as a result of the new requirement to employ a depositary. Against these costs, shareholders will benefit from some extra protection from the effects of unforeseen events and in the security of assets. I would like to record the Board's thanks to AVI and to all of our suppliers for their efforts in bringing this process to a satisfactory conclusion.

Changes to Articles of Association

As part of the arrangements to comply with the AIFMD, we have also reviewed with external advisers the Articles of Association of the Company, which were last reviewed and updated in 2009, to ensure that they remain in line with current best practice. A number of amendments this year have been recommended which will be put forward at the AGM as a Special Resolution. The amendments are technical in nature and I hope that you will support them.

NAV

For the year under review, the NAV of the Company rose by 6.8% on a total return basis. This compares with an increase in our lead benchmark, the MSCI All Country World ex-US Index, of 5.1%. The Morningstar Investment Trust Global Index and the MSCI All Country World Index were up by 9.2% and 11.8% respectively, reflecting the continuing strong performance of the US markets where we have limited exposure.

The strength of the US markets and the weakness of the Euro have held back the level of returns. The key theme driving the strong relative performance compared with the lead benchmark was the overall returns of our investments in European holding companies and closed-end funds, as described in more detail in the Investment Manager's Review.

Between the year end and 5 November 2014, the latest date for which data is available, the Company's net asset value decreased by 1.1% compared with a return of -0.3% by the MSCI All Country World ex-US Index on a total return basis.

At the time of writing, liquidity stands at 9.0%, compared with 1.7% at the year end and a range of 1.5% to 15.1% during the year under review.

Since the year end, the Company has hedged part of its exposure to the Japanese yen.

Income

Your Company is managed with a target of producing superior capital growth and the Board believes that it would be inappropriate to set any income requirement for the Investment Manager which could compromise their ability to deliver this primary objective.

As indicated in the Half Year Report to 31 March 2014, net income and earnings per share this year are lower than last year, driven by a number of different factors. Underlying portfolio income was lower as the Investment Manager made significant adjustments to the holdings, details of which are set out in the Investment Manager's Review. Key changes included sales of Vivendi and Orkla, both of which had paid substantial ordinary and special dividends in past years, and which were sold at low discounts. The new investments generally have lower dividend yields, but were purchased on low valuations.

Costs

The ratio of ongoing charges rose during the year due to a number of reasons.

As I reported last year, with effect from 1 October 2013, the base annual management fee increased from 0.6% to 0.7% of net assets. No further performance fees will be payable.

Your Company has incurred significant legal and other costs this year as the result of the implementation of the AIFMD. In addition, in the light of the Retail Distribution Review, your Company has increased its marketing budget and reviewed thoroughly its approach to, and investment in, explaining its investment strategy. It has increased the frequency of meetings with investors and reviewed its website strategy to ensure that the news provided by the Investment Manager to investors through all channels is coherent and clear and that the Investment Manager's valuable time is most productively spent.

As stated in the Half Year Report, the Board has reviewed its policy of charging a proportion of management costs to capital. Previously, the annual management fee was allocated 50% to revenue and 50% to capital, but 100% of the cost of servicing debt was charged to revenue. It is clear that a much higher proportion of long-term total returns has been the result of capital growth rather than revenue and this is expected to continue. Therefore, from this financial year, the Board has decided that 70% of the annual management fee and 70% of the cost of servicing the Company's debt will be allocated to capital and 30% allocated to revenue. This is in line with the policy set out in the Statement of Recommended Practice for Investment Trusts issued by the Association of Investment Companies and the practice adopted by similar investment companies. This change in policy has resulted in a modest increase in the revenue available for distribution by way of dividend than would otherwise have been the case.

Dividend

The Company has accumulated significant revenue reserves in past years with a view to ensuring that AVI can maintain the freedom to pursue the primary objective of the Company, which is capital growth. Our reserves give us flexibility in our dividend policy without constraining the Investment Manager in the pursuit of this goal. Given the changes in the portfolio, the lower net income, and the additional regulatory and other costs charged to revenue this year, we are using our reserves this year to maintain the core dividend.

A dividend of 2.0 pence per share was paid at the half year stage and the Board is recommending a final dividend of 8.5 pence. The total ordinary dividends paid and proposed for the year amount to 10.5 pence per share, which is unchanged from last year's ordinary dividends. There will be no special dividend this year.

Discount

The year ended with the discount at 10.3%, down from 11.8% one year ago and 13.7% at the half year end. During the year, the discount has been between 10.3% and 14.3%. As indicated in the Half Year Report, the Board has conducted an internal review and an independent external review of its buy back strategy and alternatives, and these have endorsed the current approach. Over the year, the Company has bought back 9.4m shares, which has not prevented us from making a significant number of new investments, and has enhanced NAV per share by 0.8%.

Board

Again this year, in line with accepted best practice, each of the Directors is subject to re-election. Your Board carries out an annual review of its effectiveness and every three years carries out an independent external review, led by a specialist in this field. This external review concluded that the Directors' qualifications, effectiveness, performance and contribution to the Board are of a high standard. All of the Directors are therefore offering themselves for re-election.

Administration

With effect from 1 April 2014, Capita Company Secretarial Services took over as corporate Company Secretary and AVI has also subcontracted certain fund administration services to Capita Asset Services. On behalf of the Board, I would like to thank our previous suppliers, Phoenix Administration Services, for their diligent service over the last 10 years.

Outlook

It is most encouraging that, even after several years of equity markets recovering from the financial crisis, the Investment Manager is continuing to find quality businesses to invest in and at significant discounts to their NAV.

The bigger picture around the world looks rather more uncomfortable than even a few months ago. The prospect of rising interest rates in the US is becoming more real, yet the near-term economic outlook for Continental Europe seems to have worsened considerably and strengthened the likelihood of easy monetary policy for some time to come. In addition to these factors, there has been a welcome but unexpected weakness in the oil price. There is potential danger in the Ukraine and in the Middle East with ISIS. There is also less certainty about China's rate of economic growth and the impact of this on the world economy. The weaker Euro should eventually benefit the strong exporters within Europe. In the UK, of course, we face a year of political change, with a general election only a few months away and the recent party conferences have made clear the significant decisions which the electorate faces.

Your Board formally considers the continuing appointment of AVI each year and remains vigorous in evaluating and monitoring AVI's style and investment progress against this background. It is confident that AVI can continue to produce good returns in the long term. Your Board is also encouraged by the strongly positive feedback from visits to institutional investors by your Investment Manager made over the past few months as a result of the enhanced marketing initiatives.  

Increasing levels of corporate activity in the past have often been the catalyst for realising the value of the sort of investments which your Investment Manager specialises in. The portfolio looks to contain a good store of value and is, overall, well positioned.

The Strategic Report has been approved and signed on the Board's behalf.

Strone Macpherson

Chairman

7 November 2014

Strategic Report / Overview of Strategy

Total returns to 30 September 2014

Company
1 Year	10 Years
6.8%	149.2%
Benchmark
MSCI All Country World ex-US Index
1 Year	10 Years
5.1%	130.8%
Other Comparators
Morningstar Investment Trust Global Index
1 Year	10 Years
9.2%	143.2%
MSCI All Country World Index
1 Year	10 Years
11.8%	137.4%

Aim

The Company is an investment trust. Its investment objective is to achieve capital growth through a focused portfolio of mainly listed investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value.

Investment Approach

Company's assets are managed by Asset Value Investors Limited. AVI aims to deliver superior returns while managing risks and specialises in investment in securities that for a number of reasons may be selling on anomalous valuations.

The Investment Manager has the flexibility to invest around the world and is not constrained by any fixed geographic or sector weightings but does seek to maintain a concentrated yet diversified portfolio. No more than 10% of the Company's investments may be in unlisted securities. AVI's investment philosophy, which is described in more detail below, is to:-

●	Invest in companies trading on discounts to net asset value.
●	Identify good quality underlying assets with appreciation potential at compelling valuations.
●	Focus on balance sheet strength.
●	Look for catalysts to narrow discounts.
●	Focus on bottom-up stock picking.
●	Be willing to hold cash from time to time if investments do not meet AVI's strict investment criteria.

Key Performance Indicators ('KPIs')

The Company's Board of Directors meets regularly and at each meeting reviews performance against a number of key measures.

Net asset value total return

The Directors regard the Company's net asset value total return as being the overall measure of value delivered to shareholders over the long term. Total return reflects both net asset value growth of the Company and also dividends paid to shareholders. The Investment Manager's investment style is such that performance is likely to deviate materially from that of any broadly based equity index. The Board considers the most important comparator to be the MSCI All Country World ex-US Index, which was adopted as the Company's benchmark from 1 October 2013. The Company will also continue to report performance against the MSCI All Country World Index and the Morningstar Investment Trust Global Growth Index, which is a peer group index and was the Company's benchmark index until 30 September 2013.

During the year under review, the net asset value per share showed a total return of 6.8%, which was ahead of our benchmark total return of 5.1%. While absolute returns were held back by a lack of exposure to US markets and by the weakness of the Euro, a number of key investment themes delivered strong returns. A full description of performance and the investment portfolio is contained in the Investment Review.

Discount
30 September 2014	30 September 2013
10.3%	11.8%

Estimated percentage added to net asset value per share from buybacks

2014	2013
0.8%	0.4%

The discount at which the Company's shares trade compared with net asset value

The Board believes that an important driver of an investment trust's discount or premium over the long term is investment performance. However, there can be volatility in the discount or premium. Therefore, the Board takes powers each year to buy back and issue shares with a view to limiting the volatility of the share price discount or premium.

During the year under review, the discount has moved in a range from 10.3% to 14.3% based on closing prices and, as at 30 September 2014, stood at 10.3%.

During the year under review, no new shares were issued and 9.4m shares were bought back and placed into treasury at discounts ranging from 10.1% to 14.8% and adding an estimated 0.83% to net asset value per share to the benefit of continuing shareholders.

Value for money

Ongoing charges ratio
2014	2013
0.90%	0.69%*

* Comparative adjusted for revised fee arrangements is 0.79%

The Board continues to be conscious of expenses and works hard to maintain a sensible balance between strong service and costs.

For the year ended 30 September 2014, the ongoing charges ratio was 0.90%, compared with 0.69% in 2013.

As reported in last year's Annual Report, the change in the management fee arrangements has increased the ongoing charges by approximately 0.1 percentage points, but that change also eliminated the performance fee, which could in any year have amounted to up to 0.4 percentage points. The performance fee is not included in the definition of ongoing charges. The balance of the increase is primarily due to professional fees incurred in fulfilling the requirements of AIFMD (as described in the Chairman's Statement) and the additional marketing costs incurred in reviewing and reshaping the Company's marketing strategy following the Retail Distribution Review.

Positions the Company typically holds

40-50

Top ten investments represent

41% of the portfolio

Investment Risk

When considering the total return of the investments, the Board must also take account of the risk which has been taken in order to achieve that return. There are many ways of measuring investment risk, and the Board takes the view that understanding and managing risk is much more important than setting any numerical target. The Board looks at risk from many different angles, an overview of which is set out below.

A plethora of statistical tools exist to measure risk, none of which offers a complete insight into the actual risks in a portfolio, as all rely on historical data and there is no single agreed definition of what risk is. The Investment Manager presents reports on portfolio returns and a set of contribution and risk statistics at each Board meeting. The objective of using these techniques is not to be prescriptive, but to understand levels of risk and how they have changed over time.

The purpose of this focus on risk is to ensure that the returns earned are commensurate with the risks assumed. The investment approach followed by the Investment Manager has led, over the long term, to returns in excess of those given by the market, while taking less risk in so doing.

