Annual Financial Report

RNS Number : 4913A

Edinburgh Worldwide Inv Trust PLC

22 December 2014

 

Edinburgh Worldwide Investment Trust plc

Annual Financial Report

A copy of the Annual Report and Financial Statements for the year ended 31 October 2014 has been submitted electronically to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM.

The Annual Report and Financial Statements for the year ended 31 October 2014 including the Notice of Annual General Meeting are also available on Edinburgh Worldwide's page of the Baillie Gifford website at:http://www.edinburghworldwide.co.uk

The unedited full text of those parts of the Annual Report and Financial Statements for the year ended 31 October 2014 which require to be published by DTR 4.1 is set out on the following pages.

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

Baillie Gifford & Co Limited

Company Secretaries

22 December 2014

Chairman's Statement

Investment Policy

Following shareholder approval at the Company's Annual General Meeting in January 2014, the Company's investment policy was broadened to that of investing principally in smaller, less mature companies at the time of initial investment (96.7% vote in favour). As of 1 February 2014 the portfolio had been largely reorganised to reflect this. This has resulted in a broader portfolio with 92 stocks held at the year end compared to 38 last year and the portfolio management responsibility being passed onto Douglas Brodie.

Investment Performance

In the year to 31 October 2014, the Company's net asset value per share decreased by 2.7% and the share price by 4.9%. The comparative index* increased by 1.1% in sterling terms during this period. At 31 October 2014 the discount was 8.5% compared to 6.3% at the previous year end, however over the year to 31 October 2014 the discount averaged 5.5% compared to 11.4% over the previous year.

Although the reorganised portfolio initially performed well, absolute and relative performance were impacted negatively during March and April due to a seemingly indiscriminate sell-off in technology and biotech stocks, an area of the market to which the portfolio is exposed. This resulted in the Company underperforming its comparative index in the first half of the financial year. Performance over the second half has been better, with the Company's net asset value increasing 11.6% and the comparative index 4.3%, although this has not been sufficient to result in positive relative and absolute returns for the year.

This is naturally a frustrating outcome, nonetheless, the Board and Managers are convinced of the long term merits of the investment approach employed. Research continues to be focussed on selecting growth companies and portfolio construction is driven by the merits of individual companies, rather than any sector or geographic asset allocation, in order to pursue long term capital appreciation. The strategy employed is an extension of that used previously and, although focusing on taking a stake in companies at an earlier stage in their growth cycle, the companies are expected to be held for the long term, and as their businesses develop and mature they should become much larger.

Over the nine months since reorganisation of the portfolio, the Company's net asset value per share decreased by 3.7% and the share price by 4.9%. The comparative index increased by 4.8% in sterling terms during this period. Over the eleven years that Baillie Gifford has been managing the Company's assets, in total return terms, net asset value per share has increased by 185%, the share price by 230% and the comparative index by 140%.

Gearing

The Managers invest in companies that are believed to have long term attractions and the Company will therefore typically be geared to maximise potential returns. Gearing was maintained throughout the year and was 10% of shareholders' funds at the year end (2013: 8%).

The Company's three year fixed rate multi-currency loan from National Australia Bank Limited of £10.0 million, €11.4 million and US$16.35 million matured in September 2014. It was replaced with a five year fixed rate multi-currency loan from National Australia Bank Limited of £7.5 million, €9.4 million and US$25.6 million.

Earnings and Dividend

The Company's objective is that of generating capital growth. Any income received from the underlying holdings is a by-product of this. It was highlighted in the half-year report that, due to a lower yield on the underlying portfolio, earnings for the year were expected to be lower than in previous years.

The net revenue return per share for the year was 0.14p, notably lower than the 1.68p in 2013. An unchanged final dividend of 1.50p per share is being recommended, making a total of 2.00p for the year. The shortfall against the revenue return will be met from the revenue reserve which has been accumulated over the years. As the Company's objective is capital growth, it is not intended to draw on the revenue reserve in future years and any dividend will be paid as a final dividend.

Alternative Investment Fund Managers Directive ('AIFMD')

In order to comply with the AIFMD, the Company has appointed Baillie Gifford & Co Limited as its Alternative Investment Fund Manager ('AIFM') with effect from 1 July 2014. Baillie Gifford & Co Limited was also appointed Company Secretaries with effect from 1 July. The AIFM has delegated portfolio management to Baillie Gifford & Co; therefore the Company's portfolio continues to be managed by Baillie Gifford & Co. The management fee and notice period are unchanged under these new arrangements.

The Company appointed BNYM Mellon Trust & Depositary (UK) Limited as its Depositary as of 1 July 2014. The Depositary has delegated the provision of custody services to The Bank of New York Mellon SA/NV.

Annual General Meeting

The Annual General Meeting of the Company will be held at Baillie Gifford's offices in Edinburgh at 12 noon on Thursday 29 January 2015. The Company will again seek to renew its share buyback, issuance and treasury share powers. Further information on these resolutions can be found on page 19 of the Annual Report and Financial Statements.

Douglas Brodie and John MacDougall, the portfolio's manager and deputy manager, will give a presentation and answer any questions. The Board will also be available to respond to any questions that you may have. I hope that you will be able to attend.

Outlook

Successful smaller companies create their own long term opportunities and these are only very marginally influenced by the prevailing economic conditions over the investment cycle. Fundamentals will ultimately prevail. Nonetheless short term macro developments do influence investor sentiment and impact trading conditions for businesses. This in turn results in periods of notable market volatility. Your Company is not immune from this and will at times have volatile performance and perform differently to the comparative index.

Although the US Federal Reserve has concluded its bond purchasing programme, the Bank of Japan has announced an additional ¥10tr in monetary easing and the Japanese Government Pension Investment Fund has announced its intention to increase its holding in domestic equities from 12% to 25%. Elsewhere, Europe continues to be stubbornly unresponsive to stimulus measures, the UK is performing better than many predicted while China's economic growth remains somewhat subdued in comparison to recent years as it moves from an export to consumption led economy. All these factors have and will continue to fuel market volatility.

The current global business environment is unprecedented with regard to innovation and the ever increasing role played by technology in both building new businesses and disrupting incumbents. In this more dynamic world, it is the nimble, more innovative smaller businesses that are best positioned to prosper as they lack the bureaucracy of larger incumbents while the technology at their disposal has radically changed both the trajectory and magnitude of growth that a small business can achieve. Assessing what is proven and tangible alongside what has promise and long term potential is vital. Being able to identify the companies that value innovation, which have both a cultural acceptance of it and a means to develop commercial opportunities around it, is key to unearthing the market leaders of the future, and is a key focus for the Managers.

