This Report is made solely to the Company's members, as a body,
in accordance with Section 262 of 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.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities
Statement set out on page 54, 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). Those standards require us to comply with the Auditing
Practices Board's Ethical Standards for Auditors.
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 Group'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
and Financial Statements 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.
Our assessment of risks of material misstatement
We identified the following risk that has had the greatest
effect on the overall audit strategy and scope:
> The assessment of the fair value of investments relies on a
number of macro assumptions which are subjective, as well as
projected cash flows which are based on estimates made by
management. For details of the valuation process followed by
management please refer page 69 note 13.4. There is a risk that
errors in the assumptions and projected cash flows result in a
misstatement of the investment balance in the consolidated balance
sheet and the corresponding gain/loss on revaluation of investments
recorded in the consolidated statement of comprehensive income
Our response to the risk identified
In assessing the risk of material misstatement to the
consolidated financial statements, our Group audit scope as noted
above, focused on the valuation of investments at fair value
through profit or loss. Our response to the risk of material
misstatement identified above included the following
procedures:
> we reviewed the valuation process and assessed the
effective of controls and tested the controls that related to model
integrity; and
> we challenged the Board's assumptions underpinning the fair
value of investments, including the key inputs of the forecast cash
flows, the discount rates used, and the historical accuracy of
forecasts. We used a valuation specialist to assist us with our
audit of the discount rates, foreign exchange rates and inflation
rates used, by benchmarking to data available in the market
Our application of materiality
We determined materiality for the Group to be GBP10.6 million
(2013: GBP9.0), which is approximately 1% (2013: 1%) of equity.
This provided a basis for determining the nature, timing and extent
of risk assessment procedures, identifying and assessing the risk
of material misstatement and determining the nature, timing and
extent of further audit procedures. We used equity as the basis for
determining planning materiality because the Company's primary
performance measures for internal and external reporting are based
on net asset value. On the basis of our risk assessments, together
with our assessment of the Group's overall control environment, our
judgement is that overall performance materiality for the Group
should be 50% of materiality, namely GBP5.3 million (2013: GBP4.5
million). A lower materiality of GBP1.9 million (2013: GBP1.2
million) has been applied to Interest income, Dividend income and
Management costs to be responsive to the expectations of the users
of the financial statements with regard to misstatements in these
balances of a lesser amount than the Group materiality. Performance
materiality for these balances has been determined to be 50% of
materiality, namely GBP0.95 million (2013: GBP0.65 million).
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of GBP0.53 million (2013
GBP0.45 million), as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds.
We evaluated any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to
you if, in our opinion, information in the Director's 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 Group acquired in the
course of performing our audit; or
> Is 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.
Under the Companies (Guernsey) Law, 2008 we are required to
report to you if, in our opinion:
> proper accounting records have not been kept; or
> the financial statements are not in agreement with the accounting records; or
> we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
> The directors' statement, set out on page 53, in relation to going concern; and
> The part of the Corporate Governance Statement relating to
the company's compliance with the nine provisions of the UK
Corporate Governance Code specified for our review.
Michael Bane
for and on behalf of Ernst & Young LLP,
Guernsey
Channel Islands
25 March 2015
Year ended Year ended
31 December 31 December
2014 2013
Notes GBP'000s GBP'000s
========================================= ====== ===== =============== ============
Interest income 4 32,200 28,858
Dividend income 4 23,605 17,669
Net change in fair value of investments
at fair value through profit or loss 4 32,187 30,697
Realised gain on disposal of investments 4,5 2,104 -
================================================= ===== =============== ============
Total investment income 90,096 77,224
Other operating (expense)/income 6 (599) 4,143
================================================= ===== =============== ============
Total income 89,497 81,367
Management costs 7 (11,608) (21,675)
Administrative expenses (930) (1,378)
Transaction costs 8 (2,874) (596)
Directors' fees (248) (245)
================================================= ===== =============== ============
Total expenses (15,660) (23,894)
================================================= ===== =============== ============
Profit before finance costs and tax 73,837 57,473
Finance costs 10 (2,668) (1,390)
================================================= ===== =============== ============
Profit before tax 71,169 56,083
Tax credit 11 2,042 2,551
================================================= ===== =============== ============
Profit for the year 73,211 58,634
================================================= ===== =============== ============
Earnings per share
From continuing operations
Basic and diluted (pence) 12 9.49 7.82
================================================= ===== =============== ============
All results are from continuing operations in the year.
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