Portfolio Diversification

Conventional wisdom holds that the most effective way of reducing risk is to hold a diversified portfolio of assets. The Company typically holds 40-50 positions, which could be considered a relatively concentrated (and therefore risky) portfolio. It is important to note that, in line with its investment objective, the Company's holdings are mostly in stocks which are themselves owners of multiple underlying businesses. Thus, the portfolio is much more diversified on a look-through basis than if it were invested in companies with a single line of business, for example. For the same reason, the top 10 portfolio positions, representing 41% of assets at the year end, are in practice highly diversified on a look-through basis. This diversification is evident at country, sector and currency levels.

Gearing and Liquidity

Historically, the Company has held large liquidity positions, mostly held in government bonds, when the Investment Manager cannot find sufficient value in its investment universe. This position is normally in the range of 0-25% but could in extremis be higher. This use of liquidity allows an expression of caution to be reflected in the portfolio at times of high valuation without altering the basic investment strategy. As such, it is an important mechanism for the management of overall portfolio risk. The Company is permitted to use gearing, and has a £15m debenture, but has regularly retained a net liquidity position. The liquidity position at any given time does not necessarily reflect a view on market direction but is driven by the Investment Manager's view of available investments which fit its investment criteria.

Taking account of the £15m debenture liability, the Company's debt-to-equity ratio as at 30 September 2014 was 1.8% (2013: 1.8%) but, as described above, the Company regularly maintains a net liquidity position. The Board and AVI do not expect gearing to be significantly higher than this level for the foreseeable future and have no current intentions to engage in further borrowing.

Foreign Exchange

Foreign exchange risk arises if there are falls against the Pound Sterling in the currencies in which the Company's investments are denominated. These risks are managed by the Investment Manager mainly by way of portfolio diversification but the Investment Manager may, with Board approval, hedge currency risk.

Discount

The shares of investment trusts frequently trade at a discount to their published net asset value. The Board seeks to manage the risk of any widening of the discount by regularly reviewing the level of discount at which the Company's shares trade, and it will, if necessary and appropriate, limit any significant widening through measured buybacks of shares.

The value of the Company's shares will additionally be subject to the interaction of supply and demand, prevailing net asset values and the general perceptions of investors. The share price will accordingly be subject to unpredictable fluctuations and the Company cannot guarantee that the share price will appreciate in value.

Other Risks

Further risks which can impact on performance are a loss of key personnel (especially within the investment management team); regulatory (principally breaches of either UKLA Listing Rules or Section 1159 of the Corporation Tax Act 2010) and failure of systems or controls. In managing these risks, the Company reviews staffing, succession planning and activity levels of the Investment Manager at least annually to ensure that there are adequate qualified staff/capacity available, and in particular requires the Investment Manager to notify the Board promptly of any changes in senior staff. The Company also reviews the relevant systems and controls at the Investment Manager and at other third party suppliers, including the Custodian and Administrator.

During the year, Capita was appointed as Administrator and Company Secretary to the Company, and J.P. Morgan Europe was appointed as Depositary. The Board monitors the risks inherent in the changing of a supplier, and also considers the risk controls at new suppliers. There were no material changes to the Company's risk profile during the year, other than normal movements in market risk, and an increased risk from cyber-crime. The Company has asked its principal suppliers to provide details of their cyber-crime controls.

The principal financial risks are examined in more detail in note 17 to the financial statements.

Environmental and Social Issues

The Company recognises that social, human rights, community and environmental issues can have an effect on some of its investee companies. AVI's Stewardship Policy also recognises that the social and environmental consequences of corporate activity are important factors in determining the creation and maximisation of shareholder value over the long term.

The Company is an investment trust and so its own direct environmental impact is minimal. The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

The Directors do not have service contracts and the Company has no employees. There are five Directors, four male and one female. Further information on the Board's policy on recruitment of new Directors is contained in the full Annual Report.

Future Strategy

The Board and the Investment Manager have long believed in their focus on investment in high quality undervalued assets and that, over time, this style of investment has been well rewarded. The Company has regularly held considerable levels of liquidity and expects that, from time to time, it will do so in the future.

The Company's overall future performance will, inter alia, be affected by: the Investment Manager's decisions; investee companies' earnings, dividends and asset values; and by stock market movements globally. Stock markets are themselves affected by a number of factors, including: economic conditions; central bank and other policymakers' decisions; political and regulatory issues; and currency movements.

The Company's performance relative to its peer group and benchmarks will depend on the Investment Manager's ability to allocate the Company's assets effectively, and manage its liquidity or gearing appropriately. More specifically, the Company's performance will be affected by the movements in the share prices of its investee companies in comparison to their own net asset values.

The overall strategy remains unchanged.

Strategic Report / Investment Portfolio

We seek to build a portfolio that is diversified in the underlying businesses in which it invests by sector, country and market capitalisation.

Investments at 30 September 2014

Company	Nature of business	% of class	Cost £'000	Valuation £'000	% of total assets less current liabilities
Jardine Matheson Holdings	Investment Holding Company	0.2	31,594	55,260	6.56
Investor AB 'A'	Investment Holding Company	0.8	27,673	51,352	6.10
Groupe Bruxelles Lambert	Investment Holding Company	0.5	38,354	41,129	4.89
Aker	Investment Holding Company	2.6	30,850	37,904	4.50
Sofina	Investment Holding Company	1.4	24,812	31,722	3.77
NB Private Equity Partners	Investment Company	8.4	23,738	28,822	3.42
Harbourvest Global Private Equity	Investment Company	4.5	21,712	28,104	3.34
First Pacific	Investment Holding Company	0.9	26,793	23,887	2.84
Hitachi	Conglomerate	0.1	24,281	23,486	2.79
TUI	Investment Holding Company	0.9	24,736	23,009	2.73
Top ten investments			274,543	344,675	40.94
Symphony International Holdings	Investment Company	8.8	18,559	22,351	2.65
Ecofin Water & Power	Investment Company	6.3	20,265	21,402	2.54
Marwyn Value Investors	Investment Company	15.7	18,042	20,924	2.49
Mitsui Fudosan	Real Estate Company	0.1	20,136	20,281	2.41
AP Alternative Assets	Investment Company	1.3	7,828	19,069	2.27
Rallye	Investment Holding Company	1.5	18,209	19,027	2.26
DWS Vietnam Fund	Investment Company	12.2	16,888	18,962	2.25
Dundee Corp	Investment Holding Company	3.8	24,173	18,852	2.24
Hudson's Bay	Retail Holding Company	1.0	18,233	17,851	2.12
Power Corp Canada	Investment Holding Company	0.3	17,755	17,794	2.11
Top twenty investments			454,631	541,188	64.28
Private Equity Holding	Investment Company	14.1	13,727	17,509	2.08
Doğan Şirketler Grubu Holdings	Investment Holding Company	3.6	25,386	16,846	2.00
Westfield Corp	Real Estate Investment Company	0.2	16,221	16,743	1.99
KT Corporation	Telecommunications Conglomerate	0.3	16,163	16,678	1.98
Vivendi	Media & Telecoms Conglomerate	0.1	16,941	16,578	1.97
Pantheon International Participations	Investment Company	4.1	7,489	16,182	1.92
Wm Morrison	Consumer Services Conglomerate	0.4	23,557	15,772	1.87
JP Morgan Private Equity	Investment Company	9.2	15,214	15,320	1.82
Dolphin Capital Investors	Real Estate Investment Company	6.8	16,850	15,069	1.79
Dorel Industries 'B'	Consumer Goods Conglomerate	2.9	18,713	15,054	1.79
Top thirty investments			624,892	702,939	83.49
Eurazeo	Investment Holding Company	0.4	13,173	12,734	1.51
LMS Capital	Investment Company	10.1	10,210	12,732	1.51
Immofinanz	Real Estate Investment Company	0.6	16,500	12,519	1.49
Brookfield Canada Office Properties	Real Estate Investment Company	2.9	13,318	11,284	1.34
Ashmore Global Opportunities - GBP	Investment Company	16.3	10,734	9,845	1.17
Westgrund	Real Estate Investment Company	4.8	9,907	9,826	1.17
SC Fondul Proprietatea	Investment Company	0.4	8,798	8,860	1.05
Paris Orleans	Investment Holding Company	0.8	6,962	7,223	0.86
Buwog	Real Estate Investment Company	0.5	5,419	5,751	0.68
Forterra Trust	Real Estate Investment Company	2.6	4,669	4,469	0.53
Top forty investments			724,582	798,182	94.80
Dragon Capital Vietnam Property	Real Estate Investment Company	15.4	4,729	4,278	0.51
Pantheon International Participations (Redeemable Shares)	Investment Company	1.2	2,314	4,247	0.50
Dream Unlimited 'A'	Real Estate Company	0.6	3,358	3,496	0.42
Mitra Energy*	Oil & Gas Company	2.8	5,169	2,616	0.31
Ashmore Global Opportunities - USD	Investment Company	0.5	181	185	0.02
Total equity investments			740,333	813,004	96.56
Fixed income investments
Treasury 2.75% 22/01/15	UK Government Security	-	6,043	6,041	0.72
US Treasury T-Bill 0% 11/12/14	US Government Security	-	19,888	19,738	2.35
Total fixed income investments			25,931	25,779	3.07
Total investments			766,264	838,783	99.63
Net current assets				3,156	0.37
Total assets less current liabilities			766,264	841,939	100.00

* Unlisted investment.

Strategic Report / Ten Largest Equity Investments

The top ten equity investments make up 41% of the portfolio, with underlying businesses spread across a diverse range of sectors and regions.

1.   Jardine Matheson Holdings

Nature of business - Investment Holding Company

Valuation - £55.3m

Valuation basis - Market price

% of total assets less current liabilities - 6.6%

An Asian holding company which controls Mandarin Oriental, Hongkong Land, Jardine Cycle & Carriage and Dairy Farm. The group also has a significant investment in insurance as well as other private investments. Jardine Matheson is trading on a 28% discount to the sum of its parts.

2.   Investor AB 'A'

Nature of business - Investment Holding Company

Valuation - £51.4m

Valuation basis - Market price

% of total assets less current liabilities - 6.1%

A Swedish industrial holding company which owns significant shareholdings in public multi-national companies and private companies. Investor takes an active ownership role in many companies and at year end was on a 27% discount to NAV.

3.   Groupe Bruxelles Lambert

Nature of business - Investment Holding Company

Valuation - £41.1m

Valuation basis - Market price

% of total assets less current liabilities - 4.9%

The listed Belgian holding company of Albert Frère which owns a portfolio of European blue chip companies including Total, Lafarge and Pernod Ricard. It is trading on a 26% discount to NAV.

4.   Aker

Nature of business - Investment Holding Company

Valuation - £37.9m

Valuation basis - Market price

% of total assets less current liabilities - 4.5%

A Norwegian-listed holding company trading on a 25% discount to NAV. 80% of its NAV is in listed companies and cash including interests in Aker Solutions, DetNor, Ocean Yield and Kvaerner.

5.   Sofina

Nature of business - Investment Holding Company

Valuation - £31.7m

Valuation basis - Market price

% of total assets less current liabilities - 3.8%

A diversified Belgian holding company trading on a 32% discount to estimated NAV. Over half the portfolio comprises listed companies, however they also own a portfolio of private equity holdings.

6.   NB Private Equity Partners

Nature of business - Investment Company

Valuation - £28.8m

Valuation basis - Market price

% of total assets less current liabilities - 3.4%

A London and Euronext-listed closed-end fund investing mostly in US-based private equity co-investments and debt. NBPE's discount narrowed from 27% at time of purchase to 16% due to its transition from a fund of private equity funds to making direct investments, and due to the growing income from its debt holdings. The company's re-rating is expected to continue as its legacy funds portfolio is run off and as the market recognises the highly attractive returns from the new investments.

