Annual Financial Report

RNS Number : 7558I

Aurora Investment Trust PLC

03 June 2014

Annual Financial Report Announcement

Aurora Investment Trust plc

Year ended 28 February 2014

STRATEGIC REPORT

Objective

Capital appreciation through investments listed mainly on the London Stock Exchange.

Policy

To invest primarily in equities, but with some exposure also to Fixed Interest. The portfolio comprises a mix of large, mid and smaller capitalised stocks. A distinctive feature is an emphasis on investments in companies with exposure to economies growing at a faster rate than the UK.

Benchmark

Performance is benchmarked against that of the overall London market

	Year ended 28 February 2014	Five years ended 28 February 2014	Since launch (13/3/1997)
	%	%	%

Net Asset Value per share (NAV)^	+3.04	+71.45	+96.13
Benchmark^	+9.47	+90.01	+70.06

^ capital-only return

*by reference to a starting value of 97.78p (net of launch expenses)

Dividend

The Directors recommend an increased dividend of 3.80p per share (2013: 3.75p)

(17^th consecutive annual increase)

CHAIRMAN'S STATEMENT

Yet again, events have transpired to frustrate what appeared to be the turning point in the Company's recent performance history. During the second half of the financial year there was a marked improvement in the share prices of the types of companies which make up the core of Aurora's portfolio. In the last few months, however, a combination of the impact of US QE tapering and global economic and political events have again supported Developed stock markets at the expense of Emerging Markets. The conditions which should lead to a strong relative performance for Aurora's portfolio have thus been deferred again, albeit that, with Emerging markets now offering such substantially better value than mature stock markets, the more adventurous investors are beginning again to buy Emerging Markets, recently reinforced by the result of the general election in India.

Performance for the year as a whole saw an improvement on that of the two previous years but fell short of the better performance promised during the first three quarters of the accounting year.

	Aurora (NAV per share)	Benchmark
	%	%
Since launch 13/03/97	+96.13	+70.06
5 years	+71.45	+90.01
4 years	+1.36	+33.98
3 years	(28.77)	+18.03
1 year	+3.04	+9.47

The worldwide background for equities has been supported by strong cash flows, low rates of inflation and low interest rates, with gathering economic recovery in both the US and the UK. While the Eurozone currency crisis has ebbed, particularly in Southern Europe youth unemployment continues at unacceptable levels and the prospect of deflation threatens to worsen real debt levels and frustrate economic recovery. In Asia, China presents a conundrum for investors. To the extent the figures can be relied on, valuations are very cheap and expected economic growth of around 7% remains far better than for the mature economies. The concerns are about the delayed impact of massive credit creation since 2008, the unknown risks of its shadow banking system and, particularly, the impact on property values. On the positive side, there is growing evidence of a very real clean-up of corruption and of the increase in domestic consumption needed to sustain growth, going forward.

Outlook

The withdrawal - albeit gradual - of QE monetary stimulus in the US has been accepted with relative equanimity in Developed economies/markets but has had a major impact on Emerging Markets and their currencies. Further "tapering" may lead to yet more volatility, reducing investors' risk appetite, but its negative impact on Emerging Markets may also reduce, especially when these are now the only stock markets offering excellent value. In the mature economies, given that "catching up" on the lost years of growth is by no means complete and as a result there remains slack capacity, interest rates and inflation are likely to continue to remain low for some time, although they may rise modestly in the near term. In the Eurozone, however, the threat is of deflation, both frustrating recovery and worsening the real indebtedness problems.

At current valuations, most major stock markets appear to be anticipating a prolonged period of improving economic conditions and improving profits, which look to be achievable. The UK economy needs to broaden out beyond the service industries and Government financed property price inflation to include both investment and exports. There is some promising evidence that this is now starting to happen.

Emerging stock markets and the Chinese market in particular are currently valued at historic low levels/multiples, despite their superior long term attractions. Aurora's portfolio remains heavily weighted in these markets, where performance prospects over the coming months will depend on improved sentiment, reflecting both value and long term prospects. Corporate activity may be the catalyst to improve the performance of particular stocks.

Continuation vote

On behalf of the Board, I have made contact with all major shareholders, representing an overall majority, earlier this year, from which conversations I have found a substantial level of support among shareholders in favour of Continuation. After due consideration, the Board is of the view that the investment strategy pursued by the Investment Manager remains essentially valid and that the Continuation of Aurora should afford the opportunity to benefit from the very significant underlying potential value in the portfolio. Accordingly, a Resolution will be put forward at the forthcoming AGM that the Company continues to operate as an investment trust.

Dividend

The Board has decided to propose a further (the seventeenth consecutive) modest increase to the dividend from last year's level of 3.75p to 3.80p.

AGM

I look forward to welcoming shareholders at the Company's AGM which will be held at 12.00 noon on Friday 18 July 2014 at the offices of Cavendish Administration Limited, 145-157 St John Street, London EC1V 4RU.

Lord Flight

Chairman

3 June 2014

INVESTMENT MANAGER'S REVIEW AND OUTLOOK

Forecasting the future in any sphere of life is difficult to achieve with a great degree of accuracy and consistency. Thus it proved during the last twelve months for many meteorologists who confidently pronounced last autumn that it was going to be a relatively dry winter for the UK. This prediction led to the Department of Energy and Climate Change's decision to continue not to dredge the Somerset Levels, with all the horrible and highly devastating consequences for the local residents, as a result of the winter having been one of the wettest on record in recent history.

So it proved for the portfolio. I, along with many others, had no difficulty in predicting that the traumas in the Eurozone had not all suddenly evaporated as a result of Mr. Draghi's celebrated pronouncement 'that he would do everything in his power to save the euro'. I therefore remained convinced that recovery in Europe would only occur at a snail's pace for the forthcoming future, with consequent knock-on detrimental effects for the neighbouring UK economy, which is a major trading partner.

By now, when it appears that the prospects for the Eurozone economy can still be likened to those of the MS Costa Concordia, i.e. perhaps off the rocks but still a wreck, one would have thought that having a portfolio of London listed stocks with high exposure to faster growing economies would have proved a sensible and profitable policy. It is indeed ironic that the portfolio would have been benefited considerably had it been invested in Greek banks!

Few investors would disagree that the relative macro-economic forecasts had proved entirely accurate, but they would also be quick to point out that I had failed to take sufficient account of the psychology of investors and their unwillingness to assume risk. In consequence, there was a greater overall desire, particularly in the first half, to pay high, if not excessive, multiples for large, boring, safe stocks, rather than to seek out the growth stocks of the future, such as those represented in the portfolio.

The overall result for the year was consequently disappointing. Yet again I have been awarded the wooden spoon for fund management. Nevertheless, there have been notable successes in the portfolio and I also take heart from reading a recent report from J P Morgan that Emerging Market stocks are currently, on several metrics, trading at their highest discount for ten years by comparison with Developed Markets. Accordingly, just as I look forward to seeing the latest colours and fashions in vogue at Ascot this summer, I feel confident that the moon will not have waxed and waned too many times before we are all reading once more about changed investment themes; that cash is flowing abundantly again into Emerging Markets and that Hong Kong taxi drivers are betting heavily in a resurgent Chinese stock-market. Such a change in trend would thereby bring to an end an exceptionally torrid and painful period for the Investment Manager when no less than three holdings in the portfolio have been trading at below net cash value alone. 'What an opportunity' one will be saying in a few years' time.

Despite a top-slicing of the holding, immediately prior to the year end when the shares became rather pricey, BTG (10.7% of the consolidated portfolio) has become the portfolio's largest holding as the estimates for increases in profits and cash flow continued to mount. One week earlier than expected, in late November, the FDA granted approval for the company's revolutionary treatment for varicose veins within the USA. Varithena, as it is now called, has already recently started to be marketed, initially quite slowly, in that country's specialist vein clinics; its prospects, as mentioned in this report last year, remain of 'Blockbuster' proportions. Meanwhile, the company also has high expectations for its anti- liver cancer beads, particularly in the Far East, where the incidence of hepatitis is three times Western levels, as well as for several other of its products. A maiden dividend is now openly discussed at meetings with investors.

Other disposals were made of the entire holdings of Glaxo, Pennon and Tullow; part sales were also made from Antofagasta and Premier Oil, on the grounds of a deteriorating short term outlook for their respective commodity prices.

Persimmon (4.8%), an erstwhile top holding in the pre financial crash era, was returned to the portfolio. Currently, the larger house-builders with strong balance sheets are amongst the very few companies in the UK which have a degree of pricing power. Moreover the paucity of new construction at a time of low interest rates and rapid household formation, combined with a variety of newly announced government schemes to assist new buyers, are features likely to prove a potent cocktail for increased profitability and dividends.

Gresham Computing (5.6%) has enjoyed a most successful year with the launch of its revolutionary software programme enabling instant reconciliation of accounts. It has announced six important contracts with leading customers in sectors ranging from both fixed income and equity asset management, insurance, to corporate/investment/ wholesale and transaction banking as well as spread betting. At a time when banks are no longer earning fortunes from investment banking, but having instead to concentrate on better 'housekeeping' to gain/retain clients, the potential for this business would appear mouth-watering as regulation increases yet further. To capitalise on its strong competitive position it has recently raised money through a placing to finance the expansion of its sales force in the USA and Far East, a policy which has already borne fruit since the year end.

