Half Yearly Report

RNS Number : 8938E

Securities Trust of Scotland PLC

06 November 2015

 



Securities Trust of Scotland plc

Half-yearly financial report

Six months to 30 September 2015

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

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

FINANCIAL SUMMARY

 

Total returns‡ (including reinvested dividends)	Six months ended 30 September 2015	Six months ended 30 September 2014
Share price	(12.5%)	(2.9%)
Net asset value per share*	(10.7%)	2.6%
Benchmark**	(9.1%)	5.0%

Key data	As at 30 September 2015	As at 31 March 2015	% change
Net asset value per share (cum income)	133.47p	152.93p	(12.7)
Net asset value per share (ex income)	132.40p	151.25p	(12.5)
Share price	123.50p	144.25p	(14.4)
Benchmark**	645.51	725.63	(11.0)
Discount	7.47%	5.68%

 

Income	Six months ended 30 September 2015	Six months ended 30 September 2014
Revenue return per share	2.49p	2.83p
Dividend per share	2.90p	2.30p

Ongoing charges†	Six months ended 30 September 2015	Year ended 31 March 2015	Six months ended 30 September 2014
Ongoing charges ratio	1.0%	1.0%	0.9%

Source: Martin Currie

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

* The net asset value is ex income with dividends paid by the company reinvested on xd date.

** MSCI World High Dividend Yield Index

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

Five year record

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

	2015	2014	2013	2012	2011
Net asset value per share	(3.1%)	5.6%	18.3%	18.3%	3.3%
Share price	(7.1%)	0.5%	15.2%	27.7%	9.4%
Benchmark†	(1.8%)	11.5%	17.6%	15.7%	2.6%

Source: Martin Currie

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

INTERIM MANAGEMENT STATEMENT

Chairman's Statement

Income certainty and an attractive dividend are two characteristics prized by investors.  In May I announced that Securities Trust of Scotland would use the flexibility inherent in the investment trust structure to serve the needs of current and future shareholders, and that the board had agreed to support a higher level of dividend by distributing some capital profits as necessary.

I reiterate the commitment to deliver a minimum annual dividend of 5.8p per share in the current financial year, an increase of over 18%. This will consist of three equal payments of 1.45p and a fourth payment of at least 1.45p. Based on the share price on 4 November 2015 the forecast annual dividend yield for the financial year of 4.3% is very attractive, relative to yields and interest rates available elsewhere.

REVENUES AND DIVIDENDS

In line with this new policy, the second interim dividend of 1.45p will be paid on 17 December 2015 to shareholders on the register at 20 November 2015 and brings the total dividend for the six months to 2.90p. Revenue return per share for the six months is 2.49p.

PERFORMANCE

Over the period, global markets have suffered some of the largest falls for four years and your company was not immune. The net asset value ('NAV') was down 10.7% on a total return basis, behind the MSCI World High Dividend Yield index which fell by 9.1%.  The share price total return dropped by 12.5%.  The board is acutely aware of this underperformance.  This is explained in more detail in the manager's review.

DISCOUNT TO NAV AND SHARE BUYBACKS

The discount of the company's share price to NAV widened from 5.7% to 7.5% as the market fell. In order to prevent the discount from widening further, the company bought back 3,907,250 shares at an average discount to NAV of 7.3%. 

OUTLOOK

In my view, global equities still provide an ideal platform for investors searching for consistent defined income and long-term capital growth. The strongest support for this is the yield premium on equities versus other asset classes. This remains high and, with the cash flows and balance sheets behind these dividend payments remaining strong, I believe that most companies should be able to sustain these attractive payouts. 

KEEPING IN TOUCH

Over the period, your manager has filmed several updates and interviews and third party researchers have reviewed your company. These are all available on the website at  

www.securitiestrust.com. I also encourage you to register on the website for email updates that will keep you abreast of information relating to your company.

I would like to thank you again for your continued support. As ever, please feel free to contact me if you have any questions regarding the company.

