Chairman's Statement

Review of Performance

I am pleased to present your Company's Annual Financial Report for the 12 months to 31 December 2016.

For the year, the net asset value total return was 11.8% which compares with the 16.8% 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 is provided in the Investment Manager's Report on page 7.

Share Price and Discount

The discount at which the shares trade, relative to their net asset value, was 12.9% at the end of the year compared with 12.1% at the start of the year. Following the Company's announcement on 17 March 2017 of a proposed reconstruction and winding up of the Company the Company's discount has narrowed to 3.2% as at 31 March 2017.

Continuation Vote and the Company's Future

As indicated above, on 17 March 2017, the Company announced that it had entered into Heads of Terms with the Board of Henderson High Income Trust plc ('HHI') in relation to a reconstruction and winding up of the Company (the "Proposals"). Under the Proposals, UKT shareholders are being offered the opportunity to elect to receive new ordinary shares issued by HHI and/or to exit their investment for cash at close to net asset value. The Proposals are subject to approval by shareholders of both companies in addition to the required regulatory and tax approvals.

With a Continuation Vote required at the 2017 Annual General Meeting the Board decided to conduct an extensive review of the options available with regard to the future of the Company. As a consequence of this review the Board concluded that it was not in the interests of shareholders for the Company to continue in existence as a listed company given its modest market capitalisation, relatively high ongoing charge ratio and the lack of liquidity in the Company's shares.

Having reached the above conclusion, the Board then considered if an orderly wind down of the Company was most appropriate or whether it was preferable to seek the alternative of rolling over into a larger, more liquid closed ended company thus offering shareholders a choice. After considering a number of potential rollover candidates, the Board concluded that HHI offered a solution, as outlined above, which would be attractive to shareholders and an alternative to electing to receive cash.

It is envisaged that a circular and notice of the general meeting setting out details of the Proposals will be sent to shareholders in May 2017 with the relevant general meeting likely to be convened for late June 2017.

Gearing

During the year the Company had a revolving loan facility of £5 million with Lloyds Bank Plc which is more fully described in note 12 to these Financial Statements. At the year end the Company had utilised £3m of this facility. As explained in note 12 this facility ceased at the renewal date of 26 March 2017.

Earnings and Dividend per Share

The revenue return per share for 2016 was 5.61p (2015: 4.05p)

A first interim dividend of 1.95p per share in respect of the financial year 2016 was declared on 13 August 2016 and on 3 March 2017 a second interim dividend of 2.60p per share was declared.

Chairman's Statement (continued)

Annual General Meeting

The Company's Annual General Meeting is scheduled for 17 August 2017 but will be subject to the outcome of the EGM to be held in late June relating to the proposals referred to above.

Conclusion

Given that the Company has been in existence since 1959 it is disappointing that the Board has been unable to find an efficient means by which the Company can maintain its independence. I would though like to emphasise that the Board have been diligent in their responsibilities to shareholders and mindful of the Company's relevance in a changing investment environment and believe that the Proposals are equitable and in the best interest of shareholders.

I would like to take this opportunity to thank my Board colleagues for their commitment over what has been a challenging period for the Company. I would also like to thank Dickson Minto for helping guide us to this point and also our Investment Manager who has remained committed to the task of providing a positive investment performance.

D J Warr

Chairman

21 April 2017

Investment Manager's Report

Market Background

The FTSE All-Share index delivered a total return of 16.8% in 2016. Large-caps and overseas earners led the rally; the FTSE 100 outperformed the broader index and finished 2016 at new highs. The energy sector was one of the best performers within the benchmark. Materials also performed strongly, tracking gains in commodity prices. However, telecommunications suffered as did real estate stocks.

In early 2016, domestic and overseas equities were rattled by low and volatile oil prices, disappointing Chinese economic data and central banks' actions. Later, market participants focused on the 'Brexit' referendum. The unexpected result rocked markets but UK equities subsequently recovered, led by overseas earners as sterling weakened. Markets also cheered Theresa May's swift appointment as the new prime minister, and some positive post-referendum indicators. The Bank of England ("BoE") announced stimulus measures in August (rate cuts, cheaper bank funding and more quantitative easing) but later suggested another rate cut in 2016 was unlikely.

