Source UK Services Limited - Branch GermanyLiquidiert

Source UK Services Limited - Branch Germany

München

Jahresabschluss zum Geschäftsjahr vom 01.01.2016 bis zum 31.12.2016

REGISTERED NO: 06649814

CONTENTS

Company Information

Strategic Report

Directors' Report

Independent Auditors' Report to the Members of Source UK Services Limited

Profit and Loss Account

Balance Sheet

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

COMPANY INFORMATION

Strategic Report

Strategic report for the year ended 31 December 2016

The Directors present their strategic report on Source UK Services Limited ("the Company") for the year ended 31 December 2016.

Review of the business

The principal activities of the Company are the provision of promotion, marketing and advisory services in relation to exchange traded Funds and other exchange traded investment products ("ETPs").

Putting into practice some of the recommendations from the EatBigFish project, Source engaged Mother, an advertising and creative agency specialising in challenger brands, to help establish the brand to most effectively leverage Source's strengths while making sure it stands out in such a competitive - but largely bland - market. From this project, a new brand identity was developed, including new logo, imagery and tone of voice. The website (sourceetf.com) was refreshed to reibet the changes, and the first printed materials were published in 2016.

Source continued its physical expansion in Europe, with the opening of an office in Munich and France. This places the German and French coverage team closer to investors in this key market. This office opening coincided with the wider reorganisation of the coverage team. In addition to Europe, Source also established a brunch in Israel with the same aim of placing the coverage team in closer proximity to investors in another key market for Source.

In terms of product performance, Source P-ETCs gathered more than €1.2 billion of net new assets over the year, with the vast majority going into Source Physical Gold P-ETC as investors sought relative safety amidst the political uncertainty. Source Physical Gold P-ETC ended the year with €3 billion of assets, making it Source's largest product.

Net flows into the PIMCO Source ETFs were €255 million for the year. Investor interest picked up in the second half of the year as the US interest rates outlook became less clear. Products with shorter-term durations saw the greatest inflows.

The Company's business is exposed to the typical risks associated with financial products. These risks include changes in movement in the underlying asset markets, changes in interest rates and general investment Sentiment which may impact Source's business performance. In 2016, the Company generated revenues of £23.75m (2015: £16.77m).

The Shareholders of Source Holdings Limited are currently looking at opportunities for a potential sale of the Source business.

Assets under promotion were £5,700m (2015: £3,860m).

The net assets of the Company as at 31 December 2016 were £3.2m (2015: £1.5m).

Corporate Social Responsibility (CSR)

In 2016, Source streamlined its existing CSR committee to better concentrate its focus on the Company's activities in the workplace, environment, community and marketplace. The Company's overriding mission statement on CSR policy is:

"We strongly believe the Source value of delivering excellence extends beyond the purely commercial sense to incorporate how we treat one another, as well as the wider community around us, and the environment on which we - and our future generations - depend. We continually look for ways to increase the positive and/or reduce the negative impacts that we have on all the areas within our control, and we are committed to leading by example."

Workplace

The Company promoted certain policies to foster the new brand ethos, including a more flexible dress code and mobile working. Such measures are intended to increase creativity and productivity. All employees are now equipped with Microsoft Surface machines and are encouraged to sit with other teams as appropriate. This is intended to improve cross-departmental teamwork and communication.

Environment

The Company recycles waste material in line with the local standard and uses energy efficient products where feasible. The CSR committee is working with the various departments to look for ways to reduce the amount of paper used unnecessarily by the Company. In 2016, the Company reduced the amount of printed material, including brochures and presentations, using digital alternatives where possible.

Community and fundraising

The Company identified several local London boroughs in the most need of support and is currently working with charity groups to identify specific projects in those communities in which the Company can make a difference. The Company continued its support of the First Love Foundation, including allowing employees to help prepare food hampers to be distributed to 500 families in the Tower Hamlets area. The Company's employees were also involved in a "bake off' to raise funds for the Macmillan Cancer Support charity. The Company also met with Leap, a charity working with young people dealing with conflict, and agreed to offer assistance both financially and in professional expertise.

