STS Global Income & Growth Trust plc

LEI: 549300UZ1Y7PPQYJGE19

Results for the year ended 31 March 2025

The Board of STS Global Income & Growth Trust plc (the 'Company') is pleased to announce the Company's results for the year ended 31 March 2025.

Highlights

·    The Company's share price returned 10.9% over the year, ahead of the return from the Lipper Global - Equity Global Income Index of 4.5%. The net asset value total return was also 10.9%.

·    The Company pays quarterly dividends to provide investors with a regular income. The Board has announced a fourth quarterly dividend of 3.61p per ordinary share which will be paid on 4 July 2025 to shareholders on the register on 6 June 2025. The total dividend for the year will be 8.37p per share, an increase of 28% from the prior year and 47% since the dividend was rebased in 2021. The Board is pleased to announce this significant increase in the dividend, ensuring the Company's yield is competitive while remaining sustainable, preserving full investment flexibility for the Managers. 

·    In the last 12 months the Company has been able to increase the quality and underlying growth of the portfolio by investing in a number of excellent businesses at attractive valuations.

Chairman's Statement

I am pleased to report that shareholder returns for the year to 31 March 2025 were not only positive but also ahead of both our benchmark and the peer group - a strong result in a challenging and fast-evolving global environment.

Delivering value to our shareholders remains the Board's central focus. This year, I would like to highlight two actions that reflect our ongoing commitment to this.

The Company bought back 19.4 million shares during the year at a total cost of £43.9 million and at an average discount of 1.4%, with a net benefit of £564,000 to shareholders after costs.  The buyback amounts to 13.8% of the shares in issue on 31 March 2024. By any standards this is a significant purchase and the share price discount to NAV was 1.7% at the start and end of the year.

This purchase represented a significant use of shareholders' capital and provided liquidity and value to the minority of shareholders who chose to sell shares. The Board is minded to enhance the benefits for the majority of shareholders who choose to remain invested.

Dividend and dividend policy

The Board has carefully considered both the dividend payment for the year and the future dividend policy.

A fourth quarterly dividend of 3.61p per share has been declared. This will bring the total dividend for the year to 8.37p, an increase of 28.0% over the previous year. The 8.37p dividend represents a yield of 3.5% on the closing share price as at 31 March 2025.

In setting the dividend the Board believes it has achieved the following:

·    The dividend yield of the Company will be in line with the yield of competing investment companies.

·    It is set at a sustainable level.

·    It is at a level from which it can rise reflecting growth in portfolio earnings.

·    It makes appropriate use of distributable reserves.

·    It does not impinge on the investment flexibility of the Managers.

Quarterly dividends in the current year will be increased in order that shareholders receive the higher dividend payment level at the earliest opportunity. It is intended that the first quarterly dividend for the 2026 year will be at least 2.00p.

Investment Returns

The Company delivered a total return of 10.9% over the year, comfortably ahead of the Lipper Global - Equity Global Income Index, which returned 4.5%. This strong relative performance reflects the impact of the portfolio's positioning as market drivers began to broaden beyond the narrow group of large US technology stocks that led returns in prior years.

Following an initially positive reaction to the election of President Trump, US equity markets retreated as greater consideration was given to the likely economic impacts of the tariff policies being proposed by the new Administration.

Since your Company's year-end equity markets throughout the world have shown a significant rise in volatility. The negotiating tactics employed to agree tariff levels are short term noise but the eventual outcome is likely to be higher tariff levels on trade than have been seen in a century. The economic impacts of tariffs are negative and lower economic growth will be one effect. Bond and equity markets across the globe are taking time to adjust to the new norm. However, your Company's portfolio has been relatively well placed against the recent market background.

Board Composition

I will retire as Chair and as a director of the Company at the forthcoming AGM on 23 June 2025.  I joined the Board in 2016 and have now completed nine years as a director.

