240456 j24835 threadneedle uk select trust limited...2016/08/11 · infrastructure fund limited,...

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2015

THREADNEEDLE UK SELECT TRUST LIMITED

Threadneedle UK Select Trust Limited

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Contents

Introductory information .................................................................................................. 2 Investment objective and policy ..................................................................................... 2 Financial Highlights ........................................................................................................ 2 Dividends ........................................................................................................................ 2 Directors ......................................................................................................................... 2 Advisers .......................................................................................................................... 3 Chairman’s Statement .................................................................................................... 3 Investment Manager’s Report ........................................................................................ 4 The Portfolio ................................................................................................................... 5 Industry Classification Benchmark Sector Distribution .................................................. 6 Directors’ Report............................................................................................................. 6 Long Term Viability Statement ..................................................................................... 12 Statement of Principal Risks and Uncertainties ........................................................... 12 Directors’ Responsibilities Statement........................................................................... 13 Report of the Audit Committee ..................................................................................... 14 Independent auditor’s Report ....................................................................................... 16 Statement of Comprehensive Income .......................................................................... 19 Statement of Financial Position .................................................................................... 20 Statement of Changes in Net Assets Attributable to Shareholders ............................. 21 Statement of Cash Flows ............................................................................................. 22 Notes to the Financial Statements ............................................................................... 23 Ten Year Record- Unaudited ....................................................................................... 32


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Introductory information Threadneedle UK Select Trust Limited's (the “Company”) ordinary shares are traded on the Main Market of the London Stock Exchange.

The Company’s share price is published daily under Investment Companies in the Share Information Section in the Financial Times. In addition it is published every Monday on the business pages of The Guernsey Press and the Jersey Evening Post.

Investment objective and policy The Company’s investment objective is to provide Shareholders with a total return in excess of the total return on the FTSE All-Share Index, together with a progressive dividend policy.

The Company is permitted to invest in any security listed or quoted on any UK stock exchange provided that no less than 80 per cent of its gross assets at the time an investment is made are invested in constituents of the FTSE All-Share Index.

Financial Highlights

31 December

2015 31 December

2014

Net asset value per share 189.40p 183.33p

Equity Shareholders' interest (1) £41.94m £40.76m

Revenue return on ordinary activities for the financial year after taxation £0.90m £0.85m

Capital return on ordinary activities for the financial year after taxation £1.41m £0.48m

Revenue return per ordinary share 4.05p 3.83p

Capital return per ordinary share 6.40p 2.17p

Dividend per ordinary share (2) 4.45p 4.35p

Share Price (3) 166.5p 171.5p

Net asset value total return (4) 5.7% 3.5%

FTSE All-Share total return 1.0% 1.2%

Ongoing charges (5) 1.4% 1.5%

(1) At the start of 2015, the Company held 2,070,920 ordinary shares in treasury. During the year, the Company purchased 343,000 ordinary shares to be held in treasury. From the shares held in treasury, 254,894 ordinary shares were issued as scrip dividends during the year. 2,159,026 ordinary shares were held in treasury as at 31 December 2015. These have been held for re-sale in order to satisfy general market demand and / or to satisfy elections under the scrip dividend scheme.

(2) The dividend figures include the second interim dividend declared for the year.

(3) Source: Daily Official List mid market closing price.

(4) Source: Datastream/Columbia Threadneedle Investments*. Basis: Gross net income reinvested.

(5) The ongoing charge expense excludes performance fee, withholding tax and finance costs.

* Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

Dividends Basic earnings per share for the year amounted to 10.45p (2014: 6.00p) and revenue earnings per share for the year amounted to 4.05p (2014: 3.83p). The Board declared an interim dividend of 1.90p per share (six months ended 30 June 2014: 1.85p), which was paid on 29 October 2015 to Shareholders on the register at 21 August 2015. The Company intends to continue with the policy of paying a second interim dividend each year to Shareholders in May of the following year.

A second interim dividend of 2.55p per share has been declared for 2015 payable on Friday, 13 May 2016 to Shareholders registered as at close of business on Friday, 11 March 2016 (2014: second interim dividend 2.50p). This brings the total dividend for the year to 4.45p (2014: 4.35p).

Directors D J Warr (Chairman), resident in Guernsey, Non–executive Chairman. He is a fellow of the Institute of Chartered Accountants in England and Wales and joined the Board in 2006. He is also a non-executive director of Breedon Aggregates Limited, Acorn Income Fund Limited and Advance Frontier Markets Fund Limited.

J G West FCA, resident in the UK, Non-executive and senior independent director. He joined the Board in 1997. He is a chartered accountant, who has spent his career in asset management. He is currently the Chairman of CQS New City High Yield Fund Limited and a director of a number of public and private companies, including BlackRock Income Strategies Trust plc, JP Morgan Income and Capital Trust Plc and Aberdeen Smaller Companies High Income Trust. He is also Chairman of Associated British Foods Pension Fund Limited and former chief executive of Lazard Asset Management Limited.

S A Farnon, resident in Guernsey, Non-executive director and Audit Committee Chairman. She joined the board in 2012. She is a chartered accountant and was a banking and finance Partner with KPMG Channel Islands from 1990 until 2001, Head of Audit KPMG Channel Islands and a former member of The States of Guernsey Public Accounts Committee. She is a former Commissioner of The Guernsey Financial Services Commission and currently a non-executive director of Ravenscroft Limited, HICL Infrastructure Fund Limited, Breedon Aggregates Limited, Standard Life Investments Property Income Trust Limited and Apax Global Alpha Limited.

R P King, resident in Guernsey, Non-executive director and Risk Committee Chairman. He joined the board in 2014. He is a non-executive director for a number of open and closed ended investment funds and companies including JP Morgan Senior Secured Loans Fund Limited, Chenavari Capital Solutions Limited and Weiss Korea Opportunities Fund Limited. Prior to becoming an independent non-executive director, he worked in the offshore finance industry specialising in the operational administration of offshore open and closed ended investment funds.


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Advisers Secretary, Administrator and Registered Office JTC Fund Solutions (Guernsey) Limited (Previously known as Kleinwort Benson Limited (Channel Islands) Fund Services) Ground Floor Dorey Court Admiral Park St Peter Port Guernsey GY1 2HT 01481 762400

Registrars Capita Registrars (Guernsey) Limited Mont Crevelt House Bulwer Avenue St Sampson Guernsey GY2 4LH 0870 162 3100

Investment Manager Threadneedle Asset Management Limited 78 Cannon Street London EC4N 6AG United Kingdom 020 7464 5000

Brokers and advisers Canaccord Genuity Limited 88 Wood Street London EC2V 7QR 020 7523 8000

Bankers and Custodian HSBC Bank plc 8 Canada Square London E14 5HQ 020 7991 888

Auditor Deloitte LLP Regency Court Glategny Esplanade St Peter Port Guernsey GY1 3HW 01481 724011

Chairman’s Statement Review of Performance I am pleased to present your Company’s Annual Financial Report for the 12 months to 31 December 2015.

For the year, the net asset value total return was 5.7%, which compares favourably with the 1.0% total return from the FTSE All-Share Index, the benchmark against which the Investment Manager’s performance is measured. A more detailed explanation of the investment performance during the year is provided in the Investment Manager’s Report on page 4.

Share Price and Discount During the year under review, the share price decreased by 2.9% from 171.5p to 166.5p and the discount at which the shares trade, relative to their net asset value, was 12.1% at the end of the year compared with 6.5% at the start of the year.

During the year, the Company purchased 343,000 shares which were taken into treasury from which shares were issued as scrip dividends to satisfy the elections, by Shareholders, for shares in lieu of the dividends paid in the year. At the year end, the Company held 2,159,026 shares in treasury.

The Board has used its share buyback powers to assist in managing the discount to net asset value at which the shares trade. However, in the absence of very substantial buybacks, which, in the Board’s view, would be unsustainable for the Company at its present size, it is unlikely in current market conditions that share buybacks alone will minimise the discount. However, the Board is hopeful that through a combination of continued outperformance, the use of judicious share buybacks and improving market sentiment, the share price will once again more closely reflect the underlying net asset value. The Board is also mindful that at the Company’s 2017 Annual General Meeting and in accordance with the Company’s Articles of Association, shareholders will have the opportunity to vote on the Company’s continuation.

Gearing During the year, the Company’s revolving loan facility of £5m with Lloyds Bank Plc was extended for a further two year period as more fully described in note 12 to these Financial Statements. At the year end, the Company had utilised £3m of this facility.

Earnings and Dividend per Share The revenue return per share for 2015 has increased to 4.05p (2014: 3.83p).

A first interim dividend of 1.90p per share in respect of the financial year 2015 was declared on 13 August 2015 and on 3 March 2016 a second interim dividend of 2.55p per share was declared.

Annual General Meeting The Company’s next Annual General Meeting will be held on 11 August 2016 and notice of this meeting will be sent to all members in due course, at least one month before the AGM. Shareholders are encouraged to attend and will have the opportunity to meet the Board and hopefully hear from the Investment Manager.

D J Warr Chairman 18 April 2016


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Investment Manager’s Report Market Background UK equities made modest gains during 2015, with the FTSE All-Share returning 1%. However, the aggregate figure masked a sharp divergence between mid-cap stocks and larger caps, with the FTSE 250 gaining 11.2% as the FTSE 100 shed 1.3%. Mining, energy and healthcare stocks account for roughly one-third of the FTSE 100 index, and corporate earnings in these sectors were hurt by the relative strength of sterling, while the resource companies were also affected by the fall in commodity prices.

Economic and political news in the first half of the year was dominated by the launch of full-blown quantitative easing in the eurozone, the UK general election and Greece’s worsening debt crisis. In the latter part of the year, news from Greece improved and UK markets enjoyed a sustained flurry of M&A activity, but sentiment was hit by a persistent slowdown in China and the downward pressure on commodity prices.

The domestic economy began the year on a relatively positive note, but faced a number of challenges as the year progressed. GDP growth in the second quarter was revised down to 0.5%, falling to 0.4% in the third. More positively, unemployment fell throughout 2015, while inflation returned to a small positive number year-on-year in November. Despite interest-rate “lift off” in the US in December, Bank of England governor Mark Carney reiterated that UK rates were likely to remain low “for some time”.

Performance Review The Company significantly outperformed the FTSE All-Share index over the period. This outperformance was driven by both sector allocation and stock selection, with selection in the financials and oil & gas sectors proving particularly favourable.

During the first quarter of 2015, we opened a position in Intermediate Capital and developed a larger holding in InterContinental Hotels. The growth in the fund management business at Intermediate Capital should drive an impressive level of revenue growth over the next few years. InterContinental Hotels looks set to continue to grow its revenue-per-available-room under a high quality business model.

In the second quarter, we added to Shell on weakness following the announced acquisition of BG. The deal appears to be strategically attractive for the oil major due to the quality of BG’s assets. We also initiated a position in hospitality & beverage group Greene King; we take a positive view on the synergies that could arise from its acquisition of rival Spirit Pub Company.

In the second half of the year, our key activity included building up our new position in Prudential. After a period of weaker performance by the company, we initiated a position, believing that Prudential is a strong business that should outperform following the de-rating of the sector. We also started a new position in chip-design company ARM, a business with a strong ecosystem of partnerships across an array of growth markets.

Outlook Valuations remain generally elevated and earnings revisions are weak. Our challenge in 2016, therefore, remains similar to that posed in the last two years. Stock picking is likely to be a major driver of returns, so we remain focused on having as much exposure as possible to businesses that are performing well operationally, have valuations with scope for upside, and also have sufficient strength in their balance sheets and management to exploit opportunities.

The political risk chatter will focus on the UK’s possible exit from the European Union in 2016. Volatility is likely to be a feature of the debate, and that might have the interesting side-effect of pressuring an already quite vulnerable-looking sterling.