Marketplace

The Company has undertaken an investigation into whether it can incorporate ethical policies into its investment products.

By order of the Board

Directors' Report

Directors' report for the year ended 31 December 2016

The Directors present their report and the audited financial statements of the Company for the year ended 31 December 2016.

Future developments

Source Group has succeeded in raising assets since its first products were launched in 2009, but the business realises that changes are necessary to deliver the next phase of growth. The findings from the EatBigFish project began to take shape via the Mother rebranding initiative, and the company plans to continue rolling out the new challenger brand ethos in 2017. This will include further user-focused improvements to the website and digital lead-generative initiatives. The company also plans to continue its expansion into Europe with further office openings where commercially beneficial.

The Shareholders of Source Holdings Limited are currently looking at opportunities for a potential sale of the Source business.

Political donations and political expenditure

No political donations were made in the year (2015: Nil).

Dividends

The Company's lass for the year after tax is £20,266,807 (2015: £20,465,347). The Directors do not recommend the payment of a final dividend (2015: Nil).

Directors

The Directors who held office during the year and up to the date of signing the financial statements are given below:

Branches outside the UK

During the year, the Company established branches in Germany, France and Israel.

Post balance sheet events

There are no significant post balance sheet events to disclose.

Statement of Directors' responsibilities

The directors are responsible for preparing the annual directors' report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting practice) including Financial Reporting Standard 102, the Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102).

Under company 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 lass of the Company for that period. In preparing these financial statements, the directors are required to:

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and 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 Act 2006. 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.

Disclosure of information to Auditors

The Directors in office at the date of this report have each confirmed that:

Independent auditors

The auditors, PricewaterhouseCoopers, have indicated their willingness to continue in office and a resolution concerning their re-appointment will be proposed at the Annual General Meeting.

Independent auditors' report to the members of Source UK Services Limited

Report on the financial statements

Our opinion

In our opinion, Source UK Services Limited's financial statements (the "financial statements"):

What we have audited

The financial statements, included within the Annual Report & Audited Financial Statements, comprise:

The financial reporting framework that has been applied in the preparation of the financial statements is United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and applicable law (United Kingdom Generally Accepted Accounting Practice).

In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

In addition, in light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we are required to report if we have identified any material misstatements in the Strategic Report and the Directors' Report. We have nothing to report in this respect.

Other matters on which we are required to report by exception

Adequacy or accounting records and information and explanations received

Under the Companies Act 2006 we are required to report to you if, in our opinion:

Directors' remuneration

Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors' remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the audit

Our responsibilities and those of the directors

As explained more fully in the Statement of Directors' Responsibilities set out on page 5, 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) ("ISAs (UK & Ireland)"). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What an audit of financial statements involves

We conducted our audit in accordance with ISAs (UK & Ireland). 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:

We primarily focus our work in these areas by assessing the directors' judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. With respect to the Strategic Report and Directors' Report, we consider whether those reports include the disclosures required by applicable legal requirements.

Profit and Loss Account

for the year ended 31 December 2016

There were no elements of other comprehensive income in arriving at the results for the financial year.

Balance Sheet

at 31 December 2016

The financial statements on pages 9 to 33 were approved by the Board of Directors on 24 April 2017 and were signed on its behalf by:

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2016

STATEMENT OF CASH FLOWS

for the year ended 31 December 2016

Notes to the Financial Statements

for the year ended 31 December 2016

1. GENERAL INFORMATION

Source UK Services Limited ("the Company") provides promotion, marketing and advisory services in relation to exchange traded funds and other exchange traded investment products ("ETPs").

The Company is a limited company incorporated and domiciled in the United Kingdom under the Companies Act 2006 (Registration number 06649814). The address of the registered office is 9th Floor, 110 Cannon Street, London, EC4N 6EU. The Company is authorised and regulated by the Financial Conduct Authority.