In November 2016, the High Court ruled that parliamentary approval was necessary to invoke Article 50; the government subsequently appealed to the Supreme Court. The new UK chancellor announced an increase in infrastructure spending in the Autumn Statement but also stated that fiscal deficits and government debt were likely to exceed March's estimates.

Towards year-end, investors turned their attention to politics elsewhere - notably Donald Trump's unexpected election victory and Italian voters' rejection of constitutional reforms. Oil recouped earlier losses as the Organisation of Oil Producing Countries ("OPEC") announced plans to cut output.

Performance Review

In 2016, the portfolio generated a total gross return of 15.0%, but underperformed its benchmark (the FTSE All-Share) which rose 16.8%.

The fund's relative underperformance was largely attributable to unfavourable asset allocation decisions. Our overweight in consumer discretionary stocks and underweight in energy proved particularly unhelpful. However, our decision to underweight financials and marginally overweight materials added some value.

Security selection detracted in aggregate, chiefly stock picks in financials and materials. However, our selections of industrial and consumer discretionary stocks had a favourable impact on performance. Therefore, in aggregate, our positions in these sectors added alpha as the positive effects from stock selection offset the negative effects from asset allocation.

At the stock level, our decision to exclude Vodafone and Lloyds Banking Group proved advantageous. Shares of Lloyds were initially hurt by the government's decision to postpone the sale of its stake in the bank and later by the Brexit-induced uncertainty. Vodafone's shares suffered towards year-end due to the sell-off in defensives following Trump's victory and as investors reacted unfavourably to the company's announcement that it had sold its fixed-line operations to Deutsche Telekom. Our holdings in energy company John Wood Group and miner Rio Tinto added value as the prices of oil and most other commodities strengthened in 2016.

The zero weights in BP and Glencore proved unhelpful as did the absence of HSBC when it rallied. We sold HSBC earlier in the year as we felt that it faced relative diseconomies of scale.

Other detractors included Crest Nicholson, as market sentiment turned against house builders in the run-up to and aftermath of the Brexit referendum, and BT. The telecommunications company was initially hurt by investors' concerns about the scale and speed of the company's restructuring and later by Brexit-related concerns.

Investment Manager's Report (continued)

Outlook

While the overall market environment is not changing materially, we feel that a little more caution is now required as we move into the post-reporting 'quiet' season in the UK.

The Federal Reserve is clearly on a tightening path which will ultimately lead to a slowing in the US economy, and the 'Trump Trade' seems to be tiring as its iconic figurehead appears incapable of enacting policies while valuations have clearly moved way ahead of fundamentals.

In the UK, we are now seeing evidence of falling real wage growth and there are constraints on the ability of consumers to borrow.

We remain wary of commodities. We are also cautious towards banks and lending companies; the sector could face headwinds if the countercyclical capital buffer (which was removed post-Brexit) is re-imposed. Furthermore, in our view, the BoE will be keen to clamp down on imprudent lending behaviour.

We are looking at the defensive growth areas of the market for incremental purchases. These stocks generally have strong track records of downside protection in unfavourable market conditions and also offer investors the ability to benefit from the power of compounding earnings.

A snap UK General Election has been called, which will be held on the 8th June. Political headlines will continue to create some volatility in global markets, but this will provide more opportunities for investors who are willing and able to focus on long-term fundamentals.

Chris Kinder

Portfolio Manager

Columbia Threadneedle Investments

21 April 2017

The Portfolio as at 31 December, 2016

Industry Classification Benchmark ("ICB") Sector Distribution

Directors' Report

The directors present their report and the annual financial statements for the year ended 31 December 2016 with comparatives for the year ended 31 December 2015. 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 39 shows a profit for the year amounting to £5,472,000 (2015:  £2,309,000).  The directors have declared a second interim dividend of 2.60p which, together with the first interim dividend of 1.95p, makes a total of 4.55p for the year (2015: 4.45p)

The second interim dividend will be paid on 12 May 2017 to ordinary Shareholders on the register on 17 March 2017 and a scrip dividend alternative has been offered.

Assets

At the year end, the net assets attributable to the ordinary Shareholders were £46,888,000 (2015: £41,940,000).  Based on this figure, the net asset value attributable to each ordinary share was 209.07p (2015: 189.40p).