Neil Donaldson

Chairman

6 November 2015

Manager's review

MARKET REVIEW

Global equity markets were weak over the six-month period, with the benchmark falling 9.1% in total return terms. Asia and emerging markets were particularly poor, declining by almost 20%. The energy and materials sectors were by far the weakest, falling over 20% and echoing the declines in commodity prices. These market falls reflect growing fears about Chinese growth and increasing confusion around the US Federal Reserve ("Fed") interest rate policy.

Investment makes up a large part of Chinese GDP, and given the size of the economy, around one-third of global investment occurs inside China. This is why Chinese growth matters to the rest of the world. A huge expansion of debt has accompanied the boom in Chinese investment and there are fears that much of it may be of low quality - which is why global fund managers see a debt crisis as a major risk; although the central government has a strong balance sheet, it might be reluctant to offset an investment slowdown. The impact on the world economy is already being felt in global terms: a decline in imports of capital goods, lower commodity prices, financials stress and big movements in interest and exchange rates.

At its last meeting, and counter to many expectations, the Fed kept US interest rates on hold. The accompanying statement referred to 'global economic and financial developments' as part of the rationale behind the decision. This has led many to speculate that this signals a shift in policy. Either way, it has made the outlook for US interest rate policy more uncertain in the coming months. This matters because a rate increase by America would signal the end of the low interest rate era that has dominated the world economy since the global financial crisis. The worry is that other economies around the world, particularly the more indebted ones, may struggle to cope with rate rises.

The impact of Chinese growth fears and confusion around Fed policy has been primarily felt in emerging markets and commodity sectors, both of which have been weak.

In the world of equities there are always several 'tail' risks that investors are worried about. Currently the top three are: a Chinese recession, an emerging market debt crisis, and Fed policy uncertainty. There is no doubt that the macro environment is important to the firms that we invest in. However, our interest lies in how the businesses we own operate in given environments. We remain focused on finding and owning those that will continue to allocate capital effectively, both reinvesting to generate attractive returns, and rewarding shareholders through generous dividends.

PERFORMANCE

The company's NAV total return was -10.7% for the first half of its fiscal year, around 1.6% behind its benchmark. Key factors behind the shortfall were gearing, which cost around 1.0% in a falling market, our underweight position and stock selection in the consumer staples sector, and our energy exposure. Gearing has benefited the company over the last few years in rising markets, and our cautiously optimistic outlook means we believe it will do so again in the future. The consumer staples sector performed well in this period of falling markets as many of the businesses are seen as relatively insulated from the concerns of a slowing global economy. We believe that many of the firms in the sector do not offer value given the outlook, and so are underweight - and expect to remain so for the foreseeable future.

At the stock level, the strongest positive contributors to performance included two recent purchases: WEC Energy Group, the US electricity utility, and delivery name United Parcel Service (UPS). WEC Energy has just completed the acquisition of a competitor - creating the leading electric and gas utility in the Midwest. We like the combined business as it is well placed to execute on a pipeline of regulated capital investment in a friendly regulatory environment. This, in turn, should support a generous return of capital, by means of dividend, to shareholders. UPS has reported good financial results through the year. We like it as it is seeing signs of pricing improvement in its US business, reflecting its improved services, stronger international growth and effective cost control. The resultant free cash flow and dividend growth is the cornerstone of our investment case.

Key detractors from performance during the period included Kinder Morgan and Chevron. US oil and gas pipeline firm Kinder has been weak due to the falling commodity prices and interest rate volatility as it has a relatively large amount of debt, given its utility-like business. We remain confident in the long-term outlook for the holding because of its large backlog of infrastructure projects which provide stable, fee-based cash flows. Chevron has underperformed, in line with the broader energy sector, as the oil price has fallen. It is the only integrated oil firm we own. We like it because it has many attractive upstream projects close to starting, strong capital discipline and a positive attitude towards returning cash to shareholders.  In addition, strength in certain consumer staples stocks which were not held, like Nestle and Altria cost us.  We struggle to justify the current valuations in these stocks.