2. STATEMENT OF COMPLIANCE

The individual financial statements of Source UK Services Limited have been prepared in compliance with United Kingdom Accounting Standards, including Financial Reporting Standard 102, "The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland" ("FRS 102") and the Companies Act 2006, under the provision of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (S1 2008/410).

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Basis of Preparation

These financial statements are prepared on a going concern basis, under the historical cost convention, as modified by the recognition of certain financial assets and liabilities measured at fair value.

The preparation of financial statements in conformity with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4.

(b) Going concern

The Company incurred a loss for the year ended 31 December 2016, and has been loss making since inception. The Directors have reviewed the financial projections of the Company to determine if there is material uncertainty that the Company will continue to operate for the foreseeable Future. The Directors have determined that on the basis of the support from the parent undertaking, Source Holdings Limited, no material uncertainty exists. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

(c) Consolidated Financial Statements

The Company is a wholly owned subsidiary of Source Holdings Limited. It is included in the consolidated financial statements of Source Holdings Limited. Therefore the Company is exempt by virtue of section 401 of the Companies Act 2006 from the requirement to prepare consolidated financial statements.

These financial statements are the Company's separate financial statements.

(d) Foreign currency

(i) Functional and presentation currency

Items included in the Company's financial statements are measured using the currency of the primary economic environment in which it operates (the "functional currency"). This is the Pound Sterling, which reflects the Company's primary place of business.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account.

(e) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents net amounts receivable in respect of the Company's activities in providing marketing, deal arranging and advisory, net of retrocessions and exclusive of value added tax. Fees are recognised as earned on an accruals basis in line with the terms of the various contracts.

Marketing Fees

The Company receives fees for the provision of promotion and marketing services in relation to exchange traded funds and other exchange traded investment products ("ETPs"). These fees are recognised in line with the recognition of the associated management Fee received on the products.

Portfolio Adviser & Arrangement Fees

Arranger fees are received in respect of arranger services provided to issuers of exchange traded investment products ("ETPs"). The arranger fees accrue on each day and are paid monthly in arrears. The Company pays the ETPs' fees and expenses including those of the portfolio administrators and ordinary fees and expenses incurred by the ETPs, including establishment and other administrative expenses.

Retrocessions

The Company pays retrocessions to certain third parties in respect of their initial and continuing Investment in the products promoted by the Company and these retrocessions are recognised in line with the recognition of the associated management Fee.

(f) Employee benefits

The Company provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and a defined contribution pension plan.

(i) Short term benefits

Short term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.

(ii) Defined contribution pension plans

The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are shown in accruals in the Balance Sheet. The assets of the plan are held separately from the Company in independently administered funds.

(iii) Annual bonus plan

The Company operates an annual bonus plan for employees. An expense is recognised in the profit and loss account when the Company has a legal or constructive obligation to make payments under the plan as a result of past events and a reliable estimate of the obligation can be made.

(iv) Share-based payments

Services received in consideration for equity are measured at fair value at the grant date of the instruments. The resulting cost of the share based payment is charged to the profit and loss account over the vesting period.

Non-market vesting conditions are included in assumptions about the number of options or shares that are expected to vest. At the end of each reporting period, the entity revises its estimates of the number of options or shares that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the profit & loss account, with a corresponding adjustment to equity.

When the options are exercised or the shares issued, the proceeds received net of any directly attributable transaction costs are credited to the share capital (nominal value) and share premium accounts. The graut of options or shares in the Company's parent undertaking in exchange for services received by the Company is treated as a capital contribution by the Company.

(g) Taxation

The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date.

(i) Current tax

Current tax is the amount of income tax payable in respect of the taxable profit for the year or prior years. Tax is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the period end.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. lt establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

(ii) Deferred tax

Deferred tax is recognised on all timing differences at the reporting date except for certain exceptions. Unrelieved tax losses and other deferred tax assets are only recognised when it is probable that they will be recovered against the reversal of deferred tax liabilities or other Future taxable profits.

Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the period end and that are expected to apply to the reversal of the timing difference.

(h) Tangible assets

Tangible assets are stated at cost (or deemed cost) less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price, costs directly attributable to bringing the asset to its working condition for its intended use, dismantling and restoration costs and borrowing costs capitalised.

Tangible fixed assets are initially recorded at cost and depreciated so as to write off the cost of each asset over its estimated useful life. Costs include those costs which are directly attributable to bringing the asset into working condition for its intended use. Costs that are directly attributable to the development of new business application software and which are incurred during the year prior to the date that the software is placed into operational use, are capitalised. External costs and internal costs are capitalised to the extent they enhance the future economic benefits of the business, whilst internal costs are only capitalised if they are also incremental to the Company.

Where events or changes in circumstances indicate that the carrying amount of fixed assets may not be recoverable, the assets will be written down to their recoverable amount. Fixed assets are reviewed for impairment where there is any indication that impairment has occurred.

(i) Depreciation

Depreciation is provided to write off the cost, less estimated residual values, of all tangible fixed assets, over their estimated useful lives. It is calculated on a straight-line basis over the following period:

Leased assets

(i) Operating Leased Assets

Leases that do not transfer all the risks and rewards of ownership are classified as operating leases. Payments under operating leases are charged to the profit and loss account on a straight-line basis over the period of the lease.

(ii) Lease incentives

Incentives received to enter into an operating lease are credited to the profit and loss account, to reduce the lease expense, on a straight-line basis over the period of the lease.

(j) Investments

Investment in subsidiary company is held at historical cost less accumulated impairment losses.

(k) Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less and bank overdrafts. Any bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(l) Financial Instruments

The Company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments.

(i) Financial assets

Basic financial assets, including trade and other receivables, cash and bank balances and Investments, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.

Such assets are subsequently carried at amortised cost using the effective interest method.

At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. If an asset is impaired the impairment lass is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset's original effective interest rate. The impairment loss is recognised in profit or loss.

(ii) Financial liabilities

Basic financial liabilities, including trade and other payables and loans from members of the Source Holdings Limited group, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt Instrument is measured at the present value of the future receipts discounted at a market rate of interest.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.

(iii) Offsetting

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is an enforceable right to set off the recognised amounts and there is an Intention to settle an a net basis or to realise the asset and settle to liability simultaneously.

(m) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(n) Distributions to equity holders

Dividends and other distributions to Company's shareholders are recognised as a liability in the financial statements in the period in which the dividends and other distributions are approved by the Company's shareholders. These amounts are recognised in the statement of changes in equity.

(o) Related party transactions

The Company discloses transactions with related parties which are not wholly owned with the same group. It does not disclose transactions with members of the same group that are wholly owned, other than those which are significant to the trading operations of the Company.

4. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Critical judgements in applying the entity's accounting policies

(i) Share-based payments

The Company's employees have been granted share options by the ultimate parent company, Source Holdings Limited. The Company makes use of the exemption in Section 26 of FRS 102 to account for the expense based on a reasonable allocation of the parent company's total expense. The Company has calculated its allocation of the parent company's total expense based on the number of participating employees in the Company compared to the number of participating employees in the group.

The Company also considered an allocation based on the relative remuneration cost of the relevant employees and considered that this gave rise to no significant differences in the allocated costs.

(b) Critical accounting estimates and assumptions

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(i) Useful economic lives of tangible assets

The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. See note 10 for the carrying amount of the property plant and equipment, and note 3(h) for the useful economic lives for each class of assets.

(ii) Impairment of debtors

The Company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current credit rating of the debtor, the ageing profile of debtors and historical experience. See note 12 for the net carrying amount of the debtors and associated impairment provision.