7.   Harbourvest Global Private Equity

Nature of business - Investment Company

Valuation - £28.1m

Valuation basis - Market price

% of total assets less current liabilities - 3.3%

A highly-diversified London and Euronext-listed closed-end fund investing in private equity limited partnerships. A focus on top quartile managers resulted in a strong NAV growth track record, while realisations aided by buoyant IPO, credit and M&A markets have been achieved at substantial uplifts to carrying value and confirmed the conservative nature of the valuations. On a discount of 19%, and with the forthcoming introduction of voting rights and a consolidation of the two listings, we see further upside in the shares.

8.   First Pacific

Nature of business - Investment Holding Company

Valuation - £23.9m

Valuation basis - Market price

% of total assets less current liabilities - 2.8%

A Hong Kong-listed holding company which is benefiting from continued Asian consumer growth. The company has controlling interests in listed companies which include PLDT, Metro Pacific Investments and Philex Mining in the Philippines as well as Indofood in Indonesia. The company trades on a 43% discount to its NAV.

9.   Hitachi

Nature of business - Conglomerate

Valuation - £23.5m

Valuation basis - Market price

% of total assets less current liabilities - 2.8%

A Japanese holding company which is currently Japan's largest electronics manufacturer with a diverse product offering. Business lines include power generation, construction machinery, social infrastructure, high functional materials and IT systems. Hitachi is trading on a 26% discount to the sum of its parts.

10.  TUI

Nature of business - Investment Holding Company

Valuation - £23.0m

Valuation basis - Market price

% of total assets less current liabilities - 2.7%

TUI AG is a German-listed holding company whose principal asset is its 54% stake in London-listed tour operator TUI Travel. TUI AG also owns a portfolio of branded hotels and resorts and operates a cruise line. In addition, TUI AG owns a 22% stake in Hapag-Lloyd, a container shipping business. If consummated, the proposed merger with TUI Travel scheduled to close by end-2014 should eradicate much of the near-30% discount to our estimated NAV at which TUI AG's shares trade, while the proposed disposal of the non-core stake in Hapag-Lloyd in 2015 should also aid in a re-rating.

All discounts are estimated by AVI as at 30 September 2014.

Investment Manager's Review

Overview of AVI's Investment Philosophy

British Empire is managed by Asset Value Investors Ltd.

The aim of AVI is to deliver superior investment returns while managing risks.

AVI specialises in investing in securities that for a number of reasons may be selling on anomalous valuations.

AVI's investment philosophy is to:

●	Invest in companies trading on discounts to net asset value. Our focus is to find listed companies that own assets such as listed securities, property, cash and other businesses. We then estimate the value of all of those assets. After deducting any liabilities such as debt or pension liabilities, we arrive at an estimate of net asset value for that company. We will consider investing in companies where the discount between the current share price and our estimate of the value of that business is wide. The types of company which we typically find include investment holding companies, conglomerates, closed-end funds and property companies. Our approach naturally leads to investment in a variety of companies with diverse underlying businesses.
●	Identify good quality underlying assets with appreciation potential at compelling valuations. There are many companies trading on discounts to net asset value. Our aim is to identify companies that own high quality businesses where there is not only a wide discount, but also where we consider there to be a reasonable likelihood of those assets appreciating in value.
●	Focus on balance sheet strength. Debt works very well when markets are appreciating. However, debt can also destroy a lot of value when markets are falling and the business environment for a particular company deteriorates. We consider very carefully the balance sheet strength of the companies in which we invest. Factors which we look at include the actual quantum of debt relative to the assets of the companies, the maturity profile of the debt and the cashflows that the businesses generate.
●	Look for catalyst to narrow discounts. Once we find a good quality business on an attractive valuation, we then consider whether it is likely that the discount will narrow. Many companies trade on a discount for a reason and if that reason persists, then the discount may persist. Catalysts differ for the various types of company in which we invest. For example, in the case of a closed-end fund, where we are a large shareholder we can influence a board to pursue a strategy for discount narrowing. In the case of a family controlled company where we cannot exert influence to the same extent, our analysis would involve trying to understand the interests and objectives of the controlling shareholder, and whether our interests were aligned with theirs.
●	Focus on bottom-up stock picking. We are not asset allocators attempting to invest a pool of money across various asset classes. We are equity investors focusing on a particular style of value investing. We do not hug benchmarks and we will not own a company just because it is in a benchmark. We seek to invest in companies that meet the criteria described above.
●	Be willing to hold cash if investments do not meet our criteria. Very simply put, if we cannot find companies that meet our valuation and quality criteria we will not invest our shareholders' money. We will preserve capital until an appropriate investment opportunity arises.

Our focus on buying high-quality businesses trading at wide discounts to their net asset value has served us well over the long term. There are periods of time, however, when our style is out of favour and the types of companies in which we invest are ignored by the broader market. This requires us to be patient and to remain true to our style, so that when other investors begin to appreciate the value in those companies, we are well placed to benefit. In the short term, this means that there could be some volatility in our returns. However, we are confident that we own high quality businesses, which are trading on cheap valuations and which generate reasonable cash dividends for us as we wait for the value to be appreciated by the market.

Members of the investment team at AVI invest their own money in funds which they manage. As at 30 September 2014, AVI, its directors and staff owned approximately 872,000 (2013: 780,000) shares in British Empire Securities and General Trust plc.

Portfolio Review

Your Company's NAV rose by 6.8% during the financial year ended 30 September 2014, whilst the benchmark - the MSCI All Country World ex-US Index - increased by 5.1% (both on a total return basis).

The share price total return was 8.9%. This was in excess of the NAV return due to the narrowing of the discount at which the Company's shares trade over the course of the financial year. One year ago, the discount on British Empire Securities & General Trust shares stood at 11.8%, whilst it was 10.3% at the current year end.

The Morningstar Investment Trust Global Index and the MSCI All Country World Index returned 9.2% and 11.8% respectively (both on a total return basis).

Over 10 years, your Company's NAV has returned 149% versus 131% for the MSCI All Country World ex-US Index, 143% for the Morningstar Global Index, and 137% for the MSCI All Country World Index.

In the Half Year Report, we discussed how the general pick-up in corporate activity in developed markets around the world supports our style of investing. This trend has continued in the second half of this year and your Company has continued to benefit. The term "corporate activity" encompasses a broad range of activities including mergers & acquisitions, spin-offs, disposals, Initial Public Offerings ('IPOs') and corporate re-organisations. The abundance of corporate activity reflects the high level of cash on corporate balance sheets and easy access to other forms of transaction finance, as well as the confidence of investors and corporate decision makers. From our perspective as investors in companies trading at discounts to net asset value, we view these events as drivers of both narrowing discounts and increasing net asset values. After several years in which corporate activity has been muted and discounts have remained wide, it is encouraging to see that these have started to narrow in several cases and this has been a contributing factor to the Company's outperformance.

As a consequence of increased activity and narrowing discounts, we have seen the portfolio turnover increase over the past year. The turnover level has historically been in the region of 40%, whereas over the past 12 months it has been closer to 60%. This is a result of selling out of holdings trading at narrow discounts to NAV, where we see greater risk of discount widening than further narrowing.

Encouragingly, however, the narrowing of discounts has not been a universal trend as it was in 2006. This has meant that, as we have taken profits on some holdings, we have been able to recycle capital into other opportunities still trading on wide discounts. Although 7 holdings (making up 12% of the portfolio) were sold during the year on single-digit discounts to NAV, we have invested in 19 new holdings on far wider discounts. In this way, the weighted average discount on the portfolio has remained at relatively wide levels. At the year end, it was 28.6%, which compares to a level of 28.4% one year ago.

We believe that this is an indicator of the store of value in your Company's portfolio. Several of our investments have plans to dispose of assets in the coming months. Examples include Eurazeo, which has just announced plans to sell two of its holdings comprising one-third of its NAV; Tui AG, which is attempting to merge with Tui Travel Plc, its 54% owned subsidiary; and Athene Insurance, the sole asset owned by AP Alternative Assets, will have an IPO in New York within the next year. Private equity funds continue to sell assets at prices above carrying values.

In addition, we have benefited from a number of corporate reorganisations during the year. Vivendi has been in the process of selling several of its businesses. During the year, it sold three divisions - Activision Blizzard, SFR and GVT; Aker ASA's listed subsidiary, Aker Solutions, split itself into two companies as it sought to extract greater value from its businesses; Westfield, the Australian property company, listed its domestic assets into a separate company allowing for its international assets to be listed in a market where the shares are likely to be rated more highly by investors; Immofinanz demerged Buwog, its German property assets, into a separately listed vehicle.

The largest contributors to performance during the year were Investor AB, Vivendi, Hyundai preference shares, NB Private Equity and Jardine Matheson. Of these, Hyundai preference shares were sold entirely during the year, realising a profit of 34% over cost, whilst Vivendi was reduced significantly as the majority of our holding was sold on a single digit discount to NAV, thereby yielding a profit of 14% on cost.

The largest detractors from performance were Wm Morrison, Doğan Holdings, Mitra Energy, Dundee Corporation and Immofinanz. Wm Morrison and Immofinanz were new investments made during the year, whilst the others have been in the portfolio for longer periods of time.

Link to graphs and tables on:

- Weighted average discount

- Portfolio review

- Portfolio value on a look through basis

- Equity portfolio value by market capitalization

- Portfolio value by sector

http://www.rns-pdf.londonstockexchange.com/rns/5283W_1-2014-11-7.pdf 

European Holding Companies

This was the largest area of investment for your Company, making up 24% of the portfolio on average over the year, and contributing 4% to our overall performance over the period.

Investor AB had the largest positive influence amongst the European family holding companies, making a 1.2 percentage point contribution to overall returns. This long-standing investment has continued to deliver strong performance with an increase in NAV over the year of over 29%. At the same time, the discount at which Investor AB shares trade narrowed slightly over the year and thus the share price return was 32%.

GBL and Sofina, the two Belgian holding companies, contributed 0.5 percentage points each to overall returns with share price returns of 15.4% and 19.6% respectively. Both saw their discounts narrow. In the case of GBL, the discount narrowed over the year from 29% to 26% and in the case of Sofina, from 38% to 32%.

The performance of these three companies highlights the benefits of investing alongside families that are committed to growing value for all investors with an approach to investing that has delivered strong returns over the long term. Notwithstanding the superior long-term records of these groups, for us the question of whether to invest comes down to valuation. With our focus on buying high quality assets on discounts, we also have to believe that the valuations of the underlying businesses are fundamentally attractive and represent good value in and of themselves.

During the year, we successfully sold two European holding companies after their discounts narrowed and their valuations became excessive in our view. Kinnevik and Orkla both contributed 0.4 percentage points each to our performance, and were both sold early on in the financial year on single digit discounts.

One detractor from performance amongst this group of companies was Tui AG, a German-listed holding company whose principal asset is its 54% stake in London-listed tour operator TUI Travel. TUI AG also owns a portfolio of branded hotels and operates a cruise line. In addition, TUI AG owns a 22% stake in Hapag-Lloyd, a container shipping business that recently merged its operations with Chilean peer CSAV - the combined entity is scheduled to hold its IPO in the first half of next year and will provide TUI AG with an opportunity to exit a business it has long regarded as non-core. Most importantly, the consummation of a proposed merger with TUI Travel, if approved, will create a vertically-integrated tourism company and should unlock the value currently trapped within the inefficient holding company structure. Our position declined in value by 7% over the year, but TUI AG shares were trading on a near 30% discount at year-end.

Closed-End Funds

Closed-end funds continue to form an important part of your Company's portfolio, accounting for 30% of assets at year-end and contributing 3.4 percentage points to our overall performance.