David HL Reid

Chairman

11 December 2014

*    MSCI All Countries World Index (in sterling terms) until 31 January 2014, thereafter the S&P Citigroup Global Small Cap Index (in sterling terms). The index data has been chain linked to form one comparative index figure.

Past performance is not a guide to future performance.

Managers' Review

In bringing Edinburgh Worldwide towards the opportunity in smaller, less mature companies, we believe that we are focusing on the part of the market where analytical focus and the pursuit of genuinely transformational growth can be better exploited. While the initial focus is now more explicitly on younger, more immature companies, we are looking to retain the strong growth philosophy that served Edinburgh Worldwide well over the past decade. By identifying attractive opportunities earlier we seek to benefit from growth at an earlier stage in a company's lifecycle and retain ownership of successful businesses as they grow and thrive, as such we ultimately see our role as investing in what are potentially the larger companies of the future.

We seek to understand the factors that differentiate a company and how it might evolve into the opportunity ahead of it; it is a fundamental approach that requires patience and an acceptance that success (or indeed failure) of a company is more often determined by the individual company's actions rather than what is happening with the economy at large. At times, such an approach is likely to be out of kilter with the myopic gyrations and sentiment-led exaggerations of stock markets. The near-term uncertainty arising from the ending of quantitative easing in the US and a tepid near term global economic outlook has painted an unhelpful backdrop for share prices of many smaller companies, especially those that are (in our opinion) sensibly investing at the expense of near-term profitability. Whilst frustrating, we believe such oscillations are part of modern investing and believe they should be viewed as creating opportunities for those with longer time horizons.

With the Company moving to its broadened remit on 1 February 2014, the year to end of October captures an initial 3 months of the historic portfolio. On account of the intra-period change in remit and move to a more diversified list of holdings we find it difficult to generalise with regard to the operating performance of the companies held, hence have limited commentary on specific stocks to where we think progress has been particularly noteworthy.

Tesla was amongst ten stocks that were retained in the portfolio over the full financial year. The company continues to make significant progress at scaling its production capabilities which, in combination with an expansion of the product range and a sizable investment in battery technology, gives us mounting confidence that it can further reinforce its position as an innovative disruptor in the global automotive industry.

During the past year the Company benefitted from encouraging developments at several of its healthcare companies. Newly listed 4D Pharma, a UK based biotechnology company developing natural bacteria-derived therapeutics, made good progress in bringing its products towards the clinic and we are excited about the numerous potential applications and comparative simplicity of the approach. Alnylam, a Boston-based biotechnology company developing therapeutic gene silencing technology, published encouraging trial data highlighting the clinical benefit of its innovative approach. With Alnylam's modular drug development platform now being used to address multiple areas of high or unmet medical need we believe the company can pioneer a new wave of highly efficient and targeted therapies. Illumina, the San Diego based manufacturer of DNA sequencing machines benefitted from ongoing robust adoption of sequencing in both the healthcare and research setting. This was stimulated in part by new products that further lower the cost of sequencing a human genome. We expect DNA sequencing to play an important role in healthcare over the coming decades but with the emergence of competing technologies, and arguably the bigger challenge being how best to make use of all the genetic information rather than sequencing per se, we elected to sell the holding in Illumina.

We have frequently observed that online aggregators can make for very attractive investment prospects given their scalability and network effects that they can build. In this regard we would highlight Bitauto and Zillow. Bitauto is a leading provider of internet content and marketing services for China's fast-growing automotive industry. The company is benefitting as more automotive advertising moves online and has significant potential in catering to the early stage second hand car market. Zillow, the leading online real estate portal in the US, announced the acquisition of its smaller peer Trulia. The combined entity will have a dominant position as the portal favoured by both house buyers and real estate agents and is well positioned to capture a significantly higher share of agent advertising spend in future years. Two holdings were taken over in the period; Opentable, an online restaurant booking network was acquired by Priceline and AutoNavi, a Chinese mapping company was acquired by Alibaba.

Disappointingly several of the Company's holdings suffered share price falls during the sell-off in growth and technology shares that occurred in March and April; this included online grocer Ocado and cloud-based accounting software company, Xero. In the case of two UK holdings, Xaar and ASOS, these falls were exacerbated by disappointing near-term trading, a clear reminder that young innovative businesses rarely grow in a smooth linear fashion. With regard to all four of these underperforming companies we have reassessed the investment case and have decided to retain the holdings.

Trading in the period was dominated by the reorganisation following the Annual General Meeting. Subsequent to this the Company acquired positions in a number of new holdings including Financial Engines, an investment advisor focused on providing highly scalable advice on US 401k retirement plans, and Foundation Medicine, a diagnostics company that is commercialising a comprehensive genetic test that maps the molecular changes that occur in cancer and uses this to guide patient specific treatments. The Company's holding in the US home services review network, Angie's List, was sold following disappointing results that raised questions as to how much value tradesmen derive from the network.

While cognisant of economic uncertainties, we continue to believe that there is a broader structural theme at work that is ultimately more relevant to long term bottom-up investors; that theme relates to innovation and the ever increasing role played by technology in building and growing businesses.

Investment Philosophy

Most small businesses are destined to stay small given their limited scope for both structural growth and meaningful differentiation. Such businesses constitute the bulk of the smaller companies' universe yet are of no appeal to us. However, what is intriguing about the smaller companies' universe is that it contains a subset of immature but potentially high growth companies. By identifying attractive growth companies earlier we seek to benefit from growth at an earlier stage in a company's lifecycle and retain ownership of successful companies as they grow and thrive; we see our role as investing in what are potentially the larger companies of the future as opposed to the smaller companies of today.

In refocusing the Company's remit towards the opportunity initially offered by smaller companies, we are looking to concentrate on the part of the market where we believe our analytical effort and the pursuit of genuinely Transformational growth can be better exploited. Although the focus at time of initial investment has shifted towards younger, more immature companies, the emphasis on strong growth and the global philosophy that has served the Company well over recent years is retained; in this regard it is notable that 10 of the 38 holdings held at the start of the period were retained, which now make up about 20% of the portfolio.

It is important to remember that big successful ideas typically start out as small, tentative and unproven. Early iterations are easy to dismiss as unworkable but experimentation with, and evolution of, an initially raw concept can, over time, yield huge commercial relevance. Our philosophy involves weighing up what is proven and tangible alongside what has promise and long term potential. Integral to this approach is recognising the role of innovation in business development; it provides the fuel for business creation, growth and long term competitive differentiation. Consequently, identifying companies that value innovation, having both a cultural acceptance of it and a means to develop commercial opportunities around it, is fundamental to our investment approach.

