ACORN INCOME FUND LIMITED

Transcription

1 ACORN INCOME FUND LIMITED (a company incorporated and registered in Guernsey with registered number 34778) Directors: Helen Green (Non-executive Chairman) Nigel Ward (Non-executive Director) David Warr (Non-executive Director) Registered Office: PO Box 255 Trafalgar Court Les Banques St. Peter Port Guernsey GY1 3DA Alternative Investment Fund Managers Directive - Pre-investment Disclosure Document Dated: 3 August 2015 Article 23(1) and (2) of the Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (the "AIFMD") requires that the alternative investment fund manager (the "AIFM") shall, for each of the alternative investment funds ("AIFs") that it markets in the EEA, make available to AIF investors, in accordance with the AIF rules or instruments of incorporation, certain information before the AIF investors invest in the AIF, as well as any material changes thereof. Acorn Income Fund Limited (the "Company") has elected to act as its own AIFM. This document contains the information required by Article 23(1) and (2) of the AIFMD to be made available to potential investors in the Company. This document refers to, and should be read in conjunction with, the Company's Annual Report which is available on the Company's website at Unless otherwise indicated, capitalised terms used in this document have the meanings set out in the Schedule. 1 A description of the investment strategy and objectives of the AIF The investment objective of the Company is to provide shareholders with a high income and also the opportunity for capital growth. The Company's investments are held in two portfolios. Its assets comprise investments in equities and fixed interest securities in order to achieve its investment objective. Approximately 70 per cent. to 80 per cent. of its assets are invested in smaller capitalised United Kingdom companies, admitted to the Official List of the FCA and traded on the London Stock Exchange or traded on AIM at the time of investment. The Company also aims to enhance income for Ordinary Shareholders by investing approximately 20 per cent. to 30 per cent. of its assets in high yielding instruments which are predominantly fixed interest securities but may include up to 15 per cent. of the Company's overall portfolio (measured at the time of acquisition) in high yielding investment company shares. The proportion of the overall portfolio held in the Smaller Companies Portfolio and the Income Portfolio varies from day to day as the market prices of investments move. The Directors retain discretion to transfer funds from one Portfolio to the other and generally LONLIVE\ Page 1

2 expect between 70 per cent. to 80 per cent. of the investments to be held in the Smaller Companies Portfolio. While the Company's investment policy is to spread risk by maintaining diversified Portfolios, there are no restrictions on the proportions of either of the Portfolios which may be invested in any one geographical area, asset class or industry sector. However, not more than 7.5 per cent. of the Company's gross assets may be invested in securities issued by any one company as at the time of investment, save that (i) in respect of the Income Portfolio only, investments may be made in other investment funds subject only to the restriction set out in paragraph (c) of the paragraph headed "Investment restrictions" below; and (ii) in respect of the Smaller Companies Portfolio only, provided that not more than 10 per cent. of the Company's gross assets are invested in securities issued by any one company at any time, the 7.5 per cent. limit may be exceeded on a short term basis, with Board approval, where a company whose securities form part of the Smaller Companies portfolio issues new securities (for example by way of a rights issue). The Company's capital structure is such that the underlying value of assets attributable to the Ordinary Shares is geared relative to the rising capital entitlements of the ZDP Shares. The Company's gearing policy is not to employ any further gearing through longterm bank borrowing. Save with the prior sanction of ZDP Shareholders, the Company will incur no indebtedness other than short term borrowings in the normal course of business such as to settle share trades or borrowings to finance the redemption of the ZDP Shares. Derivatives The Company may invest in derivatives, money market instruments and currency instruments including contracts for differences, futures, forwards and options. These investments may be used for hedging positions against movements in, for example, equity markets, currencies and interest rates. In addition, these instruments will only be used for efficient portfolio management purposes. The Company will not use such instruments to engage in trading transactions. The Company will not maintain derivative positions should the total underlying exposure of these positions exceed one times adjusted total capital and reserves. Investment restrictions For so long as required by the Listing Rules in relation to closed-ended investment companies, the Company has adopted the following investment and other restrictions: (a) (b) (c) the Company will at all times invest and manage its assets in a way which is consistent with its object of spreading investment risk and in accordance with its published investment policy; the Company will not conduct any significant trading activity; and not more than 10 per cent. in aggregate of the value of the total assets of the Company at the time the investment is made will be invested in other listed closed-ended investment funds. The Listing Rules provide an exception to this restriction to the extent that those investment funds have stated investment policies to invest no more than 15 per cent. of their total assets in other listed closed-ended investment companies. LONLIVE\ Page 2