ACTIVITY

Key purchases in the period included UPS and Intesa Sanpaolo.

UPS is the world's largest package delivery firm with a growth strategy based on building its capacity, operating more efficiently and providing unique industry-specific solutions. The expansion in online retail is an important driver given that it is growing at a multiple of gross domestic product ("GDP"). UPS has responded to this by offering more solutions and modernising its operations. As a consequence, revenues are growing, returns on invested capital remain high and the returns of cash to shareholders are generous.

Intesa Sanpaolo is the leading banking group in Italy. The firm is prioritising more fee-intensive businesses and improving operational efficiency and is now one of the European leaders in asset management and a very cost-efficient operation. As a result of this, and its strong capital position, Intesa aims to reward its shareholders with high and sustainable dividends.

OUTLOOK

The macroeconomic backdrop is more uncertain now than earlier in the year, leading to a risk that management teams will remain hesitant in increasing their capital spending. While this is good for dividends in the short term, it is less positive over the long term as we need to see companies invest in order to grow. There are, however, a number of positives for equity markets: valuations, which had been high at the start of the year, are coming down as markets fall and earnings estimates decline by less; global fund manager surveys suggest that on the whole they are cautious, which is supportive for the contrarian investor; and finally, the biggest positive for equity markets is their relative yield premium to most other asset classes. In an environment where investors want, or indeed need yield, this bodes well for businesses with sustainable and growing dividends.

Alan Porter

6 November 2015

PRINCIPAL RISKS AND UNCERTAINTIES

Risk and mitigation

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

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

Ø Loss of s1158-9 status

Ø Long-term investment underperformance

Ø Market, financial and interest rate risk

Further details of these risks and how the board manages them can be found in the 2015 annual report and on the company's website www.securitiestrust.com

Directors' responsibility

In accordance with Chapter 4 of the Disclosure and Transparency Rules, and to the best of their knowledge, each director of the company, confirms that the financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law) and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014. The directors are satisfied that the financial statements give a true and fair view of the assets, liabilities, financial position and profit of the company. Furthermore, each director certifies that the interim management statement includes an indication of important events that have occurred during the first six months of the financial year, and their impact on the financial statements, together with a description of the principal risks and uncertainties that the company faces. In addition, each director of the company confirms that there have been no related party transactions during the six months to 30 September 2015.

Going concern status

The company's business activities, together with the factors likely to affect its future development, performance and position are set out in the chairman's statement and manager's review. The financial position of the company as at 30 September 2015 is shown on the unaudited condensed statement of financial position.

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

By order of the board

Neil Donaldson, Chairman

Edinburgh

6 November 2015

PORTFOLIO SUMMARY Portfolio distribution as at 30 September 2015
By region (excluding cash)	As at 30 September 2015	As at 31 March 2015
	(%)	(%)
Developed Europe	48.2	47.5
North America	44.2	43.2
Developed Asia Pacific ex Japan	3.4	3.7
Global Emerging Markets	2.4	2.6
Japan	1.8	3.0
	100.0	100.0

By sector (excluding cash)	As at 30 September 2015	As at 31 March 2015
	(%)	(%)
Financials	19	15
Healthcare	16	15
Industrials	15	9
Consumer goods	14	16
Consumer services	9	14
Utilities	9	5
Basic materials	6	7
Telecommunications	6	7
Oil & gas	5	11
Technology	1	1
	100	100

By asset class (including cash and borrowings)	As at 30 September 2015	As at 31 March 2015
	(%)	(%)
Equities	111	109
Less borrowings	(11)	(9)
	100	100

Largest 10 holdings	(Unaudited) 30 September 2015	(Unaudited) 30 September 2015	(Audited) 31 March 2015	(Audited 31 March 2015
	Market value	% of total	Market value	% of total
	£000	portfolio	£000	portfolio
British American Tobacco	7,419	4.4	6,774	3.4
WEC Energy Group	6,079	3.6	-	-
Novartis	5,932	3.5	6,555	3.3
Philip Morris International	5,839	3.4	5,727	2.9
Chevron	5,712	3.4	8,977	4.5
Pfizer	5,707	3.4	6,458	3.3
Roche Holdings	5,381	3.2	5,772	2.9
United Parcel Service	4,899	2.9	-	-
Paychex	4,503	2.6	4,612	2.3
SSE	4,422	2.6	4,435	2.2

UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME

		(Unaudited) Six months to 30 September 2015			(Unaudited) Six months to 30 September 2014
	Note	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
(Losses)/gains on investments	6	-	(22,521)	(22,521)	-	2,085	2,085
Currency losses		(19)	(32)	(51)	(25)	(29)	(54)
Income	3	3,803	-	3,803	4,418	-	4,418
Investment management fee		(168)	(312)	(480)	(178)	(331)	(509)
Other expenses		(280)	-	(280)	(281)	-	(281)
Net return before finance costs and taxation		3,336	(22,865)	(19,529)	3,934	1,725	5,659
Finance costs		(37)	(69)	(106)	(26)	(49)	(75)
Net return on ordinary activities before taxation		3,299	(22,934)	(19,635)	3,908	1,676	5,584
Taxation on ordinary activities	5	(345)	-	(345)	(451)	-	(451)
Net returns attributable to ordinary redeemable shareholders		2,954	(22,934)	(19,980)	3,457	1,676	5,133
Net returns per ordinary redeemable share	2	2.49p	(19.33p)	(16.84p)	2.83p	1.37p	4.20p

		(Audited)
		Year to 31 March 2015
		Revenue	Capital	Total
	Note	£000	£000	£000
(Losses)/gains on investments	6	-	14,119	14,119
Currency losses		(10)	7	(3)
Income	3	8,003	-	8,003
Investment management fee		(366)	(679)	(1,045)
Other expenses		(526)	-	(526)
Net return before finance costs and taxation		7,101	13,447	20,548
Finance costs		(64)	(119)	(183)
Net return on ordinary activities before taxation		7,037	13,328	20,365
Taxation on ordinary activities	5	(784)	-	(784)
Net returns attributable to ordinary redeemable shareholders		6,253	13,328	19,581
Net returns per ordinary redeemable share	2	5.11p	10.90p	16.01p

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

The revenue and capital items are presented in accordance with The Association of Investment Companies (AIC) SORP 2014.

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

No operations were acquired or discontinued in the year.

UNAUDITED CONDENSED STATEMENT OF CASH FLOW

		(Unaudited) Six months to		(Unaudited) Six months to		(Audited) Year to
		30 September 2015		30 September 2014		31 March 2015
	Note	£000	£000	£000	£000	£000	£000
Net cash inflow from operating activities	9		3,201		3,625		5,613
Servicing of finance
Finance costs			(104)		(75)		(184)
Taxation
Overseas withholding tax suffered			5		-		31
Taxation recovered			-		(17)		-
Capital expenditure and financial investment
Capital distributions		324		-		47
Payments to acquire investments		(50,397)		(29,469)		(77,094)
Receipts from disposal of investments		54,855		28,707		72,668
Net cash inflow/(outflow) from investing activities			4,782		(762)		(4,379)
Dividends paid	4		(3,430)		(3,058)		(5,869)
Net cash inflow/(outflow) before use of liquid resources and financing			4,454		(287)		(4,788)
Financing
Repurchase of ordinary share capital during the period		(5,330)		-		(1,851)
Net movement in short-term borrowings		-		7,000		7,000
Net cash (outflow)/inflow from operating activities			(5,330)		7,000		5,149
Decrease/(increase)  in cash for the period			(876)		6,713		361
Reconciliation of net cash flow to movements in net debt
(Decrease)/increase in cash as above		(876)		6,713		361
Net movement in short-term borrowings		-		(7,000)		(7,000)
Change in net debt resulting from cash flows			(876)		(287)		(6,639)
Opening net debt			(13,238)		(6,599)		(6,599)
Closing net debt			(14,114)		(6,886)		(13,238)

 

UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION

		(Unaudited) As at 30 September 2014		(Unaudited) As at 30 September 2014		(Audited) year to 31 March 2015
	Note	£000	£000	£000	£000	£000	£000
Fixed assets
Investments at fair value through profit or loss
Listed on Exchanges in the UK			39,724		41,702		39,863
Listed on Exchanges abroad			130,518		147,364		158,846
	6		170,242		189,065		198,709
Current assets
Loans and receivables	7	436		9,825		2,310
Cash at bank		2,886		10,114		3,762
		3,322		19,939		6,072
Creditors
Amounts falling due within one year	8	(17,289)		(33,758)		(19,749)
Net current liabilities			(13,967)		(13,819)		(13,677)
Net assets			156,275		175,246		185,032
Capital and reserves
Called up ordinary share capital			1,223		1,223		1,223
Capital redemption reserve			78		78		78
Share premium account			30,040		30,040		30,040
Special distributable capital reserve*			102,101		109,299		107,448
Capital reserve*			20,086		31,368		43,020
Revenue reserve*			2,747		3,238		3,223
			156,275		175,246		185,032
Net asset value per ordinary redeemable share	2		133.47p		143.29p		152.93p

*These reserves are distributable.

UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY

		Called up ordinary share capital	Capital redemption reserve	Share premium account	Special distributable reserve	Capital reserve	Revenue  reserve	Total
For the six months to 30 September 2015 (Unaudited)	Note	£000	£000	£000	£000	£000	£000	£000
As at 31 March 2015		1,223	78	30,040	107,448	43,020	3,223	185,032
Return attributable to shareholders		-	-	-	-	(22,934)	2,954	(19,980)
Ordinary shares bought back during the period		-	-	-	(5,347)	-	-	(5,347)
Dividends paid	4	-	-	-	-	-	(3,430)	(3,430)
Balance at 30 September 2015		1,223	78	30,040	102,101	20,086	2,747	156,275

		Called up ordinary share capital	Capital redemption reserve	Share premium account	Special distributable reserve	Capital reserve	Revenue  reserve	Total
For the six months to 30 September 2014 (Unaudited)	Note	£000	£000	£000	£000	£000	£000	£000
As at 31 March 2014		1,223	78	30,040	109,299	29,692	2,839	173,171
Return attributable to shareholders		-	-	-	-	1,676	3,457	5,133
Dividends paid
Balance at 30 September 2014		1,223	78	30,040	109,299	31,368	3,238	175,246

		Called up ordinary share capital	Capital redemption reserve	Share premium account	Special distributable reserve	Capital reserve	Revenue  reserve	Total
For the year ended 31 March 2015 (Audited)	Note	£000	£000	£000	£000	£000	£000	£000
As at 31 March 2014		1,223	78	30,040	109,299	29,692	2,839	173,171
Return attributable to shareholders		-	-	-	-	13,328	6,253	19,581
Ordinary shares bought back during the year		-	-	-	(1,851)	-	-	(1,851)
Dividends paid	4	-	-	-	-	-	(5,869)	(5,869)
Balance at 31 March 2015		1,223	78	30,040	107,448	43,020	3,223	185,032

NOTES TO THE FINANCIAL STATEMENTS

1.   Accounting policies

For the period ended 30 September 2015 (and the year ending 31 March 2016), the company is applying for the first time, Financial Reporting Standard (FRS 102) applicable in the UK and Republic of Ireland, which forms part of the revised Generally Accepted Accounting Practice (New UK GAAP) issued by the Financial Reporting Council (FRC) in 2012 and 2013.

These condensed financial statements have been prepared on a going concern basis in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, FRS 102, Interim Financial Reporting (FRS 104) issued by the FRC in March 2015 and the revised Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts"(SORP) issued by the AIC in November 2014.

As a result of the first time adoption of New UK GAAP and the revised SORP, comparative amounts and presentation formats have been amended where required. The net return attributable to ordinary shareholders and total shareholders' funds remain unchanged from under old UK GAAP basis, as reported in the preceding annual and interim reports. The Statement of Cash Flows has been restated to reflect presentational changes required under FRS 102 and does not include any other material changes.