Innovation is at its most powerful when it creates novel platforms with wide ranging relevance. While technology platforms can come in many forms they appeal because validation of the initial platform can create emerging winners with a very large and highly scalable opportunity. We would highlight the holding in the biotechnology company, Alnylam, as a case in point. Here is a company which is pioneering the development of highly specific gene suppression technology which, given the modular nature of its drug platform, can be customised to treat a wide range of genetically-linked disorders. Another example would be Ocado, which is at the forefront of using automation and digitisation to create a globally-relevant platform for online grocery. All too frequently we believe the market underestimates the long term relevance of platform-based companies as it tends to obsess about their immediate relevance and near-term financial characteristics.

Growth companies, especially those which are young and hard to model, are difficult businesses to value. The wide range of potential outcomes and profitability that is heavily skewed to future years is a combination of uncertainties that many investors struggle with. We do not have all the answers but by approaching the challenge with a genuine long term perspective, accepting a degree of uncertainty, backing robust innovation and entrepreneurial management, we believe we are well positioned to identify the smaller businesses most likely to shape the world in which we live. As technological advancements encroach into an increasing pool of opportunity, the rate and extent of growth that a small business can achieve, in a relatively short period of time, is almost unrecognisable to that of a few years ago. Innovative smaller business that are unburdened by the legacy of historic business practices, or those willing to adapt to change, are best positioned to harness this opportunity.

Portfolio Performance 31 October 2014

Name		Business		Fair value 2014 £'000		% of total assets	Performance†			Fair value 2013 £'000
							Absolute %	Relative %
Alnylam   Pharmaceuticals		Therapeutic gene silencing		10,121		4.3	13.2	5.8		-
IP Group		Intellectual property   commercialisation		8,631		3.6	53.4*	45.2*		2,933
Stratasys		3D printer manufacturer		7,641		3.2	7.1*	1.4*		3,735
Tesla Motors		Electric cars		6,784		2.9	52.4*	44.3*		1,350
MarketAxess		Electronic bond trading platform		6,673		2.8	9.0	1.9		-
Zillow		US online real estate portal		6,172		2.6	37.0	28.1		-
TripAdvisor		Online travel review platform		6,123		2.6	7.6*	1.9*		5,689
LinkedIn		Professional networking site		5,190		2.2	2.8*	(2.7)*		5,044
Dexcom		Real time blood glucose monitoring		4,887		2.1	26.9	18.6		-
IPG Photonics		Produces high-power fibre lasers   and amplifiers		4,485		1.9	2.8	(3.9)		-
IMAX		Film and cinema equipment		4,392		1.8	12.2	4.9		-
Genomic Health		Genomic-based clinical diagnostic tests for cancer		4,207		1.8	20.9	13.0		-
Novadaq Technologies		Medical systems for intra-surgical   imagining		3,978		1.7	(23.0)	(28.1)		-
Ocado		Online food retailer		3,965		1.7	(51.2)	(54.4)		-
4D Pharma		Bacteria derived novel therapeutics		3,900		1.6	285.8	261.4		-
iRobot		Domestic and military robots		3,810		1.6	5.9*	0.3*		2,955
Morphosys		Therapeutic antibodies		3,796		1.6	8.7	1.6		-
Dialog Semiconductor		Analogue chips for mobile phones		3,791		1.6	71.8	60.6		-
Seek		Online recruitment portal		3,642		1.5	39.2	29.9		-
Financial Engines		Investment advisory firm		3,612		1.5	(27.3)	(29.5)		-
Bitauto		Chinese automotive website		3,474		1.5	176.4	158.4		-
EPAM Systems		Outsourced software and services		3,420		1.4	19.2	11.4		-
Aerovironment		Small unmanned aircraft systems		3,292		1.4	10.0	2.9		-
Faro Technologies		Designs and develops measurement  devices		3,252		1.4	10.6	3.4		-
Splunk		Data diagnostics		3,199		1.3	5.7*	0.1*		330
Seattle Genetics		Antibody conjugates based biotechnology		3,106		1.3	(4.7)*	(9.8)*		3,256
Nanoco		Quantum dot manufacturer		2,999		1.3	(1.9)	(7.7)		-
Imagination   Technologies		Graphics semiconductor designer		2,888		1.2	1.6	(5.0)		-
M3		Online medical database		2,876		1.2	12.6	5.1		-
Temenos		Banking software		2,860		1.2	5.6	(1.3)		-
Genus		Animal breeding services		2,721		1.1	(16.3)	(21.8)		-
Wirecard		Internet payment and processing     services		2,684		1.1	(14.5)	(20.1)		-
Renishaw		Measurement and calibration   equipment		2,500		1.1	(2.1)	(8.5)		-
Cosmo Pharmaceuticals		Therapies for gastrointestinal   diseases		2,498		1.1	57.1	50.4		-
Acacia Research		Patent licenser		2,498		1.1	38.0	29.0		-
Stamps.com		Website for postage services		2,474		1.0	(1.4)	(7.8)		-
Oxford Instruments		Produces advanced instrumentation   equipment		2,408		1.0	(35.8)	(40.0)		-
MonatoRO		Online business supplies		2,370		1.0	23.9	15.7		-
MakeMyTrip		Online travel services		2,336		1.0	45.3	35.8		-
FEI		Electron microscopes		2,302		1.0	(4.0)*	(9.1)*		4,696
ASOS		Online fashion retailer		2,258		0.9	(55.8)	(58.7)		-
AKR Corporindo		Distributes chemical products		2,221		0.9	15.5	9.6		-
Digital Garage		Internet business incubator		2,177		0.9	(51.5)	(54.7)		-
Victrex		High-performance thermo-plastics		2,153		0.9	(3.0)	(9.4)		-
AAC Technologies		Miniature acoustic components		2,085		0.9	44.5	35.0		-
Xeros		Commercial laundry manufacturer		1,947		0.8	5.3	3.0		-
Rightmove		UK online property portal		1,899		0.8	(14.8)	(20.4)		-
SDL		Language translation services		1,882		0.8	12.0	4.7		-
Start Today		Internet fashion retailer		1,849		0.8	(2.3)	(8.8)		-
Xing		Professional networking		1,844		0.8	2.0	(4.6)		-
Xero		Cloud-based accounting software		1,843		0.8	(63.1)	(65.6)		-
Teradyne	Semiconductor testing equipment   manufacturer		1,725		0.7		(0.3)		(6.8)	-
Retroscreen Virology	Outsourced pre-clinical analytical   services		1,710		0.7		2.2		(5.3)	-
Senomyx	Developer of additives to amplify   certain flavours in foods		1,708		0.7		(0.5)		(3.0)	-
Perform	Commercialises online sports rights		1,666		0.7		11.1		3.9	-
CTS Eventim	Event ticketing and promotion		1,657		0.7		2.7		(4.0)	-
Foundation Medicine	Develops cancer diagnostic   technology		1,618		0.7		21.8		17.0	-
Xaar	Ink jet printing technology		1,594		0.7		(74.2)		(75.9)	-
Basware	Software solutions for financial   transactions		1,558		0.7		31.1		22.6	-
Abcam	Scientific reagent supplier		1,551		0.7		(23.2)		(28.2)	-
Barco	Designs and develops visualisation   solutions		1,543		0.6		3.9		(3.0)	-
Next	Provides online property information		1,540		0.6		(42.8)		(46.6)	-
Galapagos	Developer of novel model of action   therapeutics		1,459		0.6		(39.8)		(43.7)	-
Exa	Simulation software and services		1,333		0.6		(21.0)		(26.1)	-
Power Integrations	Analogue integrated circuits		1,318		0.5		(12.3)		(18.0)	-
Sarine Technologies	Systems for diamond grading and   cutting		1,239		0.5		61.2		50.6	-
Intelligent Energy   Holding	Developer of modular fuel cells		1,234		0.5		(38.2)		(38.7)	-
Genomma Lab	Distributes over-the-counter drugs   and personal care products		1,228		0.5		(0.0)		(5.3)	-
Zumtobel	Commercial lighting		1,144		0.5		(8.5)		(14.6)	-
Horizon Discovery	Customised cell lines to aid drug   discovery		1,140		0.5		(14.2)		(16.7)	-
Yoox	Online luxury fashion retailer		1,073		0.5		(51.4)		(54.6)	-
Intralinks	Secure collaboration tools		1,051		0.4		(20.7)		(25.8)	-
Cellectis	Biotech focused on genetic   engineering		1,045		0.4		180.2		161.6	-
Noah	Distributes wealth management   products in China		922		0.4		18.7		10.9	-
Ricardo	Automotive engineer		902		0.4		2.7		(4.0)	-
Thin Film Electronics	Develops printed, rewritable   memory media		895		0.4		(32.8)		(37.3)	-
Just Dial	Offers a search engine to users   throughout India		849		0.4		13.8		7.0	-
Ceres Power Holding	Developer of fuel cell		821		0.3		(7.9)		(10.1)	-
Velocys	Gas to liquid technology		752		0.3		26.9		18.6	-
Suss Microtec	Fabrication and inspection   equipment		724		0.3		(35.4)		(39.6)	-
Oisix	Organic food website		724		0.3		(53.0)		(56.1)	-
China Financial Services	SME lending in China		716		0.3		(28.7)*		(32.5)*	1,030
Avacta Group	Analytical reagents and   instrumentation		682		0.3		(30.5)		(34.5)	-
Medgenics	Therapeutic protein delivery   technology		674		0.3		(25.2)		(30.1)	-
Tissue Regenix	Regenerative medical devices		657		0.3		2.3		(4.5)	-
C4X Discovery Holdings	Rational drug design and   optimisation		651		0.3		(0.0)		(6.0)	-
Summit Corporation	Drug discovery and development		533		0.2		(24.2)		(27.8)	-
Westport Innovations	Natural gas engine technology		418		0.2		(62.0)		(63.2)	-
Kingdee	Enterprise management software		408		0.2		(9.4)		(15.4)	-
Applied Graphene Materials	Manufactures grapheme   nanoplatelets		228		0.1		(27.4)		(31.7)	-
GI Dynamics	Develops and markets medical   devices		207		0.1		(64.1)		(66.5)	-
China Lumena New   Materials	Mines, processes and manufactures   natural thenardite products		-		-		(100.0)		(100.0)	-
Total equities			227,012		95.7
Net liquid assets			10,212		4.3
Total assets at fair value #			237,224		100.0