Sarah Harvey will take over the role of Chair, having been appointed a director in 2018. Sarah has a wealth of corporate experience and will bring a fresh perspective to the role. Alexandra Innes will assume the role of Senior Independent Director and Bridget Guerin will take over from Sarah as Chair of the Marketing and Communications Committee.

Due to a combination of factors, and in particular the merger with Troy Income & Growth Trust in 2024, STS will have an all-female Board after my departure. Though this will leave the Board in compliance with the FCA Listing Rules and the FTSE Women Leaders Review, we would like to have better gender diversity, and this issue will be addressed in the coming years.

At the same time, our Board's culture is firmly rooted in delivering shareholder value. The Board believes that the significant buyback programme, the proposed dividend, and the strong investment performance this year are all aligned with that goal.

In a year when several investment trusts have come under pressure due to the perception that they have failed to deliver value for shareholders, our actions stand in contrast and demonstrate clear accountability to shareholders.

Sarah and I are always happy to engage with shareholders who would like to discuss any aspect of the Board's composition or strategy in more detail.         

Outlook

Equity and bond markets are currently trying to adjust to a more uncertain economic outlook. 

Your Managers are seeing many opportunities to invest in their chosen companies at valuation levels not seen for many years. They are committing capital at these levels with their usual long term holding period in mind.  Sharp movements in markets offer opportunities and it is not a time to spectate. I am confident that your Managers are managing the portfolio to best advantage in these uncertain times.

John Evans

21 May 2025

Manager's Review

The Company's share price returned 10.9% over the year to 31 March 2025, ahead of the return from the Lipper Global - Equity Global Income Index of 4.5%. Since the inception of Troy's management, the Company has returned 34.7%, slightly behind the peer return of 39.6%.

Global equity markets made steady progress over the period under review, albeit unspectacular when compared to the exceptional gains of the previous two years. Importantly, the portfolio delivered solid returns and growth in underlying free cash flow to support the Company's growing dividend.

Longstanding investment Paychex had a strong year. This is a US software company engaged in the delivery of payroll and human resources management including benefits and insurance. The US economy proved to be more robust than many expected last year, leading to a healthy employment backdrop which supports activity for this company. A further fillip was provided by fewer interest rate cuts than were predicted by markets from which the company benefits via its management of client cash. The shares have delivered an excellent return for the Company over the years, balanced between income and capital and we expect this to continue for years to come.

Following a change of management and a reinvigoration of the business, investors have become more enthused by the prospects for Unilever to the benefit of the shares. The company enjoys formidable competitive advantages from owning a number of well recognised global consumer brands, such as Dove, Knorr and Marmite, as well as the scale and depth of manufacturing and distribution to support these brands. However, in recent times the company has struggled to deliver growth. We believe the new CEO, Fernando Fernandez, who himself replaced the relatively new previous CEO Hein Schumacher, has the right attributes to drive change in the organisation to address this and improve shareholder returns.

Formally called the Chicago Mercantile Exchange, CME Group was a positive contributor. The company is very well placed to benefit from the structural increase in the use of futures and options to manage risk in portfolios. It also benefits from greater volatility in markets, as well as increased government debt issuance, both of which we expect. The shares have further benefited from the launch, and then subsequent failure to gain traction of a rival exchange. This highlighted once again the strong, competitive advantages and dominant market position CME Group commands.

The strongest contributor to the return for the year was the consumer staples sector which makes up a material part of the portfolio. These gains were led by Philip Morris and British American Tobacco ('BAT') which appreciated by 74.9% and 43.9% respectively in the year. In each case investors have rewarded the companies for the resiliency of their cashflows and gained greater confidence in the sustainability of their business models.