5. TURNOVER

6. OPERATING LOSS

7. EMPLOYEES AND DIRECTORS

Employees

The average monthly number of persons (including executive directors) employed by the Company during the year was:

Directors

Highest paid director

The highest paid director's emoluments were as follows:

Key management compensation

Key management includes the directors and members of senior management. The compensation paid or payable to key management for employee services is shown below:

8. SHARE BASED PAYMENTS

a) Settled Incentive Schemes

Share options

3,115 new options over the €0.01 ordinary shares of the Group's parent undertaking, Source Holdings Limited ("SHL"), were granted in the year (2015: Nil) and no options lapsed (2015: Nil). As at 31 December 2016 3,115 options over the ordinary shares of SHL remained unvested (2015: Nil).

The cost of the share based payments is included in the profit and loss account over the vesting period based an the fair value of the options and the number of options expected to vest. During 2016 the cost of the share options granted was £45,266 (2015: £Nil).

A threshold event in 2017 would result in an accelerated expense impact of £436,280.

Restricted B shares

During 2016 no new restricted €0.01 B shares of SHL were granted (2015: Nil) and no B shares were redeemed and cancelled (2015: 19,975). As at 31 December 2016 24,390 shares remained outstanding (2015: 24,390).

Prior to the occurrence of a Threshold Event a B share confers upon the holder no right to vote or receive dividends and the right on a winding up to repayment of paid up capital only. Following the occurrence of a Threshold Event, when the ordinary shareholders have received notice that an independent valuer has determined the market value of the shares to be €200 million or more, a B share will confer upon the holder the same rights to capital and income as are conferred upon the holder of an ordinary share.

On the grant date the employees were required to settle the par value of the B shares.

The cost of the share based payments is included in the profit and loss account over the vesting period based on the fair value of the B shares and the number of outstanding shares expected to vest. During 2016 the cost of the B shares granted was £Nil (2015: £Nil).

b) 2014 Incentive Scheme

Restricted C shares

During the year the Group granted certain employees 41,360 (2015: 9,352) restricted €0.01 C shares of SHL and 2,278 of these shares were redeemed and cancelled (2015: 16,717). As at 31 December 2016 55,268 (2015: 16,186) remain outstanding with vesting dates ranging from 10 September 2019 to 10 May 2021. The shares vest evenly across this 5 year period on the anniversary of the date of the grant.

Prior to the occurrence of a Threshold Event a C share shall confer upon the holder no right to vote or receive dividends and the right on a winding up to repayment of paid up capital only. Following the occurrence of a Threshold Event, when the ordinary shareholders have received notice that an independent valuer has determined the IRR to be 15% or more, a C share shall confer upon the holder the same rights to capital and income as are conferred upon the holder of an ordinary share.

On grant date the employees were required to settle the par value of the C shares.

The fair value of the C shares awarded has been measured using a derivative of the Black-Scholes Model and the calculated C share price further discounted for the effect of minority shareholdings, marketability and non-voting shares as follows:

The related inputs to a derivative of the Monte Carlo model are as follows:

Volatility is the standard deviation of the continuously compounded rates of return on the share over a period of time. The rate of return is a measure of the benefit or cost of both dividends and share price movement.

As SHL is a private company with no historical share price data to determine an appropriate volatility level, the 260 day historical volatilities of comparable quoted companies was analysed over the expected investment period prior to the Valuation Date. Given that volatilities tend to revert towards a long term average level, over the 5 year life of the CSOP/ESOP it is reasonable to expect the volatility to revert towards the long term average level of these comparable companies, calculated at 30-32 per cent.

The cost of the share based payments is included in the profit and loss account over the vesting period based an the fair value of the C shares and the number of C shares expected to vest. During 2016 the cost of the C shares granted was £77,889 (2015: £40,086).

A threshold event in 2017 would result in an accelerated expense impact of £449,109.

Restricted D shares

During the year the Group granted certain employees 41,360 (2015: 9,352) restricted €0.01 D shares of SHL and 2,278 of these shares were redeemed and cancelled (2015: 16,717). As at 31 December 2016 55,268 (2015: 16,186) remain outstanding with vesting dates ranging from 10 September 2019 w 10 May 2021. The shares vest evenly across this 5 year period an the anniversary of the date of the grant.