We feel 2016 will be another challenging year for overall markets, with a high chance of volatility along with a possibility of some reversion to the mean. Fortunately, our stock picking philosophy and process is highly suited to deliver performance in these uncertain times.

Chris Kinder Portfolio Manager Columbia Threadneedle Investments

18 April 2016


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The Portfolio as at 31 December 2015

Company

Market Value £’000

1 BT Group 1,910

2 AstraZeneca 1,805

3 Imperial Tobacco 1,590

4 GlaxoSmithKline 1,342

5 Reckitt Benckiser Group 1,329

6 Unilever 1,322

7 Legal and General 1,146

8 London Stock Exchange Group 1,113

9 British American Tobacco 1,088

10 Prudential 1,064

11 BG Group 1,009

12 Reed Elsevier 961

13 Diageo 946

14 Royal Dutch Shell 930

15 Smith & Nephew 921

16 Barclays 917

17 GKN 912

18 Sage Group 905

19 InterContinental Hotels Group 902

20 Wolseley 901

21 Rio Tinto 883

22 Crest Nicholson 859

23 St James’s Place 802

24 Merlin Ent. 785

25 Daily Mail & General 718

26 BAE Systems 705

27 Wood Group (John) 673

28 Compass Group 637

29 Booker Group 615

30 HSBC Holdings 588

31 Berendson 562

32 Carnival 540

33 Johnson Matthey 528

34 Derwent London 528

35 Rentokil 514

36 Royal Mail 512

37 FDM Group 497

38 RSA Insurance Group 454

39 Melrose Industries 447

40 Smith (DS) 446

Company

Market Value £’000

41 RPC Group 439

42 Phoenix 435

43 Stagecoach Group 407

44 Breedon Aggregates 396

45 Rolls Royce Holdings 389

46 Pearson 380

47 Grainger 380

48 Smiths Group 377

49 Schroders 370

50 Burberry 345

51 Bellway 340

52 IMI 339

53 Greene King 284

54 Essentra 280

55 Wetherspoon (J.D) 260

56 Headlam Group 255

57 Intermed Cap 239

58 Standard Chartered 237

59 PZ Cussons 225

60 G4S 213

61 Ultra Electronics 204

62 ARM Holdings 192

63 ITE Group 144

64 Aggreko 123

65 Hunting 110

66 Tullow Oil 89

67 De La Rue 63

68 Rolls Royce RTS 6

Total Valuation 42,827


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Industry Classification Benchmark (“ICB”) Sector Distribution

Sector Classification

Total 2015

%

Total 2014

%

Oil and Gas Oil and gas producers 4.8 8.4 Oil Equipment, Services and Distribution 1.9 1.9 6.7 10.3 Industrials Construction and materials 0.9 0.7 Aerospace and defence 3.1 4.0 General industrials 3.0 3.7 Industrial engineering 1.9 1.7 Support services 6.3 8.3 Industrial Goods & Sevices – 1.3 Industrial transportation 1.2 – 16.4 19.7 Basic Materials Chemicals 1.3 2.4 Mining 2.1 2.9 3.4 5.3 Consumer goods Automobiles and parts 2.2 2.3 Beverages 2.3 2.2 Food Producers – 3.1 Household goods and home construction 6.6 4.9 Tobacco 6.4 5.4 Personal goods 4.5 1.6 22.0 19.5 Consumer Services Travel and leisure 9.1 7.6 Food and drug retailers 1.5 2.1 Media 5.2 5.5 15.8 15.2 Health Care Pharmaceuticals and biotechnology 7.5 8.1 Health care equipment and Services 2.2 2.3 9.7 10.4 Telecommunications Fixed line telecommunications 4.6 4.4 4.6 4.4 Technology Software and computer services 3.3 3.7 Technology hardware & Equipment 0.5 – 3.8 3.7

Sector Classification

Total 2015

%

Total 2014

%

Financials Banks 4.2 4.9 Financial services 4.1 4.6 Insurance – 1.1 Real estate investments & services 0.9 1.9 Real estate investment trusts 1.3 – Non-life insurance 1.1 1.2 Life assurance 8.1 5.6 19.7 19.3 Net current liabilities (2.1) (7.8) Net assets 100.0 100.0

Note: The distribution of investments is based on the valuations at 31 December 2015 and at 31 December 2014. All of the investments are listed or quoted on the London Stock Exchange.

Directors’ Report The directors present their report and the annual financial statements for the year ended 31 December 2015 with comparatives for the year ended 31 December 2014. The directors confirm that the annual financial report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s performance, business model and strategy.

Principal activities The principal activity of the Company during the year was that of acting as an investment company. The Company is an authorised closed-ended investment scheme regulated by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. The Company’s ordinary shares have been admitted to the Official List of the UK Listing Authority with a premium listing and to trading on the London Stock Exchange’s Main Market for listed securities.

Revenue and dividend The statement of comprehensive income set out on page 19 shows a profit for the year amounting to £2,309,000 (2014: £1,332,000). The directors have declared a second interim dividend of 2.55p which, together with the first interim dividend of 1.90p, makes a total of 4.45p for the year (2014: 4.35p).

The second interim dividend will be paid on 13 May 2016 to ordinary Shareholders on the register on 11 March 2016 and a scrip dividend alternative has been offered.

Assets At the year end, the net assets attributable to the ordinary Shareholders were £41,940,000 (2014: £40,756,000). Based on this figure, the net asset value attributable to each ordinary share was 189.40p (2014: 183.33p).


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Share capital During the year, in the ordinary course of business, 343,000 issued ordinary shares were repurchased by the Company and held in treasury. The authority allowing the Company to purchase its own shares expires on the date of the 2016 annual general meeting and the Board will seek renewal of this authority at that annual general meeting.

During the year, in the ordinary course of business, 254,894 ordinary shares were issued from the treasury reserve to satisfy elections by ordinary Shareholders to receive shares in lieu of cash dividends (2014: 104,258).

Save for issues of treasury shares to satisfy demand for scrip, issues of treasury shares into the market for cash cannot be made at a discount to NAV and will be subject to pre-emption rights unless the Company has shareholder authority to sell such shares without regard to pre-emption, which authority is sought at each annual general meeting. For the avoidance of doubt, pre-emption rights do not apply in respect of the shares issued out of treasury to satisfy existing Shareholders’ elections for scrip. Under the Companies Law and the Articles, the Company may only hold a maximum of up to 10 per cent of the total number of shares in issue at any time in treasury.

Further details of the repurchases and sales of treasury shares are given in note 14 to the financial statements.

Share buyback policy The Board may from time to time use its share buyback powers with the objective of narrowing any discount to their underlying net asset value at which the Company's shares trade in normal market conditions. However, Shareholders should note that the Board is not bound to undertake share buybacks and will do so entirely at its own discretion bearing in mind, inter alia, available cash, the remaining shareholder authority the Company has to conduct share buybacks and the ability of the Company to satisfy the statutory solvency test or any other Guernsey companies law requirements. There is no guarantee that the Board will decide to exercise its buyback powers in any particular case or that it will be successful in achieving its objective.

Substantial shareholdings As at 31 March 2016, the following had notified the Company or were recorded on the Company’s share register as holding notifiable interests in the Company's voting rights:

31 March

2016 31 December

2015

Ameriprise Financial Inc 22.28% 22.28% Mr J.M. & Mrs A.E. Le Pelley 10.45% 10.45% State Street Nominees Limited 17.53% 17.53% Mr G.E. Green 6.89% 6.89% Huntress (CI) Nominees Limited 6.68% 6.68% Vidacos Nominees Limited 5.03% 5.03%

As at 31 March 2016, there had been no other notifiable interests in the Company’s voting rights reported to the Company.

Directors The directors are responsible for the determination of the Company’s investment objectives and policies and have overall responsibility for the Company's activities. The directors have put procedures in place to ensure that the Company meets current corporate governance good practice.

Details of the current Board’s composition, including each director’s roles and other significant commitments, are provided on page 2.

None of the directors has a contract of service with the Company and no contract or arrangement in which any director was materially interested and which was significant in relation to the Company’s business subsisted during or at the end of the year. Furthermore, the directors are not entitled to any minimum period of notice or to compensation in the event of their removal as a director.

The directors who served on the Board during the year, together with their beneficial interests and those of their spouses and dependent children as at 31 December 2014 and 2015, were as follows:

2015 Shares 2014 Shares

D.J. Warr 148,652 118,323 S.A. Farnon and as Executor of CRW Best 94,954 92,587 R.P. King (appointed 16 April 2015) 0 0 J.G. West 38,584 34,584 J.M. Le Pelley (retired 29 May 2015) 2,313,766 2,256,044

There have been no changes in the current directors’ interests in the shares of the Company between 31 December 2015 and 31 March 2016.

Gearing The Company has entered into a £5 million loan facility agreement with Lloyds Bank Plc, which expires on 26 March 2017. The facility has been used to gear the Company’s investment portfolio with the aim of enhancing returns to Shareholders and the Board seeks to target a level of approximately 10% to 20% of the Company’s net asset value. Interest accrues on the loan at 1.1% over LIBOR and it is repayable at the option of the Company. A non-utilisation fee of 0.39% per annum is payable on any portion of the facility not drawn down. As at 31 December 2015, and as at the date of this report, £3 million of the facility had been drawn down and utilised.

Corporate governance a) Statements of compliance The UK Financial Conduct Authority’s Listing and Disclosure and Transparency Rules require all overseas companies with a premium listing (which includes the Company) to include a corporate governance statement in its directors’ report, which must contain a reference to the corporate governance code to which the Company is subject and / or the corporate governance code which the Company may have voluntarily decided to apply and / or all relevant information about the corporate governance practices applied beyond the requirements under national law.


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The Association of Investment Companies (the “AIC”), of which the Company is a member, has published its Code of Corporate Governance for Investment Companies (the “AIC Code") and the Corporate Governance Guide for Investment Companies dated February 2015 (the “AIC Guide”), which incorporates the UK Financial Reporting Council’s (the “FRC”) UK Corporate Governance Code, the AIC Code and certain requirements of the Listing Rules. The FRC has confirmed that “it remains our view that by following the AIC Corporate Governance Guide boards of investment companies should fully meet their obligations in relation to the UK Corporate Governance Code and Paragraph 9.8.6 of the Listing Rules.”

The Board has considered the principles and recommendations of the AIC Guide. The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company. The Board considers that reporting against the principles and recommendations of the AIC Code will provide better information to Shareholders.

The directors believe that the Company has complied with the provisions of the AIC Code where appropriate, and that it has complied throughout the year with the provisions where the requirements are of a continuing nature. Following the publication of the latest version of the AIC Code dated February 2015, the directors put in place further measures designed to ensure compliance with that version of the AIC Code.

On 30 September 2011, the Guernsey Financial Services Commission published its Finance Sector Code of Corporate Governance (the “GFSC Code”), which came into effect on 1 January 2013. The GFSC Code provides a framework which applies to all companies in the regulated finance sector in Guernsey. The GFSC Code deals with governance issues under several topics including the Board, accountability, risk management, disclosure and reporting, remuneration and Shareholder relations. Companies which report against the AIC Code are deemed to meet the requirements of the GFSC Code.

b) The Board The Company is led and controlled by a Board comprising non-executive directors, all of whom have wide experience and are considered to be independent. The Board believes that it is in the Shareholders’ best interests for the Chairman, Mr Warr, and the senior independent director, Mr West, to be the two primary points of contact for all matters relating to the governance of the Company.

Following the retirement of Mr Le Pelley as Chairman of the Board at the Company’s annual general meeting (the “AGM”) held on 29 May, 2015, Mr Warr was appointed as the Chairman. Following his appointment as Chairman, Mr West replaced him as the senior independent non-executive director. The appointment of directors is considered by the Board who sit on the Nomination Committee, further information on which is given below.