†      Absolute and relative performance has been calculated on a total return basis over the period 1 November 2013 to 31 October 2014 (performance figures for investments bought during the period are part-period returns - see note below). Absolute performance is in sterling terms; relative performance is against S&P Citigroup Global Small Cap Index (in sterling terms).

*     Investments marked with an asterisk were held at 31 October 2013; the performance for these investments is for the year to 31 October 2014. All other investments were purchased following the portfolio re-organisation and their performance figures are part-period returns.

#    Before deductions of loan

Source: Baillie Gifford/StatPro.

Past performance is not a guide to future performance.

Geographical Distribution of Total Assets

				At 31 October 2014 %	At 31 October 2013 %
North America				47.0	51.8
		USA		45.2	51.8
		Canada		1.8	-
South America				0.5	-
	Mexico			0.5	-
Europe				34.9	24.3
	United Kingdom			22.8	5.4
	Eurozone			9.4	13.5
	Developed Europe (non euro)			2.7	5.4
Asia				10.9	18.5
	Japan			4.8	1.4
	China			2.4	14.7
	Hong Kong			0.9	-
	India			1.4	2.4
	Indonesia			0.9	-
	Singapore			0.5	-
Australasia				2.4	-
	Australia			1.6	-
	New Zealand			0.8	-
Total equities				95.7	94.6
Net liquid assets				4.3	5.4
Total assets (before deduction of loan)				100.0	100.0

Sectoral Distribution of Total Assets

	At 31 October 2014 %	At 31 October 2013 %
Information Technology	35.7	37.8
Health Care	23.4	10.0
Consumer Discretionary	16.9	31.9
Industrials	9.1	5.0
Financials	8.6	3.6
Materials	1.7	-
Energy	0.3	-
Consumer Staples	-	6.3
Total equities	95.7	94.6
Net liquid assets	4.3	5.4
Total assets (before deduction of loan)	100.0	100.0

Investment Changes

	Valuation at 31 October 2013 £'000	Net acquisition/ (disposals) £'000	Appreciation/ (depreciation) £'000	Valuation at 31 October 2014 £'000
Equities:
North America
USA	125,411	(29,190)	10,850	107,071
Canada	-	3,934	458	4,392
South America
Mexico	-	1,229	(1)	1,228
Europe
United Kingdom	13,082	52,526	(11,336)	54,272
Eurozone	32,553	(6,759)	(3,476)	22,318
Developed Europe (non euro)	13,043	(7,672)	882	6,253
Asia
Japan	3,359	12,699	(4,522)	11,536
China	35,811	(34,730)	4,439	5,520
Hong Kong	-	1,481	604	2,085
India	5,766	(2,569)	(12)	3,185
Indonesia	-	1,985	236	2,221
Singapore	-	879	360	1,239
Australasia
Australia	-	3,111	738	3,849
New Zealand	-	5,015	(3,172)	1,843
Total equities	229,025	1,939	(3,952)	227,012
Net current assets	12,944	(2,888)	156	10,212
Total assets	241,969	(949)	(3,796)	237,224