Mexico and the USA are the countries with the highest proportion of obesity amongst their populations in the globe. The UK does not lag far behind - 26%of children are now deemed obese, whereas twenty years ago the relevant figure was closer to 6%. This huge rise has occurred as a result of the sale of school playing fields, excessive amounts of time spent with computers as well as overindulgence of colas and unhealthy food, often containing High Fructose Corn Syrup and excessive calories. The net result of obesity is a foreshortened life span and a huge burden on the health service. In recognition of the problem, Mexico led the way last year by imposing a tax on sugar. The states of California and Illinois have imposed a ban on colas being available for sale in schools, whilst much discussion in the UK has been stimulated as to whether a sugar tax ought to be imposed here also. 'Too regressive' reply the critics, so immediate introduction is unlikely, yet the way forward is clear to all - 'sugar is becoming the new tobacco'.

All this bodes exceedingly well for the holding in Pure Circle (3.6%). The company grows the plant stevia in temperate climates on rapidly increasing acreages. Once refined, in Malaysia, it is added in small quantities, being two hundred times sweeter than sugar, to a huge range of food and beverage products on sale around the world with the permission from relevant health authorities. Most importantly, this natural sweetener contains zero calories, and is free of any potentially harmful products, such as Aspertame (an ingredient of Coke Zero). With great fanfare the company has recently launched, in green cans, Coca Cola Life in Chile and Argentina; it is not difficult to comprehend why the cognoscenti consider the global potential to be enormous amongst the increasingly health conscious average consumer.

I only hope that the company will be able to retain its independence long term, but I already have severe doubts. The vast majority of the shares are now held by Asian companies, which can envisage the massive opportunities available to the company as a viable competitor to the major producers of sweeteners and sugar, the world's third largest traded commodity.

Although listed in London, Ashtead (5.5%) is the second largest plant hire company for the construction industry in the USA. Its profits are currently growing strongly on account of a combination of the following features. The construction industry (mainly non-residential) is recovering quite strongly in the area covered by the company and at a time when construction businesses are moving away from plant ownership to plant hire. Moreover, the strength of the balance sheet and its relative size enables it to enjoy greater purchasing power than its smaller rivals as well as the opportunity to make lucrative infill acquisitions. Its outlook appears bright for several more years.

Normally a manager relishes the prospect of a takeover of one of his largest holdings. This occurred last summer to Prosperity Minerals, a Chinese group involved in the booming property market, whose main development I had visited in central Guangzhou, as well as the owner of two valuable cement plants and an iron ore importing business. Sadly, the bid came from the controlling shareholder before the company had even come to London to discuss the annual results with shareholders and at a price which I considered to be derisory. Moreover, much to my chagrin, I felt strongly that the non-executive directors did not strive either to improve the price or to ensure that the bid completed after the ex-dividend date. I was very disappointed, but, nevertheless, the Company did realise a modest profit on this holding.

Asian Citrus (3.9%), a former favourite and indeed the portfolio's largest holding last year, has performed disastrously during the period. This was as a result of the combination of poor corporate governance, another year of heavy rain (no less than seven feet falling in its main orange grove), the replanting programme and the shocking decision, despite the massive cash-flow, to forgo the dividend. Currently, even without the sale of a single share during the year, it no longer features at the date of this report amongst the top ten holdings.

Fortunately, new management has recently been installed, the fruit juice making capacity has been increased by 66% to 100,000 tonnes per year and the waterlogged trees are recovering their strength and vitality as the weather proves more normal. Accordingly, I have high hopes that the shares will return to favour amongst investors. Currently they are so lowly valued, that the market capitalisation represents merely two thirds of the value of the present net cash. Thus the 5million trees already planted, set to produce some 700,000 tonnes of oranges per year as well as grapefruit and bananas in ten years' time (and thereafter for another twenty plus years), together with two modern factories for the production of fruit-juice, have a negative value attributed to them. Surely this represents an extremely attractive target for corporate activity in a sector favoured for expansion by the government?

The World Bank has recently revised its calculations of the size of the Chinese economy and now forecasts that it will overtake the US economy (the world's largest since 1872 when it gained the crown from the UK) later in 2014.This has been made possible by the authoritarian control and excellent economic planning by a series of governments on the one hand and by entrepreneurs in private industry on the other.

One such example is West China Cement (3.2%) which has been in the portfolio for five years. It continues to grow rapidly by building new energy efficient plant in the country's hinterland; its current annual capacity and output is no less than 23million and 18million tonnes respectively-more than twice the size of the UK cement industry. Its profits remained static, however, due to slight pricing pressures during the last two years, but these are likely to disappear as no new plants are allowed to be built in the region and the local economy continues to expand rapidly. Furthermore, the fortunes of the company have recently been boosted by the latest plans to double the size of the high speed rail programme to 10,000 kilometres - putting this into perspective the UK has only 100 kilometres until the P.M.'s hobbyhorse called HS2, costing some £50bn, commences.

A recent addition to the portfolio is the AIM quoted Naibu (1.7%), an extremely successful Chinese manufacturer of sports shoes and apparel which are sold in tier 3 and 4 cities throughout the country. As a contrarian investor, from time to time, I could not resist the temptation to invest in this well-managed company which, annually grows its profits at 12%, is set to yield nearly 10% , whilst rated on a lowly prospective P/E of 1.3 times, with a holding of net cash exceeding its current market capitalisation. Not surprisingly, I have not lost much sleep over whether I should instead have bought Unilever, whose recent record is near static earnings, P/E 21 times, gearing 22% and yield 3%. I can think of no better way to illustrate the magnificent latent potential in this portfolio.

Resulting from recent huge wage inflation in the manufacturing coastal areas of China, Bangladesh has rapidly gained market share to achieve second place in the fiercely competitive global textile export trade. This country is, however, being severely held back by the chronic shortage of electricity which causes frequent brown-outs and shutdowns resulting from a 40% deficit of electrical production capacity relative to potential demand. This has occurred on account of the country's lack of any oil resources, rapidly declining gas supplies and complete indecision by the government (or more specifically, I have been led to believe, the P.M) to give the go-ahead for open cast coal mining to commence, as well as the construction of a nearby coal fired power station, to ease the problem.

Following the deaths of more than 1,000 people last year when the Rana Plaza building collapsed under the weight of, and severe vibration from, no less than three gigantic temporary generators on the roof, I was convinced that GCM (1.3%) would soon be granted permission to start open cast mining. The logic was compelling. Sadly, the P.M appears to be primarily concerned about food rather than, as was the case with her celebrated father, energy security, so has continued to 'duck' the issue, despite the vast majority of the locals and politicians being in favour of the project. Many commentators find this decision completely incomprehensible as GCM, once granted permission, has budgeted to provide irrigation equipment to recirculate clean water to the local farmers enabling them to produce not two but three rice crops per year, thus augmenting, not diminishing food production.

The case for GCM remains overwhelming/compelling. It plans to produce no less than 15million tonnes of coal per year for more than 40 years at a cost of production of less than US$35 per tonne. 21% of its output being coking coal worth some US $ 120 per tonne, would be transported directly via railway lines already constructed to the Indian steel mills south of Calcutta. The thermal coal (79%), which could not be imported for less than $80 per tonne, would be burnt in a nearby power station. Importantly, raising the finance would not be a major problem either; both the Asia Development Bank and the equipment manufacturers have already promised the vast majority of the sums required. Accordingly, I continue to wait patiently for common sense to prevail and for permission to be granted to commence this project; it alone would increase the growth rate of Bangladeshi GDP by no less than 1% per year, thereby removing many thousands of locals from destitution.

The advent of the shale gas industry in the US has transformed the prospects for that economy over the last few years. Not only has it reduced the price of gas to one third of the level prevailing in the Far East, thereby revitalising many industries such as chemicals through 'onshoring', but also reduced the country's dependency on imported oil and gas and radically reduced the balance of payments deficit.

The Prime Minister has similar ambitions for the UK which, according to the British Geological Society, has sufficient shale gas resources to supply the country's energy needs for the forthcoming 50 years. Accordingly, the government has provided an enticing array of tax incentives etc. for both local residents and explorers. Recent political tensions in the Ukraine have further increased the determination to reduce dependency on Russian energy supplies, so every encouragement is being given to this nascent and potentially vast new industry which would necessitate a huge capital investment programme.

I liken the current position to being awarded a second bite at a juicy cherry. When I started my career in the early 1970's I failed to have any involvement with the incipient huge North Sea oil boom, which of course I now regret. This is a second chance and golden opportunity to make amends for that error. I firmly believe that we are on the verge of a stock-market mania for shale gas exposure. I have now had long discussions with three out of the four companies involved in the sector. They are all of the view that within four /five years a massive amount of shale gas will be being extracted and without causing either earthquakes or water pollution. I have therefore taken a large position in the most freely traded company, namely IGas Energy (3.7%), which has extensive licences in the Bowland shale area in the North West. The company informed me that the ideal situation for it would be to 'frack' with a base on an industrial site adjoining a petro chemical plant into which it could pump the gas directly, without the need for expensive infrastructure or interruption from objecting locals.

