Principal Risks
The Board is responsible for managing the risks faced by the Company. Through delegation to
the Audit Committee, the Board has established procedures to manage risk, to review the
Company’s internal control framework and to establish the level and nature of the principal risks
the Company is prepared to accept in order to achieve its long-term strategic objective. At least
once a year the Audit Committee carries out a robust assessment of the principal and emerging
risks with the assistance of Frostrow. A risk management process has been established to identify
and assess risks, their likelihood and the possible severity of impact. Further information is
provided in the Audit Committee Report beginning on page 55. These principal risks and the ways
they are managed or mitigated are set out on the following pages.
The Board’s policy on risk management has not materially changed during the course of the
reporting period and up to the year end.
Movement during the year: Unchanged, Reduced, Increased, New risk included during the year
*
Movement Key Risks and Uncertainties Key Mitigations
Corporate Strategy
The Board may have to reduce the Company’s
dividend.
84% of the Company’s income is represented by
dividends from LTL. If LTL’s funds under
management fall the Company’s dividend
paying potential could be negatively impacted.
The Board reviews at every Board meeting the
investment portfolio, income forecasts and
levels of available revenue reserves prepared by
the Company Secretary at every Board meeting.
Sufficient dividends are paid to maintain
investment trust status.
The Company has retained revenue reserves,
which can be used to supplement dividend
payments in the event of a short-term
reduction in net revenue.
In the event of a sustained fall in LTL’s FUM and
its dividend paid to the Company, the
Company’s dividend would have to be adjusted
downwards.
The Company’s share price total return may
differ materially from the NAV per share total
return resulting in the shares trading at either
a premium or a discount to NAV.
Regular consideration is given to the share price
premium or discount to NAV per share and the
Company has authority to buy back shares and
hold in treasury.
Investment Strategy and Activity
The departure of a key individual at the Manager
may affect the Company’s performance.
The Board keeps the investment management
arrangements under continual review. In turn,
the Manager reports on developments at LTL,
including succession and business continuity
plans. The Board meets with other members of
the wider team employed by the Manager.
Key-man insurance has been secured by the
Company to help mitigate this risk. The Board
is also encouraged by the continued
development of the investment management
team at LTL who are now taking on greater
responsibility at a more senior level.
The investment strategy adopted by the
Manager, including the high degree of
concentration of the investment portfolio, may
lead to an investment return that is materially
lower than the Company’s benchmark index,
and/or a possible failure to achieve the
Company’s investment objective.
The Board regularly discusses with the Manager
the structure of the portfolio, including asset
allocation and portfolio concentration.
The Board reviews the performance of the
portfolio against the benchmark at every meeting.