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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Rights & Issues Investment Trust Plc | LSE:RIII | London | Ordinary Share | GB0007392078 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2,220.00 | 2,140.00 | 2,200.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | 4.89M | 3.59M | 0.6355 | 33.67 | 121.02M |
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Rights and Issues Investment Trust PLC (RIII)
Rights and Issues Investment Trust PLC: Annual Report
26-Feb-2019 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
RIGHTS AND ISSUES INVESTMENT TRUST PLC
Annual Report & Accounts for the full year to 31 December 2018
Printed copies of the Annual Report will be sent to shareholders shortly.
Additional copies may be obtained from the Corporate Secretary - Maitland
Administration Services Limited, Hamilton Centre, Rodney Way, Chelmsford,
Essex CM1 3BY.
The Annual General Meeting of the Company will be held at The Gridiron
Building, 8th Floor, Number One Pancras Square, Pancras Road, King's Cross,
London N1C 4AG on Tuesday 2nd April 2019 at 12 noon.
The Directors have proposed the payment of a final dividend of 21.0p per
Income share which, if approved by shareholders at the forthcoming Annual
General Meeting, will be payable on 4th April 2019 to shareholders whose names
appear on the register at the close of business on 15th March 2019
(ex-dividend 14th March 2019).
The following text is copied from the Annual Report & Accounts.
INVESTMENT OBJECTIVE & POLICY
The Board's objective is to exceed the benchmark index over the long term
whilst managing risk.
The Company invests in equities with an emphasis on smaller companies. UK
smaller companies will normally constitute at least 80% of the investment
portfolio. UK smaller companies include both listed securities and those
quoted on the Alternative Investment Market ("AIM").
The investment portfolio will normally lie in the range of 80% to 100% of
shareholders' funds and therefore gearing will normally be between -20% and
0%. As a result of the Alternative Investment Fund Managers Regulations 2013
it has been decided that the Company will not use gearing.
CAPITAL STRUCTURE
ISSUED SHARE CAPITAL (at 31st December 2018)
8,006,179 Income shares of 25p each.
INCOME ENTITLEMENT
Equal entitlement to dividends and other distributions.
CAPITAL ENTITLEMENT
Equal entitlement to the surplus assets.
VOTING
One vote per share.
PRICE (mid-market) (at 31st December 2018) 1970.00p.
DIVID YIELD 1.60%.
DISCOUNT MANAGEMENT POLICY
On 7th December 2016, the Company implemented share buy-back arrangements to
encourage the level of discount to be not more than 10%.
SHARE BUY BACKS
During the year, the Company has bought back for cancellation a total of
369,079 Income shares for a total consideration of GBP7.9m, representing 4.1% of
the share capital of the Company at 7th December 2016.
DISCOUNT (at 31st December 2018) 6.99%.
RIGHTS AND ISSUES INVESTMENT TRUST PLC ('THE TRUST" or 'THE COMPANY") MAY BE
LIQUIDATED AT ANY TIME, BUT THE BOARD OF DIRECTORS HAS INDICATED THAT IT IS
NOT ITS PRESENT INTENTION TO DO SO PRIOR TO 25TH JULY 2021.
Note: The above is a summary of rights. For full information shareholders
should refer to the Articles of Association.
HISTORIC RECORD
Year to Net asset Net asset Net FTSE All FTSE All
value per value per Share Share
share share Index
(Rebased
31st dividend
December per Income Index
(Index share
1984 = 1984 =
100) 100)
1984 29.0p 100 3.80p 592.94 100
1990 75.4p 260 7.50p 1032.60 174
1995 175.0p 602 10.50p 1802.56 304
2000 473.9p 1631 25.50p 2983.81 503
2005 732.0p 2520 40.50p 2847.00 480
2010 776.4p 2673 25.50p 3094.41 522
2011 751.2p 2586 25.50p 2857.88 482
2012 962.0p 3312 26.75p 3093.41 522
2013 1382.5p 4759 40.00p* 3609.63 609
2014 1297.1p 4465 36.00p 3532.74 596
2015t 1595.6p 5492 36.00p 3444.26 581
2016 2002.2p 6892 52.50p* 3873.22 653
2017 2372.3p 8166 30.75p 4221.82 712
2018 2118.1p 7291 31.50p 3675.27 620
* Includes Special Dividend
From 2015 onwards the historic record is for the Company only and not the
Group.
Note: Until 2016 net asset value per share is based on the Capital shares
adjusted for the reconstruction (four Income shares for each Capital share).
Thereafter, performance is based on the Income shares (the only remaining
share class).