It is not difficult to see that the bulk of this company's valuation can be currently accounted for by the near 3,000 barrels of oil equivalent per day, which the company is already extracting onshore, leaving little value to be attributed to the staggering £60 billion of possible revenues from its resource. What a gem! Several large companies such as Centrica, and above all Total, have already shown their hand in wanting to get involved in these valuable licences. Farm-outs or take-over attempts shortly are a virtual certainty in the sector.

Aberdeen Asset Management (4.9%) was bought following the announcement of its agreement to purchase Scottish Widows Investment Partnership. It has now become not only the largest fund management business in the UK, but also number six in the world. As a consequence, its ability to win new mandates from the world's larger asset allocators will undoubtedly be enhanced. This feature will become particularly relevant once the outflows of funds from its emerging market products, which the group has been suffering in recent months, dry up and the trend reverses.

Medusa Mining (1.2%) suffered badly in share price terms during the year as a result not only of the fall in the price of gold, but also from interruptions to mining due to heavy rains and the long running problems encountered, and since resolved, at the time of the installation of the new, larger ore mill. The outlook, however, now looks extremely exciting. Within two years production should have doubled its previous level to reach 200,000oz. per year at the very low estimated cost of $300 per oz. Should the gold price remain at current levels, and both these targets be achieved, then the current share price represents a lowly P/E of under two. There is also the possibility of doubling production again to 400,000 oz. per year, if a nearby new deposit is exploited. What a nugget.

Ceres Power (0.8%) has recently undergone both a much needed change of management and cash injection as well as a change of direction. The company will now focus on earning royalty streams from its product of a fuel cell stack which generates electricity when attached to a domestic gas boiler. Since the UK and other governments are keen to reduce the amount of carbon emissions they are offering huge index linked Feed in Tariff incentives to customers willing to install them, such that the payback period for the cost of the stack is not much more than four years in the UK and up to 80% of total cost in Japan. During the last twelve months the company has signed joint venture agreements with the largest boiler manufacturer in Korea (K D Navian) two large groups in Japan, as well as Cummins Diesel in the USA; furthermore it already has a longstanding agreement with Centrica for the UK.

Since the annual global new gas fired boiler sales amount to 18million units, this relatively unknown company needs only to obtain a small share of this huge potential market, at its targeted royalty rate of £200 per unit, to propel its shares in the direction of FTSE100. An astonishing thought!

As occurred at the Feast of Cana in Galilee I am leaving the best until last - appropriate for the London listed Israeli company, Emblaze (4.5%) (whose market cap is £48m), which has evoked much criticism as a stale holding in the portfolio, but which I am confident will prove inaccurate shortly. During the year a reverse takeover took place. The new management is currently using part of the company's huge net cash balance to buy control of a food import/export business. Given that the shares were suspended at an extremely low valuation (only half net cash value) and that there is likely to be an Israeli bull market in view of the fact that the technology led economy appears set to continue expanding at its current level of 5-6% p.a., the prospects for price appreciation appear enticing on these grounds alone.

All this could, however, be dwarfed by a successful outcome if David (Emblaze) slays Goliath (Apple) in the much delayed trial by jury set to commence in California on 30 June. The lawsuit is in respect of royalties unpaid by Apple in respect of every Iphone and Ipad sold, since Emblaze filed the patent in 2009, with a retail value considerably in excess of US $300billion. A successful outcome, about which I feel increasingly confident, since Apple appears to be using other excuses for delay rather than the validity of the patents, would transform the valuation of the ENTIRE portfolio. Moreover the tenor of the conversation with Microsoft, which Emblaze is also suing, would change overnight. I wait with bated breath; it is undoubtedly a potential match winner.

OUTLOOK

The economy in both the US and UK continues to recover, albeit rather patchily; even the number in employment is growing once more in both countries. Indeed, much to the astonishment of many commentators, the IMF has raised its growth forecasts for the UK to such an extent that it appears that it will be the fastest growing economy amongst the G7 nations in 2014 (thereby finally exceeding the level of GDP reached in 2008). This volte face must provide much pleasure for the Chancellor who was greatly criticised only twelve months earlier.

Life, however, is not so rosy in the Eurozone where the banking system is still hugely undercapitalised, the energy policy, particularly in Germany, is proving an expensive disaster, youth unemployment is showing little sign of improvement in the peripheral countries and signs of Japanese style deflation are starting to become more prevalent.

Elsewhere many emerging economies are suffering from reduced commodity prices. Moreover the manufacturing sector in China is slowing down as the central government strives to rein in the shadow banks to prevent a potential property bubble before the many types of reform announced at the recent Third Plenum can take effect. As this slow-down has now persisted for four consecutive quarters it is quite possible, however, that further stimulatory measures are announced imminently. I retain my confidence in this economy to continue to produce, despite the almost daily bearish commentary, far superior growth relative to other major economies, albeit at a slower rate than before. The ongoing immense balance of payments surplus and the staggering US$ 4 trillion of foreign reserves will enable this country to manage its way through a few setbacks without too much difficulty until the much needed financial reforms are effected.

One new important feature to raise investor confidence and thus risk appetite is that of the possibility of the onset of a significant amount of corporate activity emanating from cash rich US companies which prefer to spend their cash reserves on UK/European targets rather than suffer tax on repatriating it to the US. Alstom, Astrazeneca and Wolfson Microelectronics may be just the early victims on a lengthening list of such predatory activity.

Overall, I remain hugely excited about the great potential which, as I have expounded at length, is available to be extracted from the portfolio.

I liken my position to a frustrated gardener who overhears complaints on the first opening day of the season, after a harsh winter, from disappointed visitors complaining about the lack of colour. He is also rather saddened not to hear any compliments being made about the neatly trimmed and aerated lawns, the well clipped hedges and topiary, the immaculate weed free borders or the carefully mulched shrubs, but slightly embarrassed that the recently planted large array of spring bulbs, such as narcissi, crocuses, daffodils and tulips are not yet in flower as a result of the cold winds.

His polite advice is for them to return later in the season when the borders are ablaze with colour, the roses in full bloom, the orange blossom scenting the whole garden and when the many buddleias will attract hundreds of colourful butterflies. Moreover, with a correctly timed visit they are likely to be able to eat the first crop of asparagus, which has taken seven years to produce, and see the stunning meconopsis (vivid blue poppy) and peonies planted two years previously producing their first ever flowers.

Accordingly, I hope that the Company's long suffering shareholders will exercise a little more patience by voting for the continuation of the Company at the forthcoming AGM and thereby enable a harvest of rich pickings to be enjoyed in the not too distant future.

James Barstow

Mars Asset Management Limited

3 June 2014

INVESTMENT POLICY AND PERFORMANCE

This report deals with the results of Aurora Investment Trust plc and its subsidiary ("the Group").

INVESTMENT POLICY

The Company's objectives are pursued through investments in securities, the majority of which are listed on the London Stock Exchange, predominantly comprising equities but allowing exposure to fixed interest and equity related securities. The portfolio comprises a mix of large, mid and smaller capitalised stocks. A distinctive feature is an emphasis on investments in companies with exposure to economies growing at a faster rate than the UK.

In pursuing this policy, the Investment Manager takes into account the following considerations:

Distribution of the portfolio relative to the benchmark

An element of risk is inherent in investment undertaken on a selective basis. The Company seeks to mitigate the degree of risk by investing in securities in substantial organisations, normally listed and traded on the London Stock Exchange, and by spreading its investments across a range of such securities.

The benchmark is the FTSE All-Share Index, which is an index of over 700 of the largest capitalised stocks quoted on the London market. This Index is not only representative of the UK economy but also includes a significant degree of international exposure, because the London Stock Exchange has become the stock market of choice for many of the emerging world's largest companies and, furthermore, many of the largest stocks are multinational companies with the majority of their revenues derived outside the UK. Therefore the Investment Manager can achieve the aim of exposure to fast-growing economies while investing selectively in stocks quoted on the London market. However, the Investment Manager makes no attempt to replicate the benchmark and the weightings of the portfolio to particular sectors may differ significantly from those of the benchmark.

A performance fee is payable to the Investment Manager only if the benchmark is beaten and a NAV is achieved that is greater than the NAV at the time when the previous performance fee was paid. This incentivises the Investment Manager to seek to achieve a superior distribution in the portfolio to that of the benchmark.

Risk diversification

At 28 February 2014 the Company and its subsidiary held 36 stocks, spread across 8 main sectors.

The Board does not believe that it should normally or continuously impose prescriptive limits on the Investment Manager regarding the geographic breakdown or distribution by sector of the portfolio. However, these matters are a subject of repeated discussion between the Board and the Investment Manager and from time to time particular informal limits are agreed between them.

Gearing Policy

The Company is usually geared to a moderate degree. Borrowings are limited by the articles to a maximum of 30% of NAV and by the Company's bank covenant to 25% of NAV. The Board has adopted a policy whereby under normal circumstances borrowings are to be kept to within approximately 20% of the Company's NAV, but with the flexibility to rise for limited periods. This flexibility is considered desirable to avoid the possibility of forced sales in adverse market conditions.