Prior to the occurrence of a Threshold Event a D share shall confer upon the holder no right to vote or receive dividends and the right on a winding up to repayment of paid up capital only. Following the occurrence of a Threshold Event, when the ordinary shareholders have received notice that an independent valuer has determined the investor multiple of investment to be 2 or more, a D share shall confer upon the holder the same rights to capital and income as are conferred upon the holder of an ordinary share.

On grant date the employees were required to settle the par value of the D shares.

The fair value of the D shares awarded has been measured using a derivative of the Black-Scholes Model and the calculated D share price further discounted for the effect of minority shareholdings, marketability and non-voting shares as follows:

The related inputs to a derivative of the Monte Carlo model are as follows:

The determination of volatility has been explained above.

The cost of the share based payments is included in the profit and lass account over the vesting period based on the fair value of the D shares and the number of D shares expected to vest. During 2016 the cost of the D shares granted was £79,503 (2015: £41,054).

A threshold event in 2017 would result in an accelerated expense impact of £81,054.

Restricted E shares

During the year the Group granted certain employees 41,360 (2015: 9,352) restricted €0.01 E shares of SHL and 2,278 of these shares were redeemed and cancelled (2015: 16,717). As at 31 December 2016 55,268 (2015: 16,186) remain outstanding with vesting dates ranging from 10 September 2019 to 10 May 2021. The shares vest evenly across this 5 year period on the anniversary of the date of the grant, provided the threshold value is not exceeded before this time, should the equity value exceed the threshold value in advance of this time all shares vest immediately.

Prior to the occurrence of a Threshold Event an E share shall confer upon the holder no right to vote or receive dividends and the right on a winding up to repayment of paid up capital only. Following the occurrence of a Threshold Event, when the ordinary shareholders have received notice that an independent valuer has determined the market value of the shares to be €350 million or more, an E share shall confer upon the holder the same rights to capital and income as are conferred upon the holder of an ordinary share.

On grant date the employees were required to settle the par value of the E shares.

The fair value of the E shares awarded has been measured using a derivative of the Black-Scholes Model and the calculated E share price further discounted for the effect of minority shareholdings, marketability and non-voting shares as follows:

The related inputs to a derivative of the Monte Carlo model are as follows:

The determination of volatility has been explained above.

The cost of the share based payments is included in the profit and loss account over the vesting period based on the fair value of the E shares and the number of E shares expected to vest. During 2016 the cost of the E shares granted was £109,292 (2015: £59,811).

A threshold event in 2017 would result in an accelerated expense impact of £234,097.

9. INCOME TAX

The tax assessed on the profit on ordinary activities for the year is the standard rate of corporation tax in the UK of 20% (2015: 20%). The differences are explained below:

The following factors may affect future tax charges:

Deferred tax assets are recognised in respect of tax losses carried forward to the extent that it is probable that the losses will be capable of being offset against taxable profits in future periods. The value attributed to them takes into account the uncertainty or otherwise of their recoverability. Their recoverability is measured against anticipated taxable profits. Cumulative tax losses to 31 December 2016 are £110,189,145 (2015: £91,071,530). The amount of unrecognised deferred tax at 31 December 2015 in respect of these cumulative tax losses was £22,037,829 (2014: £18,214,306).

10. TANGIBLE ASSETS

11. FIXED ASSET INVESTMENTS

Fixed asset investments comprise equity shares in Source Schweiz GmbH which is not publicly traded.

The Company owns 100% of the ordinary share capital of its subsidiary; Source Schweiz GmbH. Source Schweiz GmbH is incorporated in Switzerland. During the year no dividends were received (2015: Nil).

12. DEBTORS

Other debtors includes £952,006 (2015: £1,223,853) falling due alter more than one year.