DIRECTORS AND ADVISERS
DIRECTORS
Dr D. M. BRAMWELL (Chairman)
D. M. BEST
Dr A. J. HOSTY
S. J. B. KNOTT
J. B. ROPER
REGISTERED OFFICE
Hamilton Centre
Rodney Way
Chelmsford CM1 3BY
WEBSITE
www.maitlandgroup.com/investment-trusts/rights-and-issues-investment-trust-plc
ADMINISTRATOR/SECRETARY
MAITLAND ADMINISTRATION SERVICES LTD
Hamilton Centre
Rodney Way
Chelmsford CM1 3BY
SOLICITORS
EVERSHEDS SUTHERLAND
One Wood Street
London EC2V 7WS
AUDITOR
BEGBIES
9 Bonhill Street
London EC2A 4DJ
REGISTRARS
LINK MARKET SERVICES LTD
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
BROKERS
STOCKDALE SECURITIES LTD
100 Wood Street
London EC2V 7AN
BANKERS/CUSTODIAN
HSBC BANK PLC
London EC2P 2BX
REGISTRATION DETAILS
Company Registration Number: 00736898 (Registered in England)
SEDOL number: 0739207
ISIN number: GB0007392078
London Stock Exchange (EPIC) Code: RIII
Global Intermediary Identification Number (GIIN): I2ZVNY.99999.SL.826
Legal Entity Identifier (LEI): 2138002AWAM93Z6BP574
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the fifty-sixth Annual General Meeting of the
members of Rights and Issues Investment Trust Public Limited Company will be
held in the Gridiron Building, 8th Floor, Number One Pancras Square, Pancras
Road, King's Cross, London N1C 4AG, on 2nd April 2019, at 12 noon, for the
following purposes:
ORDINARY BUSINESS
1. To receive the audited financial statements and Reports of the Directors
and Auditor for the year ended 31st December 2018.
2. To approve the Annual Report on Directors' Remuneration, set out on pages
21 to 26 (excluding the restated Remuneration Policy on pages 24 and 25), for
the financial year ended 31st December 2018.
3. To approve the payment of a final dividend of 21.0 pence per Income share
for the financial year ended 31st December 2018.
4. To re-elect Dr D. M. Bramwell as a Director.
5. To re-elect D. M. Best as a Director.
6. To re-elect Dr A. J. Hosty as a Director.
7. To re-elect S. J. B. Knott as a Director.
8. To re-elect J. B. Roper as a Director.
9. To reappoint Begbies as Auditor and authorise the Directors to determine
the Auditor's remuneration.
SPECIAL BUSINESS
To consider and, if thought fit, pass resolutions 10 and 11 as Special
Resolutions:
10. THAT the Company be and is hereby generally and unconditionally authorised
in accordance with section 701 of the Companies Act 2006 to make market
purchases (within the meaning of section 693 of the Companies Act 2006) of
Income shares, provided that:
10.1 the maximum aggregate number of Income shares hereby authorised to be
purchased shall be 1,196,769 (representing approximately 14.99% of the Income
shares in issue on 21st February 2019);
10.2 the minimum price (exclusive of expenses) which may be paid for an Income
share is 25 pence;
10.3 the maximum price (exclusive of expenses) which may be paid for an Income
share is not more than the higher of (i) an amount equal to 105% of the
average market value of the Income shares for the five business days
immediately preceding the day on which the Income share is purchased; and (ii)
the higher of the last independent bid and the highest current independent bid
on the London Stock Exchange when the purchase is carried out, or such other
amount as may be specified by the FCA from time to time;
10.4 the authority hereby conferred will expire at the conclusion of the
Annual General Meeting of the Company in 2020 unless such authority is renewed
prior to such time; and
10.5 the Company may make a contract to purchase Income shares under the
authority hereby conferred prior to the expiry of such authority which will or
may be executed wholly or partly after the expiration of such authority and
may make a purchase of Income shares pursuant to any such contract; provided
that all Income shares purchased pursuant to this authority shall be cancelled
or transferred into treasury immediately upon completion of the purchases.
11. THAT the Company's Income shares be renamed Ordinary shares and the draft
new articles of association produced to the meeting and initialled for
identification by the Chairman be adopted in substitution for and to the
exclusion of all previous articles of association.
By Order of the Board,
MAITLAND ADMINISTRATION SERVICES LTD Secretary, 25th February 2019
Notes:
1. Any shareholder entitled to attend and vote at the above meeting is
entitled to appoint one or more proxies (who need not be a shareholder of the
Company) to attend and to vote instead of the shareholder. To appoint more
than one proxy, additional proxy forms may be obtained by contacting the
Company's registrars. Please also indicate by ticking the box provided if the
proxy instructions are one of multiple instructions being given. All forms
must be signed and should be returned together in the same envelope.
Completion and return of a form of proxy will not preclude a shareholder from
attending and voting at the meeting in person, should he subsequently decide
to do so.
2. The right to appoint a proxy does not apply to persons whose Income shares
in the Company (the "Shares") are held on their behalf by another person and
who have been nominated to receive communications from the Company in
accordance with section 146 of the Companies Act 2006 ("nominated persons").