Both companies are transitioning from the traditional business of selling combustible products to distributing a range of dramatically less harmful products. In the case of Philip Morris, they have developed the premier global heat-not burn product called IQOS and, via the acquisition of Swedish Match, have a rapidly growing modern oral product named Zyn. This should allow the company to increase both free cashflow growth and margins in the long term. BAT is strategically some way behind Philip Morris but should benefit from similar trends in time. This is not yet reflected in the valuation of the shares which trade at a very wide discount to its better managed peer. We see plenty of scope for this to close to the benefit of the shares. Further upside is possible from the sale over time of BAT's stake in Indian fast moving consumer goods ('FMCG') company ITC, the proceeds from which may be used to buy back shares.

The two greatest detractors from performance were both spirits companies Diageo and Pernod Ricard. Diageo is a long-term investment in the Company whereas Pernod Ricard is a newer addition. We like these businesses long term as spirits brands give rise to greater consumer loyalty than wine or beer. Further, the trend towards drinking less but better has seen spirits enjoy a greater share of consumption, with premiumisation further improving margins. Recently these structural advantages have been challenged by offsetting structural and cyclical trends that have worried investors. 

Structurally it is feared that the consumption of spirits may be reduced owing to the widespread adoption of GLP-1 drugs which suppress appetite. Further, it is thought younger consumers are now more health conscious and less inclined to drink alcohol. Additionally, there is some concern that the legalisation of cannabis may lead to some substitution of consumption. To these structural concerns have been added cyclical fears: the boom in consumption and stocking up of spirits during COVID- related lockdowns has been followed by a mini-bust.

Our view is that, though these concerns have some merit, they do not invalidate the long-term investment case for these companies, especially following the material de-rating^[1] of the sector. We believe demand will recover and inventories will normalise in time. GLP-1 drugs may impact consumers while on the medication, but it may, we believe, be a temporary effect (human nature tends to be surprisingly consistent in some respects). Evidence suggests that the young are delaying consumption, but that this tends to revert to more familiar trends when people either have children or enter the workplace. As regards cannabis, it is thought to be consumed in different "use occasions" and so is arguably less impactful than feared. More recently the tariff wars have hurt sentiment as well, potentially, as profitability for a time.

In our experience the narrative and sentiment surrounding an industry or business follow share prices. The more they fall the more negative the surrounding comment. It is worth remembering, however, that you cannot have good news and attractive prices. These companies are dealing with plenty of bad news, including tariffs, but we think in time that current valuation levels will be seen as having been a long-term buying opportunity.

We bought Canadian National Railway last year and have added to it recently. We view this as an excellent strategic asset that is impossible to replicate. It has long benefitted from both the increasing productivity of its network with the application of technology and its pricing power owing to its oligopolistic position and lack of substitutes in certain regions and for certain types of cargo.  It also benefits from being the only transcontinental railway in North America running from the Atlantic (Halifax), to the Pacific (Vancouver) to the Gulf of Mexico (or should that be America?) in New Orleans. The shares have been weak for several one-off reasons such as wildfires and floods and a more persistent problem relating to labour relations. Tariffs are also unwelcome. Despite this we believe the combination of value, predictability and resiliency of free cash flow and income renders this is an appropriate long-term investment for the Company.

Pepsi also appeared in the list of detractors to performance. With an impressive track record of dividend growth, a dominant market position in the US snacking industry and a long-term opportunity to grow in the rest of the world, this is a high-quality global income asset. A combination of a fuller starting valuation and, like the spirits companies, concerns around GLP-1 adoption has made for a lacklustre return. Free cash flow growth has been constrained by a capital investment programme that should in time reap rewards. We would expect this to be evident in the coming months. Meanwhile the durability of the business should not be overlooked given the current policy and market backdrop.

Finally, Microsoft declined in this period following years of strong returns. In part this was owing to the sharp sell off in the very large technology companies that have led the US equity market higher in recent years. A change in market sentiment against the so-called Magnificent 7 (of which Microsoft is a part) was inevitable at some stage. More fundamentally, however, there is rising scepticism surrounding the efficacy of the massive investments made in the build out of artificial intelligence ('AI') infrastructure. Microsoft is deploying AI and has been a direct beneficiary of this capital splurge via its hyper-scale cloud business. It was therefore exposed to this shift in sentiment. The scale and diversification of Microsoft suggests this is a manageable challenge and that the combination of predictable growth and quality justifies the current valuation. This leads us to retain the position despite shorter term market pressures.