3 2 If the AIF is a feeder, information on where the master AIF is established Not applicable. 3 If the AIF is a fund of funds, information on where the underlying funds are established Not applicable. 4 A description of the types of assets in which the AIF may invest Please refer to paragraph 1 above. The Company's investments are held in two portfolios. Smaller Companies Portfolio The Smaller Companies Portfolio is invested predominantly in companies which at the time of investment are smaller capitalised UK companies. The Directors define smaller capitalised UK companies as those companies constituting the bottom ten per cent. of the UK market by market capitalisation. This is the same measure that is used to select the constituents of the Numis Smaller Companies Index. The focus is on companies with experienced and well-motivated management, products or services supplying growth markets, sound operational and management controls, good cash generation and a progressive dividend. The Smaller Companies Portfolio is predominantly invested in securities which are admitted to the Official List of the FCA and traded on the London Stock Exchange or traded on AIM at the time of investment. There is no fixed allocation to any industry sectors and the Smaller Companies Portfolio is invested in a diversified spread of industry sectors, but has limited exposure to certain sectors which do not generally satisfy the requirement for good cash generation and progressive dividends. Income Portfolio The assets in the Income Portfolio comprise sterling denominated fixed interest securities, including corporate bonds, preference and permanent interest bearing shares, convertible securities, reverse convertible bonds, contingent convertible bonds, debentures and other similar securities and securities issued by open-ended bond funds. However, not all of these investments are necessarily held in this Portfolio at any one time. The Income Portfolio may also contain higher yielding shares of other investment companies, including property investment companies, not exceeding 15 per cent. of the overall Portfolio at the time of investment. It may also contain instruments denominated in other currencies in respect of which the currency exposure is generally hedged. There is no fixed allocation between unrated investments (being those which have not been given a credit rating), investment grade securities and non-investment grade securities. The proportion of the overall Portfolio held in the Smaller Companies Portfolio and the Income Portfolio varies from day to day as the market prices of investments move. The Directors retain discretion to transfer funds from one Portfolio to the other and generally expect between 70 per cent. to 80 per cent. of the investments to be held in the Smaller Companies Portfolio. LONLIVE\ Page 3

4 5 The investment techniques that the AIF, or the AIFM on behalf of the AIF, may employ and all associated risks Please refer to paragraphs 1 and 4 above. Please refer to paragraph 1 above. 7 The circumstances in which the AIF may use leverage The Company has no restrictions on gearing or borrowings in its Articles. ZDP Shares are treated as debt under applicable International Accounting Standards. In order to protect the interests of ZDP Shareholders, the Company will not, without the prior sanction of the ZDP Shareholders at a separate class meeting, incur any bank borrowings (other than short term indebtedness in the normal course of business, such as when settling share transactions) except where such borrowings are for the purpose of paying the Final Capital Entitlement due to holders of ZDP Shares. However, this will not prevent gearing increasing as a result of investments falling in value. There are no set gearing limits. The Company may invest in derivatives, money market instruments and currency instruments including contracts for differences, futures, forwards and options. These investments may be used for hedging positions against movements in, for example, equity markets, currencies and interest rates. In addition, these instruments will only be used for efficient portfolio management purposes. The Company will not use such instruments to engage in trading transactions. The Company will not maintain derivative positions should the total underlying exposure of these positions exceed one times adjusted total capital and reserves. 8 The types and sources of leverage permitted and the associated risks Please refer to paragraph 7 above. For further information about the associated risks investors are directed to the Company's Annual Report available on the Company's website 6 Any applicable investment restrictions For further information about the associated risks investors are directed to the Company's Annual Report which is available on the Company's website at 9 Any restrictions on the use of leverage and any collateral and asset reuse arrangements Please refer to paragraph 7 above. There are no collateral and asset reuse arrangements. LONLIVE\ Page 4