Our investments in this category are primarily focused in the listed private equity sector, where we still see significant potential for further upside in our holdings from both discount contraction and NAV growth. Supportive equity and credit markets are now aiding realisations from portfolios that have been held back by the lack of exits in the wake of the financial crisis. These realisations are typically being made at substantial uplifts to carrying value, providing a tailwind to NAV growth but also validating reported NAVs, which investors have been viewing with scepticism. This should aid in narrowing unjustifiably wide discounts.

The two largest contributors were NB Private Equity Partners and Harbourvest Global Private Equity, our positions in which rose in value by 30% and 23% (in GBP) respectively over the financial year.

NB Private Equity Partners is a closed-end fund managed by Neuberger Berman, actively investing in US private equity and debt. The company also owns a private equity funds portfolio to which no new commitments have been made since a new policy was adopted in 2010. This refocused the portfolio on a twin strategy of making equity co-investments in, and providing junior debt to, companies backed by leading private equity sponsors. High cash-flows from the mature funds portfolio are being redeployed into investments under the new strategy, which now account for two-thirds of the portfolio. While several funds in the listed private equity sector now pay distributions to shareholders, NB Private Equity Partners is unique in that its dividend yield of 4.2% is covered by the cash-flows from its debt portfolio. We expect both the continuing portfolio transition and growing investor awareness of how the attractive yield is generated to drive a further re-rating in the company's shares from the current 16% discount (versus 27% at the time of our first purchase).

The second-strongest performer, Harbourvest Global Private Equity, is a highly-diversified London and Euronext-listed closed-end fund investing in private equity limited partnerships. A focus on top quartile managers has translated to a strong track record of NAV growth, while realisations aided by buoyant IPO, credit, and M&A markets are being achieved at average uplifts of 40% over carrying value, confirming the conservative nature of underlying managers' valuations. On a discount of 19%, and with the near-term catalyst of the introduction of voting rights and a consolidation of the two listings, we see further strong upside in the shares.

Our position in LMS Capital, to which we added over the year, saw a return of +17% on the back of a rising share price and a tender offer at NAV following the sale of its investment in Updata Infrastructure. The company's realisation strategy has seen over half of our investment cost returned to us since we first bought shares in 2012 for an overall return of +31%, an impressive performance given that we believe much of the portfolio value remains to be crystallised upon exits.

Of the 15 closed-end funds held over the year, only Ashmore Global Opportunities delivered a negative return. Despite three returns of capital at NAV made as part of its realisation policy, the position registered a 4.3% decline, caused in large part by the write-down of its investment in a Brazilian ethanol producer on the back of a government decision not to remove caps on gasoline prices.

During the first half of the year, we took advantage of a narrowing discount to sell out of our long-standing and successful investment in Electra Private Equity.

Asian Holding Companies

This area of the portfolio contributed 1.3 percentage points to overall return, with the largest performances coming from Jardine Matheson and Hyundai Motor Company preference shares. These two holdings increased in value by 11% and 34% over the year respectively.

The stake in Hyundai Motor Company  was acquired via the preference shares which were trading on a 47% discount to the ordinary share. Over an eight month period, the discount between the preference shares and the ordinary shares narrowed to its tightest historic level at 28% whilst the discount between the ordinary shares and the NAV remained unchanged. We sold this position less than seven months after acquiring it and realised a 34% profit.

Jardine Matheson continues to deliver strong performance. In a year of fairly muted performance for Asian markets (the MSCI Asia Pacific ex-Japan total return was +6%), Jardine Matheson's NAV total return (including dividends) was 13.2% and its share price total return was 11%.

Conglomerates

This area contributed 1 percentage point to overall performance and it made up on average 10.5% of the portfolio over the course of the year. The main contributor to performance from this segment of the portfolio was Vivendi, whose share price increased by 12.4% over the period. At the start of the year, Vivendi made up 7% of your Company, whereas by the year end we had reduced this to 2%. During the course of the year, Vivendi announced the sales of several businesses which it owned and this has been well received by investors. The company has moved away from a conglomerate structure in favour of a more focused media business and this process has resulted in a sharp contraction in the discount at which Vivendi trades. We used the narrowing discount to exit a large part of our investment on discounts of between 5% and 10% to estimated NAV.

Other Investments

In addition to the Asian and European holding companies, we also held investments in Wm Morrison, the UK supermarket chain, in one Turkish holding company (Doğan), in two Canadian holding companies (Dundee Corporation and Power Corp) and in Hudson's Bay, the Canadian retailer.

This area of the portfolio detracted 2.2 percentage points from performance, with the largest cost coming from the investment in Wm Morrison. We believed that the company, with asset backing from its freehold estate and following a sharp decline in its share price, looked good value early in 2014. The shares have continued to fall as the operational challenges facing the supermarket industry from the low-cost operators continue unabated. There are early signs that Wm Morrison may be gaining back some market share. Capital is being released from its property portfolio and the shares are trading below the value of that real estate. Sentiment towards the company and the broader sector is extremely bearish. In the event that sentiment turns, there should be upside in the shares from current very depressed levels.

The second largest negative contributor in this section was Doğan Holdings, which is active in the Turkish media and energy sectors. Our position in Doğan decreased in value by 27% over the year, as the weak economic backdrop and perceived political risk in the local media sector weighed on the shares. Nevertheless, we were encouraged by management's decisive action to tackle the inefficient group structure by buying out minorities in their main listed media asset at an attractive price. At a 67% discount to our estimated NAV and with cash at the holding company level almost covering the share price, the shares are cheaply valued.

Dundee Corp was a relatively disappointing holding for us over the year as it returned a negative 16.4% in Pound Sterling terms. Some of this reflects a strong Pound Sterling, which strengthened by over 9% during the period against the Canadian Dollar. We have confidence in the quality of the underlying assets, which include gold and other precious metals, a private wealth management business and property. Whilst some of these have been out of favour this year, we believe the very wide discount of 44% more than reflects this and there should be scope for improved performance in future given the very good long-term track record of the company.

Mitra Energy, British Empire's only unlisted holding and a 0.7% of NAV position at the start of the year, was written down by 63% over the year due to proposals being announced for a reverse take-over and associated discounted equity raise to shore up the company's balance sheet.

Property

Property had an average weighting over the period of 15%, contributing 0.2 percentage points over the twelve months with assets in North America, Europe, Asia and Australia.

There were positive returns from British Land in the UK, from Westfield in Australia, and from Suntec REIT in Singapore. These were offset by negative returns at Immofinanz and Forterra Trust.

GAGFAH, our largest contributor within property, was sold in July. The share price rose by 37% over the year up until our sale as several identified hurdles were met and the company traded in line with NAV.

We also sold our Hong Kong property positions during the year. Planning permission for affordable housing has not yet been granted to Henderson Land and with no clarity on time horizon we exited our position. Great Eagle, our other Hong Kong property position, successfully sold three hotels into a REIT structure. Disappointingly, management decided to reinvest the proceeds instead of returning capital to shareholders as anticipated.

In Europe, Immofinanz, an Austrian listed company, spun off its German and Austrian residential arm, Buwog, to existing shareholders while retaining a 49% stake. Our holding in Buwog is performing well, with a share price rise of 13% since listing in April. Immofinanz, with exposure to Russia and Eastern Europe, is trading on a 50% discount to NAV.

As discussed earlier, we purchased retail asset owner Westfield. This company separated its assets into two companies: Scentre owning its Australian and New Zealand assets, while Westfield retained its other global assets. We sold our Scentre position as it traded on a single digit discount to NAV and we maintain our Westfield shares, giving us exposure to high quality retail assets in North America and Europe on a 20% discount to NAV.

The holding in Forterra Trust proved costly, with our position declining in value by 38% over the year. Delays to the completion of their flagship retail and office development, The Place, Shanghai, weighed on the shares. Once complete, however, the development will allow for the resumption of dividend payments and we see considerable upside with the shares on a 63% discount to NAV.

Liquidity

Net liquidity at the year end was 1.7%, whilst it was 15.1% at the start of the year, reflecting the deployment of cash into the opportunities described in this report.

Share Buybacks

During the year, the Company purchased 9.394m of its own shares. These are being held in treasury. The effect of the buybacks was to increase NAV per share by 0.83 percentage points.

Outlook for the portfolio

Economic activity in the developed economies has remained subdued since the financial crisis in 2008. It has taken years for many of these economies to regain their pre-crisis levels and there are some that still have a way to go to attain that level. Perhaps the anaemic recovery is to be expected given the overhang of unprecedented levels of debt across the developed world in combination with ageing populations. Whatever the cause of the disappointing growth, it has left the perception of a degree of slack in the developed economies and given cover to Central Banks to pursue highly accommodative monetary policies. Easy monetary policies have continued for six years following the initial crisis. We will, of course, never know the counter-factual case of how economies would have fared in the absence of ultra-low interest rates and Central Bank bond buying. The effects of these policies on markets, however, have been pronounced. The low yields available on high-quality government bonds have led to a search for yield elsewhere. Yields on other asset classes have been forced down and risk premia compressed. Asset price valuations have been elevated and volatility has been exceptionally low.

Can this state of affairs continue?

Despite being tested by rising geopolitical risks, in the Middle East and Ukraine in particular, markets have remained calm up until the last few weeks. It may be that the accommodative monetary policies have anaesthetised investors against such short-term pain, although recent gyrations in markets are testing that thesis.

Undoubtedly, monetary policy in major developed economies will remain 'easy' for the next year in comparison with long-term historical averages. A challenge for investors, however, may arise from the increasingly divergent economic outlook for the developed economies. Persistent deflationary pressures in the Eurozone are likely to lead to further monetary stimulus, while in the US the economic recovery is slow but steady and is driving expectations for a gradual scaling-back of monetary stimulus. The US Federal Reserve is expected to end its asset purchases in late 2014 and to start raising US policy rates in the middle of 2015. The UK economy is also performing relatively well and the Bank of England is also expected to commence raising rates in 2015.

Central Banks will, no doubt, be hoping to execute their next moves without unduly alarming the markets. This may prove difficult as investors begin to react to the divergent outlook not only for economies but also interest rates and currency cross rates. We should probably expect that volatility will increase from historical lows in many markets and that some high valuation levels may not be sustainable.

From our perspective, the end of quantitative easing should have a positive impact, as investors become more discerning about which stocks to own. Correlations between securities have decreased and this is an environment in which good stock pickers ought to do well. The "lower for longer" backdrop and buoyant credit and IPO markets remains supportive of companies wishing to extract value from their assets by way of disposals, spin-offs, reorganisations and returns of capital.

In this environment, the opportunity for discounts to contract and for NAVs to grow is strong. This is what we have been seeing within our universe of stocks during the period. It is reflected by the fact that a larger number of holdings than in recent history were sold at very narrow discounts. In many cases, the growth in the NAVs of these companies has also been in excess of that of benchmarks as companies have taken advantage of strong capital markets to realise value for their shareholders.

Encouragingly, we are still able to identify opportunities to invest our capital in companies that we believe have fundamentally attractive valuations, have the potential to deliver strong NAV growth over the long term and also have genuine catalysts for discounts to narrow. Whilst it is true that there have been several examples of marked discount contraction in the portfolio, it remains a stock specific trend rather than a structural trend as it was in 2006. For these reasons, the level of liquidity in the portfolio is lower than it has been in recent years.

Valuation levels have risen along with the market, and downside risk is consequently greater. We seek to defend ourselves from such a risk in a number of ways. The first is to be certain that we are not overpaying for the companies we own; that their valuations are not overly stretched and appear reasonable relative to historic metrics as well as the prospects for that company. The second is by focusing on discounts. We do not wish to hold on to stocks where discounts have narrowed and the risk of capital loss from the discount widening is high. And, thirdly, we try to identify stocks where the wide discounts are genuine mis-pricings rather than value traps. By having a process that seeks to understand why discounts exist, we try to avoid value traps - companies where there are good reasons for discounts to exist - and only invest in those where the discounts are a genuine opportunity for outperformance.