Portfolio Activity

Within the overall trend of a rising equity market, several opportunities have presented themselves for investment this year. We are continuously seeking to increase the quality and underlying growth of the portfolio whilst maintaining an attractive level of income for shareholders. In the last 12 months we have been able to pursue this objective by investing into a number of excellent businesses at very attractive valuations.

The most significant new holding established in the year was the Spanish software company Amadeus. The company is a leading provider of IT solutions for the global travel and tourism industry. It operates two main business segments: distribution and IT solutions. The distribution segment connects travel providers with travel agencies and other intermediaries. The IT solutions segment offers software and cloud-based platforms that help airlines to manage their operations and hotels to manage their reservation systems. We believe that Amadeus has a strong competitive position in both segments, benefiting from high barriers to entry, network effects, and economies of scale. In the IT solutions business, Amadeus's competitive position has improved since COVID. Its competitors are losing business as they cannot match Amadeus on research and development spending. Additionally, some of them are dealing with financial problems that we believe will further hamper their ability to compete effectively.

Air travel, after the significant COVID disruptions, is forecast to grow ahead of GDP. Amadeus has a dominant market share, and we consider the company to be well placed to benefit as spending increases with its existing customers. In the hospitality sector, Amadeus is making significant progress with its reservation system. Given the above we believe Amadeus to be significantly undervalued and have established a meaningful holding in the Company.

We also established a new investment in Rentokil Initial. Some will remember this business, managed by Clive Thompson in the 1980s and 1990s. It became a conglomerate via acquisitions, earning Mr Thompson the nickname "Mr 20%" - referring to what became to be expected of him - the delivery of 20% earnings per share growth each year - until it was not and ended badly. The shares fell by 92% between 1998 to 2009. Today it is a much better business. Under Andy Ransom the company is focussed on commercial and residential pest control, where it has become the global leader as well as the largest player in the lucrative US market. It also has smaller businesses engaged in facilities management, providing washroom hygiene equipment and workwear.

Pest control is an inherently attractive industry (at least from an investment standpoint) given the resilient, repeat, non-discretionary nature of spending in this category, often mandated by regulation, leading to high recurring revenue and decent growth. Further, per capita pest control spend increases as countries develop, and a warming planet may even further bolster demand. Companies in the sector also enjoy durable competitive advantages. Scale and local density of operations lead to a superior cost and productivity as well as brand equity.

The second largest competitor in the US, Rollins (which admittedly is purely focussed on pest control in one geography), trades at a very substantial premium to its UK peer. Some of the reason for this premium is that Rentokil has temporarily stumbled following the acquisition of the US pest business called Terminix. At Troy we are generally wary of large corporate deals, and this was no exception, leading us to refrain from investing while the deal progressed. The valuation of the shares subsequently declined as teething problems became apparent. However, we believe these issues will ultimately be solved. In the meantime, we are being given the opportunity to invest in a high-quality global income asset at a tantalising valuation.

Coloplast is a leading global medical device company listed in Denmark. It has been in the Troy investment universe for several years and was recently established as an investment in the Company. With dominant positions in Europe and a growing US presence, the company designs, manufactures and markets ostomy care systems, disposable containment devices and intermittent catheters for continence care. They have also acquired an innovative business, called Kerecis, which uses fish skin in wound care.

The nature of the intimate products Coloplast makes, together with their expertise and history of innovation, creates strong brand recognition among patients and healthcare providers leading to valuable customer loyalty. The company has demonstrated strong returns on capital employed as well as consistent growth over many years. Underlying demand is increasing as populations age and chronic conditions become more widespread. The shares have materially derated in recent years to a level that we think is sufficiently attractive to establish an investment.