Distribution of Total Assets* by Industry

		Industry Analysis 31 October 2014 %		Portfolio Weightings (relative to comparative index†) at 31 October 2014 %
	Biotechnology	11.5		9.0
	Internet Software and Services	8.9		7.3
	Electronic Equipment, Instruments and Components	7.9		5.3
	Internet and Catalogue Retail	7.8		7.2
	Semiconductors and Semiconductor Equipment	5.6		3.5
	Software	5.6		2.9
	Capital Markets	5.5		2.7
	Media	4.6		1.9
	Computers and Peripherals	4.3		3.7
	Health Care Equipment and Supplies	4.2		2.2
	IT Services	3.4		1.5
	Pharmaceuticals	3.2		1.7
	Life Sciences Tools and Services	3.0		2.2
	Professional Services	3.0		1.8
	Automobiles	2.9		2.7
	Diversified Financial Services	2.8		1.7
	Trading Companies and Distributors	1.9		0.5
	Chemicals	1.7		(1.6)
	Household Durables	1.6		(0.6)
	Machinery	1.5		(3.0)
	Health Care Technology	1.5		1.2
	Aerospace and Defence	1.4		0.1
	Electrical Equipment	1.3		0.2
	Energy Equipment and Services	0.3		(1.2)
	Consumer Finance	0.3		(0.3)
	Net Liquid Assets	4.3
Total assets		100.0
* Total assets before deduction of bank loan
† S&P Citigroup Global Small Cap Index. Weightings exclude industries where the Company has no exposure.

Related Party Transactions

The Directors' fees for the year are detailed in the Directors' Remuneration Report on page 25 of the Annual Report and Financial Statements.

No Director has a contract of service with the Company. During the year no Director was interested in any contract or other matter requiring disclosure under section 412 of the Companies Act 2006.

Management Fee Arrangements

Details of the investment management agreement are disclosed on page 18 of the Annual Report and Financial Statements. The annual management fee is 0.95% on the first £50m of net assets and 0.65% on the remaining net assets, calculated quarterly. Prior to 1 April 2013 the fee was 0.80% per annum of the market value of the Company's shares, calculated quarterly, plus a performance fee. No  performance fee was payable for the period to 31 March 2013 and none is payable under the new arrangements.

Until 31 March 2013, the Company paid a secretarial fee to Baillie Gifford which was adjusted annually in line with the Retail Price Index. The secretarial fee for the five months to 31 March 2013 was £34,000 and there is no secretarial fee under the new arrangements.

The details of the management fee and secretarial fee are as follows:

	2014 £'000		2013 £'000
Investment management fee	1,447		1,365
Secretarial fee	-		34
	1,447		1,399

Principal Risks and Uncertainties

As an Investment Trust, the Company invests in equities and makes other investments so as to meet its investment objective of achieving long term capital growth. In pursuing its investment objective, the Company is exposed to various types of risk that are associated with the financial instruments and markets in which it invests.

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

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

Market Risk

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

(i) Currency Risk

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

The Investment Managers monitor the Company's exposure to foreign currencies and report to the Board on a regular basis. The Investment Managers assess the risk to the Company of the foreign currency exposure by considering the effect on the Company's net asset value and income of a movement in the rates of exchange to which the Company's assets, liabilities, income and expenses are exposed. However, the country in which a company is listed is not necessarily where it earns its profits. The movement in exchange rates on overseas earnings may have a more significant impact upon a company's valuation than a simple translation of the currency in which the company is quoted.

Foreign currency borrowings can limit the Company's exposure to anticipated future changes in exchange rates which might otherwise adversely affect the value of the portfolio of investments.

Exposure to currency risk through asset allocation, which is calculated by reference to the currency in which the asset or liability is quoted, is shown on page 42 of the Annual Report and Financial Statements. The changes to the net currency exposure have resulted from the broadening of the Company's Investment Policy.

At 31 October 2014	Investments £'000		Cash and deposits £'000		Bank Loan £'000		Other debtors and creditors* £'000		Net exposure £'000
US dollar	118,195		10,575		(16,001)		(29)		112,740
Euro	22,318		-		(7,361)		54		15,011
Yen	11,536		-		-		10		11,546
Swiss franc	5,358		-		-		-		5,358
Australian dollar	3,849		-		-		-		3,849
Hong Kong dollar	3,209		-		-		-		3,209
Indonesian rupiah	2,221		-		-		-		2,221
New Zealand dollar	1,843		-		-		-		1,843
Singapore dollar	1,239		-		-		-		1,239
Mexican peso	1,228		-		-		-		1,228
Norweigian krone	895		-		-		-		895
Indian rupee	849		-		-		-		849
Danish krone	-		-		-		-		-
Swedish krona	-		-		-		-		-
Total exposure to currency risk	172,740		10,575		(23,362)		35		159,988
Sterling	54,272		20		(7,500)		(418)		46,374
	227,012		10,595		(30,862)		(383)		206,362

* Includes net non-monetary assets of £10,000.

At 31 October 2013	Investments £'000		Cash and deposits £'000		Bank Loan   £'000		Other debtors and creditors* £'000		Net exposure £'000
US dollar	144,303		6,656		(10,177)		250		141,032
Euro	32,553		1,451		(9,646)		11		24,369
Yen	3,359		-		-		17		3,376
Swiss franc	-		-		-		-		-
Australian dollar	-		-		-		-		-
Hong Kong dollar	16,921		1		-		-		16,922
Indonesian rupiah	-		-		-		-		-
New Zealand dollar	-		-		-		-		-
Singapore dollar	-		-		-		-		-
Mexican peso	-		-		-		-		-
Norweigian krone	-		-		-		-		-
Indian rupee	5,765		-		-		-		5,765
Danish krone	7,104		-		-		-		7,104
Swedish krona	5,937		-		-		30		5,967
Total exposure to currency risk	215,942		8,108		(19,823)		308		204,535
Sterling	13,083		4,973		(10,000)		(445)		7,611
	229,025		13,081		(29,823)		(137)		212,146

* Includes net non-monetary assets of £26,000.