The continued outperformance of the US market over Europe is now an extended multi-year phenomenon. US valuations look increasingly expensive versus Europe. At some point, this trend may be subject to reversal. Although we cannot be confident of the timing, any such move would be positive for your Company's portfolio.

As ever, the short-term direction of stock markets is hard to predict. Our investment process has delivered outperformance over the long term. After a period in which our style has been out of favour, it appears that the current market environment is more conducive to our approach. We are confident in the quality of the portfolio and in its potential to deliver strong returns for shareholders in future years.

Directors

Strone Macpherson

Steven Bates

Andrew Robson

Susan Noble

Nigel Rich

Management Agreement

Asset Value Investors Limited is the Company's appointed Investment Manager, and was engaged under the terms of an Investment Management Agreement effective from 5 May 2004 and varied with effect from 1 October 2008 and 1 October 2013. On 17 July 2014, this agreement was terminated, and a new Investment Management Agreement (the 'IMA'), under which AVI was appointed as the Company's Alternative Investment Fund Manager (in compliance with the requirements of the Alternative Investment Fund Managers' Directive), was put into place. The IMA is terminable by one year's notice from either party, other than for "cause".

The management fee provisions under the new IMA are in all material respects equivalent to those in the previous agreement.

The Investment Manager is entitled to a management fee of 0.70% of the net assets of the Company, calculated quarterly by reference to the net assets at the preceding quarter end and paid monthly.

Going Concern

The Directors have carefully reviewed the Group's current financial resources and the projected expenses of the Group for the next 12 months. On the basis of that review and as the majority of net assets are securities which are traded on recognised stock exchanges, the Directors are satisfied that the Company's resources are adequate for continuing in business for the foreseeable future and that it is appropriate to prepare the Group's financial statements on a going concern basis.

The full Annual Report contains the following statements regarding responsibility for the Annual Report and financial statements (references in the following statements are to pages in the Annual Report).

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that law they are required to prepare Group financial statements in accordance with International Financial Reporting Standards as adopted by the EU ('IFRS') and have elected to prepare the parent Company financial statements on the same basis. They are also responsible for ensuring that the Annual Report includes information required by the Disclosure Rules of the UK Listing Authority.

The Group and Company financial statements are required by law and IFRS to present fairly the financial position of the Group and Company and the financial performance and cash flows of the Group and Company for the relevant period. The Companies Act 2006 (the 'Act') provides, in relation to such financial statements, that references in the relevant part of the Act to financial statements giving a true and fair view are references to their achieving a fair presentation. In preparing the Group and Company financial statements the Directors are required to:

●	select suitable accounting policies and apply them consistently in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
●	make judgements and estimates which are reasonable and prudent;
●	state whether the financial statements have been prepared in compliance with IFRS, subject to any material departures disclosed and explained therein;
●	provide additional disclosures where compliance with the specific requirements of IFRS are considered to be insufficient to enable users to understand the impact of particular transactions, events and conditions on the financial position and performance; and
●	prepare financial statements on a going concern basis unless it is inappropriate to presume that the Group or Company will continue in business.

Financial statements of the Company are published on the Company's website at www.british-empire.co.uk. The Directors are responsible for ensuring the maintenance and integrity of the information relating to the Company published on this website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors are also responsible for ensuring that the Company complies with the provisions of the Disclosure Rules of the UK Listing Authority which, with regard to corporate governance, require the Company to disclose how it has applied the principles, and complied with the provisions, of the corporate governance code applicable to the Company.

Declaration

The Directors listed above, being the persons responsible, hereby confirm to the best of their knowledge:

●	that the financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group;
●	that in the opinion of the Board, the Annual Report and Accounts taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy; and
●	the Strategic Report and the Investment Manager's Review include a fair review of the development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that the Group faces.

Non-statutory Accounts

The financial information set out below does not constitute the Company's statutory accounts for the year ended 30 September 2014 but is derived from those accounts. Statutory accounts for the year ended 30 September 2014 will be delivered to the Registrar of Companies in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Accounts on the Company's website at

www.british-empire.co.uk.

Consolidated Statement of Comprehensive Income

 of the Group for the year ended 30 September 2014

		2014 Revenue return	2014 Capital return	2014 Total	2013 Revenue return	2013 Capital return	2013 Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Income
Investment income	2	18,208	-	18,208	28,796	-	28,796
Gains on investments held at fair value	8	-	41,595	41,595	-	80,029	80,029
Losses on Equities Index Unsecured Loan Stock 2013 held at fair value		-	-	-	-	(1,166)	(1,166)
Exchange (losses)/gains	16	-	(1,210)	(1,210)	-	776	776
		18,208	40,385	58,593	28,796	79,639	108,435
Expenses
Investment management fee	3	(1,773)	(4,136)	(5,909)	(2,353)	(2,353)	(4,706)
Other expenses (including irrecoverable VAT)	3	(1,715)	-	(1,715)	(1,332)	(144)	(1,476)
Profit before finance costs and tax		14,720	36,249	50,969	25,111	77,142	102,253
Finance costs	4	(369)	(868)	(1,237)	(1,360)	(7)	(1,367)
Profit before taxation		14,351	35,381	49,732	23,751	77,135	100,886
Taxation	5	(524)	-	(524)	(1,976)	8	(1,968)
Profit for the year		13,827	35,381	49,208	21,775	77,143	98,918
Earnings per Ordinary Share	7	9.29p	23.76p	33.05p	13.90p	49.24p	63.14p

On a total basis, the Company did not have any income or expense that was not included in consolidated profit for the year. Accordingly, the "Profit for the year", on a total basis, is also the "Total Comprehensive Income for the year" for the Company, as defined in IAS1 (revised) and no separate Statement of Comprehensive Income for the Company has been presented.

The total column of this statement is the profit and loss account of the Group. The revenue return and capital return columns are supplementary and are prepared under the guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations.

All income is attributable to the equity holders of British Empire Securities and General Trust plc. There are no minority interests.

The accompanying notes are an integral part of the financial statements.

Consolidated and Company Statements of Changes in Equity

for the year ended 30 September 2014

	Ordinary share capital	Capital redemption reserve	Share premium	Capital reserve	Merger reserve	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Group
For the year ended 30 September 2014
Balance as at 30 September 2013	16,001	2,934	28,078	716,486	41,406	39,550	844,455
Ordinary Shares bought back and held in treasury	-	-	-	(47,058)	-	-	(47,058)
Total comprehensive income for the year	-	-	-	35,381	-	13,827	49,208
Ordinary dividends paid (see note 6)	-	-	-	-	-	(15,831)	(15,831)
Special dividends paid (see note 6)	-	-	-	-	-	(3,790)	(3,790)
Balance as at 30 September 2014	16,001	2,934	28,078	704,809	41,406	33,756	826,984
For the year ended 30 September 2013
Balance as at 30 September 2012	16,001	2,934	28,078	664,536	41,406	38,270	791,225
Ordinary Shares bought back and held in treasury	-	-	-	(25,193)	-	-	(25,193)
Total comprehensive income for the year	-	-	-	77,143	-	21,775	98,918
Ordinary dividends paid (see note 6)	-	-	-	-	-	(14,972)	(14,972)
Special dividends paid (see note 6)	-	-	-	-	-	(5,523)	(5,523)
Balance as at 30 September 2013	16,001	2,934	28,078	716,486	41,406	39,550	844,455
Company
For the year ended 30 September 2014
Balance as at 30 September 2013	16,001	2,934	28,078	718,248	41,406	37,788	844,455
Ordinary Shares bought back and held in treasury	-	-	-	(47,058)	-	-	(47,058)
Total comprehensive income for the year	-	-	-	33,619	-	15,589	49,208
Ordinary dividends paid (see note 6)	-	-	-	-	-	(15,831)	(15,831)
Special dividends paid (see note 6)	-	-	-	-	-	(3,790)	(3,790)
Balance as at 30 September 2014	16,001	2,934	28,078	704,809	41,406	33,756	826,984
For the year ended 30 September 2013
Balance as at 30 September 2012	16,001	2,934	28,078	666,301	41,406	36,505	791,225
Ordinary Shares bought back and held in treasury	-	-	-	(25,193)	-	-	(25,193)
Total comprehensive income for the year	-	-	-	77,140	-	21,778	98,918
Ordinary dividends paid (see note 6)	-	-	-	-	-	(14,972)	(14,972)
Special dividends paid (see note 6)	-	-	-	-	-	(5,523)	(5,523)
Balance as at 30 September 2013	16,001	2,934	28,078	718,248	41,406	37,788	844,455

The accompanying notes are an integral part of the financial statements.

Consolidated and Company Balance Sheets

as at 30 September 2014

		Company		Group
		2014	2013	2014	2013
	Notes	£'000	£'000	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss	8	839,033	848,366	838,783	846,354
		839,033	848,366	837,783	846,354
Current assets
Receivables	10	3,225	8,349	3,225	8,349
Cash and cash equivalents		5,994	7,124	5,994	7,126
		9,219	15,473	9,219	15,475
Total assets		848,252	863,839	848,002	861,829
Current liabilities
Payables	11	(6,313)	(4,437)	(6,063)	(2,427)
		(6,313)	(4,437)	(6,063)	(2,247)
Total assets less current liabilities		841,939	859,402	841,939	859,402
Non-current liabilities
8 1/8 per cent Debenture Stock 2023	12	(14,936)	(14,928)	(14,936)	(14,928)
Provision for deferred tax	13	(19)	(19)	(19)	(19)
Net assets		826,984	844,455	826,984	844,455
Equity attributable to equity shareholders
Ordinary share capital	14	16,001	16,001	16,001	16,001
Capital redemption reserve		2,934	2,934	2,934	2,934
Share premium		28,078	28,078	28,078	28,078
Capital reserve		704,809	718,248	704,809	716,486
Merger reserve		41,406	41,406	41,406	41,406
Revenue reserve		33,756	37,788	33,756	39,550
Total equity	15	826,984	844,455	826,984	844,455
Net asset value per Ordinary Share - basic	15	575.92p	551.97p	575.92p	551.97p
Number of shares in issue excluding Treasury Shares	14	143,594,872	152,988,888	143,594,872	152,988,888

The financial statements were approved by the Board of British Empire Securities and General Trust plc on 7 November 2014 and were signed on its behalf by:

PSS Macpherson Chairman

The accompanying notes are an integral part of the financial statements.

Registered in England & Wales No. 28203

Consolidated and Company Cash Flow Statements

for the year ended 30 September 2014

		Company		Group
	Notes	2014 £'000	2013 £'000	2014 £'000	2013 £'000
Reconciliation of profit before taxation to net cash inflow from operating activities
Profit before taxation		49,732	100,886	49,732	100,886
Losses on Equities Index Unsecured Loan Stock 2013 held at fair value		-	1,166	-	1,166
Realised exchange losses/(gains) on currency balances		1,210	(776)	1,210	(776)
Gains on investments held at fair value through profit or loss		(39,833)	(80,026)	(41,595)	(80,029)
Purchases of investments		(700,340)	(711,162)	(700,340)	(711,162)
Sales of investments		754,801	744,465	754,801	744,465
Decrease/(increase) in other receivables		1,146	(1,620)	1,146	(1,620)
(Decrease)/increase in creditors		(1,455)	442	305	445
Taxation		(426)	(920)	(426)	(920)
Amortisation of debenture issue expenses		8	7	8	7
Net cash inflow from operating activities		64,843	52,462	64,841	52,462
Financing activities
Dividends paid	6	(19,621)	(20,495)	(19,621)	(20,495)
Payments for Ordinary Shares bought back and held in treasury		(45,142)	(25,193)	(45,142)	(25,193)
Redemption of Equities Index Unsecured Loan Stock 2013	12	-	(8,204)	-	(8,204)
Cash outflow from financing activities		(64,763)	(53,892)	(64,763)	(53,892)
(Decrease)/increase in cash and cash equivalents		80	(1,430)	78	(1,430)
Exchange movements		(1,210)	776	(1,210)	776
Change in cash and cash equivalents		(1,130)	(654)	(1,132)	(654)
Cash and cash equivalents at beginning of year		7,124	7,778	7,126	7,780
Cash and cash equivalents at end of year	16	5,994	7,124	5,994	7,126

The accompanying notes are an integral part of the financial statements.