The accounting policies applied for the condensed set of financial statements are set out in the company's annual report for the year ended 31 March 2015. However, the references to prior individual FRSs should now be taken to reference FRS 102.

2.  Returns and net asset value

	(Unaudited) Six months to 30 September 2015	(Unaudited) Six months to 30 September 2014	(Audited) Year to 31 March 2015
Revenue return
Revenue return attributable to ordinary redeemable shareholders	£2,954,000	£3,457,000	£6,253,000
Average number of shares in issue during the period	118,627,997	122,299,148	122,262,535
Revenue return per ordinary redeemable share*	2.49p	2.83p	5.11p
Capital return
Capital return attributable to ordinary redeemable shareholders	(£22,934,000)	£1,676,000	£13,328,000
Average number of shares in issue during the period	118,627,997	122,299,148	122,262,535
Capital return per ordinary redeemable share	(19.33p)	1.37p	10.90p
Total return
Total return per ordinary redeemable share	(16.84p)	4.20p	16.01p
Net asset value per share
Net assets attributable to shareholders	£156,275,000	£175,246,000	£185,032,000
Number of shares in issue at the period end	117,084,127	122,299,148	120,991,377
Net asset value per share	133.47p	143.29p	152.93p

* During the six months to 30 September 2015 special dividends of £96,000 (30 September 2014: £145,000) were received and treated as income.

During the six months to 30 September 2015 there were 3,907,250 shares bought back into treasury at a cost of £5,347,000. (Six months to 30 September 2014: there were no shares bought back into treasury). Between 1 October and 4 November 2015, 208,575 ordinary shares of 1p each were bought back into treasury at a cost of £260,000.

3. Income

	(Unaudited) Six months to 30 September 2015 £000	(Unaudited) Six months to 30 September 2014 £000	(Audited) Year to 31 March 2015 £000
From listed investments
Franked income - equities	740	885	1,883
Unfranked income - equities	3,020	3,529	6,110
	3,760	4,414	7,993
Other income
Interest on deposits	3	4	10
Stock lending income	40	-	-
	3,803	4,418	8,003

During the six months to 30 September 2015 the company received a capital dividend of £324,000 from Direct Line Insurance (six months to 30 September 2014: no capital dividends received).

4. Dividends

	(Unaudited) Six months to 30 September 2015 £000	(Unaudited) Six months to 30 September 2014 £000	(Audited) Year to 31 March 2015 £000
Year ended 31 March 2014 - fourth interim dividend of 1.35p	-	1,651	1,651
Year ended 31 March 2015 - first interim dividend of 1.15p	-	1,406	1,406
Year ended 31 March 2015 - second interim dividend of 1.15p	-	-	1,406
Year ended 31 March 2015 - third interim dividend of 1.15p	-	-	1,406
Year ended 31 March 2015 - fourth interim dividend of 1.45p	1,731	-	-
Year ended 31 March 2016 - first interim dividend of 1.45p	1,699	-	-
	3,430	3,058	5,869

5. Taxation on ordinary activities

	(Unaudited) Six months to 30 September 2015 £000			(Unaudited) Six months to 30 September 2014 £000			(Audited) Year to 31 March 2015 £000
Foreign tax			345			451			784

6. Investments

	(Unaudited) As at 30 September 2015 £000	(Unaudited) As at 30 September 2014 £000	(Audited) As at 31 March 2015 £000
Investments at fair value through profit or loss
Opening valuation	198,709	179,047	179,047
Opening investment holding gains	(26,510)	(20,650)	(20,650)
Opening cost	172,199	158,397	158,397
Add: acquisitions at cost	49,233	38,760	78,258
Disposal proceeds	(54,855)	(30,827)	(72,668)
Less: net gain on disposal of investments	3,353	1,977	8,212
Disposals at cost	(51,502)	(28,850)	(64,456)
Closing cost	169,930	168,307	172,199
Add: investment holding gains	312	20,758	26,510
Closing valuation	170,242	189,065	198,709