5 10 The maximum level of leverage which the AIFM is entitled to employ on behalf of the AIF Please refer to paragraph 7 above. 11 A description of the procedures by which the AIF may change its investment strategy or investment policy, or both In accordance with the Listing Rules, the Company must obtain the prior approval of its Ordinary Shareholders to any material change to its published investment policy. In addition, the Articles provide that the investment policy of the Company may only be amended with the prior sanction of a resolution of the holders of the ZDP Shares passed at a separate general meeting of such holders convened and held in accordance with the Articles. The Board may amend the Company's investment strategy from time to time. 12 A description of the main legal implications of the contractual relationship entered into for the purpose of investment, including information on jurisdiction, the applicable law and the existence or absence of any legal instruments providing for the recognition and enforcement of judgments in the territory where the AIF is established The Company is incorporated in Guernsey. Investors who acquire shares in the Company will do so subject to the Company's Articles. The Articles are one of the Company's constitutional documents and contain the rights and restrictions attaching to the Company's shares. The Articles may only be amended by way of a special resolution. A shareholder's liability to the Company will be limited to the value of the shares held by such investor. Each investor agrees to be bound by the Articles once the shares for which the investor has agreed to subscribe have been acquired by the investor. The contract to subscribe for shares and all disputes and claims arising out of or in connection with it (including noncontractual disputes or claims) will be governed by and construed in accordance with the laws of England and Wales. By subscribing for shares, each investor will irrevocably submit to the jurisdiction of the courts of England and Wales and will waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum. This does not prevent an action being taken against the investor in any other jurisdiction. The Judgements (Reciprocal Enforcement) (Guernsey) Law 1957 shall apply and a final and conclusive judgment, capable of execution, obtained in the Supreme Court and the Senior Courts of England and Wales (excluding the Crown Court) would be recognised and enforced by the Royal Courts of Guernsey without re-examination of the merits of that case, but will be subject to compliance with procedural and other requirements of Guernsey's reciprocal enforcement legislation. LONLIVE\ Page 5

6 13 The identity of the AIFM, the AIFs depositary, the auditor and any other service providers and a description of their duties and the investors' rights AIFM The Company has not appointed an external AIFM and, accordingly, the Company (acting through the Board) is responsible for compliance with the AIFMD. Investment Manager The Company has appointed Premier Asset Management (Guernsey) Limited as the Investment Manager. The Investment Manager is a subsidiary of Premier Asset Management Limited. It is licensed under the provisions of the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, by the Guernsey Financial Services Commission to carry on controlled investment business. Under the terms of the Management Agreement, the Investment Manager is responsible for, amongst other things, providing administration and secretarial services to the Company. With the consent of the Company, the Investment Manager has delegated the provision of certain administrative and secretarial services to Northern Trust International Fund Administration (Guernsey) Limited (the "Administrator" and "Company Secretary") pursuant to an administration agreement. The Administrator carries out the general secretarial functions required by the Law and ensures that the Company complies with its continuing obligations as a company listed on the Official List of the FCA. The Administrator also carries out the Company's general administrative functions such as the calculation of NAV, calculating the performance of the Company's investments and the maintenance of accounting records. The Investment Manager has delegated responsibility for the management of the Company's portfolios to the Investment Advisers. The Investment Advisers are not engaged by the Company. The Investment Advisers are Premier Fund Managers Limited, which manages the Company's Income Portfolio and Unicorn Asset Management Limited, which manages the Company's Smaller Companies Portfolio. The Investment Advisers are responsible, on behalf of the Investment Manager, for the identification and analysis of investments meeting the investment objectives and strategy of the Company. Depositary The Company has not appointed a Depositary. Custodian The Company has appointed Northern Trust (Guernsey) Limited (the "Custodian") to provide a safekeeping service to the Company. The Custodian holds all the investments (including any interests in other funds) and receives all investment income on behalf of the Company. Auditors The Company's auditors are KPMG Channel Islands Limited (the "Auditor"), which is registered to carry on audit work by the Institute of Chartered Accountants in England and Wales. The Auditor is responsible for auditing the Company's annual financial LONLIVE\ Page 6