We also started an investment in Siemens. The company is one of the largest industrial automation and electrification companies in the world which benefits from several structural trends. These include the widening and hardening of electric grids to power greener technologies as well as the need to improve the efficiency of buildings to reduce emissions. The business is involved in producing reliable highly engineered products, which are process critical and therefore highly costly to the customer if they fail. This makes for a strong competitive advantage by discouraging switching to alternative suppliers. They are also a leader in industrial software. The business is split into four divisions: Digital Industries (factory automation, industrial controls and industrial software), Smart Infrastructure (building technologies and electric power distribution), Mobility (rail and mass transit systems) and Siemens Healthineers (medical imaging, diagnostics and advanced therapy equipment). There is also an internal financing arm.

Siemens is going through a process of simplification, which we believe will unlock significant value. The company has split out both Siemens Healthineers and Siemens Energy into separate entities, retaining a stake in each of 70% and 20% respectively. We believe both may be fully spun off in the future. The resulting core business will likely enjoy higher returns on capital, lower capital intensity and should attract a richer valuation. We have seen this with several other industrial businesses in recent times, GE being the best example.

These purchases were funded via the complete sale of several investments; Proctor & Gamble and Fastenal were both sold on valuation grounds. We continue to like both businesses, and they retain their place in the Troy investment universe, but there is a price at which new ideas such as those outlined above will likely make better investments.

Cisco has been a long-term investment in the Company and has delivered attractive returns over that period. The original investment case was that the company had a very strong market position in servers but also that the business would increasingly migrate towards software products. This second leg has not evolved quite as we would have hoped. More recently the share price has appreciated because of investors' excitement regarding all things AI related. While we do think Cisco will capture some of the current AI capital expenditure boom, we think this became adequately reflected in the valuation of the shares, giving us an opportunity to sell.

Domino's Pizza was sold after having been held for several years, owing to a change in the investment case. The new management team have indicated that they wish to make a substantial acquisition to add a new brand to the current Domino's business. This would morph the company from a vertically integrated pizza delivery business to more of a platform business with multiple brands. While this may make long term strategic sense, we think it would come with much greater risk to both the business and more importantly to existing shareholders. A strategic acquisition may require either a substantial equity raise or a highly levered balance sheet which would put the dividend at risk. As a result, we decided to sell.

Johnson & Johnson was sold to part-fund the purchase of Coloplast. We believe Coloplast is a superior business as well as offering faster growth. Johnson & Johnson, as a stand-alone entity, is also a less attractive asset following the spin out of consumer healthcare company, Kenvue.

Outlook

The re-election of Donald Trump to the US presidency has set off a chain of events that few could have predicted and whose long-term effects may be profound. Global capital markets are now reacting to communications from the president, or his acolytes, on a seemingly hour-by-hour basis. While our capital is allocated across the globe, all eyes are currently on the US following the announcement of the so-called reciprocal tariffs on the world. Given that the president appears to change his mind at will, it is somewhat thankless to make too many predictions about what may or may not happen. However, to maintain some perspective it may be worth putting the current market backdrop in some context.

The inclusion of China into the global trading system in 2001 and the development of an integrated globalised economy under the auspices of the Pax Americana, led to a shift in manufacturing to lower cost areas, a restructuring towards services in the developed world and the relative rise of China. While this may have been desirable from an economic point of view, by optimising the ability of economies to pursue their comparative advantage and companies their cost base, it has created imbalances and societal pressures. This dynamic was worsened by policymakers reducing interest rates to 0% and deploying Quantitative Easing ('QE')^[2] which pushed up asset prices (for those with assets). The effect has been to denude the relative living standards of the least well off. It is into this despondency that President Trump is tapping.

The new US administration campaigned on a mandate of disrupting the status quo: geopolitically (via the threatened breakdown of the rules-based system of post-war international relations including the fraying of NATO), economically (through challenging the desirability of globalisation with the resurrection of protectionism via tariffs), and in currencies (where having the dollar as the world's reserve currency is no longer seen as an exorbitant privilege but rather as a burden to the US). Each marks a seismic shift of direction if seen through to conclusion.