Amounts owed by group undertakings are unsecured, interest free, have no fixed date of repayment and are repayable on demand.

13. CREDITORS

Amounts owed by group undertakings am unsecured, interest free, have no fixed date of repayment and are repayable on demand.

14. FINANCIAL INSTRUMENTS

The Company has the following financial instruments:

15. SHARE CAPITAL

16. NOTE TO THE STATEMENT OF CASHFLOWS

17. CAPITAL AND OTHER COMMITMENTS

Under Financial Conduct Authority capital requirements, The Company must maintain, at all times, a minimum capital level of £50,000. As a promoter of lrish Funds the Central Bank of Ireland requires The Company to maintain a minimum capital level of €635,000.

The payments that The Company is committed to make in the next year under operating leases are as follows:

18. RELATED PARTY TRANSACTIONS

The Company is a subsidiary of Source Holdings Limited ("SHL"), a Cayman incorporated holding company ulong with its fellow subsidiaries Source Investment Management Limited ('SIML'), Source Investment Products LLC ('SIPL') and Source Exchange Traded Investments LLC ('SETZ'). SIML is the management company of Source Physical Markets plc ('SMP'). Source Schweiz GmbH ('SSG') is a subsidiary of The Company. The Company has branches in Germany, France and Israel.

During the year SIML paid the Company marketing fees of £13,414,361 (2015: £10,992,730) and the Company paid expenses of £7,409,944 in relation to its promotion of SMP (2015: £6,266,465). As at 31 December 2016 SIML owed the Company £1,342,359 (2015: £649,008) in marketing fees and the Company owed SIML £266,586 (2015 SIML owed the Company: £95,055) for expenses paid on behalf of SIML.

During the year the Company received advisory fees of £7,915,709 (2015: £3,940,569) from SPM, for which the Company paid £1,348,549 of expenses (2015: £919,433). As at 31 December 2016 SPM owed £Nil (2015: £NiI).

During the year the Company paid £1,416,732 of marketing fees (2015: £1,157,449) to its Swiss subsidiary SSG. As at 31 December 2016 the Company owed SSG £92,912 (2015 SSG owed the Company: £119,449).

During the year the Company paid £1,630,063 (2015: £768,645) towards the operating fees of SET!. SET!. repaid £NiI (2015: £Nil) to the Company. As at 31 December 2016 the Company owed SETZ £172,980 (2014: £198,295).

During the year in respect of key management, including the Chief Executive Officer, Chief Strategy Officer, Chief' Development Officer, Chief Operating Officer and Chief Financial Officer, the Company paid total salarier of £4,530,087 (2015: £2,229,242), made pension contributions of £35,758 (2015: £42,813) and incurred share based payment expense of £199,186 (2015: £134,579).

Members of key management were advanced loans of £1,082,834 during the year by the Company (2015: £104,830) and £1,262,422 remains outstanding at year end (2015: £265,895). The loans are repayable on demand if certain conditions are met.

The Company is exempt from disclosing other related party transactions as they are with other companies that are wholly owned within the Group.

19. CONTROLLING PARTIES

The Company's immediate parent undertaking is Source Holdings Limited, a company incorporated in the Cayman Islands. The ultimate controlling party of the Group is WP Source Ltd, a UK incorporated subsidiary of Warburg Pincus (Bermuda) Private Equity GP Ltd, a US private equity firm.

20. EVENTS AFTER THE END OF THE REPORTING PERIOD

The Group is in the process of reviewing a number of outstanding expenses claims which have been received from previous employees. As at the date of approval of the financial statements, these are still being reviewed and, subject to receipt of appropriate supporting documentation, will be paid once approved. The maximum amount which is anticipated will be paid relating to these pending expense claims is $650,000. As supporting documentation has not yet been received, no accrual is included in the 2016 financial statements.

21. APPROVAL OF FINANCIAL STATEMENTS

The Financial Statements were approved by the Board of Directors an 25 April 2017.