7 statements in accordance with auditing standards and regulations and for providing its report to the Company's shareholders in the annual report and financial statements. Registrar The Company has appointed Anson Registrars Limited as its registrar (the "Registrar"). The Registrar is responsible for keeping the register of shareholders of the Company. Absent a direct contractual relationship between a Shareholder and a service provider to the Company, Shareholders generally have no direct rights against the relevant service provider and there are only limited circumstances in which a Shareholder may potentially bring a claim against the relevant service provider. Instead, the proper claimant in an action in respect of which a wrongdoing is alleged to have been committed against the Company by the relevant service provider is, prima facie, the Company itself. 14 A description of how the AIFM complies with the AIFMD's requirements relating to professional liability risk Not applicable. 15 A description of any AIFM management function delegated by the AIFM The Company has delegated management of its portfolio to the Investment Manager due to the expertise and resources of the Investment Manager. 16 A description of any safe-keeping function delegated by the Depositary The Company has not appointed a Depositary. The Custodian is entitled to appoint a sub-custodian and may delegate any of its functions and powers to a sub-custodian. Notwithstanding such delegation, the Custodian will remain responsible to and be the principal obligant of the Company for delivery of custodial services. 17 A description of the identity of each delegate appointed Please refer to paragraph 13 above. 18 A description of any conflicts of interest that may arise from such delegations The Investment Manager and Investment Advisers are not required to devote all their resources to the Company. To the extent that the Investment Manager and the Investment Advisers devote resources to their responsibilities to other business interests, their ability to devote resources and attention to the Company's affairs will be limited. This could adversely affect the Company's ability to achieve its investment objective, which could have a material adverse effect on the Company's profitability, Net Asset Value and share price. The Investment Manager and Investment Advisers are involved in other financial, investment or professional activities which may on occasion give rise to conflicts of interest with the Company. In particular, the Investment Manager and Investment Advisers manage funds other than the Company and may provide investment LONLIVE\ Page 7

8 management, investment advisory or other services in relation to these funds or future funds which may have similar investment policies to that of the Company. The Investment Manager and Investment Advisers may carry on investment activities for their own accounts and for other accounts in which the Company has no interest. The Investment Manager and Investment Advisers also provide management services to other clients, including other collective investment vehicles. The Investment Manager and Investment Advisers may give advice and recommend securities to other managed accounts or investment funds which may differ from advice given to, or investments recommended or bought for, the Company, even though their investment policies may be the same or similar. The Investment Manager and Investment Advisers have in place policies on dealing with conflicts of interest designed to ensure that the interests of their clients will always supersede their own interests. 19 A description of the AIF's valuation procedure and of the pricing methodology for valuing assets, including the methods used in valuing any hard-to-value assets For information about the Company's valuation procedure investors are directed to the Company's Annual Report available on the Company's website 20 A description of the AIF's liquidity risk management, including the redemption rights of investors in normal and exceptional circumstances and the existing redemption arrangements with investors Ordinary Shareholders do not have a right for their Ordinary Shares to be redeemed. The ZDP Shares will be redeemed on the ZDP Repayment Date, dependent on the Company meeting the solvency test. 21 A description of all fees, charges and expenses, and the maximum amounts directly or indirectly borne by investors Investment Manager Pursuant to an investment management agreement dated 11 December 2006 (as amended on 1 January 2010) between the Company and the Investment Manager, in consideration for its services thereunder the Investment Manager is entitled to receive a management fee of 0.7 per cent. per annum of the Company's total assets, calculated monthly and payable quarterly in arrears, charged 75% to capital and 25% to revenue, out of which it pays its fees to the Investment Advisers. The Investment Manager is also paid a shareholder communication and support fee, currently 3,100 per annum. The Investment Manager is also potentially entitled to a performance fee of 15 per cent. of any excess of the Net Asset Value per Ordinary Share (together with any dividend paid by reference to the relevant period) over a benchmark NAV per share multiplied by the time weighted number of shares in issue during the relevant financial period. For a full description of the performance fee investors are directed to the Company's Annual Report available on the Company's website LONLIVE\ Page 8