The Board meets regularly, normally quarterly, with additional meetings should it be considered appropriate to discuss specific issues. The table below lists the number of Board and Committee meetings attended by each director during the year ended 31 December 2015.

Scheduled Board

Other Board

Audit Committee

Nomination Committee

Risk Committee

*M.E.& R. Committee

Number of Meetings 4 10 3 1 3 1 D.J. Warr 4 10 3 1 3 1 S.A. Farnon 4 9 3 1 3 1 R.P. King (Appointed 16 April 2015) 3 1 2 0 2 0 J.G. West 4 0 2 1 3 1 J.M. Le Pelley (retired 29 May 2015) 2 4 N/A 1 1 1 * Management Engagement and Remuneration Committee.

During the year the Board held ten ad hoc meetings at short notice to deal with various operational matters. Because of the short notice and the cost to Shareholders which would ensue if Mr West attended, such meetings were held between the Guernsey-resident directors, with Mr West making his views on any proposals known to the Board in advance of such meetings whenever possible.

In neither 2014 nor 2015 did the Company employ any personnel.

c) Committees The Board has an Audit Committee chaired by Mrs Farnon, a separate report from such committee being provided below, and the Board also has a Nomination Committee chaired by Mr Warr since Mr Le Pelley’s retirement on 29 May, 2015. The Board has also created a Management Engagement and Remuneration Committee, chaired by Mr Warr since 29 May 2015. As part of its compliance with the Alternative Investment Fund Managers Directive (the “AIFMD”), as implemented by the FCA, the Board maintains a Risk Committee under the chairmanship of Mr King.

d) Nomination Committee, Board Composition and Succession Planning In addition to conducting an evaluation on the composition of the Board, in terms of size, skills and expertise, a formal evaluation of the Board’s own performance, as well as its Committees, is undertaken annually by the Nomination Committee. The Nomination Committee consists of all non-executive directors.

The objectives of Board planning in terms of its composition and succession are to ensure that the Board collectively comprises of fit and proper individuals with the capability to direct the Company in the best interests of its Shareholders. All new directors are provided with an induction by the Secretary and the Board.

The Board currently consists of four non-executive directors, all of whom are independent of the Investment Manager. Mr Warr and Mr West have served on the Board for more than nine years. Under the Code, Mr Warr and Mr West are not considered to be fully independent by reason of their appointment as directors of the Company for more than nine years, however, the Board takes the view that they are independent in judgement and character. Therefore the Board have resolved that all the directors will stand for re-appointment at each AGM, so that the Shareholders have the opportunity to consider each director’s continuing involvement with the Company.


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Directors’ fees are recommended by the full Board. The emoluments of the directors for the year, with comparative figures for 2014, were as follows:

2015 Fees

£

2014 Fees

£

D.J. Warr (Chairman since 29 May 2015) 32,250 27,000 S.A. Farnon 27,000 27,000 R.P. King (appointed 16 April 2015) 18,710 − J.G. West 24,000 24,000 J.M. Le Pelley (retired 29 May 2015) 12,340 30,000 114,300 108,000

The figures above represent emoluments earned as directors during the relevant financial year, which are paid quarterly in arrears. The directors receive no other remuneration or benefits from the Company other than the fees stated above. The directors are paid out of pocket expenses for attendance at board meetings and for any other expenditure they incur when acting on the Company’s behalf.

e) Management Engagement and Remuneration Committee The Management Engagement and Remuneration Committee consists of all non-executive directors and meets when necessary, usually at least annually. The Committee has been delegated the responsibility for monitoring, reviewing and making recommendations to the Board on all aspects of the management and administration of the Company’s assets and corporate records and other ancillary services provided by each of Threadneedle Asset Management Limited, JTC Fund Solutions (Guernsey) Limited, Canaccord Genuity Limited, Capita Asset Services and HSBC Bank Plc, as well as any other significant or long-term service providers. The Management Engagement and Remuneration Committee also makes recommendations to the Board on any proposed variation of the terms of the Investment Management Agreement and any agreement with any other service provider which the Committee considers necessary or desirable.

The Committee is authorised to seek any information it requires from any employee or agent of the Company in order to perform its duties. All agents of the Company are directed to co-operate with any reasonable request made by the Committee.

The Committee is authorised by the Board to obtain, at the Company’s expense, outside legal or other professional advice on any matters within its terms of reference if it considers necessary.

f) Risk Committee As stated above, the Board has a Risk Committee under the chairmanship of Mr King as part of its compliance with the AIFMD.

The principal function of the Risk Committee is to review on a continual basis the Company’s risk management systems, which allow the Company to identify, measure, manage and control investment risks and other related risks to which the Company may be exposed. This Committee has a responsibility to provide such reporting as requested by the Audit Committee

to enable the Audit Committee to review the effectiveness of the Company’s risk management function.

g) Committees’ Terms of Reference The Terms of Reference for all Committees are available for inspection at the Company’s registered office during normal business hours.

h) Relations with shareholders In conjunction with the Board, the Broker keeps under review the register of members of the Company. Potential investors are also contacted by the Investment Manager and Corporate Broker.

All Shareholders are encouraged to participate in the Company's annual general meeting. All directors and one or more representatives of the Investment Manager normally attend the AGM, at which Shareholders have the opportunity to ask questions and discuss matters with the directors and the Investment Manager.

It is recognised that the AIC Code requires notices of AGMs to be despatched at least 20 working days before the meeting. The Company will continue to comply with this provision in 2016.

i) Accountability and audit a) Statement of going concern In the opinion of the directors, the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason the financial statements have been prepared using the going concern basis.

The directors have arrived at this opinion by considering, inter alia, the following factors:

the values of the Company’s assets were as at 31 December 2015 and as at the date of this report greater than the values of its liabilities;

the Company had sufficient liquidity to meet all on-going expenses as at 31 December 2015;

the portfolio of investments held by the Company consists mostly of listed investments which are readily realisable and therefore the Company expects, in the event that insufficient income is received to meet its operating expenses, to be able to realise sufficient investments for cash to meet its liabilities as they fall due; and

as at 31 December 2015, the Company had £3 million of external borrowings. Although the Company will be obliged to repay those borrowing facilities at the expiry of the loan facility on 26 March 2017, unless the facility is renewed before that date, the Company would be able to repay those borrowings out of assets realised for cash for such purpose.

In accordance with the Company’s Articles of Incorporation the Shareholders will have an opportunity to vote on the Company’s continuation at the 2017 AGM and this is further considered in the separate long-term viability statement included later in this annual financial report.


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b) Internal controls The directors acknowledge that they are responsible for establishing and maintaining the Company's system of internal controls and reviewing its effectiveness. Internal control systems are designed to manage rather than eliminate the failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. They have therefore established an ongoing process designed to meet the particular needs of the Company in managing the risks to which it is exposed, consistent with the guidance provided by the AIC. Such review procedures have been in place throughout the financial year and up to the date of the approval of this annual financial report.

The Board has contractually delegated to Threadneedle Asset Management Limited the management of the Company's investments. The Investment Management Agreement between the Company and the Investment Manager sets out the matters over which the Investment Manager has authority and the limits above which Board approval must be sought. Other matters reserved for the approval of the Board include the annual financial report, communications with Shareholders (other than monthly factsheets produced by the Investment Manager) and decisions on strategy.

The Company’s investments are held in safe custody by HSBC Plc, JTC Fund Solutions (Guernsey) Limited has been contracted to provide the Company's administration, secretarial and accounting functions and Capita Registrars (Guernsey) Limited provides its registration function. The Management Engagement and Remuneration Committee regularly reviews the performance of the services provided by these companies.

The Investment Manager and JTC Fund Solutions (Guernsey) Limited maintain their own systems of internal controls, on which they have reported to the Board. The Company, in common with other investment companies, does not have an internal audit function.

The systems are designed to ensure effectiveness and efficient operations, internal control, and compliance with laws and regulations. In establishing the systems of internal control, regard is paid to the materiality of relevant risks, the likelihood of costs being incurred and costs of control. It follows therefore that the systems of internal control can only provide reasonable but not absolute assurance against the risk of material misstatement or loss.

There are well established budgeting and forecasting procedures in place and reports are presented to the Board detailing variances against budget and prior year and other performance data. The effectiveness of the internal control systems is reviewed annually by the Board and the Audit Committee. The Audit Committee has a discussion at least annually with the Company’s auditor to ensure that there are no unknown issues of concern in relation to the audit opinion on the accounts and, if necessary, representatives of the Investment Manager or the secretary and Administrator would be excluded from those discussions.

The Board regularly takes steps to embed internal controls and risk management further into the operations of the Company and to deal with areas of improvement which come to the Board’s attention. In April 2015 the directors visited the Investment Manager’s office to review the operations and processes of the Investment Manager and to discuss such systems with relevant members of staff. This visit included a detailed review of the internal

controls, risk management and investment selection process on behalf of the Company.

The Board concluded that it was satisfied with the Investment Manager’s internal control systems at that time and no matters of concern have since come to the Board’s attention.

Investment objective and policy The Company’s investment objective is to provide Shareholders with a total return in excess of the total return on the FTSE All-Share Index, together with a progressive dividend.

The Company is permitted to invest in any security listed or quoted on any UK stock exchange provided that no less than 80 per cent of its gross assets at the time an investment is made are invested in constituents of the FTSE All-Share Index.

There are no minimum or maximum limits on the number of investments in the portfolio but it is expected that the portfolio will generally comprise shares and securities in 50 to 90 companies. The Company seeks to manage risk in part through heeding the following investment restrictions:

The top five holdings in the Company’s portfolio may not exceed 40 per cent of the total value of the portfolio.

The top three Industry Classification Benchmark (“ICB”) sectors represented in the portfolio may not exceed 50 per cent of the total value of the portfolio.

The securities of no one company may represent more than 10 per cent of the value of the Company’s portfolio measured at the time of acquisition and subsequently, when additions are made to the holding.

The Company will not hold more than 5 per cent of the issued share capital (or voting shares) in any one company.

While the Company may hold shares in other investment companies (including investment trusts), the Company will not invest more than 10 per cent in aggregate, of the value of its total assets in other listed closed-ended investment funds (save to the extent that such closed-ended investment funds have published investment policies to invest no more than 15 per cent of their total assets in such other listed closed-ended investment funds).

No material changes to the Company’s investment objective and policy will be made without the sanction of an ordinary resolution passed by a simple majority of the Company’s shareholders in general meeting.

Cash The Company intends to be fully invested in normal market conditions, but may hold up to 20 per cent of net asset value in cash on deposit (or in short-term money market instruments) during periods in which the Investment Manager believes markets are overvalued or expects them to fall.


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Gearing Gearing may be used selectively in order to leverage the Company’s portfolio to enhance returns where the Board in conjunction with the Investment Manager considers it appropriate to do so. The Company’s gearing stood at 7.15% as at 31 December 2015 (2014: 9.81%).

Derivatives Subject to the Board’s prior approval, the Investment Manager is permitted to invest in options and other derivatives for the purposes of efficient portfolio management only.

Investment Process and implementation of investment policy The Investment Manager’s investment approach is driven by stock selection, with a focus on risk and reward. Reward is derived from valuation and profit opportunity. In terms of risk, it is the level of business risk rather than index weight that determines position size in the portfolio, with portfolio risk minimised through diversification. Considerable emphasis is placed on identifying companies which are well managed, have sustainable franchises, strong balance sheets and cash flow generation, and which trade on attractive valuations relative to peers and history.

During the year under review, the assets of the Company were invested in accordance with the Company's investment policy. Further details of the performance of the Company and the extent to which the Company's objectives were achieved can be found in the Chairman's Statement and Investment Manager’s Report.