Share capital 

During the year, no ordinary shares were repurchased by the Company. The authority allowing the Company to purchase its own shares expires on the date of the 2017 annual general meeting and the Board may seek renewal of this authority at that annual general meeting, subject to the outcome of the extraordinary general meeting intended to be held in June 2017, further details of which are given on pages 21 and 22 of this directors' report.

During the year, in the ordinary course of business, 283,555 ordinary shares were issued from the treasury reserve to satisfy elections by ordinary Shareholders to receive shares in lieu of cash dividends (2015:  254,894). 

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. 

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

Directors' Report (continued)

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 December 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:

As at 31 December 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 objective and policy 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 practices.

Details of the current Board's composition, including each director's role and other significant commitments, are provided on page 4. 

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, 2015 and 2016 were as follows:

Directors' Report (continued)

Directors (continued)

There have been no changes in the current directors' interests in the shares of the Company between 31 December 2016 and 31 March 2017.

Gearing

The Company previously entered into a £5 million revolving loan facility agreement with Lloyds Bank Plc, which expired on 26 March 2017.  The facility was used during the year under review to gear the Company's investment portfolio, with the aim of enhancing returns to Shareholders, and the Board sought to target a level of borrowing approximately equal to 10% to 20% of the Company's net asset value.  Interest accrued on the loan at 1.1% over LIBOR and it was repayable at the option of the Company.  A non-utilisation fee of 0.39% per annum was payable on any portion of the facility not drawn down. 

After the year end and in light of the proposed reconstruction and potential winding up of the Company, the Board agreed that it would not be in the Company's best interests to incur the costs of renewal of the loan facility and accordingly the loan was repaid when the loan facility expired on 26 March 2017.

Corporate governance 

a) Statements of compliance

The UK Financial Conduct Authority's Disclosure Guidance 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 the Company's own national law. 

The Association of Investment Companies (the "AIC"), of which the Company is a member, has published its Code of Corporate Governance for Investment Companies dated February 2015 (the "AIC Code") and the Corporate Governance Guide for Investment Companies, also dated February 2015 (the "AIC Guide"), which incorporates the UK Financial Reporting Council's (the "FRC") UK Corporate Governance Code and the AIC Code.  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.

Directors' Report (continued)

Corporate governance (continued) 

a) Statements of compliance (continued)

The Board has noted the publication by the AIC of an updated AIC Code of Corporate Governance and Corporate Governance Guide in July 2016 (the "Updated AIC Code & Guide") following the FRC's publication of an updated version of the UK Corporate Governance Code in April 2016, which applies to accounting periods beginning on or after 17 June 2016.  The directors have put in place further measures designed to ensure compliance with the Updated AIC Code and Guide and, if the Company continues in its current form into 2018, the Board expects to report against the Updated AIC Code and Guide in the next annual financial report for the year ended 31 December 2017.

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 regulated companies in the 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.

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 2016.

*Management Engagement and Remuneration Committee.

During the year the Board held eight 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.

The Company did not employ any personnel. 

Directors' Report (continued)

Corporate governance (continued)

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. The Board has also created a Management Engagement and Remuneration Committee, chaired by Mr Warr.  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 AIC 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 has resolved that all 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.

Directors' fees are recommended by the full Board. The emoluments of the directors for the year, with comparative figures for 2015, were as follows:

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.

Directors' Report (continued)

Corporate governance (continued)

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 relevant 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. The Committee receives regular risk management reporting from the Investment Manager and also meets regularly with the Administrator to discuss matters relevant to its oversight duties.  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 

All Shareholders are encouraged to participate in the Company's annual general meeting (the "AGM")  and any such extraordinary general meetings (each an "EGM") as may be convened from time to time to consider specific proposals.  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.  All directors normally attend EGMs.

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 2017 should the 2017 AGM be convened.

Directors' Report (continued)

Corporate governance (continued)

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 2016 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 2016;

·      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 2016, the Company had £3 million of external borrowings.  The loan facility expired on 26 March 2017, on which date the entire amount outstanding under the facility, together with all accrued interest thereon, was repaid, so the Company now has no external borrowings, nor any other form of material financial indebtedness.