Currency Risk Sensitivity

At 31 October 2014, if sterling had strengthened by 5% in relation to all currencies, with all other variables held constant, total net assets and total return on ordinary activities would have decreased by the amounts shown below. A 5% weakening of sterling against all currencies, with all other variables held constant, would have had an equal but opposite effect on the financial statement amounts. The analysis is performed on the same basis for 2013.

	2014 £'000		2013 £'000
US dollar	5,637		7,052
Euro	751		1,219
Yen	577		169
Swiss franc	268		-
Australian dollar	192		-
Hong Kong dollar	160		846
Indonesian rupiah	111		-
New Zealand dollar	92		-
Singapore dollar	62		-
Mexican peso	61		-
Norwegian Krone	45		-
Indian rupee	43		288
Danish krone	-		355
Swedish krona	-		298
	7,999		10,227

(ii) Interest Rate Risk

Interest rate movements may affect directly:

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

¾  the level of income receivable on cash deposits;

¾  the fair value of fixed-rate borrowings; and

¾  the interest payable on any variable rate borrowings.

Interest rate movements may also impact upon the market value of the Company's investments outwith fixed income securities. The effect of interest rate movements upon the earnings of a company may have a significant impact upon the valuation of that company's equity.

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions and when entering borrowing agreements.

The Board reviews on a regular basis the amount of investments in cash and fixed income securities and the income receivable on cash deposits, floating rate notes and other similar investments.

The Company finances part of its activities through borrowings at approved levels. The amount of such borrowings and the approved levels are monitored and reviewed regularly by the Board.

The interest rate risk profile of the Company's financial assets and liabilities at 31 October is shown below:

Financial Assets

The Company's interest rate risk exposure on its financial assets at 31 October 2014 amounted to £10,595,000 (2013 - £13,081,000), comprising of its cash and short term deposits.

The cash deposits generally comprise overnight call or short term money market deposits of less than one month which are repayable on demand. The benchmark rate which determines the interest payments received on cash balances is the bank base rate.

Financial Liabilities

		2014 £'000	2013 £'000
The interest rate risk profile of the Company's financial liabilities at 31 October was:
Fixed rate      - Sterling denominated		7,500	10,000
- US$ denominated		16,001	10,177
- Euro denominated		7,361	9,646
		30,862	29,823
The maturity profile of the Company's financial liabilities at 31 October was:
In less than one year
- repayment of loan	-		29,823
- accumulated interest	862		729
In more than one year, but not more than five years
- repayment of loan	30,862		-
- accumulated interest	3,377		-
	35,101		30,552

Interest Rate Risk Sensitivity

An interest rate risk sensitivity analysis has not been performed as the Company does not hold bonds and has borrowed funds at a fixed rate of interest.

(iii) Other Price Risk

Changes in market prices other than those arising from interest rate risk or currency risk may also affect the value of the Company's net assets. The Company's exposure to changes in market prices relates to the fixed asset investments as disclosed in note 9 of the Annual Report and Financial Statements.

The Board manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant information from the Investment Managers. The Board meets regularly and at each meeting reviews investment performance, the investment portfolio and the rationale for the current investment positioning to ensure consistency with the Company's objectives and investment policies. The portfolio does not seek to reproduce the comparative index: investments are selected based upon the merit of individual companies and therefore performance may well diverge from the short term fluctuations of the comparative index.

Other Price Risk Sensitivity

Fixed asset investments are valued at bid prices which equate to their fair value. A full list of the Company's investments is given on pages 12 and 13 of the Annual Report and Financial Statements. In addition, a geographical analysis of the portfolio and an analysis of the investment portfolio by broad industrial or commercial sector is given on pages 14 and 15 of the Annual Report and Financial Statements.

110.0% (2013 - 108.0%) of the Company's net assets are invested in equities. A 10% increase in quoted equity valuations at 31 October 2014 would have increased total assets and total return on ordinary activities by £22,701,000 (2013 - £22,903,000). A decrease of 10% would have had an equal but opposite effect.

Liquidity Risk

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

Liquidity risk is not significant as the majority of the Company's assets are investments in quoted securities that are readily realisable. The Board monitors the exposure to any one holding.

The Company has the power to take out borrowings, which gives it access to additional funding when required. The Company's borrowing facilities are detailed in notes 11 and 12 of the Annual Report and Financial Statements.

Credit Risk

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

This risk is managed as follows:

¾  Where the Investment Managers make an investment in a bond or other security with credit risk, that credit risk is assessed and then compared to the prospective investment return of the security in question.

¾  The Board regularly receives information from the Investment Managers on the credit ratings of those bonds and other securities in which the Company has invested.

¾  The Company's listed investments are held on its behalf by The Bank of New York Mellon SA/NV acting as agent, the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed. The Investment Managers monitor the Company's risk by reviewing the custodian's internal control reports and reporting its findings to the Board.

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

¾  Transactions involving derivatives, and other arrangements wherein the creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained interest, are subject to rigorous assessment by the Investment Managers of the creditworthiness of that counterparty.

¾  Cash is only held at banks that are regularly reviewed by the Managers.

Credit Risk Exposure

The maximum exposure to credit risk at 31 October was:

	2014 £'000	2013 £'000
Cash and short term deposits	10,595	13,081
Debtors and prepayments	130	715
	10,725	13,796

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

Fair value of financial assets and financial liabilities

The Directors are of the opinion that the financial assets and liabilities of the Company are stated at fair value in the balance sheet with the exception of long term borrowings which are stated at amortised cost in accordance with FRS26.

	2014	2014		2013	2013
	Book £'000	Fair* £'000		Book £'000	Fair* £'000
Fixed rate loan	30,862	31,120		29,823	30,117
Total long term borrowings	30,862	31,120		29,823	30,117

*    The fair value of the bank loan is calculated with reference to government bonds of comparable yield and maturity.

Capital Management

The Company does not have any externally imposed capital requirements other than the loan covenants detailed in note 12 on page 39 of the Annual Report and Financial Statements. The capital of the Company is the ordinary share capital as detailed in note 13 of the Annual Report and Financial Statements. It is managed in accordance with its investment policy in pursuit of its investment objective, both of which are detailed on page 7 of the Annual Report and Financial Statements. Shares may be issued and/or repurchased as explained on page 19 of the Annual Report and Financial Statements.

Fair Value of Financial Instruments

Fair values are measured using the following fair value hierarchy:

Level 1:        reflects financial instruments quoted in an active market.

Level 2:       reflects financial instruments whose fair value is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables includes only data from observable markets.