The Company's portfolio consisted of 68 investments, primarily UK issuers, as at 31 December 2015. The top 10 holdings comprised 32.68% of total net assets (2014: 33.63%).

The Company’s financial instruments comprise investments, cash and various items such as debtors, creditors etc. that arise directly from the Company’s operations. The main purpose of these instruments is the investment of Shareholders’ funds.

The investment strategy of the Company was delegated to the Investment Manager under an agreement dated 27 July 2012, which agreement was amended and restated on 23 September 2014. The Investment Manager operates within agreed parameters and the Board monitors its performance on a regular basis.

The Alternative Investment Fund Managers Directive (‘AIFMD’) The AIFMD, which was required to be transposed by EU Member States into national law by 22 July 2014, seeks to regulate alternative investment fund managers (‘AIFMs’) established in the EU and prohibits such managers from managing any alternative investment fund (an ‘AIF’) or marketing shares in such funds to investors in the EU unless the AIFM has been authorised.

Following implementation of the AIFMD by H.M. Treasury in the United Kingdom, the Company elected to be a self-managed AIF and accordingly notified both the FCA in the UK and the Guernsey Financial Services Commission in May 2014. In deciding on the self-managed option, the Board was mindful that the reporting requirements and consequential costs of so doing were less than would have been the case if the Investment Manager

had been appointed as the AIFM and therefore considered this approach to be both practical and cost effective. The Board remains of this opinion as of the date of this report.

As the Company has notified the FCA, the Company is able to continue marketing its shares into the UK under the UK’s National Private Placement Regime.

The Board has implemented the necessary measures to facilitate compliance with AIFMD, which included the establishment of the Risk Committee. The Board have also implemented policies and risk based controls to monitor both the investment and operational risks that impact the Company. The Risk Committee meets each quarter and receives monthly reporting on the risks associated with the management of the investment portfolio.

The Board is cognisant of the European Union’s ongoing discussions regarding, inter alia, passporting arrangements for AIFs and ESMA’s recommendations as regards to so called “third countries”, i.e. non-EU member states. The Board and its advisors monitor developments to ensure continued compliance and to ensure that any potential opportunities are not missed.

Retail Distribution On 1 January 2014, the UK’s Financial Conduct Authority (the “FCA”) introduced rules relating to the restrictions on the retail distribution of unregulated collective investment schemes and close substitutes (non-mainstream pooled investments). UK investment trusts are excluded from these restrictions, as are other “excluded securities” as defined by the FCA.

As reported in last year’s annual report, the Board believes that the Company’s shares are “excluded securities” under category (a) of the FCA’s definitions of such and, as a result, the FCA’s restrictions on retail distribution do not apply. This status is reviewed regularly and the Board intends to conduct the Company’s affairs to retain such status for the foreseeable future.

Taxation, FATCA and the OECD’s Common Reporting Standard The Company has been granted exemption by States of Guernsey Income Tax from Guernsey income tax and Guernsey levies no other relevant taxes, such as capital gains tax or inheritance tax. Although the Company cannot provide taxation advice and all Shareholders are responsible for their own taxation affairs, the Company does monitor relevant developments and has taken action to ensure compliance, including registration under the United States’ Foreign Account Tax Compliance Act (“FATCA”) and the appointment of Capita Asset Services as its agent to collate and report relevant data under FATCA and the Organisation for Economic Co-operation and Development’s (“OECD”) Common Reporting Standard. The Board takes advice from independent tax advisors when deemed necessary or desirable.

Auditor Deloitte LLP has expressed its willingness to continue in office as auditor and a resolution to re-appoint it will be proposed at the forthcoming AGM.


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Disclosure of information to the auditor As at the date of approval of the financial statements, the directors confirm that:

so far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware; and

they have taken all steps they ought to have taken as directors to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 249 of The Companies (Guernsey) Law, 2008, as amended.

By order of the Board

D J Warr S A Farnon 18 April 2016

Long Term Viability Statement C.2.1 and C.2.2 of the Code and AIC principle 21 recommends that companies publish a long term viability statement and this statement is intended to meet that requirement.

The directors regularly assesses the viability of the Company and considers the Company’s current financial position and the principal risks to which it is exposed. Those risks are described in more detail in the Statement of Principal Risks and Uncertainties below and in the notes to the financial statements.

The directors have assessed the principal risks and, together with the Investment Manager, have adopted procedures and strategies to mitigate these risks. The Investment Manager has an established investment management policy and set of procedures that limits the various elements of portfolio risk, including exposure to any one particular security, sector, asset class or geographical area. The Investment Manager regularly updates the directors on the Company’s portfolio and the overall status of the market. The directors perform a solvency test before any dividend is declared. In performing its viability analysis, the Board has made the assumption that interest rates in most developed economies will remain relatively low and that global growth will show steady but modest improvement over the foreseeable future.

The Board also monitors cash flow and liquidity at each regular meeting, as well as monitoring the Company’s total expense ratio to ensure that its operating costs are reasonable in the current market environment and do not exceed materially those of its competitors. The Company is primarily invested in large cap, liquid issuers, which under normal trading conditions ensures that it can realise its investments to raise cash and meet its expenses when they fall due. As a result, the directors are confident that the Company will be able to continue in operation and has sufficient assets to meet its liabilities as they fall due over the next three years.

On the advice of the Investment Manager, the Board also believes that the UK’s economy will gradually improve over the next three years and that equities remain attractively valued. As a result, the Board believes that the Company’s investment strategy of investing in UK companies that offer high and growing levels of dividends remains viable.

The Board also has regular communications with and receives regular reporting from the Company’s Broker to understand market dynamics and changes in the share register. The Board monitors the discount at which the Company’s shares trade compared with the prevailing net asset value and, when considered necessary or desirable, repurchases its own shares in the market to hold in treasury, which supports the share price and is accretive to the net asset value of the remaining shares in issue. If the Company’s shares were to trade at a premium, the Company would consider selling shares into the market to satisfy demand.

The Company has appointed an experienced corporate secretary, whose staff keep abreast of and advise the Board on relevant changes to applicable laws and regulations and the Board may take legal advice on any matter and at any time as it considers to be necessary or desirable. Although the Company can neither anticipate nor control future changes in law or regulation, the Board is confident that its directors and advisors are suitably qualified and experienced and that the Company is unlikely to commit any material offence, whether by action or omission.

As stated above, under the Company’s articles of incorporation the Board is obliged to propose a continuation resolution to Shareholders at the 2017 AGM. If that resolution is not passed, the directors will be required to formulate alternative proposals for the Company, which may or may not involve the restructuring or winding up of the Company, for submission to the Company’s Shareholders.

In light of the above and following careful consideration and analysis of the financial position and the principal risk factors, the Board believes that the Company will remain viable as a closed-ended investment company for the next three years subject to Shareholders supporting the continuation of the Company at the AGM to be held in 2017.

Statement of Principal Risks and Uncertainties The risks detailed below are considered by the Board to be the principal risks relating to an investment in the shares of the Company but are not the only risks relating to the Company. Additional risks and uncertainties of which the Company is presently unaware or that the Company currently believes are immaterial may also adversely affect its business, financial status, operating capabilities or the value of the shares.

The Board has undertaken a robust assessment of the principal risks which may affect the Company, including those that would threaten its business model, future performance, solvency or liquidity. The Board has adopted a controls based approach to its risk monitoring requiring each of its service providers, including the Investment Manager, to establish the necessary controls to ensure that all known risks are monitored and managed in accordance with agreed procedures. The Board receives periodic updates at


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their board meetings on key risks and have adopted their own control review to ensure, where possible, that risks are monitored appropriately.

Investment Risk The Board has considered how the Company is exposed to the UK market conditions and investment selection risk that may impact on the portfolio and its potential failure to perform in accordance with the Company’s investment objective and policy, where markets move adversely or if the Investment Manager fails to comply with the investment policy. The Board reviews reports from the Investment Manager each month and at each quarterly Board meeting, with a focus on the investment performance of the portfolio on a risk based approach. The liquidity of the portfolio is monitored as part of this review. The Board also considers the level of gearing that is being utilised in the management of the investment portfolio, which also includes a review of interest rate risk, and believes that this currently has minimal impact to the Company’s investment portfolio.

The Company does not undertake any currency or interest rate hedging.

Tax, legal and regulatory risk The Company is exposed to tax, legal and regulatory changes, which may impact on how the portfolio is managed, distributions are made to investors and future marketing opportunities. There is also the risk that it may fail to maintain accurate accounting records and meet its obligations as a publicly listed company. The Administrator, Broker and Investment Manager provide regular updates to the Board on compliance with regulatory requirements and changes in applicable law and regulations.

Dependence on the Investment Manager The Company is dependent on the ability of the Investment Manager to manage the portfolio in accordance with the agreed mandate and retain the necessary staff to ensure the appropriate investment selection is made within a risk controlled environment. The directors meet with the Investment Manager periodically to ensure an appropriate level of expertise is maintained.

Share Price Discount The Company is exposed to Shareholder dissatisfaction owing to its inability to influence the share price discount to NAV. The Board in conjunction with the Company’s Broker monitors share price discount (and premium) continually and has instructed share buy-backs from time to time to help reduce any such discount. The Board believes that it has access to sufficiently liquid assets to support share buy backs as determined from time to time.

Stability of Income Generation The Company has historically provided a consistent income return to Shareholders but, owing to changing income on the underlying investment portfolio, there is a risk that insufficient income will be generated to maintain future dividend payments. The Board monitors income levels closely and also has the ability to utilise capital returns to finance dividends.

Operational Risk The Company is exposed to the risk arising from any failures of systems and controls in the operations of the Investment Manager, Administrator, Custodian and other service providers appointed by the Company. The Board

and its Committees regularly review reports from the Investment Manager and the Administrator on their internal controls. The Administrator will report to the Investment Manager any valuation issues which will be brought to the Board for final approval as required. The Management Engagement Committee performs an annual review of the Investment Manager and also other service providers as appropriate. The last review of the Investment Manager was in April 2015 and the annual review of service providers was performed in January 2016.

Financial Risks The financial risks, including market, credit interest, currency, investment concentration and liquidity risk faced by the Company are set out in note 17 of the Annual Financial Report on pages 29 to 31. The controls in place to reduce the financial risks are reviewed by the Board at the quarterly board meetings.

Fraud Risk The Company is exposed to fraud risk. The Audit Committee continues to monitor the fraud, bribery and corruption policies of the Company. The Board receives a confirmation from all service providers that there have been no instances of fraud or bribery.

Directors’ Responsibilities Statement The directors are responsible for preparing the annual financial report in accordance with applicable law and regulations.

The Companies (Guernsey) Law, 2008 (the “Companies Law”) requires the directors to prepare financial statements for each financial year. Under the Companies Law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (“IFRS”).

Under the Companies Law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that the directors:

properly select and apply accounting policies;

present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

provide additional disclosures when compliance with the specific requirements in IFRS’s are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

make an assessment of the Company's ability to continue as a going concern.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply


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with the Companies Law. 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 Company’s website. Legislation in Guernsey and the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

To the best of the knowledge of the directors:

The financial statements, which have been 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 Company;

The Chairman’s Statement, Investment Manager’s Report and Notes to the Financial Statements are incorporated herein by reference and include a true and fair review of the development and performance of the Company and a description of the principal risks and uncertainties that it faces, as required by DTR 4.1.8 of the Disclosure and Transparency Rules; 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.

By order of the Board

D J Warr S A Farnon 18 April 2016

Report of the Audit Committee Role and responsibility This is the report of the Audit Committee which has been prepared with reference to the AIC Code and describes the work of the Committee in discharging its responsibilities.

The Company has established an Audit Committee in compliance with the Financial Conduct Authority's (FCA’s) Disclosure and Transparency Rule 7.1 and the AIC Code, which reports formally twice each year to the main Board. It has formally delegated duties and responsibilities within written terms of reference which are reviewed and reapproved annually.