The valuation in the US market has been stretched in absolute terms and relative to government bond markets. This is at a time of economic and now political uncertainty. The US equity market represents about 70% of the global index and the Magnificent 7 around 35% of that. The pain of a reversal of these trends could be material to both investors who are over-exposed to this dynamic, as well as the economy, as declining wealth saps confidence and discourages spending.

Conversely, we believe our portfolio exhibits value, quality and resilience, together with diversification away from the risks outlined above, to the benefit of shareholders. Our conservative approach should enable us to both limit the worst effects of the current volatility as well as deliver reliable income growth. This combination could be especially valuable to shareholders in coming months by avoiding the requirement to sell assets at inopportune times to cover current liabilities. This is the cornerstone of our cautious, income-focussed approach. It allows our shareholders the opportunity to endure such inauspicious times with greater equanimity and leave capital undisturbed and invested for the long term.

At the same time, we are encouraged to see several long-desired investments beginning to fall to levels of valuation that we deem attractive. This should enable us, over time, to add high-quality long-term investments to the portfolio to drive growth in underlying free cash flow to the benefit of both capital and income growth. Indeed, since the year end, we have made several changes to the portfolio owing to the opportunities presented by market volatility. This includes making an initial investment in Nike, selling our remaining holding in Hershey and adding to Diageo, Rentokil and Siemens.

Unwelcome though the current uncertainty may be, it is likely to contain the seeds of opportunity for the patient global income investor.

James Harries

21 May 2025

For further information contact:

Troy Asset Management

Investment Manager

Tel:  0207 499 4030

Juniper Partners Limited

Company Secretary

Tel:  0131 378 0500

Responsibility statement

The directors confirm that to the best of their knowledge:

·     the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

·     the annual report, including the strategic report, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal and emerging risks and uncertainties that it faces; and

·     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.

Principal risks and uncertainties

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 Manager, as described in the table below. The principal and emerging 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.

Operational and management risks along with a review of potential emerging risks, are regularly monitored at Board meetings and the Board's planned mitigation measures for the principal and emerging risks are described in the table below. As part of its annual strategy meeting, the Board carries out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.

The Board maintains a risk register and also carries out a detailed risk analysis as part of its annual strategy meeting. The Board has identified the following principal and emerging risks to the Company:

Following the ongoing assessment of the principal and emerging risks facing the Company, and its current position, the Board is confident that the Company will be able to continue in operation and that the processes of internal control that the Company has adopted and oversight by the Manager and the Company Secretary continues to be effective.

Going Concern

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, Manager's review, Strategic report and the Report of the directors in the annual report.

The Company has a three-year multi-currency revolving credit facility for £20 million, with an additional £5 million accordion option, which expires in September 2026. As at 31 March 2025 £15.1 million had been drawn under this facility in the following currencies: £1.5 million, €4.5 million and US$12.75 million. The Company has adequate financial resources in the form of readily realisable listed securities and as a result the directors assess that the Company is able to continue in operational existence without the facilities.

In accordance with the 2019 AIC Code of Corporate Governance, 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 and emerging risks and uncertainties disclosed on pages 17 to 19 of the annual report and also considered the potential impact of increased tariffs. They have reviewed revenue forecasts (adjusted for various sensitivities) and they believe that the Company has adequate financial resources and a suitably liquid investment portfolio to continue its operational existence for the foreseeable future, and at least for the period to 31 March 2027, which is at least 12 months from the date the financial statements are authorised for issue.

The Statement of comprehensive income, Statement of financial position, Statement of changes in equity and Statement of cash flow follow.

Statement of comprehensive income

The total columns of this statement are the profit and loss accounts of the Company.