Notes to the Financial Statements

1. Accounting policies

The financial statements of the Group and the Company have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. These comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ('IASC') that remain in effect, to the extent that IFRS have been adopted by the European Union.

The functional currency of the Group is Pounds Sterling because this is the currency of the primary economic environment in which the Group operates. The financial statements are also presented in Pounds Sterling rounded to the nearest thousand, except where otherwise indicated.

(a) Basis of preparation

The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice (the 'SORP') for investment trusts issued by the AIC in January 2009 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

(b) Adoption of new and revised standards

At the date of authorisation of these financial statements, the following Standards, which have not been applied in these financial statements, were in issue but were not yet effective (and in some cases had not yet been adopted by the EU):

International Accounting Standards (IAS/IFRS)		Effective for periods beginning on or after
IAS 27	Reissued as IAS27 Consolidated and Separate Financial Statements (as amended in 2011)	1 January 2014
IAS 28	Investments in Associates and Joint Ventures	1 January 2014
IFRS 9	Financial Instruments: Classification and Measurement	1 January 2015
IFRS 10	Consolidated Financial Statements	1 January 2014
IFRS 11	Joint Arrangements	1 January 2014
IFRS 12	Disclosure of Interests in Other Entities	1 January 2014

The Company does not believe that there will be a material impact on the consolidated financial statements from the adoption of these standards/interpretations.

(c) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiary) made up to 30 September each year. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

As permitted by Section 408 of the Companies Act 2006, no Company Statement of Comprehensive Income has been prepared. The profit for the year for the Company is £49,208,000 (2013: £98,918,000).

(d) Presentation of Statement of Comprehensive Income

In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. The Company is registered as a UK Investment Company under Section 833 of the Companies Act 2006. Additionally, net revenue is the measure which the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 1159 of the Corporation Tax Act 2010.

(e) Use of estimates

The preparation of financial statements requires the Group to make estimates and judgements that affect items reported in the Group and Company Balance Sheet and Consolidated Statement of Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on best knowledge of current facts, circumstances and, to some extent, future events and actions, the Group's actual results may ultimately differ from those estimates, possibly significantly. Unquoted equity investments that the Group holds are not traded and, as such, the prices are more uncertain than those more widely traded securities. The unquoted investments are valued by reference to valuation techniques approved by the Directors and in accordance with the International Private Equity and Venture Capital Valuation ('IPEVC') guidelines as described in note 1(i).

(f) Income

Dividends receivable are included in revenue on an ex-dividend basis except where, in the opinion of the Board, the dividend is capital in nature, in which case it is included in capital. UK dividends are included net of tax credits. Overseas dividends are included gross of any withholding tax.

Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital.

Interest receivable from fixed interest securities is included in revenue on a time apportionment basis using the effective interest method.

(g) Expenses

All expenses and interest payable are accounted for on an accruals basis. Expenses have been charged to revenue except as follows:

●	the management fee has been allocated 30% (2013: 50%) to revenue and 70% (2013: 50%) to capital within the Consolidated Statement of Comprehensive Income;
●	expenses which are incidental to the purchase or sale of an investment are recognised within the Consolidated Statement of Comprehensive Income as a capital item; and
●	expenses are presented as capital where a connection with the maintenance or enhancement of the value of investments can be demonstrated.

(h) Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from profit before tax as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that were enacted or substantially enacted at the Balance Sheet date.

In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Consolidated Statement of Comprehensive Income is the "marginal basis". Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Consolidated Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is charged or credited in the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with within equity.

Investment trusts which have approval as such under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.

(i) Investments held at fair value through profit or loss

When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date.

The Group's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis in accordance with the documented investment strategy and information is provided internally on that basis to the Group's Board of Directors. Accordingly, upon initial recognition, the investments are designated by the Group as 'held at fair value through profit or loss' and are described in the financial statements as investments held at fair value.

All investments are designated as held at fair value upon initial recognition and are measured at subsequent reporting dates at fair value, which for listed investments is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted.

Fair values for unquoted investments, or investments for which the market is inactive, are established by using various valuation techniques in accordance with the IPEVC guidelines. These may include recent arm's length market transactions, the current fair value of another instrument which is substantially the same, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised. Where no reliable fair value can be estimated for such instruments, they are carried at cost subject to any provision for impairment.

Foreign exchange gains and losses for fair value through profit or loss on investments are included within the changes in their fair value.

(j) Movements in fair value

Changes in fair value of investments are recognised in the Consolidated Statement of Comprehensive Income as a capital item. On disposal, realised gains and losses are also recognised in the Consolidated Statement of Comprehensive Income as capital items.

(k) Cash and cash equivalents

Cash comprises cash in hand and at the bank and short-term deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

(l) Dividends payable

Dividends are recognised in the period in which they are declared.

(m) Foreign currency translation

Transactions in currencies other than Pounds Sterling are recorded at the rates of exchange prevailing on the date of the transaction. Items that are denominated in foreign currencies are retranslated at the rates prevailing on the Balance Sheet date. Foreign exchange differences arising on translation are recognised in the Consolidated Statement of Comprehensive Income.

(n) Finance costs

Finance costs are accounted for on an accruals basis using the effective interest method and have been allocated 30% (2013: 100%) to revenue and 70% (2013: nil) to capital. This complies with the Statement of Recommended Practice for Financial Statements of Investment Trust Companies, which require the finance costs of the Debenture Stock to be allocated between revenue and capital in the same proportions as the management fee.

(o) Debenture pricing

The 8 1/8 per cent Debenture Stock 2023 is valued at amortised cost under the effective interest method and secured by a floating charge over all assets of the Company. Costs in relation to arranging the debt finance of the 8 1/8 per cent Debenture Stock 2023 have been capitalised and are amortised over the term of the finance. Further details of the Debenture Stock are disclosed in notes 12 and 17.

(p) Capital Reserve

Capital reserve - other - The following are taken to this reserve:

●	gains and losses on the disposal of investments.
●	amortisation of issue expenses;
●	costs of share buybacks;
●	exchange difference of a capital nature; and
●	expenses, together with the related taxation effect, allocated to this reserve in accordance with the above policies.

Capital reserve - investment holding gains - The following are taken to this reserve:

●	increase and decrease in the valuation of investments held at the year end.

(q) Merger Reserve

The merger reserve represents the share premium on shares issued on the acquisition of Selective Assets Trust plc on 13 October 1995.

(r) Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being the investment business. Consequently, no business segmental analysis is provided.

2. Income

					2014 £'000	2013 £'000
Income from investments
Listed investments					18,195	28,709
Other income
Deposit interest					13	15
Interest received on Norwegian withholding tax  reclaims					-	66
Underwriting commission					-	6
					13	87
Total income					18,208	28,796
Income from investments:
Equity securities					18,068	28,489
Fixed interest securities					127	220
					18,195	28,709
Total income comprises:
Dividends					18,068	28,489
Interest					140	301
Underwriting commission					-	6
					18,208	28,796

3. Investment management fee and other expenses

	2014	2014		2013	2013
	Revenue	Capital	2014	Revenue	Capital	2013
	return	return	Total	return	return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Management fee†	1,773	4,136	5,909	2,353	2,353	4,706
	1,773	4,136	5,909	2,353	2,353	4,706
Other expenses:
Directors' emoluments - fees	133	-	133	132	-	132
Auditor's remuneration - audit	34	-	34	24	-	24
Auditor's remuneration - taxation	13	-	13	12	-	12
Auditor's remuneration - other services to the Group	8	-	8	17	-	17
Marketing costs	475	-	475	204	-	204
Printing and postage costs	68	-	68	80	-	80
Registrar fees	94	-	94	100	-	100
Custodian fees	275	-	275	275	-	275
Depositary fees	28	-	28	-	-	-
Advisory and professional fees	261	-	261	149	-	149
Irrecoverable VAT	162	-	162	83	-	83
Other expenses	164	-	164	256	144	400
	1,715	-	1,715	1,332	144	1,476

† Net of the fee of £nil (2013: £42,000) paid to Phoenix Administration Services Limited for company secretarial services.

For the year ended 30 September 2014, the fee calculated in accordance with the Investment Management Agreement amounted to 0.7% (2013: 0.6%) of the net asset value calculated on a quarterly basis.

Details of the Investment Management Agreement and fees paid to the Investment Manager are set out above.

4. Finance costs

	2014	2014		2013	2013
	Revenue	Capital	2014	Revenue	Capital	2013
	return	return	Total	return	return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Bank overdraft interest	3	7	10	17	-	17
Interest on other loans	366	853	1,219	1,343	-	1,343
Amortisation of debenture issue expenses*	-	8	8	-	7	7
	369	868	1,237	1,360	7	1,367

*See note 12.

5. Taxation

	2014	2014		2013	2013
	Revenue	Capital	2014	Revenue	Capital	2013
	return	return	Total	return	return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
(a) Analysis of charge in year
Corporation tax	-	-	-	-	-	-
Foreign withholding tax	1,027	-	1,027	3,215	-	3,215
Overseas tax reclaimable	(503)	-	(503)	(1,239)	-	(1,239)
Total current tax for year (see note 5(b))	524	-	524	1,976	-	1,976
Deferred tax	-	-	-	-	(8)	(8)
Total deferred tax for year	-	-	-	-	(8)	(8)
Total tax for year	524	-	524	1,976	(8)	1,968

(b) Factors affecting current tax charge for the period

The tax assessed for the year is lower than the standard rate of corporation tax in the UK for a large company of 22% (2013: 23.52%).

	2014	2014		2013	2013
	Revenue	Capital	2014	Revenue	Capital	2013
	return	return	Total	return	Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Profit before taxation	14,351	35,381	49,732	23,751	77,135	100,886
Corporation tax at 22%* (2013: 23.52%)	3,157	7,784	10,941	5,586	18,142	23,728
Effects of:
Capital gains not subject to tax	-	(8,885)	(8,885)	-	(18,971)	(18,971)
Revaluation of Equities Index Unsecured Loan Stock 2013	-	-	-	7	-	7
Non-taxable UK dividends	(238)	-	(238)	-	-	-
Non-taxable overseas dividends	(3,131)	-	(3,131)	(6,701)	-	(6,701)
Overseas tax suffered	524	-	524	1,976	-	1,976
Disallowable management expenses	7	-	7	-	-	-
Movement in unutilised management expenses	205	1,101	1,306	1,108	829	1,937
Movement in deferred tax	-	-	-	-	(8)	(8)
Total tax charge for the year (note 5 (a))	524	-	524	1,976	(8)	1,968

*Under the Finance Act 2013, the rate of corporation tax was lowered to 21% from 23% on 1 April 2014. An average rate of 22% is applicable for the year ended 30 September 2014.