Level 3:       reflects financial instruments whose fair value is determined in whole or in part using a valuation technique based on assumptions that are not supported by prices from observable market transactions in the same instrument and not based on available observable market data.

The valuation techniques used by the Company are explained in the accounting policies on page 34 of the Annual Report and Financial Statements.

The financial assets designated as valued at fair value through profit or loss are all categorised as Level 1 in the above hierarchy.  None of the financial liabilities are designated at fair value through profit or loss in the financial statements.

Alternative Investment Fund Managers (AIFM) Directive

In accordance with the AIFM Directive, information in relation to the Company's leverage and the remuneration of the Company's AIFM, Baillie Gifford & Co Limited, is required to be made available to investors. In accordance with the Directive, the AIFM remuneration policy is available from Baillie Gifford & Co Limited on request (see contact details on the back cover of the Annual Report and Financial Statements) and the numerical remuneration disclosures in respect of the AIFM's first relevant reporting period (year ended 31 March 2016) will be made available in due course.

The Company's maximum and actual leverage levels (see Glossary of Terms on page 55 of the Annual Report and Financial Statements) at 31 October 2014 are shown below:

Leverage

	Gross Method	Commitment Method
Maximum limit	2.50:1	2.00:1
Actual	1.15:1	1.15:1

Other Risks

Other risks faced by the Company include the following:

Regulatory Risk - failure to comply with applicable legal and regulatory requirements such as the tax rules for investment companies, the UKLA Listing Rules and the Companies Act could lead to suspension of the Company's Stock Exchange listing, financial penalties, a qualified audit report or the Company being subject to tax on capital gains. Baillie Gifford's Business Risk, Internal Audit and Compliance Departments provide regular reports to the Audit and Management Engagement Committee on Baillie Gifford's monitoring programmes.

Major regulatory change could impose disproportionate compliance burdens on the Company. In such circumstances representation is made to ensure that the special circumstances of investment trusts are recognised.

Small Company Risk - the Company has investments in smaller, immature companies which are generally considered higher risk as changes in their share prices may be greater and the shares may be harder to sell. Smaller, immature companies may do less well in periods of unfavourable economic conditions.

Operational Risk- risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. Baillie Gifford & Co's Internal Audit and Compliance Departments and the AIFM's permanent risk function provide regular reports to the Audit and Management Engagement Committee. The Committee also reviews the Managers' Report on Internal Controls and the reports by other key service providers are reviewed by the Managers on behalf of the Board. In addition, the Managers have a comprehensive business continuity plan which facilitates continued operations of the business in the event of a service disruption or major disaster.

Discount/Premium Volatility - the discount/premium at which the Company's shares trade can widen. The Board monitors the level of discount/premium and the Company has authority to buy back its own shares when deemed to be in the best interest of the shareholders.

Gearing Risk - the Company may borrow money for investment purposes. If the investments fall in value, any borrowings will magnify the extent of this loss. If borrowing facilities are not renewed, the Company may have to sell investments to repay borrowings.

All borrowings require the prior approval of the Board and gearing levels are discussed by the Board and Managers at every meeting. Covenant levels are monitored regularly. The Company's investments are in listed securities that are readily realisable.

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

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that year. In preparing these financial statements, the Directors are required to:

¾  select suitable accounting policies and then apply them consistently;

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

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

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

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

Under applicable laws and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, a Directors' Remuneration Report and a Corporate Governance Statement that complies with that law and those regulations.

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

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

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

¾  the Annual Report and Financial Statements taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy; and

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

By order of the Board

David HL Reid

Chairman

11 December 2014

Income Statement

	For the year ended 31 October 2014			For the year ended 31 October 2013
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Losses)/gains on investments	-	(3,952)	(3,952)	-	57,734	57,734
Currency gains/(losses)	-	749	749	-	(699)	(699)
Income (note 2)	1,186	-	1,186	1,987	-	1,987
Investment management fee	(362)	(1,085)	(1,447)	(341)	(1,024)	(1,365)
Other administrative expenses	(428)	-	(428)	(435)	-	(435)
Net return before finance costs and taxation	396	(4,288)	(3,892)	1,211	56,011	57,222
Finance costs of borrowings	(195)	(584)	(779)	(200)	(599)	(799)
Net return on ordinary activities before taxation	201	(4,872)	(4,671)	1,011	55,412	56,423
Tax on ordinary activities	(133)	-	(133)	(188)	-	(188)
Net return on ordinary activities after taxation	68	(4,872)	(4,804)	823	55,412	56,235
Net return per ordinary share (note 4)	0.14p	(9.94p)	(9.80p)	1.68p	113.07p	114.75p

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

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

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

Balance Sheet

	At 31 October 2014 £'000	At 31 October 2013 £'000
Fixed assets
Investments held at fair value through profit or loss	227,012	229,025
Current assets
Debtors	130	715
Cash and short term deposits	10,595	13,081
	10,725	13,796
Creditors
Amounts falling due within one year (note 6)	(513)	(30,675)
Net current assets/(liabilities)	10,212	(16,879)
Total assets less current liabilities	237,224	212,146
Creditors
Amounts falling due after more than one year (note 6)	(30,862)	-
Net assets	206,362	212,146
Capital and reserves
Called up share capital	2,450	2,450
Share premium	82,180	82,180
Special reserve	35,220	35,220
Capital reserve	84,806	89,678
Revenue reserve	1,706	2,618
Shareholders' funds	206,362	212,146
Net asset value per ordinary share (after deducting borrowings at fair value)	420.58p	432.31p
Net asset value per ordinary share (after deducting borrowings at par)	421.11p	432.91p
Ordinary shares in issue	49,004,319	49,004,319

Reconciliation of Movements in Shareholders' Funds

For the year ended 31 October 2014

	Called up share capital £'000	Share premium £'000	Special Reserve £'000	Capital* reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 November 2013	2,450	82,180	35,220	89,678	2,618	212,146
Net return on ordinary activities after taxation	-	-	-	(4,872)	68	(4,804)
Dividends paid during the year (note 5)	-	-	-	-	(980)	(980)
Shareholders' funds at 31 October 2014	2,450	82,180	35,220	84,806	1,706	206,362

For the year ended 31 October 2013

	Called up share capital £'000	Share premium £'000	Special Reserve £'000	Capital* reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 November 2012	2,450	82,180	35,220	34,266	2,775	156,891
Net return on ordinary activities after taxation	-	-	-	55,412	823	56,235
Dividends paid during the year (note 5)	-	-	-	-	(980)	(980)
Shareholders' funds at 31 October 2013	2,450	82,180	35,220	89,678	2,618	212,146

*       The capital reserve as at 31 October 2014 includes investment holdings gains of £4,008,000 (2013 - gains of £112,998,000).