The revenue and capital items are presented in accordance with the Association of Investment Companies ('AIC') Statement of Recommended Practice (SORP 2022).

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

No operations were acquired or discontinued in the year.

Statement of financial position

Statement of changes in equity

* These reserves are distributable with the exception of the unrealised portion of the capital reserve, which is non-distributable.

** The Company does not have any other income or expenses that are not included in the 'Net return attributable to ordinary shareholders' as disclosed in the Statement of comprehensive income above, and therefore this is also the 'Total comprehensive income' for the year.

Statement of cash flow

^* Receipts from the sale of, and payments to acquire, investment securities have been classified as components of cash flows from operating activities because they form part of the Company's dealing operations.

^** Cash flows relate to transaction with TIGT in March 2024.

Notes:

1.            Significant accounting policies

The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice (Accounting Standards 'UK GAAP') including Financial Reporting Standard (FRS) 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in July 2022. All of the Company's operations are of a continuing nature.

The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments held at fair value through profit or loss. In preparing these financial statements the directors have considered the impact of climate change on the value of the listed investments that the Company holds. As the portfolio consists of listed equities, which are valued using quoted bid prices for investments in an active market, the fair value reflects the market participants' view of climate change risk.

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 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 the period to 31 March 2027, which is at least 12 months from the date the financial statements are authorised for issue.

The principal accounting policies are set out in Note 1 to the annual report. These policies have been applied consistently throughout the current and prior year.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. There are no critical accounting estimates or judgements.

Functional currency - the Company is required to determine a functional currency, being the currency in which the Company predominately operates. The Board has determined that sterling is the Company's functional currency, which is also the currency in which these financial statements are prepared. This is also the currency in which all expenses and dividends are paid in.

2.            Returns and net asset value

3.            Dividends

The distributable reserves as at 31 March 2025 are £105,030,000, of this £6,257,000 will be used to fund the third and fourth interim dividends. The amount reflected above for the cost of the proposed fourth interim dividend for 2025 is based on 120,144,415 ordinary shares, being the number of ordinary shares in issue excluding those held in treasury at the date of this report. The articles of association of the Company permit dividends to be paid out of capital.

4.            Investments at fair value

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 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments, credit risk, etc); or

Level 3: significant unobservable inputs (including the Company's own assumptions in determining the fair value of investments). The financial assets measured at fair value through profit or loss are grouped into the fair value hierarchy as follows:

5.            Share capital

There were 19,356,000 shares bought back during the year to 31 March 2025 at a cost of £43,870,000 (2024: 11,855,197 shares at a cost of £25,891,000). No shares were issued in the year (2024: the Company issued 52,889,037 shares following the transaction with Troy Income & Growth Trust plc, for net proceeds of £117,752,000). The share premium represents the surplus amount over the nominal value of the issued share capital, net of any related issuance costs.

6.            Related party transactions

With the exception of the management and secretarial fees, directors' fees and directors' shareholdings (disclosed on page 36 of the annual report), there have been no related party transactions during the year, or in the prior year.

The management fee payable in respect of the year ended 31 March 2025 was £1,135,000 (2024: £1,366,000), of which £694,000 (2024: £302,000) was outstanding at the year-end. The secretarial and directors' fees payable in respect of the year ended 31 March 2025 are detailed in note 4 of the annual report. The amount outstanding at the year end for secretarial fees and directors' fees was £6,000 (2024: £4,000) and £nil (2024: £nil) respectively.

7.            Further information

These are not statutory accounts in terms of Section 434 of the Companies Act 2006.  Full audited accounts for the year to 31 March 2025 will be sent to shareholders in May 2025 and will be available for inspection at 28 Walker Street, Edinburgh EH3 7HR, the registered office of the Company. The full annual report and accounts will be available on the Company's website www.stsplc.co.uk. A copy will also shortly be available for inspection at the National Storage Mechanism at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

The audited accounts for the year ended 31 March 2025 will be lodged with the Registrar of Companies.