The Audit Committee is mandated by the Board to investigate any activity within its terms of reference and to consult externally with legal or other independent professional advisors, as required, to ensure that the Committee adequately discharges its duties and responsibilities, which include:

(a) consider and make recommendations to the Board concerning the appointment, re-appointment and removal of the External Auditor and assess the independence and objectivity, effectiveness and performance of the External Auditor in accordance with the AIC Corporate Governance Code requirements;

(b) oversee the process for selecting the External Auditor and make appropriate recommendations through the Board for the Shareholders to consider at the annual general meeting;

(c) review annually the terms of the External Auditor’s engagement letter and their proposed remuneration. To make recommendations to the Board regarding the annual external audit fee;

(d) discuss with the External Auditor, before the audit commences, the nature and scope of the audit (or any review of the interim financial statements which might in future be requested) and to review the Auditor's Audit Plan, quality control procedures and steps taken by the External Auditors to respond to changes in regulatory and other requirements;

(e) develop and implement policy on the engagement of the External Auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken;

(f) review and challenge where necessary, in relation to the half-yearly and annual financial reports before submission to the Board, paying particular attention to:

Any changes in accounting policies and practice;

Major judgmental areas;

Significant adjustments arising from the audit;

The going concern and long term viability assumption;

Compliance with accounting standards (and in particular accounting standards adopted in the financial year for the first time);

Compliance with applicable legal and regulatory requirements (including inter alia, those of the Financial Conduct Authority, the London Stock Exchange, the Guernsey Financial Services Commission and The Companies (Guernsey) Law, 2008, as amended); and

Compliance with the AIC Code of Corporate Governance;

(g) discuss problems and reservations arising from the final audit, and any other matters which the auditor may wish to discuss (in the absence of the Company’s agents where necessary);

(h) review the External Auditor’s Report to the Audit Committee and any response thereto;

(i) review on behalf of the Board, the Company’s system of internal control (including financial, operational, compliance and risk


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management) and make recommendations to the Board. With regard to risk management the Board has specifically delegated to the Risk Committee matters detailed in their Terms of Reference. The Audit Committee is responsible for monitoring the effectiveness of the Risk Committee;

(j) review from time to time the appropriateness of internal audit reporting by the Company’s agents;

(k) consider the major findings of internal investigations and management’s response;

(l) review the Company’s operating, financial and accounting policies and practices;

(m) provide advice to the Board on whether the annual financial report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s performance, business model and strategy;

(n) monitor the effectiveness of the system of accounting and internal control and review the Company’s statement on internal control systems before endorsement by the Board;

(o) review the Investment Manager’s internal controls Report and the Company’s internal control review prepared by the Investment Manager and Administrator;

(p) review the Company’s procedure for prevention, detection and reporting of fraud;

(q) the Committee shall review the Company’s arrangements for the Investment Manager’s employees raising concerns in confidence, about possible wrong doing in financial reporting or other matters. The Committee shall ensure these arrangements allow proportionate and independent investigation and appropriate action;

(r) consider any other matters specifically delegated to the Committee by the Board from time to time;

(s) the committee may review any matter that it considers appropriate not withstanding that it is not specifically mentioned in the above list of duties; and

(t) any or all powers of the Committee may be delegated by resolution of the Committee unless otherwise determined by the Board.

The Audit Committee may review any matter that it considers appropriate, whether or not it is specifically mentioned in the above list of duties.

Where non-audit services are provided by the auditor, these engagements are pre-approved by the Audit Committee to ensure that the auditor’s independence and objectivity is not breached. No non-audit services were provided during the year ended 31 December 2015 (2014: £13,950).

Composition Mrs Farnon is the Chairman of the Audit Committee and Messrs King, Warr and West are additional members serving on the Committee. Only independent non-executive directors serve on the Audit Committee and the members do not have any links with the Company’s External Auditor. They are also independent of the management teams of the Investment Manager, Administrator and all other service providers. The Audit Committee meets formally no less than twice a year in Guernsey and on an ad hoc basis if required. In addition, it meets the External Auditor at least twice a year. The membership of the Audit Committee and its terms of reference are kept under review.

Significant issues considered regarding the Annual Financial Report In discharging its responsibilities, the Audit Committee has specifically considered the following significant issues relating to the financial statements:

Significant issue How was the issue addressed

Valuation of the Company’s Investments

The Board reviews the portfolio valuations on a regular basis throughout the year. The Board meets with the Investment Manager at least quarterly and seeks assurance that the pricing basis is appropriate and in line with relevant accounting standards as adopted by the Company and that the carrying values are materially correct. The Company’s net asset value is calculated on a daily basis by the Administrator, JTC Fund Solutions (Guernsey) Limited and published in the Financial Times.

Ownership of the Company’s Investments

The Company’s investments are held in safe custody by HSBC Bank Plc. The Board monitors the performance of the Custodian and also considers the security of the investments held by the Custodian. The Investment Manager has procedures to ensure that investments can only be made to the extent that the appropriate contractual and legal arrangements are in place to protect the Company’s assets. The Administrator reconciles the investments held according to their records with the Custodian’s records. The Board satisfies itself with these procedures by reviewing the internal control documents of the Administrator.

Accuracy of calculation of investment management and performance fees

The management fee and any performance fee is calculated in accordance with the contractual terms in the Investment Management Agreement by the Administrator, JTC Fund Solutions (Guernsey) Limited. These calculations are prepared on a daily basis as part of the daily net asset value calculation. The Board monitors the investment management fee and any performance fee on an ongoing basis. The standard schedule used to calculate the performance fee has been created by the Administrator and reviewed and approved by the Board before being used. The Board also approves any performance fee prior to payment.


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Auditor and audit tenure The Company’s auditor, Deloitte LLP, has acted in this role since 1974 under its current trading name of Deloitte LLP as well as predecessor trading names. The Committee, in conjunction with the Board, is committed to reviewing this appointment on a regular basis to ensure that the Company is receiving an optimal level of service. The appointment of the auditor is reviewed annually and we are satisfied that sufficient safeguards are put in place by the auditor to mitigate risks associated with long association such as regular partner rotation. The audit partner was rotated following the completion of the 31 December 2013 audit. There are no contractual obligations which restrict the Company’s choice of auditor.

Assessment of the external audit process The Audit Committee considers the nature, scope and results of the auditor’s work and monitors the independence of the External Auditor. The Audit Committee also has a responsibility to monitor the effectiveness of the audit process. Formal reports are received from the auditors on an annual basis relating to the extent of their work. The work of the auditors in respect of any significant audit issues and consideration of the adequacy of that work is discussed.

The Chairman of the Audit Committee liaises with the Investment Manager and Administrator to discuss the extent of audit work completed to ensure all matters of risk are covered while the Committee assesses the quality of the draft financial statements prepared by the Administrator.

The Audit Committee has an active involvement and oversight of the preparation of both half yearly and annual financial statements. Ultimate responsibility for reviewing and approving the annual financial report remains with the Board.

Conclusion in respect of the Annual Financial Report The production of the Company’s annual financial report is a comprehensive process requiring input from a number of different parties. One of the key governance requirements of the Company’s annual financial report is that it is fair, balanced and understandable. The Board has requested that the Committee advise on whether it considers that the annual financial report fulfil these requirements.

As a result of the work performed, the Committee has concluded that the annual financial report for the year ended 31 December 2015, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholder’s to assess the Company’s performance, business model and strategy and has reported on these findings to the Board. The Board’s conclusions in this respect are set out in the Directors’ Report on page 6.

S A Farnon Chairman of Audit Committee 18 April 2016

Independent auditor’s Report

Opinion on financial statements of Threadneedle UK Select Trust Limited

In our opinion the financial statements: give a true and fair view of the state of the

Company’s affairs as at 31 December 2015 and of its profit for the year then ended;

have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and

have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

The financial statements comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Cash Flows, the Statement of Changes in Net Assets and the related notes 1 to 19. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

Going concern and the directors’ assessment of the principal risks that would threaten the solvency or liquid

We have reviewed the directors’ statement regarding the appropriateness of the going concern basis of accounting contained within note 2 to the financial statements and the directors’ statement on the longer-term viability of the Company on page 12. We have nothing material to add or draw attention to in relation to:

the directors' confirmation on page 12 that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity;

the disclosures on pages 29 to 31 that describe those risks and explain how they are being managed or mitigated;

the directors’ statement in note 2 to the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material uncertainties to the Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;

the directors’ explanation on page 12 as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

We agreed with the directors’ adoption of the going concern basis of accounting and we did not identify any such material uncertainties. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company’s ability to continue as a going concern.


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Independence We are required to comply with the Financial Reporting Council’s Ethical Standards for Auditors and we confirm that we are independent of the Company and we have fulfilled our other ethical responsibilities in accordance with those standards. We also confirm we have not provided any of the prohibited non-audit services referred to in those standards.

Our assessment of risks of material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team.

Risk How the scope of our audit compared to the risk

Valuation of investments Investments of £42.83m are classified as Level 1 investments at year-end as disclosed in note 10 to the Financial Statements. There is a risk that the Company's pricing methodology does not accurately reflect the potential exit price at the year-end date. This risk is heightened when current market conditions may impair the liquidity of the investment portfolio as an element of judgement may need to be incorporated into the valuation. There is also a risk that investments could be illiquid and hence they could be incorrectly classified as level 1.

Our audit procedures included: Evaluating the design and implementation of

controls around the valuation of investments; Testing 100% of the year-end prices to

prices obtained independently from reliable third party sources;

Reviewing exchange rates used to translate foreign currency assets and liabilities at the year-end date against a reliable third party source for reasonableness; and

Checking the liquidity of the whole portfolio to market data as at the year-end date to assess treading volumes and whether any adjustments to establish the fair value of illiquid or otherwise suspended for trading equities were required.

Ownership of investments There is a risk that the Company has not retained the rights and obligations of its investment portfolio, or that the investments portfolio is not recognised on a trade date basis which may result in gains and losses on investments being recognised in an incorrect period.


controls around the custody of investments; Receiving direct confirmation of all positions

from the Custodian on both a trade date and settlement date basis and reconciled the trade date basis to the Company’s records in order to test for the recognition of gains and losses in the correct period;

Discussing with the Investment Manager and reviewing the bank statements to determine if the Custodian has undertaken any stock lending activities in the year under review; and

Evaluating the Board’s assessment of the Custody Risk associated to investments and the Custodian.

Risk How the scope of our audit compared to the risk

Accuracy of calculation of performance fees The performance fee of £104,000 (2014: £101,000) is payable to the Investment Manager, based on the excess total return of the Company's net assets compared to the total return of the FTSE All-Share Index, over a 2 year period. The calculation requires reference to a third party index and adjustment to the Company's net asset value (“NAV”) to reflect the Company's total return over the specified performance period. As this calculation is complex and considered to be a related party transaction it has been identified as a significant risk. During the year to 31 December 2015, the Fund has performed ahead of the benchmark. As a result the Investment Manager is entitled to a performance fee in line with the calculations as stipulated in the Investment Management Agreement


controls around the calculation of performance fees;

Calculating an expectation of the fees by following the calculation methodology detailed in the agreements entered into by the Company and comparing this to the Company’s records. For our expectation of the fees, we utilised third party market data in respect of the performance fee benchmark and checked the calculation of the Company’s NAV total return; and

Reviewing the Company’s own calculation of the performance fees and sample testing the fees to invoice, also checking settlement of those samples to bank statements.

The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee discussed on page 15. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.