In accordance with the Company's Articles of Incorporation the Shareholders are due to have an opportunity to vote on the Company's continuation at the 2017 AGM. However, that vote will not be required and the 2017 AGM not held, if the proposals in relation to the reconstruction and winding up of the Company to be put to Shareholders at the EGM expected to be held in late June 2017 are approved and become effective. This creates a material uncertainty on going concern which is further explained in this director's report, note 2b of the financial statements as well as in the separate long-term viability statement included later in this annual financial report.

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 share registration, transfer agency and paying agency functions. The Management Engagement and Remuneration Committee regularly reviews the performance of the services provided by these companies.

Directors' Report (continued)

Corporate governance (continued)

i) Accountability and audit (continued)

b) Internal controls (continued)

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 December, 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.

Directors' Report (continued)

Investment objective and policy (continued)

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. If the proposed reconstruction and winding up becomes effective, Shareholders who elect to rollover their shareholding in the Company will, following implementation of the proposals, be invested in a Company with a different investment objective and policy to the Company's current investment objective and policy.  The proposals to be voted upon by shareholders at the EGM to be held in late June 2017 are explained later in this directors' report.

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.

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 6.40% as at 31 December 2016 (2015: 7.15%).  Since the expiry of the revolving loan facility with Lloyds Bank Plc on 26 March 2017 and repayment of the outstanding balance, the Company has no external borrowings.

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, Implementation of Investment Policy and Continued Appointment of the Investment Manager

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 61 investments, primarily UK issuers, as at 31 December 2016.  The top 10 holdings comprised 34.91% of total net assets (2015: 32.68%).

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.

Directors' Report (continued)

Investment Process, Implementation of Investment Policy and Continued Appointment of the Investment Manager (continued)

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.

As required by Listing Rule LR 15.6.2(2), the directors confirm that, having reviewed the performance of the Investment Manager during the year under review and up to the date of this report, they are of the opinion that the continuing appointment of the Investment Manager on the terms agreed is in the interests of shareholders as a whole. However, in the light of the proposed reconstruction and winding up of the Company, the Company has served notice on the Investment Manager, such termination of appointment to be effective from 11.59 p.m. on 27 June 2017 or such later date as the scheme of reconstruction and winding up shall become effective.

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 advisers monitor developments to ensure continued compliance and to ensure that any potential opportunities are not missed, although progress with passporting for companies incorporated in certain third countries, including Guernsey, has been delayed by the UK's vote to leave the European Union and it cannot yet be forecasted when such passporting might be possible.

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.

Directors' Report (continued)

Retail Distribution (continued)

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, subject to the restructuring proposals to be voted upon in June, 2017.

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 on the Company, 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 Common Reporting Standard of the Organisation for Economic Co-operation and Development (the "OECD").  The Board takes advice from independent tax advisers when deemed necessary or desirable.

Auditor

Deloitte LLP has expressed its willingness to continue in office as auditor and, if the Company is required to have its accounts for the year ended 31 December 2017 audited, a resolution to re-appoint them will be proposed at the forthcoming AGM, should it be held.

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.

Extraordinary General Meeting and Annual General Meeting

As announced on 17 March 2017, being cognisant of the continuation vote required by the Company's articles to be proposed at the 2017 AGM and taking account of Shareholders' views, the Board spent a considerable amount of time reviewing the options available to grow the Company to a credible and sustainable size and to reduce the consistent discount to their prevailing net asset value at which the Company's shares have traded.   Having undertaken a thorough review of the options, the Board reached the conclusion that Shareholders would be unlikely to support the continuation of the Company in its current form and that it would be in the Company's and Shareholders' best interests to propose either an orderly wind down of the Company or the alternative of rolling over into a larger, more liquid closed ended company. The Board undertook a review of potential rollover candidates and, following a beauty parade process with a shortlist of suitable candidates, decided to recommend a reconstruction and winding up of the Company with Henderson High Income Trust plc ("HHI") as the Company's rollover option (the "Proposals").

Directors' Report (continued)

Extraordinary General Meeting and Annual General Meeting (continued) 

The Board has agreed heads of terms with the Board of HHI and Henderson Investment Funds Limited ("Henderson"), the investment manager of HHI, in relation to the Proposals. Under the Proposals, Shareholders will also be offered the opportunity to exit their investment for cash at close to net asset value if they do not wish to rollover their investment into HHI.