(c) Unrecognised tax losses

The Company has a tax loss of £32,589,000 carried forward at the Balance Sheet date which is available indefinitely for offset against future taxable profits. A potential deferred tax asset of £6,517,800 (based on 20% tax rate) has not been recognised in respect of this tax loss as there is uncertainty over whether there will be sufficient future taxable profits against which this tax loss can be offset.

6. Dividends

	2014	2013
	£'000	£'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 30 September 2013 of 8.50p (2012: 7.50p) per Ordinary Share	12,885	11,836
Special dividend for the year ended 30 September 2013 of 2.50p (2012: 3.50p) per Ordinary Share	3,790	5,523
Interim dividend for the year ended 30 September 2014 of 2.00p (2013: 2.00p) per Ordinary Share	2,946	3,136
	19,621	20,495

Set out below are the interim, final and special dividends paid or proposed on Ordinary Shares in respect of the financial year, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered.

Interim dividend for the year ended 30 September 2014 of 2.00p (2013: 2.00p) per Ordinary Share	2,946	3,136
Proposed final dividend for the year ended 30 September 2014 of 8.50p (2013: 8.50p) per Ordinary Share	12,116*	12,924
Proposed special dividend for the year ended 30 September 2014 of nil (2013: 2.50p) per Ordinary Share	-	3,801
	15,062	19,861

* Based on shares in circulation on 5 November 2014.

7. Earnings per Ordinary Share

	2014	2014	2014	2013	2013	2013
	Revenue	Capital	Total	Revenue	Capital	Total
Basic	9.29p	23.76p	33.05p	13.90p	49.24p	63.14p

The total basic earnings per Ordinary Share is based on Group net profit for the financial year of £49,208,000 (2013: £98,918,000) and on 148,907,851 (2013: 156,665,364) Ordinary Shares, being the weighted average number of Ordinary Shares in issue (excluding shares in treasury) during the year.

The total basic earnings per Ordinary Share figures detailed above can be further analysed between revenue and capital, as below.

The basic revenue earnings per Ordinary Share is based on Group revenue after taxation for the financial year of £13,827,000 (2013: £21,775,000) and on 148,907,851 (2013: 156,665,364) Ordinary Shares, being the weighted average number of Ordinary Shares in issue (excluding shares in treasury) during the year.

The basic capital earnings per Ordinary Share is based on Group net profit for the financial year of £35,381,000 (2013: £77,143,000) and on 148,907,851 (2013: 156,665,364) Ordinary Shares, being the weighted average number of Ordinary Shares in issue (excluding shares in treasury) during the year.

8. Investments held at fair value through profit or loss

	Listed   investments	Unlisted investments	Group total  investments	Investment in subsidiary	Company total investments
	£'000	£'000	£'000	£'000	£'000
(a) Securities
Opening book cost	768,555	9,530	778,085	250	778,335
Opening investment holding gains/(losses)	71,616	(3,347)	68,269	1,762	70,031
Opening fair value	840,171	6,183	846,354	2,012	848,366
Movement in the year:
Purchases at cost:
Equities	480,270	935	481,205	-	481,205
Bonds	221,125	-	221,125	-	221,125
Sales - proceeds:
Equities	(645,942)	(196)	(646,138)	-	(646,138)
Bonds	(105,358)	-	(105,358)	-	(105,358)
- realised gains/(losses) on sales	42,445	(5,100)*	37,345	-	37,345
Movement in investment holding gains/(losses)
-  reversal of unrealised (appreciation)/depreciation upon realisation	(8,061)	5,235	(2,826)	(1,762)	(4,588)
- movement in unrealised appreciation/(depreciation)	11,517	(4,441)	7,076	-	7,076
Closing fair value	836,167	2,616	838,783	250	839,033
Closing book cost	761,095	5,169	766,264	250	766,514
Closing investment holding gains/(losses)	75,072	(2,553)	72,519	-	72,519
Closing fair value	836,167	2,616	838,783	250	839,033

* The realisation of the loss relating to the Company's holding in Resaca Exploitation which was included in opening investment holding losses.

	Group	Company
	£'000	£'000
(b) Gains on investments
Gains on sales of securities based on historical cost	37,345	37,345
Movement in investment holding gains for the year	4,250	2,488
Net gains on investments	41,595	39,833

(c) Transaction costs

Investment transaction costs on purchases and sales of investments during the year to 30 September 2014 amounted to £1,411,000 and £881,000 respectively (2013: £778,000 and £626,000 respectively).

9. Subsidiary undertaking

The Group consists of the Company and its one subsidiary, BEST Securities Limited.
Name of undertaking	Principal activity	Country of incorporation and operation	Description of shares held	Proportion of nominal value of issued shares and voting rights held by:
				Company (%)	Group (%)
BEST Securities Limited	Dealing Subsidiary	England	Ordinary	100	100

10. Other receivables

	Company		Group
	2014	2013	2014	2013
	£'000	£'000	£'000	£'000
Sales for future settlement	-	3,305	-	3,305
Overseas tax recoverable*	2,542	2,640	2,542	2,640
Prepayments and accrued income	669	2,403	669	2,403
VAT recoverable	14	1	14	1
	3,225	8,349	3,225	8,349

* This relates to withholding tax in a number of countries which is in the process of being reclaimed and which the Company expects to receive in due course.

No amounts are past due or impaired. The carrying value approximates to fair value.

11. Other payables

	Company		Group
	2014	2013	2014	2013
	£'000	£'000	£'000	£'000
Purchases for future settlement	2,080	90	2,080	90
Amounts owed for share buybacks	2,786	870	2,786	870
Amounts owed to subsidiary undertakings	250	2,013	-	-
Other creditors	1,197	1,464	1,197	1,467
	6,313	4,437	6,063	2,427

The carrying value approximates to fair value.

12. Non-current liabilities

	Group & Company
	2014	2013
	£'000	£'000
8 1/8 per cent Debenture Stock 2023	14,936	14,928
	14,936	14,928

The movement on the 8 1/8 per cent Debenture Stock 2023 represents the amortisation of issue expenses. The market value of the Debenture Stock as at 30 September 2014 was £18.5 million (2013: £18.5 million). The effect on the NAV per share of deducting the Debenture Stock at market value rather than par is disclosed in note 15.

The mid-market price of the 8 1/8 per cent Debenture Stock 2023 as at 30 September 2014 was 123.50p (2013: 123.50p).

The Debenture Stock is secured by a floating charge over all of the assets of the Company.

Further information on the Debenture Stock is set out in the full Annual Report.

13. Provision for deferred tax

	Group & Company
	2014	2013
	£'000	£'000
Provided
In respect of the origination and reversal of temporary differences	-	(8)
	-	8
The movement in the provision for deferred taxation is as follows:
Opening balance	19	27
Charge to capital account	-	(8)
Closing balance	19	19

	2014	2013
	£'000	£'000
The deferred tax provision is made up as follows:
Equities Index Unsecured Loan Stock 2013	19	19
Closing balance	19	19

14. Called-up share capital (Group and Company)

	Ordinary Shares of 10p each
	Shares	Nominal value £'000
Authorised:
Balance throughout the year	245,000,000	24,500
Allotted, called up and fully paid:
Balance at beginning of year	160,014,089	16,001
Cancellation of Ordinary Shares	-	-
Balance at end of year	160,014,089	16,001
Treasury Shares:
Balance at beginning of year	(7,025,201)
Buyback of Ordinary Shares into treasury	(9,394,016)
Balance at end of year	(16,419,217)
Total Ordinary Share capital excluding Treasury Shares	143,594,872

During the year, 9,394,016 (2013: 5,106,097) Ordinary Shares with a nominal value of £939,401.60 and representing 5.87% of the issued share capital, were bought back and placed in treasury for an aggregate consideration of £47,058,009 (2013: £25,192,951). No Ordinary Shares were bought back for cancellation (2013: nil).

15. Net asset value

The net asset value per share and the net asset value attributable to the Ordinary Shares at the year end are calculated in accordance with their entitlements in the Articles of Association and were as follows:

	Net asset value per share attributable
	Group and Company
	2014	2013
	p	p
Ordinary Shares (basic)	575.92	551.97
	Net asset value attributable
	Group and Company
	2014	2013
	£'000	£'000
Ordinary Shares (basic)	826,984	844,455

The movement during the year of the Group assets attributable to the Ordinary Shares was as follows:

	2014	2013
	Ordinary	Ordinary
	Shares	Shares
	(basic)	(basic)
	£'000	£'000
Total net assets attributable at beginning of year	844,455	791,225
Ordinary Shares bought back and held in treasury	(47,058)	(25,193)
Total comprehensive income for the year	49,208	98,918
Dividends appropriated in the year	(19,621)	(20,495)
	826,984	844,455

Basic net asset value per Ordinary Share is based on net assets and on 143,594,872 (2013: 152,988,888) Ordinary Shares, being the number of Ordinary Shares in issue excluding Treasury Shares at the year end.

At the year end, the net asset value per Ordinary Share adjusted to include the Debenture Stock at market value rather amortised cost was 573.42p (2013: 549.62p).

16.  Analysis of cash and cash equivalents at end of year

	At			At
	30 September	Cash	Exchange	30 September
	2013	flow	movement	2014
	£'000	£'000	£'000	£'000
Group
Cash at bank and on deposit	7,126	78	(1,210)	5,994
Company
Cash at bank and on deposit	7,124	80	(1,210)	5,994

17.  Financial instruments and capital disclosures

Risk management policies and procedures

The investment objective of the Group is to achieve capital growth through a focused portfolio of investments, particularly in companies whose share prices stand at a discount to estimated underlying net asset value.

The Group's financial instruments comprise equity and fixed interest investments, cash balances and borrowings. The Group makes use of borrowings to achieve improved performance in rising markets. The risk of borrowings may be reduced by raising the level of cash balances or fixed interest investments held.

The Group may also enter into derivative transactions which comprise forward foreign exchange contracts (the purpose of which is to manage currency risk arising from the Group's investing activities) and quoted options on indices appropriate to sections of the portfolio (the purpose of which is to provide protection against falls in the capital values of the holdings). The Group has not used derivatives during the current financial year as part of its investment strategy.

The Board sets out its investment policies in the full Annual Report.

The Board and Investment Manager consider and review the risks inherent in managing the Group's assets which are detailed below.

Currency exposure	Sterling	Euro	CAD$	US$	Other	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 30 September 2014
Investments held at fair value through profit or loss that are monetary items	6,041	-	-	19,738	-	25,779
Other receivables	46	740	79	352	2,008	3,225
Cash and cash equivalents	5,852	-	141	-	1	5,994
Other payables	(3,983)	-	-	(2,080)	-	(6,063)
8 1/8% Debenture Stock 2023	(14,936)	-	-	-	-	(14,936)
Provision for deferred tax	(19)	-	-	-	-	(19)
Currency exposure on net monetary items	(6,999)	740	220	18,010	2,009	13,980
Investments held at fair value through profit or loss that are equities	116,173	227,409	84,331	194,967	190,124	813,004
Total net currency exposure	109,174	228,149	84,551	212,977	192,133	826,984

This exposure is representative at the Balance Sheet date and may not be representative of the year as a whole.

	Sterling	Euro	CAD$	US$	Other	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 30 September 2013
Investments held at fair value through profit or loss that are monetary items	86,865	-	-	43,183	-	130,048
Other receivables	1,035	1,085	3,535	309	2,385	8,349
Cash and cash equivalents	6,688	-	1	-	437	7,126
Other payables	(2,337)	-	-	(90)	-	(2,427)
8 1/8% Debenture Stock 2023	(14,928)	-	-	-	-	(14,928)
Provision for deferred tax	(19)	-	-	-	-	(19)
Currency exposure on net monetary items	77,304	1,085	3,536	43,402	2,822	128,149
Investments held at fair value through profit or loss that are equities	59,762	150,054	107,028	132,920	266,542	716,306
Total net currency exposure	137,066	151,139	110,564	176,322	269,364	844,455

The value of the Group's assets and the total return earned by the Company's shareholders can be significantly affected by foreign exchange rate movements as some of the Group's assets are denominated in currencies other than Pounds Sterling, the currency in which the Company's financial statements are prepared. It is not the Group's usual policy to hedge this risk. Income denominated in foreign currencies is converted to Pounds Sterling upon receipt.