18

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. We determined materiality for the Company to be £419,000 (2014: £815,132), which is approximately 1% of net assets. We have reassessed the materiality level in the year, in light of available market practise, and have therefore changed the percentage applied from 2% in the prior year, as this is more consistent with comparable entities and UK investment Trusts. In determining materiality, we considered the balances on which the users of the financial statements would judge the performance of the Company. As the investment objective of the Company is primarily to invest for capital appreciation, we consider the net asset value of the Company to be a key performance indicator for shareholders. We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £8,380 (2014: £16,300), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit

Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control, and assessing the risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team. The Administrator maintains the books and records of the entity. Our audit therefore included obtaining an understanding of this service organisation (including obtaining and reviewing their controls assurance report) and its relationship with the entity.

Matters on which we are required to report by exception Adequacy of explanations received and accounting records

Corporate Governance Statement

Our duty to read other information in the Annual Report

Under The Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:

we have not received all the information and explanations we require for our audit; or

proper accounting records have not been kept; or

the financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters. Under the Listing Rules we are also required to review part of the Corporate Governance Statement relating to the company’s compliance with certain provisions of the UK Corporate Governance Code. We have nothing to report arising from our review. Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:

materially inconsistent with the information in the audited financial statements; or

apparently materially incorrect based on, or materially inconsistent with, our knowledge of

the company acquired in the course of performing our audit; or

otherwise misleading. In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.

Respective responsibilities of directors and auditor

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews. This report is made solely to the Company’s members, as a body, in accordance with Section 262 of The Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

David Becker for and on behalf of Deloitte LLP Chartered Accountants and Recognised Auditor Guernsey, Channel Islands 18 April 2016


19

Statement of Comprehensive Income

for the year ended 31 December 2015

Notes

2015 2014

Revenue £’000

Capital £’000

Total £’000

Revenue £’000

Capital £’000

Total £’000

Income

Dividend revenue 3 1,507 - 1,507 1,434 - 1,434

Net gains on financial assets at fair value through profit or loss 10 – 1,698 1,698 – 749 749

Net foreign exchange gains – 1 1 – 1 1

1,507 1,699 3,206 1,434 750 2,184

Expenses

Investment management fees 4 53 159 212 50 151 201

Performance fees 4 26 78 104 25 76 101

Administration fees 108 – 108 106 – 106

Registrar’s fees 16 – 16 22 – 22

Auditor’s fees 26 – 26 32 – 32

Directors’ fees and expenses 16 115 – 115 111 – 111

Other expenses 252 – 252 225 – 225

Total operating expenses before finance costs 596 237 833 571 227 798

Operating profit before finance costs 911 1,462 2,373 863 523 1,386

Finance costs

Interest and other finance cost 12 16 48 64 13 41 54

Profit for the year 895 1,414 2,309 850 482 1,332

Basic and diluted return per ordinary share 7 4.05p 6.40p 10.45p 3.83p 2.17p 6.00p

The total column of this statement is the Statement of Comprehensive Income of the Company, with the revenue and capital columns representing supplementary information.

All revenue and capital items in the above statement derive from continuing operations. All income is attributable to the ordinary Shareholders of the Company.

The notes on pages 23 to 31 are an integral part of these financial statements.


20

Statement of Financial Position

as at 31 December 2015

Notes 2015 £’000

2014 £’000

Assets

Cash and cash equivalents 8 2,266 970

Other receivables and accrued income 9 94 95

Financial assets at fair value through profit or loss 10 42,827 43,950

Total assets 45,187 45,015

Liabilities

Other payables and accrued expenses 11 247 259

Borrowings 12 3,000 4,000

Total liabilities 3,247 4,259

Net assets attributable to shareholders 41,940 40,756

Represented by:

Share Capital 14 2,430 2,430

Treasury share reserve 14 (3,879) (3,724)

Other reserves 43,389 42,050

Net assets attributable to shareholders 41,940 40,756

Number of ordinary shares in issue (net of treasury shares) 14 22,143,066 22,231,172

Net asset value per share 15 189.40 183.33

These financial statements were approved by the Board on 18 April 2016 and are signed on behalf of the Board by:

D J Warr S A Farnon

18 April 2016



21

Statement of Changes in Net Assets Attributable to Shareholders


Issued share

capital £’000

Treasury share

reserve £’000

Share premium

reserve £’000

Capital redemption

reserve £’000

Capital reserve-realised

£’000

Capital reserve-

unrealized £’000

Revenue reserve

£’000 Total £’000

At 1 January 2015 2,430 (3,724) 11,307 4,308 16,714 5,296 4,425 40,756

Shares repurchased – (596) – – – – – (596)

Share subscriptions – – – – – – – –

Cash dividends:

– 2014 second interim dividend – – – – – – (302) (302)

– 2015 first interim dividend – – – – – – (227) (227)

Shares issued for scrip dividends – 441 – – (441) – – –

Profit for the year – – – – 1,238 176 895 2,309

At 31 December 2015 2,430 (3,879) 11,307 4,308 17,511 5,472 4,791 41,940

There were no other recognised income and expenses for the year ended 31 December 2015.


Issued share

capital £’000

Treasury share

reserve £’000

Share premium

reserve £’000

Capital redemption

reserve £’000

Capital reserve-realised

£’000

Capital reserve-

unrealized £’000

Revenue reserve

£’000 Total £’000

At 1 January 2014 2,192 (19) 7,156 4,308 15,335 6,620 4,099 39,691

Shares repurchased – (3,891) – – – – – (3,891)

Share subscriptions 225 – 3,923 – – – – 4,148

Cash dividends:

– 2013 second interim dividend – – – – – – (295) (295)

– 2014 first interim dividend – – – – – – (229) (229)

Shares issued for scrip dividends 13 186 228 – (427) – – –

Profit for the year – – – – 1,806 (1,324) 850 1,332

At 31 December 2014 2,430 (3,724) 11,307 4,308 16,714 5,296 4,425 40,756

There were no other recognised income and expenses for the year ended 31 December 2014.



22

Statement of Cash Flows


Notes 2015 £’000

2014 £’000

Cash flows from operating activities

Payments for purchase of financial investments (5,232) (15,876)

Proceeds from sale of financial investments 8,053 12,387

Dividend received from investments 1,507 1,425

Investment management fee paid (209) (200)

Other operating expenses (615) (637)

Net cash outflow from operating activities 3,504 (2,901)

Cash flows from financing activities

Interest paid (84) (21)

Share repurchase 14 (596) (3,891)

Share subscriptions 14 – 4,148

Equity dividends paid 6 (529) (524)

(Decrease) / Increase in borrowings 12 (1,000) 4,000

Net cash (outflow)/inflow from financing activities (2,209) 3,712

Net increase in cash and cash equivalents 1,295 811

Effect of exchange rate changes on cash and cash equivalents 1 1

Cash and cash equivalents at the beginning of the year 970 158

Cash and cash equivalents at the end of the year 8 2,266 970



23

Notes to the Financial Statements

1. General information The Company is an authorised closed-ended investment Company incorporated under The Companies (Guernsey) Law, 2008, as amended, with its registered office situated at Ground Floor Dorey Court, Admiral Park, St Peter Port, Guernsey GY1 2HT. The Company’s shares have been admitted to the Official List of the UK Listing Authority with a premium listing and to trading on the London Stock Exchange’s Main Market for listed securities.

The objective of the Company is to provide Shareholders with a total return in excess of the total return on the FTSE All-Share Index, together with a progressive dividend policy.

The Company has no employees.

2. Accounting policies a. Basis of preparation The financial statements have been prepared in accordance with the applicable International Financial Reporting Standards (“IFRS”) and interpretations adopted by the International Accounting Standards Board (“IASB”), and in accordance with the guidelines included in the AIC Statement of Recommended Practice for Financial Statements of Investment Trust Companies issued in January 2003 and revised in January 2014 (“AIC SORP”) to the extent that it is not in conflict with IFRS. The financial statements have been prepared on a historical cost basis except for financial assets held at fair value through profit or loss, which have been measured at fair value.

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income.

Critical accounting judgements and key sources of estimation uncertainty The preparation of financial statements in conformity with IFRS requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both the current and future periods.

The critical judgments and key sources of estimation uncertainty are detailed within the accounting policies note below.

b. Going concern In the opinion of the directors, the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason the financial statements have been prepared using the going concern basis.

The directors have arrived at this opinion by considering, inter alia, the following factors:

the Company had sufficient liquidity to meet all on-going expenses at 31 December 2015;

the portfolio of investments held by the Company materially consists of listed investments which are readily realisable and therefore the Company will have sufficient resources to meet its liquidity requirements; and

as at 31 December 2015, the Company had £3 million of external borrowings, but was under no obligation to repay any borrowing facilities. As at the date of approval of the annual financial report the Company had in place a two year £5 million loan facility with Lloyds Bank Plc expiring on 26 March 2017, of which £3 million had been utilised.

In accordance with the Company’s Articles of Association the Shareholders will have an opportunity to vote on the Company’s continuation at the 2017 Annual General Meeting.

c. Adoption of new and revised standards Standards not yet affecting the reported results nor the financial position The same accounting policies, presentation and methods of computation are followed in these annual financial statements as those followed in the preparation of the Company’s audited financial statements for the year ended 31 December 2014.

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective.

IFRS 7 Financial Instruments: Disclosure - effective 1 January 2016

IFRS 9 Financial instruments – effective 1 January 2018

IFRS 10 Consolidated Financial Statements - effective 1 January 2016

IFRS 15 Revenue from Contracts from Customers - effective 1 January 2018

IFRS 16 Leases – effective 1 January 2019; early adoption permitted only if entity adopts IFRS 15

IAS 1 Disclosure initiative – amendments to clarify presentation of financial statements


24

The directors do no expect that the adoption of the Standards listed above will have a material impact on the financial statements in future periods, except that IFRS 9 will impact both the measurement and disclosures of financial instruments and IFRS 15 may have an impact on revenue recognition and related disclosures. Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of IFRS 9 and IFRS 15 until a detailed review has been completed.

d. Other receivables Other receivables do not carry any interest, are short-term in nature, and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

Sales of financial assets are recognised at the trade date. Where trades have been executed but are awaiting settlement from the broker, these are accounted for as due from brokers on the Statement of Financial Position.

e. Financial assets (i) Classification The Company classifies its financial assets as fair value through profit or loss in accordance with IAS 39.

(ii) Recognition Financial assets are recognised on the trade date where a purchase is under contract whose terms require delivery within the timeframe established by the market concerned.

(iii) Initial measurement As the Company’s business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends or increases in fair value and are managed on a portfolio basis to meet the objectives of the Company, listed equities and fixed income securities are designated as fair value through profit or loss on initial recognition and material transaction costs on acquisition and all transaction costs on disposal of the financial asset are expensed as a capital item.

(iv) Subsequent measurement After initial measurement, the Company measures its financial assets, which are classified as fair value through profit or loss at fair value. In accordance with IFRS 13, the Company has applied the new definition of fair value as set out under fair value measurement.

Subsequent changes in the fair value of the Company’s financial assets are recorded in the Statement of Comprehensive Income under net gains/(losses) on financial assets at fair value through profit or loss. Foreign exchange gains and losses for financial assets at fair value through profit or loss are included within the changes in its fair value.

(v) Derecognition Financial assets are derecognised where:

a sale is under contract whose terms require delivery within the timeframe established by the market concerned; or

it is evident, following an impairment review, that the Company can no longer recover any value from the financial asset.

(vi) Impairment The Company is required to evaluate the financial assets in its portfolio to determine if any of the securities are impaired.

Fair value and impairment estimates are made at a specific point in time based on market conditions and information about the financial asset. These estimates are subjective in nature and involve uncertainties and matters of significant judgement.

The Company materially invests in listed or quoted equities and therefore at the reporting date, there were no sources of significant judgement or uncertainty.

(vii) Fair value measurement ‘Fair value’ is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date in principal or, in its absence, the most advantageous market to which the Company has access at that date. When available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as ‘active’ if transactions for the asset take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The Company measures financial assets quoted in an active market at bid price.