The Proposals will, in addition to required regulatory and tax approvals, be subject to approval by the Shareholders of both companies and the Board intends to publish a circular including a notice of the EGM at which Shareholders will be asked to approve the Proposals, in late May 2017.  The Board is of the opinion that the Proposals are in the best interests of Shareholders and intends to recommend that Shareholders vote in favour of the Proposals.

In the event that the Proposals are not approved by Shareholders at the EGM, the Board will convene the 2017 AGM to be held on or around 17 August 2017, at which, as required by the Company's articles of incorporation, a resolution for the continuation of the Company will be proposed.

By order of the Board

D J Warr                                                                S A Farnon

21 April 2017

Viability Statement

C.2.1 and C.2.2 of the UK Corporate Governance Code and AIC principle 21 recommends that companies publish a viability statement and this statement is intended to meet that requirement.

The directors regularly assess the viability of the Company and consider 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. However, as referred to in the Chairman's Statement and Directors' Report the Board intends to convene an EGM for late June 2017 at which Shareholders will be asked to approve a proposed reconstruction and winding up of the Company. If approved, the Company will be placed into voluntary winding up as at the date of the EGM.

Further to the above, if the reconstruction and winding up proposals are not approved or are approved but not subsequently implemented, the Board is obliged under the Company's articles of incorporation to propose a continuation resolution to Shareholders at the 2017 AGM.  If that continuation 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, the Directors, having considered the risks facing the Company, their mitigation and the strategy of holding large Cap investments that are realisable on any normal trading day, have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment. However, as stated above and in more detail in the Chairman's Statement, the proposed reconstruction and winding up of the Company is recommended by the directors. If the proposed reconstruction and winding up is approved at the forthcoming EGM then the Company will be placed into voluntary winding up. However, if the proposals are not approved, the company remains a going concern and is viable subject then to a continuation vote at the AGM to be held on or around 17 August 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 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 on 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 the challenge in influencing 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.

Statement of Principal Risks and Uncertainties (Continued)

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 January 2017, at which time the Management Engagement and Remuneration Committee and the Board reviewed the performance and fees of all service providers.  The Board agreed that the performance of all service providers was satisfactory and that no change of service provider was either necessary or desirable at that time.  However, if the proposed reconstruction and winding up of the Company is approved by Shareholders at the EGM expected to be held in late June 2017, the Company will, at that meeting, be placed into voluntary winding up and the appointments of all service providers will be terminated either immediately or shortly thereafter.

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 55 to 58. 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 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

21 April 2017

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 advisers, 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;

Report of the Audit Committee (continued)

Role and responsibility (continued)

i)      review on behalf of the Board, the Company's system of internal control (including financial, operational, compliance and risk 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 2016 (2015: £Nil).

Report of the Audit Committee (continued)

Composition

Mrs Farnon is the Chairman of the Audit Committee and Messrs King, Warr and West are additional members serving on the Committee. 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:-

Report of the Audit Committee (continued)

Significant issues considered regarding the Annual Financial Report (continued)

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.

Report of the Audit Committee (continued)

Conclusion in respect of the Annual Financial Report (continued)

As a result of the work performed, the Committee has concluded that the annual financial report for the year ended 31 December 2016, 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 11. 

S A Farnon

Chairman of Audit Committee                                           

21 April 2017

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THREADNEEDLE UK SELECT TRUST LIMITED

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THREADNEEDLE UK SELECT TRUST LIMITED (continued)

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THREADNEEDLE UK SELECT TRUST LIMITED (continued)

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THREADNEEDLE UK SELECT TRUST LIMITED (continued)

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THREADNEEDLE UK SELECT TRUST LIMITED (continued)

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THREADNEEDLE UK SELECT TRUST LIMITED (continued)

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THREADNEEDLE UK SELECT TRUST LIMITED (continued)

David Becker

for and on behalf of Deloitte LLP

Chartered Accountants and Recognised Auditor

Guernsey, Channel Islands

21 April 2017

Statement of Comprehensive Income

for the year ended 31 December 2016

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 43 to 59 are an integral part of these financial statements.