Cash Flow Statement

	For the year ended 31 October 2014		For the year ended 31 October 2013
	£'000	£'000	£'000	£'000
Net cash (outflow)/inflow from operating activities		(700)		365
Servicing of finance
Interest paid	(773)		(801)
Net cash outflow from servicing of finance		(773)		(801)
Taxation
Overseas tax incurred	(133)		(199)
Total tax paid		(133)		(199)
Financial investment
Acquisitions of investments	(220,402)		(30,133)
Disposals of investments	218,714		41,666
Realised currency gain/(loss)	156		(194)
Net cash (outflow)/inflow from financial investment		(1,532)		11,339
Equity dividends paid (note 5)		(980)		(980)
Net cash inflow before use of financing		(4,118)		9,724
Financing
Bank loan repaid	(28,971)		-
Bank loan drawn down	30,603		-
Net cash inflow from financing		1,632		-
(Decrease)/increase in cash		(2,486)		9,724
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash in the period		(2,486)		9,724
Increase in bank loan		(1,632)		-
Exchange movement on bank loans		593		(505)
Movement in net debt in the year		(3,525)		9,219
Net debt at 1 November		(16,742)		(25,961)
Net debt at 31 October		(20,267)		(16,742)

Reconciliation of net return before finance costs and taxation to net cash (outflow)/inflow from operating activities
Net return before finance costs and taxation	(3,892)	57,222
Losses/(gains) on investments	3,952	(57,734)
Currency(gains)/losses	(749)	699
(Increase)/decrease in accrued income	(16)	152
Decrease/(increase) in debtors	23	(43)
(Decrease)/increase in creditors	(18)	69
Net cash (outflow)/inflow from operating activities	(700)	365

Notes

1.	The financial statements for the year to 31 October 2014 have been prepared on the basis of the accounting policies set out in the Company's Annual Report and Financial Statements at 31 October 2013 In accordance with the Financial Reporting Council's guidance on going concern and liquidity risk, the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern. The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. Accordingly, the financial statements have been prepared on the going concern basis as it is the Directors' opinion that the Company will continue in operational existence for the foreseeable future. The Directors consider the Company's functional currency to be sterling as the Company's shareholders are predominantly based in the UK and the Company and its investment manager, who are subject to the UK's regulatory environment, are also UK based.
2.	Income			2014 £'000			2013 £'000
	Income from investments			1,176			1,973
	Deposit interest			10			14
				1,186			1,987
3.	Baillie Gifford & Co Limited are appointed as Managers and Secretaries. The annual management fee is 0.95% on the first £50m of net assets and 0.65% on the remaining net assets, calculated quarterly. Prior to 1 April 2013 the fee was 0.8% per annum of the market value of the Company's shares, calculated quarterly, plus a performance fee. No performance fee was payable for the period to 31 March 2013 and none is payable under the new arrangements. Until 31 March 2013, the Company paid a secretarial fee to Baillie Gifford which was adjusted annually in line with the Retail Price Index. The secretarial fee for the five months to 31 March 2013 was £34,000 and there is no secretarial fee under the new arrangements .
4.	Net return per ordinary share	Revenue	2014 Capital	Total	Revenue		2013 Capital		Total
	Net return on ordinary activities after taxation	0.14p	(9.94p)	(9.80p)	1.68p		113.07p		114.75p
	Revenue return per ordinary share is based on the net return on ordinary activities after taxation of £68,000 (2013 - £823,000) and on 49,004,319 ordinary shares, being the weighted average number of ordinary shares in issue during each year . Capital return per ordinary share is based on the net capital loss for the financial year of £4,872,000 (2013 - net capital gain of £55,412,000) and on 49,004,319 ordinary shares, being the weighted average number of ordinary shares in issue during each year. There are no dilutive or potentially dilutive shares in issue.
5.	Ordinary dividends			2014	2013		2014 £'000		2013 £'000
	Amounts recognised as distributions in the period:
	Previous year's final (paid 6 February 2014)			1.50p	1.50p		735		735
	Interim (paid 17 July 2014)			0.50p	0.50p		245		245
				2.00p	2.00p		980		980
	Also set out below are the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £68,000 (2013 - £823,000)
	Ordinary dividends			2014		2013		2014 £'000	2013 £'000
	Dividends paid and payable in respect of the year:
	Interim dividend per ordinary share (paid 17July 2014)			0.50p		0.50p		245	245
	Proposed final dividend per ordinary share (payable 5 February 2015)			1.50p		1.50p		735	735
				2.00p		2.00p		980	980
	If approved, the recommended final dividend will be paid on 5 February 2015 to shareholders on the register at the close of business on 9 January 2015.  The ex-dividend date is 8 January 2015. The registrars, Computershare Investor Services PLC, offer a dividend reinvestment plan. The final date for the receipt of elections for the dividend reinvestment plan is 15 January 2015.
6.	At 31 October 2013 creditors included borrowings of £29,823,000 drawn down under a three year fixed rate loan facility with National Australia Bank Limited which expired on 30 September 2014. The loan was drawn down consisted of €11.4m, US$16.35m and £10.0m at that date. The facility was replaced with a five year fixed rate facility with National Australia Bank Limited which has drawings of drawn down €9.4m, US$25.6m and £7.5m which expires on 30 September 2019. The fair value of borrowings at 31 October 2014 was £31,120,000 (2013 - £30,117,000). Net asset value per share (after deducting borrowings at fair value) was 420.58p (2013 - 432.31p).
7.	The Company incurred transaction costs on purchases of £358,000 (2013 - £55,000) and on sales of £122,000 (2013 - £34,000).
8.	At the Annual General Meeting on 27 January 2014 the Company renewed its authority to purchase shares in the market, in respect of 7,345,747 ordinary shares (equivalent to 14.99% of its issued share capital at that date). No shares were bought back during the year to 31 October 2014 or 2013. At 31 October 2014 the Company had authority to buy back 7,345,747 ordinary shares.
9.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 October 2014. The financial information for 2013 is derived from the statutory accounts for 2013 which have been delivered to the Registrar of Companies. The Auditor has reported on the 2013 and 2014 accounts, the report for both years was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The statutory accounts for 2014 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. This will be held on 29 January 2015.
10.	The Report and Accounts will be available on the Edinburgh Worldwide page of the Managers' website http://www.edinburghworldwide.co.uk† on or around 22 December 2014.
None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

†    Neither the contents of the 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.

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