If there is no quoted price in an active market, then the Company uses valuation techniques that maximises the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation techniques incorporate all of the factors that market participants would take into account in pricing a transaction.

The Company recognises transfers between levels of fair value hierarchy as at the end of the accounting period during which the change has occurred.

f. Net gains/(losses) on financial assets at fair value through profit or loss

Net gains/(losses) on financial assets at fair value through profit or loss includes changes in the fair value of financial assets held at fair value through profit or loss.

Unrealised gains and losses comprise changes in the fair value of financial assets for the year and from reversal of prior year’s unrealised gains and losses for financial assets which were realised in the reporting period.

Realised gains and losses on disposals of financial assets classified as fair value through profit or loss are calculated using the average method. They represent the difference between a financial asset’s initial carrying amount and its disposal amount.

g. Financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. A financial liability is any liability that contractually obligates the Company to deliver cash or another financial asset or exchange financial assets or financial liabilities that are potentially unfavourable to the Company, or a contract that will or may be settled in the Company’s own equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the Company after


25

deducting all of its liabilities. As the ordinary shares have no fixed rights to redemption or income they are classified as equity.

h. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs, finance charges, including premiums payable on settlement or redemption and direct issue costs. Interest is accounted for on an accruals basis in the Statement of Comprehensive Income using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

i. Other payables Other payables are not interest-bearing and are stated at their nominal value.

Purchases of financial assets are recognised at the trade date. Where trades have been executed but the Broker requires funds for settlement of the trade, these have been accounted for as due to Brokers on the Statement of Financial Position.

j. Dividend revenue, interest revenue and other revenue Dividend revenue is brought into the Statement of Comprehensive Income as a revenue item on the ex-dividend date or, where no ex-dividend date is quoted, when the Company’s right to receive payment is established. All dividends are shown gross of withholding tax.

Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the amount of the cash dividend is recognised as dividend revenue in the Statement of Comprehensive Income.

Fixed returns on non-equity investments and on debt securities are recognised as a revenue item in the Statement of Comprehensive Income on a time apportionment basis so as to reflect the effective yield on the investment. Other returns on non-equity shares are recognised when the right to the return is established.

Deposit interest is recognised as interest revenue and is included in the Statement of Comprehensive Income on an accruals basis.

Other revenue, such as underwriting commission, is recognised on a received basis as the timing of receipts of this nature is uncertain and therefore the received basis is deemed the most appropriate method to account for this revenue.

k. Functional and presentation currency The Company’s functional and presentation currency is Sterling, which is the currency of the primary economic environment in which the Company operates. The Company’s performance is evaluated and its liquidity is managed in Sterling, therefore Sterling is considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.

l. Foreign currency translations Foreign currency monetary assets and liabilities are translated into Sterling at the rate of exchange ruling at the Statement of Financial Position date. Transactions during the year in foreign currencies are translated into Sterling at the rate ruling at the date of the transaction. Realised and unrealised foreign exchange gains and losses are recognised in the Statement of Comprehensive Income.

m. Statement of Cash Flows The Company is required to prepare a Statement of Cash Flows in accordance with IFRS and has elected to prepare the Statement of Cash Flows on a direct basis.

n. Expenses All expenses are accounted for on an accruals basis. Expenses are charged through the Statement of Comprehensive Income as revenue except as follows:

expenses which are incidental to the acquisition of an investment are deducted from gains on investments through the Statement of Comprehensive Income as capital;

expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment; and

expenses are charged to the Statement of Comprehensive Income as capital realised where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect, the Investment Manager’s fee and performance fee have been allocated 75% to the capital reserve - realised and 25% to the revenue reserve in line with the Board’s expected long-term split of returns in the form of capital gains and income respectively from the investment portfolio of the Company.

o. Finance costs Finance costs are accounted for on an accruals basis. Finance costs are allocated, insofar as they relate to the financing of the Company’s investments, 75% to capital reserve - realised and 25% to revenue account, in line with the Board’s expected long-term split of returns, as outlined in the expenses note above.

p. Segment Reporting A business segment is a distinguishable component of the Company that is engaged in providing products and services and that is subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Company that is engaged in providing products and services and that is subject to risks and returns that are different from those of other economic environments. The Board is of the opinion that the Company is organised in one main business segment, namely the management of the Company’s investments in order to achieve the Company’s investment objectives as described in note 1 to the financial statements. The Board is further of the opinion that the Company’s secondary segment reporting format is also organised into one main geographical unit as the location of all investments is materially all within the United Kingdom.


26

q. Treasury shares Where the Company purchases its own share capital, the consideration paid, which includes any directly attributable costs, is recognised as a deduction from net assets attributable to Shareholders through the treasury share reserve.

When such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs, is recognised as an increase in equity and the resulting surplus or deficit on the transaction is transferred to/from the treasury share reserve.

3. Dividend and other income

2015 £’000

2014 £’000

Dividend revenue from investments designated at fair value through profit or loss:

Dividends 1,507 1,434

Total income 1,507 1,434

4. Investment management and performance fees Threadneedle Asset Management Limited was appointed as Investment Manager under an Investment Management Agreement with the Company dated 27 July 2012. On 23 September 2014, the Investment Management Agreement was amended and restated. No changes to the management or performance fees were made. The investment management fee is calculated as 0.5% per annum of the value of the funds under management on each Valuation Date in respect of each quarter or such other date or fee as shall be agreed from time to time between the Company and the Manager. The first Valuation Date for the purpose of the management fee was 31 December 2012.

The Investment Manager is also entitled to a performance fee, which is calculated as 10% of the total return NAV out-performance of the FTSE All-Share Index (total return) both expressed as a percentage of that as indicated at the end of that year and that of the immediately preceding financial year. The performance fee percentage calculated may not exceed 0.25% over a period of 12 months. A performance fee of £104,000 is attributable for the year ended 31 December 2015 (31 December 2014: £101,000). This performance fee shall be payable within 23 days of 31 March 2016.

5. Taxation The Company is exempt from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinances 1989 to 1997 and is charged an annual exemption fee of £1,200 (2014: £600), which is included within other expenses in the Statement of Comprehensive Income.

The Company suffered £148,400 (2014: £95,000) of withholding tax on foreign dividends during the year and this expense has been included in other expenses in the statement of comprehensive income.

6. Dividends

2015 £’000

2014 £’000

Equity dividends

Ordinary shares

Second interim dividend for 2014: 2.50p (gross) on 12,070,400 shares paid in 2015

302

295

Scrip dividend for 2014 paid in 2015: 141,509 shares issued at a cost of 176.00p per share

249

241

First interim dividend for 2015: 1.90p (gross) on 11,969,629 shares paid in 2015

227

229

Scrip dividend for 2015 paid in 2015: 113,385 shares issued at a cost of 169.41p per share

192

186

970 951

7. Basic return per ordinary share

2015 2014

Revenue pence

Capital pence

Total pence

Revenue pence

Capital pence

Total pence

Return 4.05 6.40 10.45 3.83 2.17 6.00

Revenue return per ordinary share is based on the net revenue on ordinary activities of £895,000 (2014: return £850,000) and on 22,097,140 ordinary shares, being the weighted average number of ordinary shares in issue during the year (2014: 22,214,349).

Capital return per ordinary share is based on a net capital profit for the financial year of £1,414,000 (2014: return £482,000) and on 22,097,140 ordinary shares, being the weighted average number of ordinary shares in issue during the year (2014: 22,214,349).


27

8. Cash and cash equivalents Cash and cash equivalents comprises bank balances and cash held by the Company including short-term deposits with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value.

9. Other receivables and accrued income

Other receivables

2015 £’000

2014 £’000

Accrued income 83 82

Prepayments 11 13

94 95

The directors consider that the carrying amount of receivables approximates to their fair value.

10. Financial assets at fair value through profit or loss

2015 2014

Fair Value £’000

% of net assets

%

Fair Value £’000

% of net assets

%

Financial assets at fair value through profit or loss

– Listed equity securities 42,827 102.11 43,950 107.84

– De-listed trading entities – – – –

42,827 102.11 43,950 107.84

Net gains on financial assets at fair value through profit or loss

2015 £’000

2014 £’000

Realised gains 1,522 2,073

Unrealised gains/(losses) 176 (1,324)

1,698 749

Fair value measurements The Company adopted the amendment to IFRS 13, effective 1 January 2014. IFRS 13 establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under IFRS 13 are as follows:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability.

The determination of what constitutes ‘observable’ requires significant judgment by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The following tables present the Company’s financial assets and liabilities by level within the valuation hierarchy as of 31 December 2015 and 2014:

Level 1 fair value assets 2015 £’000

Percentage of net assets

% 2014 £’000

Percentage of net assets

%

Investments valued at fair value 42,827 102.11 43,950 107.84

Level 2 fair value assets

Investments valued at fair value – – – –

Total fair value financial assets 42,827 102.11 43,950 107.84

11. Other payables and accrued expenses

Other payables

2015 £’000

2014 £’000

Administrative fees 54 53

Audit fees 19 18

Investment management fees 52 49

Loan facility fee and interest payable 13 33

Performance fee 104 101

Registrars fees 1 4

Sundry expenses 4 1

247 259

The directors consider that the carrying amount of payables approximates to their fair value.


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12. Loan facility On 26 March 2014 the Company entered into a one year £5 million revolving loan facility with Lloyds Bank Plc (the “Bank”), secured on the assets of the Company, for investment purposes. On 19 March 2015 the loan facility was extended until 26 March 2017. As at 31 December 2015, £3,000,000 of the loan facility was being utilised. Interest is payable at a rate of Sterling LIBOR plus 1.1%, payable quarterly in arrears, and the borrowing is held at amortised cost. Loan interest of £51,000 was paid during the year. A fee of 0.39% per annum is payable on the undrawn amount of this facility, resulting in £8,200 being paid for the year under review. £5,100 of the £10,000 loan arrangement fee was amortised over the year and also included in finance costs. In addition, the Company is required to comply with the following covenants imposed by the Bank:

the Company is required to ensure that the borrowing does not at any time exceed 20% of the Adjusted Gross Asset Value*;

the Company is required to maintain the Net Worth (meaning net asset value adjusted for such items as intangible assets and unrealised gains or losses accrued since the date of the audited annual financial reports) at not less that £20,000,000;

the Company is required to ensure that the investment portfolio includes holdings in not less than 25 separate businesses; and

the Company is required not to change its investment policy without the written permission of the Bank.

* Adjusted Gross Asset Value means the market value of Total Gross Assets adjusted by deducting:

(a) The value of unlisted investments;

(b) The amount by which any single investment exceeds 7.5% of the investment portfolio;

(c) The amount by which the investment in a single ICB Investment Sector exceeds 20% of the investment portfolio; and

(d) The amount by which the largest 10 investments exceeds 50% of the investment portfolio.

13. Business and geographical segments As described in the accounting policies in note 2 to the financial statements, the Board is of the opinion that the Company is organised in one main business segment, namely the management of the Company’s investments in order to achieve the Company’s investment objectives as described in note 1 to the financial statements, and considers this to be the primary reporting format for segment information and no further business segment information not already included in other parts of the financial statements is required.

The Board is also of the opinion that the Company’s secondary segment reporting format is also organised into one main geographical unit as the location of all of its investments is materially all within the United Kingdom.

Income Net Assets

2015 £’000

2014 £’000

2015 £’000

2014 £’000

United Kingdom 1,507 1,434 41,940 40,756

1,507 1,434 41,940 40,756

Geographical locations are determined by the Company based on the country of primary listing for listed instruments and the country of incorporation for unlisted instruments.