Nominated persons may have a right under an agreement with the registered
shareholder who holds the Shares on their behalf to be appointed (or to have
someone else appointed) as a proxy. Alternatively, if nominated persons do not
have such a right, or do not wish to exercise it, they may have a right under
such an agreement to give instructions to the person holding the Shares as to
the exercise of voting rights.
3. In order to be valid, a form of proxy, which is provided with this notice,
and a power of attorney or other authority under which it is signed, or
certified by a notary or office copy of such power or authority, must reach
the Company's registrars, Link Asset Services, PXS, 34 Beckenham Road,
Beckenham BR3 4TU not less than 48 hours (excluding any part of a day which is
a non-working day) before the time of the meeting or of any adjournment of the
meeting. A form of proxy is enclosed with this notice.
4. CREST members who wish to appoint a proxy or proxies by utilising the CREST
electronic proxy appointment service may do so by utilising the procedures
described in the CREST manual. CREST personal members or other CREST sponsored
members, and those CREST members who have appointed a voting service
provider(s), should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on their behalf.
5. In order for a proxy appointment made by means of CREST to be valid, the
appropriate CREST message must be transmitted so as to be received by the
Company's agent, Link Market Services (whose CREST ID is RA10) by the
specified latest time(s) for receipt of proxy appointments. For this purpose,
the time of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST applications host) from which
the Company's agent is able to retrieve the message by enquiry to CREST in the
manner prescribed.
6. The Company may treat as invalid a CREST proxy instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001. A register showing the interests of each Director and their
connected persons, so far as they are aware, in the Income shares will be
available for inspection at the offices of the Company Secretary, Maitland
Administration Services Limited, Hamilton Centre, Rodney Way, Chelmsford,
Essex CM1 3BY, during normal business hours every weekday except Saturdays,
from the above date to the day preceding that of the general meeting. It will
also be available for inspection at the place of the meeting for 15 minutes
prior to the general meeting and during the meeting. Apart from the Investment
Director, there are no contracts of service existing between the Company and
any of the Directors.
7. Any shareholder attending the general meeting is entitled, pursuant to
section 319A of the Companies Act 2006, to ask any question relating to the
business being dealt with at the meeting. The Company will answer any such
questions unless:
i. to do so would interfere unduly with the preparation for the meeting or
involve the disclosure of confidential information;
ii. the answer has already been given on a website in the form of an answer to
a question; or
iii. it is undesirable in the interests of the Company or the good order of
the meeting that the question be answered.
From the date of this notice and for the following two years the following
information will be available on the Company's website and can be accessed at
www.maitlandgroup.com/investment-trust/rights-and-issues-investment-trust-plc:
[1]
i. the matters set out in this notice of general meeting;
ii. the total numbers of Shares in respect of which shareholders are entitled
to exercise voting rights at the meeting; and
iii. the totals of the voting rights that shareholders are entitled to
exercise at the meeting in respect of the Shares.
8. Any shareholders' statements, shareholders' resolutions and shareholders'
matters of business received by the Company after the date of this notice will
be added to the information already available on the website as soon as
reasonably practicable and will also be made available for the following two
years.
9. Where a poll is taken at the general meeting, from the date of this notice
and for the following two years the following information will be available on
the Company's website and can be accessed at
www.maitlandgroup.com/investment-trust/rights-and-issues-investment-trust-plc:
[2]:
i. the date of the general meeting;
ii. the text of the resolution or, as the case may be, a description of the
subject matter of the poll;
iii. the number of votes validly cast;
iv. the proportion of the Company's issued share capital represented by those
votes;
v. the number of votes cast in favour;
vi. the number of votes cast against; and
vii. the number of abstentions (if counted).
10. In order to attend and vote at this meeting you must comply with the
procedures set out in notes 1 to 3 by the time specified in note 3.
11. The right of shareholders to vote at the meeting is determined by
reference to the register of shareholders. As permitted by section 360B(3) of
the Companies Act 2006 and Regulation 41 of the Uncertificated Securities
Regulations 2001, shareholders (including those who hold Shares in
uncertificated form) must be entered on the Company's share register at close
of business on 29th March 2019 in order to be entitled to attend and vote at
the meeting. Such shareholders may only cast votes in respect of Shares held
at such time. Changes to entries on the relevant register after that time
shall be disregarded in determining the rights of any person to attend or vote
at the meeting.
12. The total number of Income shares of 25p in issue as at 21st February
2019, the last practicable day before printing this document, was 7,983,785
Shares and the total level of voting rights was 7,983,785.
CHAIRMAN'S STATEMENT
Weakness in US tech stocks have led to a very sharp correction in equity
markets since September and the FTSE All-Share Index declined by 12.9% in
2018.