The Board keeps the level of gearing and the extent, if any, of borrowing in foreign currencies under close review.

Hedging

The Company does not use derivatives to hedge market or currency exposure.

OBJECTIVES AND KEY PERFORMANCE INDICATORS (KPIs)

The Company's principal investment objective is to achieve capital growth. The Company's success in attaining its objectives is measured by reference to KPIs as follows:

a) The Company seeks to achieve a positive total return over the long-term. To measure its success, the Board compares shareholders' returns from owning the shares (share price appreciation and dividends) over one and five years and since launch to the return on an appropriate gilt-edged security (without reinvestment of dividends or interest). The Board considers long-term performance to be of greater importance than short-term and that the five-year comparison is the Company's Primary KPI.

b) The Company's Benchmark is the FTSE All-Share Index, against which the Net Asset Value (NAV) return (capital only) is compared. After achieving the goal of making absolute returns for shareholders, the next aim is to provide a better return from the portfolio than from the market as measured by the Benchmark.

c) The Company also seeks to outperform other companies that it considers to be its Peer Group. The Company's one and five year NAV returns are therefore compared with those of the AIC UK Growth Sector Size Weighted Average.

d) The Company seeks to ensure that the operating expenses of running the Company as a proportion of NAV (the Ongoing Charges Ratio) are reasonable.

The Board has also sought to achieve a dividend rising in line with inflation, although this is not defined as a KPI.

PERFORMANCE

The Investment Manager is Mars Asset Management Limited (Mars), which is regulated by the FCA. The main fund manager is James Barstow (managing director of Mars). Mr Barstow reports in detail upon the Company's activities in his Report.

The Company's performance relative to the KPIs described above was as follows:

(a) Performance of share price vs. gilt edged security

	Year ended 28 February 2014	Five years ended 28 February 2014	Since launch (1997)

Share price and dividends	+11.13%	+128.70%	+116.18%
Treasury 8% stock 2015 and interest	+1.49%	+32.97%	+144.92%

The Company has achieved this KPI over one and five years but not since launch.

(b) Performance of NAV vs. Benchmark

	Year ended 28 February 2014	Five years ended 28 February 2014	Since launch (1997)

Net Asset Value per share	+3.04%	+71.45%	+96.13%*
Benchmark	+9.47%	+90.01%	+70.06%

All NAV figures are for capital-only performance

*by reference to a starting value of 97.78p (net of launch expenses).

The Company has achieved this KPI since launch, but not over one or five years.

	Year ended 28 February 2014	Five years ended 28 February 2014

Net Asset Value per share	+3.04%	+71.45%
AIC UK Growth Sector Weighted Average	+26.31%	+192.23%

The Company has not achieved this achieved this KPI over one or five years.

(d) Ongoing Charges Ratio

	Year ended 28 February 2014	Year ended 29 February 2013

Ongoing Charges Ratio	2.18%	2.03%

The ratio is calculated excluding finance costs but including operating expenses charged to capital and applied to the average NAV of the year. Expenses of a type not expected to recur under normal circumstances are excluded from the calculation.

Increase in dividend

The Company has succeeded in achieving a steady increase in the level of dividend paid over the past 16 years. Another modest increase is proposed in respect of the year ended 28 February 2014. The directors are recommending a dividend of 3.80p per share (2013: 3.75p per share).

REVENUE RESULT AND DIVIDEND

The Group's revenue profit after tax for the period amounted to £1,208,986 (2013: loss £351,125). The Company made a revenue profit after tax of £374,209 (2013:£415,211).

At the Annual General Meeting on 18 July 2014, a resolution will be proposed to approve a final dividend of 3.80p (2013: 3.75p) per ordinary share, absorbing £395,088 (2013: £389,890). The final dividend will be paid on 29 July 2014 to shareholders on the register at 13 June 2014; the ordinary shares will go ex-dividend on 11 June 2014. In accordance with International Financial Reporting Standards this dividend is not reflected in the financial statements for the year ended 28 February 2014.

RISK ANALYSIS

The Board considers that the principal risks faced by the shareholders of the Company fall into two categories:

External Risks

Poor performance in the UK and/or world economies; poor corporate profits and dividends.

Poor stock market performance caused by market-specific factors, such as rising interest rates, the unwinding of "bubbles" or disinvestment by institutions, superimposed on general economic factors, or caused by shocks, wars, disease etc. The Board does not consider, however, that short-term volatility represents a risk that the Company seeks to avoid, since it regards long-term performance to be of primary importance.

Internal Risks

Poor asset management, which may include poor stock selection, excessive concentration of the portfolio, mistakes regarding currency movements, speculation in shares of companies without sound or established businesses and speculation in derivatives.

Poor control of borrowing, including borrowing at excessive rates of interest relative to likely returns and borrowing excessive amounts leading to the breach of covenants and possible enforced sales of assets at disadvantageous prices.

Poor governance, compliance or administration, including particularly the risk of loss of investment trust status.

All these and other risks can result in shareholders not making acceptable returns from their investment in the Company.

RISK CONTROLS

External risks

Information on the mitigation of risk by diversification and by control of gearing and hedging is given in the Investment Policy section.

Further details concerning currency risks, liquidity risks and interest rate risks are given in note 19.

Internal risks

The control of risks related to governance, compliance and administration is dealt with in the report on Corporate Governance.

SOCIAL, ETHICAL, HUMAN RIGHTS AND ENVIRONMENTAL MATTERS

Being an investment company, with no staff, premises, manufacturing or other operations of its own, the Company does not have any direct influence on social, ethical, human rights and environmental matters. The Company has no greenhouse gas emissions to report from its operations, nor any responsibility for emission producing sources. However, the Investment Manager bears in mind such matters when choosing investments and aims to avoid investment into companies that are found to perform badly in those areas.

BOARDROOM DIVERSITY

The Company has no employees other than the Directors. At 28 February 2014 the Company had four directors, all of whom were male. The Company's policy is that the Board should have a broad range of skills; while keeping this in mind, consideration is given to the recommendations of the AIC Code and other guidance on boardroom diversity.

FIVE YEAR SUMMARY

The following data are all expressed as pence per share. They are shown both as previously published and as adjusted by adding back the final dividend for each year.

Year	NAV per share	Dividend in respect of year	Share price (mid market)

2010	191.52	3.45	159.50
2011	269.24	3.50	246.00
2012	214.84	3.55	175.75
2013	186.13	3.75	152.75
2014	191.78	3.80	166.00

OUTLOOK

The outlook for Aurora is discussed in the Chairman's Statement and the Manager's Review and Outlook.

TOP TEN HOLDINGS - CONSOLIDATED

AT 28 FEBRUARY 2014

All holdings are of ordinary shares, unless otherwise stated

	By valuation	Percentage of
	£'000	Portfolio
BTG	2,577,850	10.71
Royal Dutch Petroleum	1,628,900	6.77
Gresham Computing	1,353,000	5.62
Ashtead Group	1,314,000	5.46
Aberdeen Asset Management	1,171,800	4.87
Persimmon	1,156,000	4.80
Emblaze Systems	1,078,475	4.48
Rio Tinto	1,029,600	4.28
Asian Citrus	942,500	3.92
IGas Energy	896,250	3.72

	13,148,375	54.64

Other holdings	10,913,698	45.36
Total investments - consolidated	24,062,073	100.00

PORTFOLIO ANALYSIS

AT 28 FEBRUARY 2014

	Percentage of Portfolio
Information Technology Services	9.99
Resources	21.11
General Industries	21.14
Consumer Goods	23.16
Cyclical Services	1.07
Financial Services	16.61
Fixed Interest	5.75
Transport	1.17
	100.00%

ANALYSIS OF INVESTMENTS BY SECTOR - CONSOLIDATED - BY MARKET VALUE

AT 28 FEBRUARY 2014

All holdings are of ordinary shares, unless otherwise indicated

Company

Subsidiary

Total

Value

Percentage of

Company

£'000

Portfolio

Fixed income	Amlin 6.5% Bond	495		495	2.06
	Lloyds Bank 11.75% PIBS	879		879	3.65
		1,374		1,374	5.71

Banks, Retail	HSBC Holdings	446		446	1.85
	Standard Chartered	285		285	1.18
		731		731	3.03


Financial Services	Charlemagne Capital	324		324	1.35
	Man Group	726		726	3.02
	Aberdeen Asset Management	1,172		1,172	4.87
		2,222		2,222	9.24
Information Technology Services	Emblaze Systems	1,034	44	1,078	4.48
	Gresham Computing	1,353		1,353	5.62
		2,387	44	2,431	10.1


Insurance	Amlin	337		337	1.40
	Prudential	678		678	2.82
		1,015		1,015	4.22

Mining	Anglo Pacific	299		299	1.24
	Antofagasta	495		495	2.06
	Coal of Africa	-	51	51	.21
	GCM Resources	289	15	304	1.26
	Kazakhmys	274		274	1.14
	Medusa Mining Ltd	280		280	1.16
	Rio Tinto	1,030		1,030	4.28
	Glencore Xstrata	395		395	1.65
		3,062	66	3,128	13.00