14. Share capital

Authorised

2015 £’000

2014 £’000

Unlimited number of shares – –

The holders of the ordinary shares are entitled to receive notice of and to attend and vote at general meetings of the Company. At such meetings on a show of hands each Shareholder shall have one vote and on a poll each Shareholder shall have one vote for each share held by them. The Company is not entitled to any votes in respect of any ordinary shares held in treasury.

On a winding-up, any surplus assets remaining after the payment of all creditors shall be divided amongst the Shareholders in the same proportion as the capital attributable to them on the winding-up date.

Issued, called up and fully paid:

2015 £’000

2014 £’000

24,302,092 (2014: 24,302,092) ordinary shares of 10p each including 2,159,026 treasury shares (2014: 2,070,920)

2,430

2,430

2015

Treasury share reserve Shares in issue

Share Premium

Shares Nominal

Cost £’000

Shares Nominal

Cost £’000

Cost £’000

Balance at 1 January 2015 2,070,920 3,724 24,302,092 2,430 11,307

Shares purchased and held in treasury 343,000 596 – – –

Shares sold from treasury in lieu of dividends (254,894) (441) – – –

Balance at 31 December 2015 2,159,026 3,879 24,302,092 2,430 11,307


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2014

Treasury share reserve Shares in issue

Share Premium

Shares Nominal

Cost £’000

Shares Nominal

Cost £’000

Cost £’000

Balance at 1 January 2014 24,322 19 21,914,053 2,192 7,156

Shares purchased and held in treasury 2,150,856 3,891 – – –

Shares sold from treasury in lieu of dividends (104,258) (186) – – –

Ordinary shares created or issued in lieu of dividends – – 131,016 13 228

Ordinary shares created or issued during the year – – 2,257,023 225 3,923

Balance at 31 December 2014 2,070,920 3,724 24,302,092 2,430 11,307

During 2015 and 2014 no shares were purchased for cancellation.

15. Net asset value per share The net asset value per ordinary share is calculated based on net assets attributable to the ordinary Shareholders of £41,940,000 (2014: £40,756,000) and on 22,143,066 (2014: 22,231,172) ordinary shares, being the number of ordinary shares in issue at the end of the year, excluding treasury shares.

16. Related party transactions The members of the Board are listed on page 2 of the annual report. Fees earned by the directors of the Company during the year were £114,300 (2014: £108,000), of which £Nil (2014: £nil) was outstanding at the period end. Allowable expenses claimed by the directors in the course of their duties amounted to £1,000 for the year (2014: £3,000).

Amerprise Financial Inc. (“Ameriprise”), the parent of the Investment Manager, controlled the voting rights attached to 22.28% of the Company’s shares as at 31 December 2015. Ameriprise exercises discretion over these shares held on behalf of its clients.

The Investment Manager earned investment management fees of £212,000 (2014: £201,000) during the year, of which £52,000 (2014: £49,000) was outstanding at the reporting date. In addition £104,000 performance fees were accrued for the year (2014: £101,000).

17. Financial risk management Introduction The Company’s objective in managing risk is the creation and protection of Shareholder value. Risk is inherent in the Company’s activities, but is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. The process of risk management is critical to the Company’s continuing profitability. The Company is exposed to market risk (which includes interest rate risk and price risk), credit risk and liquidity risk arising from the financial assets it holds.

Capital risk management The capital structure of the Company consists of the cash and cash equivalents, borrowings and equity attributable to ordinary Shareholders, comprising issued share capital, treasury share reserve, share premium reserve, capital redemption reserve, capital reserves and revenue reserve as disclosed in the Statement of Changes in Net Assets Attributable to Shareholders. The Company does not have any externally imposed capital requirements.

The investment objective of the Company is to invest over 80% of its gross assets by value in the UK and the investment policy aims to provide a total return to Shareholders in excess of the net total return on the FTSE All-Share Index and a progressive dividend policy. The Company aims to deliver its objective by investing available cash and using leverage whilst maintaining sufficient liquidity to meet ongoing expenses and dividend payments.

The Company’s policy is to provide net income for distribution from the dividend income earned from a portfolio of mainly UK equity securities which are listed on the London Stock Exchange. Further, the Company has allocated to capital 75% of its investment management fee and performance fee in line with the Board’s expectation of long-term returns in the form of capital gains from the investment portfolio of the Company.

During the year under review, the assets of the Company were invested in accordance with the Company’s Investment Manager’s strategy. The Company invests in various sectors and businesses to mitigate the primary risk of the Company, price risk. In addition, price-volatility levels are reviewed and monitored daily.

Concentration risk Concentration risk is the risk that the Company’s portfolio is not suitably diversified and therefore the Company could become materially exposed to sector specific price fluctuations.

As at 31 December 2015, the Company’s portfolio consisted of 68 investments spread over 9 industries. Further, the portfolio only held investments issued in the United Kingdom.


30

The Board has also adopted investment restrictions to manage the risk profile, which are:

The top five holdings in the Company’s portfolio may not exceed 40 per cent of the total value of the portfolio.

The top three ICB sectors represented in the portfolio may not exceed 50 per cent of the total value of the portfolio.

The securities of no one company may represent more than 10 per cent of the value of the Company’s portfolio measured at the time of acquisition and subsequently, when additions are made to the holding.

The Company will not hold more than 5 per cent of the issued share capital (or voting shares) in any one company.

While the Company may hold shares in other investment companies (including investment trusts), the Company will not invest more than 10 per cent, in aggregate, of the value of its total assets in other listed closed-ended investment funds (save to the extent that such closed-ended investment funds have published investment policies to invest no more than 15 per cent of their total assets in such other listed closed-ended investment funds).

The Board monitors investment restrictions by utilising the Investment Manager’s and the Administrator’s compliance functions. Investment strategy and allocation is monitored by the Board through the use of an Investment Manager.

Credit risk Credit risk is the risk that an issuer or counterparty may be unable or unwilling to meet a commitment that it has entered into with the Company.

The Company’s principal financial assets are bank balances and cash, other receivables and investments as set out in the Statement of Financial Position which represents the Company’s maximum exposure to credit risk in relation to the financial assets. The credit risk on bank balances is limited because the counterparties are banks with high credit ratings of A-1+ assigned by international credit-rating agencies.

All transactions in listed securities are settled upon delivery using approved Brokers. The risk of default is considered minimal as delivery of securities sold is only made once the Broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet its obligations.

Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its liabilities as they fall due.

The Company’s assets comprise securities that can be readily realised to meet obligations. As a result, the Company is able to realise its investments in these instruments at an amount close to their fair value in order to meet its liquidity requirements. Dividend income is also expected to be sufficient to cover short-term liquidity requirements.

The loan facility was due to expire in March 2016, but was extended to March 2017 and therefore does not increase the liquidity risk.

No liquidity analysis for the Company’s financial assets and liabilities has been provided for in the current or prior year as liquidity risk is not considered material.

Country risk The Board has reviewed the disclosures contained within the annual financial report and believes that no additional disclosures are required since the Company is primarily invested in UK listed equities.

Market risk Market risk is the possibility that future changes in market prices may make a financial instrument less valuable or more onerous.

The Company’s market risk is managed by the Investment Manager through diversification of the investment portfolio in accordance with the Company’s investment policy.

a) Price risk Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices whether those changes are caused by factors specific to the individual financial instrument or its issuers, or factors affecting similar financial instruments traded in the market.

In accordance with the Company’s investment objectives, the Company does not hedge against its exposure to market price risk.

The investment strategy of the Company has been delegated to the Company’s Investment Manager under an agreement dated 27 July 2012, as amended and restated on 23 September 2014. The Investment Manager operates under agreed parameters and the Board monitors its performance on a regular basis.


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Price sensitivity The following table details the Company’s sensitivity to a 10% increase and decrease in the market prices while all other variables were held constant. 10% is the sensitivity rate used when reporting price risk internally to key management personnel and represents management’s assessment of the possible change in market prices. A positive number indicates an increase in net assets attributable to holders of shares where the market price of the relevant financial instrument increases and a negative number indicates a decrease where the market price of the relevant financial instrument decreases.

Net Assets 10% increase in price

Net Assets 10% decrease in price

Impact on financial assets at fair value

through profit or loss

Impact on financial assets at fair value

through profit or loss

2015 £’000

2014 £’000

2015 £’000

2014 £’000

Increase/(decrease) in net assets attributable to shareholders

– Designated as at fair value through profit or loss 4,283 4,395 (4,283) (4,395)

4,283 4,395 (4,283) (4,395)

In practice the actual trading results may differ from the sensitivity analysis above and the difference could be material.

b) Interest rate risk Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates associated with that financial instrument.

The Company’s interest rate sensitive assets and liabilities mainly comprise of cash and cash equivalents and borrowings. The cash and cash equivalents and borrowings are subject to floating rates and are considered to be part of the investment strategy of the Company. No other hedging is undertaken in respect of this interest rate risk. As such, the Board does not believe the Company suffers any material interest rate risk.

18. Parent and ultimate controlling party The Board is of the opinion that there is no immediate parent or ultimate controlling party of the Company.

19. Events after the reporting date A second interim dividend of 2.55p per Ordinary Share has been declared for 2015 (2014: second interim dividend 2.50p). In accordance with the requirements of IFRS, as this was not declared until after the Statement of Financial Position date, no accrual has been reflected in these financial statements for this amount. This dividend will be payable on Friday, 13 May 2016, to Shareholders on the register as at close of business on Friday, 11 March 2016. This, together with the first interim dividend of 1.90p (2014: first interim dividend 1.85p) paid during the year, makes a total of 4.45p for the year. The Company intends to continue with the policy of paying a second interim dividend each year to Shareholders in May of the following year in place of a final dividend. Scrip election forms were sent to all Shareholders on Thursday, 24 March 2016 and the latest date for receipt by the Registrar of scrip elections is Monday, 25 April 2016.


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Ten Year Record - Unaudited The Ten Year Record set out below has been prepared from the accounting records of the Company. While it does not form part of the financial statements, it should be read in conjunction with them and the Auditor’s report thereon.

Year ended 31 December

Gross revenue £’000(1&2)

Net revenue after taxation

£’000

Revenue return per ordinary share

p

Gross dividends per ordinary share

p(3)

Ordinary share capital eligible for

dividends £’000

Net asset value of ordinary shares

(Ex-div) p

2006 1,041 648 3.12 3.10 2,083 152.9

2007 1,241 824 3.96 3.25 2,071 158.3

2008 1,449 1,042 5.04 3.63 2,073 106.9

2009 1,075 746 3.61 3.75 2,058 149.8

2010 1,043 692 3.36 3.90 2,069 161.7

2011 1,307 907 4.38 4.10 2,074 142.1

2012 834 354 1.72 4.15 2,066 147.4

2013 1,152 704 3.30 4.25 2,189 181.3

2014 1,434 850 3.83 4.35 2,223 183.3

2015 1,507 895 4.05 4.45 2,214 189.4

Notes:

(1) The information provided prior to 2006 in the above statement is prepared in accordance with UK GAAP and not IFRS.

(2) Following the introduction of FRS 16 (IAS 12) all dividends receivable from 1999 have been shown gross of withholding tax whereas previously they were shown net.

(3) Following the introduction of FRS 21 (IAS 10) all dividends paid by the Company from 2004 are accounted for in the period in which the Company is liable to pay them. Such treatment is also consistent with International Financial Reporting Standards. In previous years, the Company accrued dividends in the period in which the net revenue, to which those dividends related, was accounted for.

To find out more visit columbiathreadneedle.com Important Information. Threadneedle Investment Services Limited, ISA Manager, Authorised Corporate Director, AIFM and Unit Trust Manager. Registered No. 3701768. Registered in England and Wales. Registered Office: Cannon Place, 78 Cannon Street, London EC4N 6AG. Authorised and regulated by the Financial Conduct Authority. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. columbiathreadneedle.com 240456/J24835

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