	(Unaudited) As at 30 September 2015 £000	(Unaudited) As at 30 September 2014 £000	(Audited) As at 31 March 2015 £000
Gains on investments
Net gain on disposal of investments	3,353	1,977	8,212
Movement in investment holdings unrealised (losses)/gains	(26,198)	108	5,860
Capital distributions	324	-	47
	(22,521)	2,085	14,119

Transaction costs

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

	(Unaudited) Six months to 30 September 2015 £000	(Unaudited) Six months to 30 September 2014 £000	(Audited) Year to 31 March 2015 £000
Acquisitions	96	82	151
Disposals	65	48	94
	161	130	245

7. Loans and receivables

	(Unaudited) As at 30 September 2015 £000	(Unaudited) As at 30 September 2014 £000	(Audited) As at 31 March 2015 £000
Dividends receivable	202	357	859
Special dividends to capital receivable	-	-	47
Interest accrued	-	1	-
Due from brokers	-	2,120	-
Stock lending income receivable	4	-	-
Tax recoverable	217	270	222
Prepayments and other debtors	13	7,077	1,182
	436	9,825	2,310

8. Creditors - amounts falling due within one year

	(Unaudited) As at 30 September 2015 £000	(Unaudited) As at 30 September 2014 £000	(Audited) As at 31 March 2015 £000
Interest accrued	2	1	-
Due to brokers	17	9,291	1,164
Sterling bank revolving loan	17,000	17,000	17,000
Other creditors	270	7,466	1,585
	17,289	33,758	19,749

The company has a £17,000,000 revolving loan facility with State Street Bank and Trust Company which expires on 25 September 2016.  Under this agreement £17,000,000 was drawn down at 30 September 2015 at a rate of 1.28438% with a maturity date of 29 December 2015.

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

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

	(Unaudited) Six months to 30 September 2015 £000	(Unaudited) Six months to 30 September 2014 £000	(Audited) Year to 31 March 2015 £000
Net return before finance costs	(19,529)	5,659	20,548
Decrease/(increase) in accrued income and other debtors	1,869	(6,603)	(1,256)
Decrease/(increase) in creditors	(1,315)	7,105	1,224
Net losses/(gains) on investments	22,521	(2,085)	(14,119)
Taxation withheld from income on investments	(345)	(451)	(784)
Net cash inflow from operating activities	3,201	3,625	5,613

10.  Analysis of net debt

	(Unaudited) As at 31 March 2015 £000	Cash flow £000	(Unaudited) As at 30 September 2015 £000
Cash at bank	3,762	(876)	2,886
Bank borrowings - sterling revolving loan	(17,000)	-	(17,000)
Net debt	(13,238)	(876)	(14,114)

11. Interim report

The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in s434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 September 2015 and 30 September 2014 have not been audited or reviewed.

The information for the year ended 31 March 2015 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under s498 (2), (3) or (4) of the Companies Act 2006.

12. Fair value hierarchy

Under FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' an entity is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:

- Level a: Quoted prices for identical instruments in active markets.

- Level b: Prices of a recent transaction for identical instruments.

- Level c: Valuation techniques that use:

(i) Observable market data; or

(ii) Non-observable data.

As at 30 September 2015 financial assets in the form of quoted equities held at fair value through profit or loss to the value of £170,242,000 were classified as Level 'a' in the fair value hierarchy (31 March 2015: quoted equities to the value of £198,709,000 classified as Level 1 - equivalent to the Level 'a' under FRS 102) with no assets classified as Level 'b', 'c(i)' or 'c(ii)' (31 March 2015: no assets classified as Level 2 or 3 - equivalent to Level 'b', 'c(i)' or 'c(ii)' under FRS 102).

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

13. Post balance sheet events

Since 1 October 2015 a further 208,575 ordinary shares of 1p each have been bought back into treasury at a cost of £260,000.

 

END

 

 

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