Non-Cyclical Consumer Goods
	Asian Citrus	943		943	3.92
	BTG	2,578		2,578	10.71
	Purecircle Ltd	876		876	3.65
	Imperial Tobacco	731		731	3.04
	Naibu Global	405		405	1.68
		5,533		5,533	23.00

Oil Exploration & Production	Petro Matad	69		69	0.29
	Premier Oil	284		284	1.18
	Royal Dutch Petroleum 'B'	1,629		1,629	6.77
	IGAS Energy	837	60	897	3.73
		2,819	60	2,879	11.97

General Industrials	Aggreko	156		156	0.65

Transport	Ocean Wilson Holding	280		280	1.16

Oil, Integrated	BG Group	816		816	3.39

Cyclical Services	Ceres Power Holdings	199		199	0.83
	China New Energy	57		57	0.24
		256		256	1.07

Basic Industries	West China Cement	771		771	3.20

Construction & Engineering	Persimmon	1,156		1,156	4.80

Support Services	Ashtead Group	1,314		1,314	5.46

	Total Portfolio	23,892	170	24,062	100.00%

ANALYSIS BY TYPE, MARKET AND CURRENCY

				£'000

	Ordinary shares			22,688
	Fixed interest securities			1,374
				24,062

	UK listed securities			19,137
	Hong Kong listed security			771
	AIM securities			4,154
				24,062

	Denominated in sterling			23,291
	Denominated in Hong Kong $			771
				24,062

STATEMENT OF DIRECTORS' RESPONSIBILITIES FOR THE ANNUAL REPORT

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

Company law in the United Kingdom requires the directors to prepare financial statements for each financial year. Under that law the directors have to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the Company financial statements under IFRS as adapted by the European Union. Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates which are reasonable and prudent;

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

· 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 Remuneration Report comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the website used by the Company.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Disclosure of information to auditor

The directors confirm that:

· so far as each director is aware, there is no relevant audit information of which the Company's auditor is unaware; and

· the directors have taken all the steps that they ought to have taken as directors to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Statement under the Disclosure and Transparency Rules 4.1.12

The directors confirm that to the best of their knowledge and belief;

(a) This annual report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face;

(b) the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer and the undertakings included in the consolidation taken as a whole; and

Having taken advice from the Audit Committee, the Directors consider that the annual report and financial statements taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

For and on behalf of the Board

Lord Flight

Chairman

3 June 2014

FINANCIALS

CONSOLIDATED STATEMENT OF

COMPREHENSIVE INCOME

FOR THE YEAR ENDED 28 FEBRUARY 2014

Year ended 28 February 2014

Year ended 29 February 2013

		Revenue	Capital	Total	Revenue	Capital	Total
Note		£'000	£'000	£'000	£'000	£'000	£'000
	Losses on investments designated at fair value through profit or loss	-	(49)	(49)	-	(2,653)	(2,653)

	Gains/(losses) losses of trading subsidiary at fair value through profit or loss	906	-	906	(755)	-	(755)

2	Investment income	726	-	726	865	-	865
	Total income	1,632	(49)	1,583	110	(2,653)	(2,543)
3	Investment management fees	(85)	(85)	(170)	(93)	(93)	(186)
3	Other expenses	(243)	-	(243)	(252)	-	(252)
	Profit/(loss) before finance costs and tax	1,304	(134)	1,170	(235)	(2,746)	(2,981)
6	Finance costs	(98)	(98)	(196)	(110)	(110)	(220)
	Profit/(loss) before tax	1,206	(232)	974	(345)	(2,856)	(3,201)
7	Tax	3	-	3	(6)	-	(6)
	Profit/(loss) and total comprehensive income for the year	1,209	(232)	977	(351)	(2,856)	(3,207)

9	Earnings per share	11.63p	(2.23p)	9.40p	(3.12p)	(25.37p)	(28.49p)

The revenue and capital columns, including the revenue and capital earnings per share data, are supplementary information prepared under guidance published by the AIC. As permitted by S408 of the Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income. The amount of the Company's profit for the financial year was £977,076 (2013: loss £3,207,172)

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. All revenue is attributable to the equity holders of the parent company. There are no minority interests.

The Board recommends a final dividend of 3.80p per share (see note 8) out of the Company's revenue reserves

CONSOLIDATED BALANCE SHEET

AT 28 FEBRUARY 2014

		2014	2013
Notes		£'000	£'000
	NON-CURRENT ASSETS
10	Investments designated at fair value through profit or loss	23,892	21,932

	CURRENT ASSETS
	Investments designated at fair value through profit or loss (held by subsidiary)	170	988
	Sales for future settlement	180	430
	Other receivables	84	107
	Cash and cash equivalents	140	120
		574	1,645

	TOTAL ASSETS	24,466	23,577

	CURRENT LIABILITIES:
	Other payables	74	72
	Bank loan and overdraft	4,453	4,153
		4,527	4,225


	TOTAL ASSETS LESS CURRENT LIABILITIES	19,939	19,352

	EQUITY
12	Called up share capital	3,598	3,598
	Capital redemption reserve	179	179
	Share premium account	10,997	10,997
14	Investment holding losses	(6,867)	(7,081)
14	Other capital reserves	12,806	13,251
	Revenue reserve	(774)	(1,592)

	TOTAL EQUITY	19,939	19,352

15	Net assets per ordinary share	191.78p	186.13p

Company no. 03300814

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 28 FEBRUARY 2014

2014	Notes
		Share capital	Capital redemption reserve	Share premium account	Investment holding losses	Other capital reserves	Revenue reserve	Total
		£,000	£'000	£,000	£,000	£,000	£,000	£,000

Opening equity		3,598	179	10,997	(7,081)	13,251	(1,592)	19,352

Total comprehensive income for the year		-	-	-	214	(445)	1,208	977

Dividends paid	8	-	-	-	-		(390)	(390)

Closing equity		3,598	179	10,997	(6,867)	12,806	(774)	19,939

2013	Notes
		Share capital	Capital redemption reserve	Share premium account	Investment holding losses	Other capital reserves	Revenue reserve	Total
		£,000	£'000	£,000	£,000	£,000	£,000

Opening equity		3,598	179	10,997	(2,467)	13,343	(831)	24,819

Total comprehensive (loss) for the year		-	-	-	(4,614)	1,758	(351)	(3,207)

Purchase of own shares		-	-	-	-	(1,850)	-	(1,850)

Dividends paid	8	-	-	-	-	-	(410)	(410)

Closing equity		3,598	179	10,997	(7,081)	13,251	(1,592)	19,352

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 2014

Notes		2014	2013
		£'000	£'000

	NET CASH FLOW FROM OPERATING ACTIVITIES
	Cash inflow from investment income and interest	757	927
	Cash inflow from held for trading current asset investments	1,724	-
	Cash outflow from management expenses	(424)	(442)

	Payments to acquire non-current asset investments	(6,705)	(4,650)
	Receipts on disposal of non-current asset investments	4,947	7,199

	Tax recovered/(paid)	3	(6)

16	NET CASH FLOW FROM OPERATING ACTIVITIES	302	3,028



	CASH FLOWS FROM FINANCING ACTIVITIES
	Purchase of own shares	-	(1,850)
	Dividends paid	(390)	(410)
	Increase/(decrease) in bank borrowings	300	(463)
	Finance charges and interest paid	(192)	(222)
	NET CASH FLOW FROM FINANCING ACTIVITIES	(282)	(2,945)


	INCREASE IN CASH	20	83

	Cash and cash equivalents at beginning of year	120	37

	Increase in cash	20	83

	CASH AND CASH EQUIVALENTS AT END OF YEAR	140	120

COMPANY BALANCE SHEET

AT 28 FEBRUARY 2014

		2014	2013
Notes		£'000	£'000
	NON-CURRENT ASSETS
10	Investments designated at fair value through profit or loss	23,892	21,932
11	Investment in subsidiary	15	908
		23,907	22,840

	CURRENT ASSETS
	Sales for future settlement	180	430
	Other receivables	239	190
	Cash and cash equivalents	140	117
		559	737

	TOTAL ASSETS	24,466	23,577

	CURRENT LIABILITIES:
	Other payables	74	72
	Bank loan and overdraft	4,453	4,153
		4,527	4,225


	TOTAL ASSETS LESS CURRENT LIABILITIES	19,939	19,352


	EQUITY
12	Called up share capital	3,598	3,598
	Capital redemption reserve	179	179
	Share premium account	10,997	10,997
14	Investment holding losses	(8,302)	(9,350)
14	Other capital reserves	12,806	13,251
	Revenue reserve	661	677

15	TOTAL EQUITY	19,939	19,352

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 28 FEBRUARY 2014

2014	Notes
		Share capital	Capital redemption reserve	Share premium account	Investment holding losses	Other capital reserves	Revenue reserve	Total
		£,000	£'000	£,000	£,000	£,000	£,000	£,000

Opening equity		3,598	179	10,997	(9,350)	13,251	677	19,352

Total comprehensive income/(loss) for the year		-	-	-	1,048	(445)	374	977

Dividends paid	8	-	-	-	-	-	(390)	(390)