During the year, the Company did not enter into any forward foreign exchange contracts. There were no open forward foreign exchange contracts as at 30 September 2014.

Over the year, the Pound Sterling strengthened against the Group's principal investing currencies, the US Dollar by 0.11% (2013: 0.28%), the Canadian Dollar by 8.84% (2013: 4.76%) and the Euro by 7.28% (2013: weakened 4.69%).

A 5% rise or decline of the Pound Sterling against foreign currency denominated (i.e. non Pound Sterling) assets and liabilities held at the year end would have decreased/increased the total return and net asset value by £35,891,000 (2013: £35,369,000).

Interest rate risk

Interest rate movements may affect:

• the fair value of investments in fixed-interest rate securities;

• the level of income receivable on cash deposits;

• the interest payable on variable rate borrowings; and

• the fair value of the Company's long term debt.

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions. The Company, generally, does not hold significant cash balances, with short-term borrowings being used when required.

The Debenture Stock, issued by the Company as a planned level of gearing, pays a fixed rate of interest and is carried in the Company's Balance Sheet at amortised cost rather than at fair value. Hence, movements in interest rates will not affect equity but may have an impact on the Company's share price and discount/premium, which is not likely to be material. Further information on the Debenture Stock is shown in note 12.

The exposure at 30 September of financial assets and financial liabilities to interest rate risk is shown by reference to:

●	·      floating interest rates
●	·      fixed interest rates

	At 30 September 2014 £'000	At 30 September 2013 £'000
Exposure to floating interest rates: Cash and cash equivalents	5,994	7,126

If the above level of cash was maintained for a year, a 1% increase/decrease in LIBOR would increase/decrease the revenue return and net assets by £60,000 (2013: £71,000).

		£'000
Exposure to fixed interest rates: Investments held at fair value through profit or loss 8 1/8 per cent Debenture Stock 2023 (fair value based on market prices)		25,779  (18,525)
		7,254

The impact of holding the Debenture Stock at fair value would be to reduce the Group's net assets by £3,589,000.

The maturity dates and the nominal interest rates on the investments held at fair value through profit or loss are shown in the Investment Portfolio above. The weighted average effective interest rate on these investments is 0.15% (2013: 0.20%).

The Company's fixed income portfolio at the year end was valued at £25,779,000 (2013: £130,048,000). A 1% increase/decrease in relevant market interest rates would be expected to decrease/increase the portfolio's value by approximately £58,000 (2013: £378,000), all other factors being equal.

The fair value of the Company's Debenture Stock at the year end was £18,525,000 (2013: £18,525,000). A 1% increase/decrease in the applicable interest rates would be expected to decrease/increase the fair values of the Debenture Stock by approximately £1,198,000 (2013: £1,208,000), all other factors being equal.

Market price risk

The management of market price risk is part of the fund management process and is typical of equity investment. The portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis with the objective of maximising overall returns to shareholders. Further information on the Investment Portfolio is set out above.

If the fair value of the Group's investments at the year end increased or decreased by 10%, then it would have had an effect on the Group's capital return and equity equal to £83,878,000 (2013: £84,635,000).

Liquidity risk

The Company's assets mainly comprise readily realisable securities which can be easily sold to meet funding commitments, if necessary. Unlisted investments in the portfolio are subject to liquidity risk. The risk is taken into account by the Directors when arriving at their valuation of these items.

The remaining contractual payments on the Group's financial liabilities at 30 September, based on the earliest date on which payment can be required was as follows:

	In 1 year or less £'000	In more than 1 year but not more than 2 years  £'000	In more than 2 years but not more than 3 years £'000	In more than 3 years but not more than 10 years £'000	Total £'000
At 30 September 2014
81/8% Debenture Stock 2023	(1,219)	(1,219)	(1,219)	(22,007)*	(25,664)
Other payables	(6.063)	-	-	-	(6,063)
Deferred tax	(19)	-	-	-	(19)
	(7,301)	(1,219)	(1,219)	(22,007)	(31,746)
		In more than	In more than	In more than
		1 year but	2 years but	3 years but
	In 1 year	not more	not more	not more
	or less £'000	than 2 years £'000	than 3 years £'000	than 11 years £'000	Total £'000
At 30 September 2013
8 1/8 % Debenture Stock 2023	(1,219)	(1,219)	(1,219)	(23,228)*	(26,885)
Other payables	(2,427)	-	-	-	(2,427)
Deferred tax	-	(19)	-	-	(19)
	(3,646)	(1,238)	(1,219)	(23,228)	(29,331)

* Comprises the remaining interest payments to 2023, together with the principal to be repaid in 2023.

Credit risk

Credit risk is mitigated by diversifying the counterparties through whom the Investment Manager conducts investment transactions. The credit standing of all counterparties is reviewed periodically with limits set on amounts due from any one counterparty.

The total credit exposure of the Group at the year end as shown on the Balance Sheet and Investment Portfolio was £34,998,000 (2013: £145,522,000).

The total credit exposure represents the carrying value of fixed income, cash and receivable balances and totals £34,998,000 (2013: £145,522,000), as detailed in the table above.

Fair values of financial assets and financial liabilities

Except for the Group's Debenture Stock measured at amortised cost as shown below, the financial assets and financial liabilities of the Group are either carried in the Balance Sheet at their fair value (investments), or the Balance Sheet amount is a reasonable approximation of fair value (due from brokers, dividends receivable, accrued income, cash at bank and due to brokers).

		2014		2013
	Book value £'000	Fair value £'000	Book value £'000	Fair value               £'000
8 1/8% Debenture Stock 2023	(14,936)	(18,525)	(14,928)	(18,525)

Quoted market prices have been used to determine the fair value of the Group's Debenture Stock.

The fair value of the Group's unquoted investments is measured by the Directors using valuation methodologies in accordance with IPEVC guidelines.

Valuation of financial instruments

The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements. Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant assets as follows:

●	Level 1 - valued using quoted prices unadjusted in active markets for identical assets or liabilities.
●	Level 2 - valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included within Level 1.
●	Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data for the asset or liability.

The tables below set out fair value measurements of financial instruments as at the year end, by the level in the fair value hierarchy into which the fair value measurement is categorised.

Financial assets at fair value through profit or loss at 30 September 2014

	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Equity investments	810,388	-	2,616	813,004
Fixed interest bearing securities	25,779	-	-	25,779
	836,167	-	2,616	838,783

Financial assets at fair value through profit or loss at 30 September 2013

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Equity investments	710,123	-	6,183	716,306
Fixed interest bearing securities	130,048	-	-	130,048
	840,171	-	6,183	846,354

The valuation techniques used by the Company are explained in the accounting policies note. There have been no transfers during the year between Levels 1 and 2.

A reconciliation of fair value measurements in Level 3 is set out below.

Level 3 financial assets at fair value through profit or loss at 30 September

	2014  £'000	2013   £'000
Opening fair value	6,183	4,492
Transfer from Level 1 to Level 3 investment	-	5,296
Purchases at cost	935	-
Sales - proceeds	(196)	-
Total gains/(losses) included in gains on investments in the Consolidated Statement of Comprehensive Income
- on sold assets	(5,100)	-
Movement in investment holding gains/(losses)
- reversal of unrealised depreciation upon realisation	5,235	-
- movement in unrealised appreciation/(depreciation)	(4,441)	(3,605)
Closing fair value	2,616	6,183

The closing fair value as at 30 September 2014 comprises an investment in Mitra Energy Limited which is held at Directors' valuation. The valuation at year-end was based on the proposed exchange ratio for a reverse take-over by Mitra Energy of Petra Petroleum, a Canadian-listed company.

Capital management policies and procedures

The structure of the Company's capital is described in note 14 and details of the Company's reserves are shown in the Statement of Changes in Equity.

The Company's capital management objectives are:

●	to ensure that it will be able to continue as a going concern; and
●	to achieve capital growth through a focused portfolio of investments, particularly in companies whose share prices stand at a discount to estimated underlying net asset value; through an appropriate balance of equity capital and debt.

The Board, with the assistance of the Investment Manager, regularly monitors and reviews the broad structure of the Group's capital on an ongoing basis. These reviews include:

●	the level of gearing, which takes account of the Group's position and the Investment 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.

The Group's objectives, policies and processes for managing capital are unchanged from last year.

The Group is subject to externally imposed capital requirements:

a)	as a public company, the Company is required to have a minimum share capital of £50,000; and
b)	in accordance with the provisions of sections 832 and 833 of the Companies Act 2006, the Company, as an investment company:
	i)	is only able to make a dividend distribution to the extent that the assets of the Company are equal to at least one and a half times its liabilities after the dividend payment has been made; and
	ii)	is required to make a dividend distribution each year such that it does not retain more than 15% of the  income that it derives from shares and securities.

These requirements are unchanged since last year and the Group has complied with them at all times.

18. Contingencies, guarantees and financial commitments

In June 2007, the European Court of Justice ruled that investment management fees should be exempt from VAT, and in early November 2007 HM Revenue & Customs decided not to contest that ruling. The Board is taking steps to reclaim such Back VAT on investment management fees as it can and has recovered £3,603,575 up to the date of this report.

While most of the Back VAT has now been recovered, the Company is taking further steps to recover Back VAT and interest, but does not anticipate any further significant recovery in the near term.

At 30 September 2014, the Group had no financial commitments (2013: £nil).

At 30 September 2014, the Group had no contingent liability in respect of any investments carrying an obligation for future subscription or underwriting commitments (2013: £nil).

At 30 September 2014, the Group had a contingent liability pursuant to an Indemnity given to Caledonia Investments plc ('Caledonia') in respect of sums received from Caledonia by way of repayment of VAT (the 'VAT Refund') paid by the Company between 1991 and 1995 on investment management fees to Caledonia. This Indemnity is against any amounts of VAT (including any interest or penalties) Caledonia is liable to repay to HM Revenue & Customs in respect of the VAT Refund, together with all reasonable costs, charges and expenses incurred by Caledonia in enforcing its rights under the Indemnity. The Company's liability under the Indemnity shall not exceed the amount of the VAT Refund received from Caledonia which amounted to £619,178 (including simple interest of £263,337).

19.  Related party disclosure

The related party transaction pursuant to the Investment Management Agreement with Asset Value Investors Limited is set out above. Management fees for the year amounted to £5,909,000 (2013: £4,706,000).

As at the year end, the following amounts were outstanding in respect of management fees: £495,000 (2013: £392,000).

Strone Macpherson is Chairman of Close Brothers Group plc, the ultimate parent of Winterflood Securities Limited which acts as the Company's Corporate Broker which is paid a retainer of £25,000 per annum by the Company, of which £nil was outstanding at the year end.

20.  Post balance sheet events

Since the year end the Company has completed the following transactions in its own shares:

Shares bought back and held in treasury

Date	Number of Ordinary Shares	Cost £'000
3 October 2014	159,359	817
10 October 2014	343,000	1,747
16 October 2014	88,500	436
17 October 2014	59,000	289
24 October 2014	215,517	1,066
31 October 2014	194,452	986
	1,059,528	5,341

There are no further post balance sheet transactions that require disclosure or adjustment in the financial statements.

 

END

 

 

FR UBAKRSVAARAA