9 The Investment Manager has agreed that if the total expense ratio of the Company (ignoring any performance fee and any non-routine professional expenses) for any financial period will exceed 1.5 per cent. of the Company's year-end total assets it will reimburse or, to the extent not already paid, waive that part of its management fee and/or performance fee paid or payable in respect of that relevant financial period so as to reduce the total expense ratio of the Company for that period to 1.5 per cent. of total assets, provided always that the Investment Manager shall in any event be entitled to a minimum management fee of 100,000 per annum. In addition to the fees referred to above the Investment Manager is also entitled to be reimbursed the costs of delegating administration services. Remuneration of Directors The ordinary remuneration of the Directors who do not hold executive office for their services (excluding amounts payable under any other sub-paragraph of the Articles) shall not exceed in aggregate 100,000 per annum or such higher amount as the Company may from time to time by ordinary resolution determine. Such remuneration shall be deemed to accrue from day to day. The Directors shall also be paid all reasonable out-ofpocket travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the Directors or any committee of the Directors or general meetings of the Company or in connection with the business of the Company. In addition, the Board may award additional remuneration to any Director engaged in exceptional work at the request of the Board on a time spent basis. Directors' remuneration for the last reported financial year amounted to 25,000 per Director per annum, except for the Chairman who received 27,500 per annum. Please refer to the Company's Annual Report made available on the Company's website The Company also incurs annual fees, charges and expenses in connection with administration, promotional activities, auditors' fees, lawyers' fees and custodian charges. The Company's Ongoing Charges (which include the Investment Manager's fee) for the financial year 2014, amounted to 1.70%. For more recent data please refer to the Company's Annual Report made available on the Company's website The expenses and fees which will be borne by the Company and their investors are limited as set out above, but there is no formal cap on the level of those expenses and fees. 22 A description of how the AIFM ensures fair treatment of investors The Directors owe fiduciary duties to the Company in accordance with the provisions of Guernsey law. In addition, the Company is required to comply with the listing principles set out in Chapter 7 of the Listing Rules which provide that "A listed company must ensure that it treats all holders of the same class of its listed equity shares that are in the same position equally in respect of the rights attaching to those listed equity shares." If LONLIVE\ Page 9

10 the FCA considers that the Company has contravened the Listing Rules it may do one or more of the following: (i) privately censure the Company; (ii) publicly censure the Company; (iii) impose a financial penalty upon the Company; and/or suspend trading of the Company's securities. 23 Whenever an investor obtains preferential treatment or the right to obtain preferential treatment, a description of that preferential treatment No investor currently obtains preferential treatment or the right to obtain preferential treatment. The rights and terms applicable to the ZDP Shares are different to those applicable to the Ordinary Shares. 24 Whenever an investor obtains preferential treatment or the right to obtain preferential treatment, a description of the type of investors who obtain such preferential treatment No investor currently obtains preferential treatment or the right to obtain preferential treatment. 25 Whenever an investor obtains preferential treatment or the right to obtain preferential treatment, a description of, where relevant, their legal or economic links with the AIF or AIFM No investor currently obtains preferential treatment or the right to obtain preferential treatment. 26 The procedure and conditions for the issue and sale of units or shares The issue of new shares by the Company is subject to the requisite Shareholder authorities being in place and all Listing Rule requirements having been met. Shares in the Company can also be bought in the open market through a stockbroker. 27 The latest net asset value of the AIF or the latest market price of the unit or share of the AIF The latest NAV per Ordinary Share and NAV per ZDP Share will be available via the London Stock Exchange and on the Company's website The month end NAV per Ordinary Share and NAV per ZDP Share will be included in the Monthly Factsheets that are available on the Company's website The Ordinary Shares have been admitted to trading on the London Stock Exchange since February 1999 with the ticker symbol AIF and the ZDP Shares have been admitted to trading since 2011 with the ticker symbol AIFZ. The latest share prices are available on as well as on the Company's website. LONLIVE\ Page 10

11 28 The latest annual report The latest annual report of the Company is available on the Company's website at 29 The historical performance of the AIF Historical annual reports of the Company are available on the Company's website at 30 The identity of the prime brokerage firm Not applicable. The Company has not appointed a prime brokerage firm. 31 A description of any material arrangements of the AIF with its prime brokerage firm and the way any conflicts of interest are managed Not applicable. The Company has not appointed a prime brokerage firm. 32 The provision in the contract with the Depositary on the possibility of transfer and reuse of AIF assets Not applicable. The Company has not appointed a Depositary. Neither the Custodian nor any sub-custodian appointed by it has any right of re-use in respect of the Company's assets. 33 Information about any transfer of liability to the prime brokerage firm that may exist Not applicable. The Company has not appointed a prime brokerage firm. 34 How and when periodic information required by Article 23(4) and (5) of the AIFMD will be disclosed Article 23(4) requires the Company to disclose information relating to: (i) the percentage of the Company's assets that are subject to special arrangements arising from their illiquid nature; (ii) any new arrangements for managing the liquidity of the Company; and (iii) the current risk profile of the Company and the risk management systems employed by the Company to manage those risks. This information shall be disclosed as part of the Company's periodic reporting to investors, as required by the Company s rules or instruments of incorporation or at the same time as the prospectus and offering document and at a minimum at the same time as the Company's annual report is made available. Information on changes to the maximum level of leverage that may be employed on behalf of the Company and any right of re-use of collateral or any guarantee under the leveraging arrangements shall be provided without undue delay. Information on the total amount of leverage employed by the Company shall be disclosed as part of the Company s periodic reporting to investors, as required by the Company's LONLIVE\ Page 11