Closing equity		3,598	179	10,997	(8,302)	12,806	661	19,939

2013	Notes
		Share capital	Capital redemption reserve	Share premium account	Investment holding losses	Other capital reserves	Revenue reserve	Total
		£,000	£'000	£,000	£,000	£,000	£,000	£,000

Opening equity		3,598	179	10,997	(3,970)	13,343	672	24,819

Total comprehensive income/(loss) for the year		-	-	-	(5,380)	1,758	415	(3,207)

Purchase of own shares		-	-	-	-	(1,850)	-	(1,850)

Dividends paid	8	-	-	-	-	-	(410)	(410)

Closing equity		3,598	179	10,997	(9,350)	13,251	677	19,352

COMPANY CASH FLOW STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 2014

	2014	2013
	£'000	£'000

NET CASH INFLOW FROM OPERATING ACTIVITIES
Cash inflow from investment income and interest	755	855
Cash outflow from management expenses	(422)	(443)

Payments to acquire non-current asset investments	(6,705)	(4,650)
Receipts on disposal of non-current asset investments	4,947	7,199

Tax (paid)/recovered	3	(6)

NET CASH INFLOW FROM OPERATING ACTIVITIES	(1,422)	2,955


CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in loans advanced to subsidiary	1,727	74

CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares	-	(1,850)
Dividends paid	(390)	(410)
Increase/(decrease) in bank borrowings	300	(463)
Finance charges and interest paid	(192)	(222)
NET CASH FLOW FROM FINANCING ACTIVITIES	(282)	(2,945)


INCREASE/(DECREASE) IN CASH	23	84



Cash and cash equivalents at beginning of year	117	33

(Decrease) / Increase in cash	23	84

CASH AND CASH EQUIVALENTS AT END OF YEAR	140	117

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

Basis of Accounting

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

Under IFRS, the AIC Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued in January 2009 has no formal status, but the Group adheres to the guidance of the SORP.

The accounting policies are unchanged from those used in the last annual financial statements except where otherwise stated. The particular accounting policies adopted are described below:

(a) Accounting Convention

The accounts are prepared under the historical cost basis, except for the measurement of fair value of investments. They have been prepared on the assumption that the shareholders will vote for continuation and thus contain np provisions for a winding-up.

(b) Basis of Consolidation

The Group accounts consolidate the accounts of the Company and of its subsidiary AIT Trading Limited ("AIT"), both drawn up to either 28 or 29 February each year. As permitted by S408 of the Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income. The amount of the Company's profit for the financial year was £977,076 (2013: loss £3,207,172).

As the Company's business is investing in financial assets with a view to profiting from their total return in the form of increases in fair value, investments are designated as fair value through profit or loss on initial recognition in accordance with IAS 39. At this time, fair value is the consideration given, excluding material transaction or other dealing costs associated with the investment.

After initial recognition such investments are valued at fair value. For quoted investments this is established by reference to bid, or last, market prices depending on the convention of the exchange on which the investment is quoted. Gains or losses are recognised in the capital column of the Statement of Comprehensive Income. All purchases and sales of investments are accounted for on a trade date basis.

The investment of the Company in AIT is stated at cost less impairment. AIT's own investments are managed and performance evaluated on a fair value basis and accordingly are designated by AIT as "at fair value through profit or loss". The AIT investments in quoted securities are valued at all times in accordance with current market values that represent fair value; at the time of acquisition they are valued on the basis of trade date accounting. Securities of companies whose prices are quoted on the London Stock Exchange are valued by reference to the Official List of the London Stock Exchange at their bid market prices at the close of the period.

(d) Income from Investments

Investment income from ordinary shares is accounted for on the basis of ex-dividend dates. Income from fixed interest shares and securities is accounted for on an accruals basis using the effective interest method. Special Dividends are assessed on their individual merits and are credited to the capital column of the Statement of Comprehensive Income if the substance of the payment is a return of capital; with this exception all investment income is taken to the revenue column of the Statement of Comprehensive Income. Income from gilts and bank interest receivable is accounted for on an accruals basis using the effective yield.

(e) Capital Reserves

The Company is not precluded by its Articles from making any distribution of capital profits by way of dividend, but the Directors have no current plans to do so. Profits and losses on disposals of investments are taken to the gains on disposal reserve. Revaluation movements are taken to the investment holding reserve via the capital column of the Statement of Comprehensive Income.

(f) Investment Management Fees, Finance Costs and Other Costs

Finance costs and monthly management fees are allocated between capital and revenue according to the Board's expected long-term split of returns between capital gains and income; one-half of these costs are charged to gains on disposal via the capital column of the Statement of Comprehensive Income. Performance-related fees are charged to gains on disposal via the capital column of the Statement of Comprehensive Income. Other costs are normally charged to revenue, unless there is a compelling reason to charge to capital. Tax relief in respect of costs allocated to capital is credited to capital via the capital column of the Statement of Comprehensive Income on the marginal basis.

(g) Taxation

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. In addition, tax losses available to be carried forward as well as other income tax credits are assessed for recognition as deferred tax assets.

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply at their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity.

(h) Foreign currency

The currency of the primary economic environment in which the Group companies operate (the functional currency) is pounds sterling ("Sterling"), which is also the presentational currency of the Group. Transactions involving currencies other than Sterling are recorded at the exchange rate ruling on the transaction date. At each balance sheet date, monetary items and non-monetary assets and liabilities, which are fair valued and which are denominated in foreign currencies, are retranslated at the closing rates of exchange. Such exchange differences are included in the Statement of Comprehensive Income and allocated to capital if of a capital nature or to revenue if of a revenue nature. Exchange differences allocated to capital are taken to gains on disposal or investment holding losses, as appropriate.

(i) Cash and cash equivalents

Cash and Cash Equivalents in the Cash Flow Statement comprise cash held at bank.

(j) Dividends payable to equity shareholders

Dividends payable to equity shareholders are recognised in the Statement of Changes in Equity when they are paid, or have been approved by shareholders in the case of a final dividend.

2.	INCOME	2014	2013
	Income from investments:	£'000	£'000
	Franked dividends from listed or quoted investments	488	432
	Unfranked income from overseas dividends	136	273
	Income from listed fixed interest securities	102	160
		726	865

3.	INVESTMENT MANAGEMENT FEES AND OTHER EXPENSES		2014			2013
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fees - monthly - performance	85 -	85 -	170 -	93 -	93 -	186 -
		85	85	170	93	93	186
	Other expenses:
	Administration fees	72	-	72	72	-	72
	Registrar's fees	13	-	13	12	-	12
	Directors' fees	79	-	79	79	-	79
	Consultancy payments	-	-	-	5	-	5
	Legal fees	-	-	-	6	-	6
	Auditors' fees - audit of the Company and of the consolidated financial statements - audit of the subsidiary	26 2	- -	26 2	22 3	- -	22 3
	- audit-related assurance services	6	-	6	6	-	6
	Miscellaneous expenses	45	-	45	47	-	47
	Total other expenses	243	-	243	252	-	252

All expenses include any relevant irrecoverable VAT. The amounts excluding VAT paid or accrued for the audit of the Company are £22,000 (2013: £18,500) and for the audit of the subsidiary £1,500 (2013: £2,500).

4. DIRECTORS' FEES

The fees paid or accrued were £74,750 (2013: £73,921). There were no other emoluments. The gross figures shown for directors' fees in note 3 above include employers' National Insurance charges or VAT, as appropriate. Full details of the fees of each director are given in the Directors' Remuneration Report.

5. TRANSACTION CHARGES

Group

G		2014	2013
		£'000	£'000

	Transaction costs on purchases of investments	41	17
	Transaction costs on sales of investments	8	13
	Total transaction costs included in gains or losses on investments at fair value through profit or loss	49	30

6.	INTEREST PAYABLE AND SIMILAR CHARGES		2014			2013
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Interest payable	55	55	110	61	61	122
	Facility and arrangement fees and other charges	43	43	86	49	49	98
		98	98	196	110	110	220

7.	TAXATION		2014			2013
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Overseas tax	(3)	-	(3)	6	-	6
	Tax charge in respect of the current year	(3)	-	(3)	6	-	6

Current taxation

The current taxation charge for the year is different from the standard rate of corporation tax in the UK (23.08%). The differences are explained below:

	2014	2013
	£'000	£'000
Total profit/(loss) before tax	974	(3,207)

Theoretical tax at UK corporation tax rate of 23.08% (2013: 24.17%)	225	(770)
Effects of:
Capital losses that are not taxable	(53)	(686)
UK dividends which are not taxable	(114)	(104)
Increase/(decrease) in excess tax losses	(16)	69
Expenses charged to capital account for which a deduction is claimed	(42)	(49)
Overseas tax paid/(recovered)	(3)	6
Actual current tax	(3)	6

The Company is an investment trust and therefore is not charged to tax on capital gains.

Factors that may affect future tax charges

The Company has tax losses of £7,678,578 (2013: £7,265,198) in respect of management expenses and of £1,462,780 (2013: £1,337,835) in respect of loan interest. Its subsidiary has trading losses carried forward of £2,809,080 (2013: £2,663,483) and £154,446 (2013:83,069) in respect of loan interest. These amounts are available to offset future taxable revenue. A deferred tax asset has not been recognised in respect of those expenses and will be recoverable only to the extent that the Company has sufficient future taxable revenue.

8. ORDINARY DIVIDENDS

	2014	2013
	£'000	£'000
Dividends reflected in the financial statements:
Final dividend paid for the year 2013 at 3.75p (2012: 3.55p)	390	410

Dividends not reflected in the financial statements:
Proposed final dividend for the year 2013 at 3.80p (2013: 3.75p)	395	390

9. EARNINGS PER SHARE

Earnings per share are based on the profit of £977,076 (2012: loss £3,207,172) attributable to the weighted average of 10,397,059 (2013: 11,257,914) ordinary shares of 25p in issue during the year, excluding shares held in Treasury.

Supplementary information is provided as follows: revenue earnings per share are based on the revenue profit of £1,208,986 (2013: loss £351,125); capital earnings per share are based on the net capital loss of £231,910 (2013: loss £2,856,047), attributable to 10,397,059 (2013: 11,257,914) ordinary voting shares of 25p.

10.	INVESTMENTS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS	2014	2013
		£'000	£'000
	UK listed or quoted securities	23,121	20,497
	Hong Kong listed security	771	1,435
	Total non-current investments	23,892	21,932
	Movements during the year:
	Opening balance of investments, at cost	29,013	30,032
	Additions, at cost	6,705	4,650

	Disposals - proceeds received or receivable	(4,697)	(7,624)
	- add realised losses/ less realised profits	(262)	1,955
	- at cost	(4,959)	(5,669)

	Cost of investments at 28 February	30,759	29,013

	Revaluation of investments to market value:
	Opening balance	(7,081)	(2,467)

	Increase/(decrease) in unrealised appreciation debited to investment holding reserve	214	(4,614)

	Balance at 28 February	(6,867)	(7,081)

	Market value of non-current investments at 28 February	23,892	21,932

The Company holds a notifiable interest in the following company, the percentage shown being the relevant proportion of the share capital held: GCM Resources 3.87%.

11. SUBSIDIARY

The Company has an investment in AIT Trading Limited (AIT), a wholly owned subsidiary registered in England and Wales, which comprises two ordinary shares of £1 each. AIT undertakes purchases of investments for re-sale in the shorter term, with the objective of achieving a trading profit. The profit before tax of AIT for the year was £834,777 (2013: loss £766,336). The net deficit of AIT at the Balance Sheet date was £1,434,627 (2013: net deficit £2,269,405). No dividend was paid from AIT to the Company (2013: £nil).

During the year the Company provided a short-term loan to AIT to finance its trading operations and charged interest to AIT at the same rate as was charged by Coutts to the Company. At 28 February 2014 the amount outstanding, excluding interest, was £1,450,375 (2013: £3,177,125) together with £154,446 of interest (2013: £83,069).

The Company makes an impairment provision when AIT is in a net deficit position, of an amount equal to the net deficit.

	2013	Movement	2014
	£'000	£'000	£'000

Loan to AIT	3,177	(1,727)	1,450
Provision for impairment	(2,269)	834	(1,435)
Net investment	908	(893)	15

12.	SHARE CAPITAL
	At 28 February:		2014	2013
	Authorised
	Ordinary shares of 25p	Number	40,000,000	40,000,000
		£'000	10,000	10,000
	Allotted, issued and fully paid
	Ordinary shares of 25p	Number	14,391,389	14,391,389
		£'000	3,598	3,598

During the year ended 28 February 2014 the Company did not purchase any of its own shares (2013: 1,155,191). No shares were cancelled during the year (2013: Nil). At 28 February 2014, the Company had 14,391,389 shares in issue, of which 3,994,330 (2013:3,994,330) are held in Treasury; the number of voting shares in issue is 10,397,059 (2013: 10,397,059).

13. TOTAL EQUITY

Total Equity includes, in addition to Share Capital, the following reserves:

Capital Redemption Reserve. When any shares are redeemed or cancelled, a transfer must be made to this reserve in order to maintain the level of capital that is not distributable.

Share Premium Account. When shares are issued at a premium to their nominal value, the "capital profit" arising on their allotment must be held in a Share Premium Account, which is not distributable in the ordinary course and may be utilised only in certain limited circumstances.

Capital profits arising from the Company's investment transactions are held as Capital Reserves, subdivided between Gains on Disposal for profits arising upon sales of investments and Investment Holding gains/losses for portfolio revaluations. The movements on this account are analysed in note 14 below.

The Company's Revenue Reserves are the net profits that have arisen from the Company's revenue income in the form of dividends and interest, less operating expenses and dividends paid out to the Company's shareholders.

14.	CAPITAL RESERVES	2014		2013
	Investment holding gains/(losses)

	Opening balance	(7,081)	(2,467)

	Revaluation of investments - listed	214	(4,614)

	Balance of investment holding gains/(losses) account at 28 February	(6,867)	(7,081)


	Other capital reserves	£,000		£'000

	Opening balance	13,251		13,343

	Net gains and losses on realisation of investments	(262)		1,955

	Expenses of capital management: management fees	(85)		(93)
	: finance costs	(98)		(110)
	Net expenses	(183)		(203)

	Purchase of own shares	-		(1,850)

	Exchange differences	-		6

	Balance of other capital reserves at 28 February	12,806		13,251


	Total capital reserve at 28 February	5,939		6,170

The capital reserves of the Company are identical to those of the Group, except that a provision is made when necessary against the Company's investment holding account for any amount loaned to AIT Trading Limited that is not covered by the subsidiary's net assets. At 28 February 2014 such a provision was made of £1,434,630 (2013: £2,269,405).

15. NET ASSETS PER ORDINARY SHARE

The figure for net assets per ordinary share is based on £19,939,345 (2013: £19,352,159) divided by 10,397,059 (2013: 10,397,059) voting ordinary shares in issue at 28 February 2014, excluding shares held in Treasury.

16.	RECONCILIATION OF PROFIT BEFORE FINANCE COSTS AND TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES	2014	2013
		£'000	£'000

	Profit/(loss) before finance costs and tax	1,170	(2,982)

	(Increase)/decrease in non-current investments	(1,960)	5,633
	Decrease in current investments	818	756
	Decrease/(increase) in sales for future settlement	250	(430)
	Decrease/(increase) in other receivables	24	65
	(Decrease)/increase in other payables	(3)	(8)
	Taxation (paid)/recovered	3	(6)

	Net cash inflow from operating activities	302	3,028

17. RELATED PARTY TRANSACTIONS

Details of transactions with AIT Trading Limited are set out in note 11.

Details of the management, administration and secretarial contracts can be found in the Directors' Report. As disclosed in that Report, Mr Barstow is a director both of the Company and of the Investment Manager. Fees payable to the Investment Manager are detailed in note 3. Other payables include accruals of a monthly management fee of £15,015 (2013: £14,434) and an administration fee of £6,000 (2013: £6,000). No performance fee was accrued (2013: £Nil). All figures include any appropriate VAT.

18. FINANCIAL ASSETS/LIABILITIES

Investments are carried in the balance sheet at fair value. For other financial assets and financial liabilities, the balance sheet value is considered to be a reasonable approximation of fair value.

Financial assets - Group

The Group's financial assets comprise equity investments, fixed interest securities, short-term receivables and cash balances. The currency and cash-flow profile of those financial assets was:

		2014			2013
	Interest bearing	Non- interest bearing	Total	Interest bearing	Non- interest bearing	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Non-current investments at fair value through profit or loss:
£ sterling equities	-	21,917	21,917	-	19,260	19,260
Hong Kong $ equities	-	771	771	-	1,435	1,435
£ fixed interest	1,374	-	1,374	1,237	-	1,237
	1,374	22,688	24,062	1,237	20,695	21,932

Short term trade receivables	-	180	180	-	430	430
Cash at bank:
Floating rate - £ sterling	-	140	140	-	120	120

	-	320	320	-	550	550

Cash at bank includes £83,930 (2013: £34,326) held by the Group's custodian, The Northern Trust Company.

Financial assets - Company

The Company's financial assets comprise equity investments, fixed interest securities, short-term receivables and cash balances. The currency and cash-flow profile of those financial assets was:

		2014			2013
	Interest bearing	Non- interest bearing	Total	Interest bearing	Non- interest bearing	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Non-current investments at fair value through profit or loss:
£ sterling equities	-	21,917	21,917	-	19,260	19,260
Hong Kong $ equities	-	771	771	-	1,435	1,435
£ fixed interest	1,374	-	1,374	1,237	-	1,237
	1,374	22,688	24,062	1,237	20,695	21,932

Short term trade receivables	-	180	180	-	430	430
Cash at bank:
Floating rate - £ sterling	-	140	140	-	117	117

	-	320	320	-	547	547

Cash at bank includes £83,548 (2013: £31,963) held by the Group's custodian, The Northern Trust Company.

Financial liabilities - Company and Group

The Group finances its investment activities through the Company's ordinary share capital, reserves and borrowing. The Group's financial liabilities comprise its overdraft facility and other short-term trade payables. Foreign currency balances are stated in the accounts in sterling at the exchange rate as at the Balance Sheet date.