12 rules or instruments of incorporation, or at the same time as the prospectus and offering document and at least at the same time as the Company's annual report is made available. Without limitation to the generality of the foregoing, any information required under Article 23(4) and (5) of the AIFMD may be disclosed (a) in the Company's annual report, (b) in the Monthly Factsheets that are available on the Company's website at (c) by the Company issuing an announcement via a Regulatory Information Service or (d) by the Company publishing the relevant information on the Company's website at at 35 An AIFM must inform investors before they invest in the AIF of any arrangement made by the Depositary to contractually discharge itself of liability Not applicable. The Company has not appointed a Depositary. The Custodian will not be liable to the Company in certain circumstances including in respect of: (i) any errors made by the Company in giving instructions or delay by the Custodian in clarifying instructions; and (ii) the negligence, fault, fraud, default or other failure by the Investment Manager, any clearing house or any sub-custodian (provided, in the latter case, the Custodian has selected such sub-custodian with reasonable care). The aggregate liability of the Custodian for any claim or series of claims as a consequence of the loss or non-availability of the property held in custody is limited to the market value of securities or certificates and the face value of currency at the time of such loss, plus interest. The Custodian will not be responsible for or incur any liability for any indirect or consequential losses suffered by the Company. The Company has agreed to indemnify the Custodian and its sub-custodians or any of their respective agents or nominees against all costs, charges, expenses, damages, liabilities, losses, penalties and claims suffered by them in the proper exercise of their duties. 36 The AIFM must also inform investors without delay of any changes with respect to Depositary liability Not applicable. The Company has not appointed a Depositary. However, and without limitation, investors may be informed of any changes with respect to the Custodian liability (a) in the Company's annual report, (b) in the Monthly Factsheets that are available on the Company's website at (c) by the Company issuing an announcement via a Regulatory Information Service or (d) by the Company publishing the relevant information on the Company's website at at LONLIVE\ Page 12

13 Schedule Definitions "Administrator" means Northern Trust International Fund Administration (Guernsey) Limited "AIF" means alternative investment fund, as defined in the AIFMD "AIFM" means alternative investment fund manager, as defined in the AIFMD "AIFMD" the Alternative Investment Fund Managers Directive, 2011/61/EU "AIM" "Articles" "Audit Committee" "Auditor" "Board" "Company" "Company Secretary" "Depositary" "Directors" "FCA" "FSMA" "Income Portfolio" "Investment Adviser" "Investment Manager" "Listing Rules" means the market of that name operated by the London Stock Exchange means the articles of incorporation of the Company means the audit committee established by the board of directors of the Company means KPMG Channel Islands Limited means the board of directors of the Company means Acorn Income Fund Limited means Northern Trust International Fund Administration (Guernsey) Limited means a depositary appointed in accordance with Article 21 of the AIFMD means the directors of the Company means the Financial Conduct Authority means the Financial Services and Markets Act 2000 (as amended) means the portfolio of investments of the Company in high income and fixed interest securities and which is managed by Premier Fund Managers Limited means Premier Fund Managers Limited, in its capacity as investment adviser to the Income Portfolio or Unicorn Asset Management Limited, in its capacity as investment adviser to the Smaller Companies Portfolio (and together the "Investment Advisers") means Premier Asset Management (Guernsey) Limited means the rules and regulations made by the FCA under Part VI of the FSMA LONLIVE\ Page 13

14 "London Stock Exchange" "NAV" or "Net Asset Value" "Official List" "Ordinary Shares" means London Stock Exchange plc means net asset value calculated in accordance with the Company's normal accounting policies means the Official List of the FCA means the ordinary shares of one penny each in the capital of the Company "Portfolios" means together the Income Portfolio and the Smaller Companies Portfolios and each a "Portfolio" "Registrar" "Smaller Companies Portfolio" means Anson Registrars Limited means the portfolio of investments of the Company in equities which, at the time of investment, are smaller capitalised UK companies, managed by Unicorn Asset Management Limited "UK" or "United Kingdom" means the United Kingdom of Great Britain and Northern Ireland "ZDP Repayment Date" means 31 January 2017 "ZDP Shares" means the redeemable zero dividend preference shares of one penny each in the capital of the Company LONLIVE\ Page 14