The Company has borrowing facilities from its banker, Coutts & Co, comprising a revolving credit of up to £5 million (2013: £5 million) plus an overdraft facility of up to £2 million (or the equivalent in euros and/or US dollars in all cases). Interest is charged at 2.25% over LIBOR in the case of the loan and over Coutts' base rate in the case of the overdraft. The facilities are secured upon the shares and securities of the Company. They are repayable upon demand, but normally are reviewed annually by the bank.

The currency and cash-flow profile of the financial liabilities of the Group and of the Company was:

	2014	2013
	£'000	£'000

Interest bearing: Bank overdraft:
Sterling	4,453	4,153
	4,453	4,153
Non interest bearing:
Short term trade payables	-	-

	4,453	4,153

19. FINANCIAL INSTRUMENTS - RISK ANALYSIS

Company and Group

The general risk analysis undertaken by the Board and its overall policy approach to risk management are set out in the Strategic Report. Issues associated with portfolio distribution and concentration risk are discussed in the Investment Policy section of the Strategic Report. This note, which is incorporated in accordance with accounting standard IFRS7, examines in greater detail the identification, measurement and management of risks potentially affecting the value of financial instruments and how those risks potentially affect the performance and financial position of the Company.

The risks concerned are categorised as follows:

A) Potential Market Risks, which are principally (i) Currency Risk (ii) Interest Rate Risk and (iii) Other Price Risk.

B) Liquidity Risk

C) Credit Risk

Each is considered in turn below:

A (i) Currency Risk

All the securities detailed in the Business Review are listed on the London Stock Exchange or quoted on AIM, with the exception of West China Cement, which was previously quoted on AIM but is now listed on the Hong Kong Exchange; the Manager is not required to sell this holding, but will not add to it since it ceased to be quoted in London. Where the underlying currency or currency of quotation is not sterling this is noted. The element of currency risk on investments may be indirect and reflected in the effect of underlying currency movements upon the London market price, whether quoted in foreign currency or not.

Based on the portfolio as at 28 February 2014, there were no investments denominated in Euros and consequently there was no currency risk arising from the possibility of a fall in the value of sterling against the Euro, impacting upon the value of investments or income. West China Cement is now denominated in Hong Kong Dollars; a 10% rise in sterling against the Hong Kong Dollar would result, all other factors remaining unchanged, in a fall of £77,063 in the value of the portfolio.

The Company had no foreign currency borrowings at 28 February 2014 (2013: Nil). In view of the elimination of foreign currency borrowings, no sensitivity analysis is presented for this risk.

A (ii) Interest Rate Risk

The weighted average interest rate of the fixed rate financial assets is 9.43% (2013: 9.43%) and the weighted average period for which rates are fixed is indefinite (2013: indefinite). The list of the Company's holdings in the Strategic Report includes details of the split between equities and fixed interest securities.

With the exception of cash, no interest rate risks arise in respect of any current asset. All cash held as a current asset is sterling denominated, earning interest at the bank's or custodian's variable interest rates.

Interest is charged on the bank borrowing facilities at the bank's variable interest rates as appropriate to the currency concerned in the case of each balance. At 28 February 2014, the Company's total borrowing was £4,452,788 (2013 £4,152,746): all of which was borrowed in sterling, upon which the interest rate at the year end was 2.75% (2013: 2.75%).

A 2% rise in LIBOR, applied to the sterling loan and overdraft balance as at 28 February 2014, would decrease net income by £89,056 on an annual basis.

A (iii) Other Price Risk

The principal price risk for the Company is the price volatility of shares that are owned by the Company. As described in the Investment Manager's Review, the Company spreads its investments across different sectors and geographies, but, as shown by the Portfolio Analysis in the Strategic Report, the Company may maintain relatively strong concentrations in particular sectors selected by the Investment Manager, such as the Resources sector.

B Liquidity Risk

Liquidity Risk is considered to be small, because the portfolio is invested in readily realisable securities. As a consequence, cash flow risks are also considered to be small. The Investment Manager estimates that, under normal market conditions and without causing excessive disturbance to the prices of the securities concerned, the majority of the portfolio could be realised within seven days.

The Company's overdraft facility is repayable upon demand, although normally renewed annually. The Directors believe that the facility will be renewed in 2014. In view of the Company's ability to sell investments, as stated above, the Company is able to reduce or eliminate its borrowing, if necessary.

C Credit Risk

The Company invests in quoted equities and fixed interest securities. The Company's investments are held by The Northern Trust Company ("the Custodian"), which is a large international bank with a high reputation. The Company's normal policy is to remain fully invested at most times and not to hold very large quantities of cash. At 28 February 2014, Group cash at bank comprised £83,930 (2013: £34,326) held by the Custodian and £56,213 held by Coutts & Co (2013: £85,371), also part of a large international bank with a very high credit rating.

Credit Risk arising on transactions with brokers relates to transactions awaiting settlement. This risk is considered to be very low because transactions are almost always undertaken on a delivery versus payment basis with member firms of the London Stock Exchange.

D Capital management policies and procedures

The Group' s capital management objectives are:

· to ensure the Group's ability to continue as a going concern; and

· to provide an adequate return to shareholders

by pursuing investment policies commensurately with the level of risk.

The Group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented on the face of the statement of financial position.

The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders (within the statutory limits applying to investment trusts), return capital to shareholders, issue new shares, or sell assets to reduce debt.

Since an overdraft was taken out in 1997, the Group has consistently honoured its covenant obligations, among which the principal capital ratio is described under Gearing Policy in the Strategic Report.

20. FAIR VALUE HIERARCHY

Under IFRS13 investment companies are required to disclose the fair value hierarchy that classifies financial instruments measured at fair value at one of three levels according to the relative reliability of the inputs used to estimate the fair values.

Classification		Input

Level 1		Valued using quoted prices in active markets for identical assets
Level 2		Valued by reference to valuation techniques using observable inputs 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

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 asset.

Assessment of Hierarchy - Group

The valuation techniques used by the Group are explained in the Accounting Policies Note 1(c). As at 28 February 2014, all investments held by the Group, including all current investments held for trading by the Company's subsidiary, are considered to fall within Level 1:

	2014	2013

Level 1	24,062	22,920
Level 2	-	-
Level 3	-	-

Assessment of Hierarchy - Company

The Company's subsidiary is held at cost less impairment and therefore its valuation as an investment in the Company's balance sheet does not fall within the fair value hierarchy:

	2013	2013

Level 1	23,892	21,932
Level 2	-	-
Level 3	-	-

21. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group.

The Directors anticipate that all of the pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements.

IFRS 9 Financial Instruments (effective from 1 January 2018)

IFRS 10 Consolidated Financial statements (effective from 1 January 2014)

These standards are not expected to have a material impact on the Group's financial statements.

22. FINANCIAL INFORMATION

This announcement does not constitute the Company's statutory accounts. The financial information for 2014 is derived from the statutory accounts for 2014, which will be delivered to the registrar of companies following the Company's Annual General Meeting. The statutory accounts for 2013 have been delivered to the registrar of companies. The auditors reported on the 2013 and 2014 accounts; their reports were unqualified and di9d not include a statement under Section 498(2) or (3) of the Companies Act 2006.

The annual report for the year ended 28 February 2014 was approved on 3 June 2014. It will be posted to shareholders and will be made available on the Investment Manager's website at www.marsassetmanagement.co.uk

This announcement contains regulated information under the Disclosure Rules and Transparency Rules of the FCA.

The annual report will be submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/NSM

23. ANNUAL GENERAL MEETING

The Annual General Meeting will be held on 18 July 2014 at 12.00 noon at 145-157 St John Street, London EC1V 4RU.

3 June 2014

Secretary and registered office

Cavendish Administration Limited

145-157 St John Street

London

EC1V 4RU

Tel: 020 7490 4355

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR FJMATMBIMBBI

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Monday, 13th May 2024

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Annual Financial Report

CHAIRMAN'S STATEMENT

INVESTMENT MANAGER'S REVIEW AND OUTLOOK

Distribution of the portfolio relative to the benchmark

Risk diversification

Gearing Policy

Hedging

External Risks

Internal Risks

Poor asset management, which may include poor stock selection, excessive concentration of the portfolio, mistakes regarding currency movements, speculation in shares of companies without sound or established businesses and speculation in derivatives.

Internal risks

TOP TEN HOLDINGS - CONSOLIDATED

PORTFOLIO ANALYSIS

ANALYSIS OF INVESTMENTS BY SECTOR - CONSOLIDATED - BY MARKET VALUE

Cyclical Services

Ceres Power Holdings

China New Energy

Basic Industries

West China Cement

Ashtead Group

Total Portfolio

Ordinary shares

Fixed interest securities

UK listed securities

Hong Kong listed security

AIM securities

Denominated in sterling

Denominated in Hong Kong $

STATEMENT OF DIRECTORS' RESPONSIBILITIES FOR THE ANNUAL REPORT

Disclosure of information to auditor

CONSOLIDATED STATEMENT OF

Year ended 29 February 2013

Note

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 28 FEBRUARY 2014

CONSOLIDATED CASH FLOW STATEMENT

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 28 FEBRUARY 2014

COMPANY CASH FLOW STATEMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Factors that may affect future tax charges

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