The UK smaller company market was impacted with the FTSE Small Cap Index
falling by 13.2%.
Your Company's portfolio was also affected with the net asset value of the
Income shares down by 10.7% to 2118.1p.
The final income dividend proposed is 21.0p making 31.5p for the year, a 2.4%
increase.
The share buy-back programme amounted to GBP7.9m in 2018. During the year, the
average discount of Income shares to net asset value was 8.8% and therefore,
in accordance with the Articles, no tender offer is required. The programme is
again being extended for a further twelve months to February 2020.
With only weeks now left, Brexit remains uncertain and there is no clarity on
the nature of the future relationship. This is now having discernible impacts
on the UK economy.
Dr D. M. BRAMWELL
Chairman
25th February 2019
STRATEGIC REPORT
The Strategic Report is designed to provide information primarily about the
Company's business and results for the year ended 31st December 2018 and
should be read in conjunction with the Chairman's Statement on page 7.
STATUS
The Company is a self-managed investment trust. The Company is registered as
an investment company as defined in section 833 of the Companies Act 2006 and
operates as such. The Company is not a close company within the meaning of the
provisions of the Corporation Tax Act 2010.
The Board has been approved by the Financial Conduct Authority to be a Small
Registered Alternative Investment Fund Manager ("AIFM").
In the opinion of the Directors, the Company has conducted its affairs during
the year under review, so as to qualify as an investment trust for the
purposes of Chapter 4 of Part 24 of the Corporation Tax Act 2010 and continues
to meet the eligibility conditions set out in section 1158 of the Corporation
Tax Act 2010.
The Financial Conduct Authority rules in relation to non-mainstream pooled
investments do not apply to the Company.
STRATEGY FOR MEETING THE OBJECTIVES
The Board's objective is to exceed the benchmark index over the long term
whilst managing risk.
To achieve this objective, the Board continues with its long-term strategy of
seeking out undervalued investments that have characteristics consistent with
a matrix of criteria developed by the Investment Director. This is supported
by the five-yearly review that addresses the above objective. The latest
review was conducted in November 2015, which concluded that the continuation
of the Company for the period until July 2021 was in the best interests of
shareholders.
In pursuing its strategy, close attention is paid to the control of costs.
Further information on this is contained in the Key Performance Indicators on
page 9.
BUSINESS MODEL
There is a rigorous process of risk analysis at the level of the individual
investment, based on the characteristics of the investee company. This
controls the overall risk profile of the investment portfolio, allowing a
higher level of concentration in the investment portfolio.
The investment portfolio is then managed on a medium-term basis with a low
level of investment turnover. This minimises transaction costs and ensures
medium-term consistency of the investment approach.
The Company's investment activities are subject to the following limitations
and restrictions:
The policy does not envisage hedging either against price or currency
fluctuations. Whilst performance is compared against major UK indices, the
composition of indices has no influence on investment decisions or the
construction of the portfolio. As a result, it is expected that the Company's
investment portfolio and performance will deviate from the comparator indices.
REVIEW OF THE BUSINESS
A review of the year and commentary on the future outlook is provided in the
Chairman's Statement on page 7.
During the year under review, the assets of the Company were invested in
accordance with the Company's investment policy.
During the year the Company's assets have decreased from GBP198.7m to GBP169.6m
and at 31st December 2018 the net asset value was 2,118.1p per Income share.
KEY PERFORMANCE INDICATORS
The Board is provided with detailed information on the Company's performance
at every Board meeting. Key Performance Indicators are:
? Shareholders' funds equity return compared to the FTSE All-Share Index (the
Company's benchmark index).
? Dividends per Income share.
? Ongoing Charge (formerly titled the Total Expense Ratio).
Shareholders' funds equity return
In reviewing the performance of the Company, the Board monitors shareholders'
funds in relation to the FTSE All-Share Index. During the year shareholders'
funds decreased by 14.7% compared to a decrease of 12.9% by the FTSE All-Share
Index. Over the five years ended 31st December 2018 shareholders' funds
increased by 37% compared with a rise of 1.8% by the FTSE All-Share Index.
Dividends per Income share
The total dividend per Income share paid and proposed is 31.50p (2017:
30.75p).
Ongoing Charge
The Ongoing Charge shows the efficiency of control of management costs. The
Ongoing Charge for the year ended 31st December 2018 was 0.48% (2017: 0.41%).
PRINCIPAL RISKS
The Board of Directors has a process for identifying, evaluating and managing
the key risks of the Company. This process operated during the year and has
continued to the date of this report. The Directors confirm that they have
carried out a robust assessment of the principal risks facing the Company,
including those that would threaten its business model, future performance,
solvency or liquidity. The Directors describe below those risks and how they
are being managed or mitigated.
Investment in an individual smaller company inherently carries a higher risk
than investment in an individual large company. In a diversified portfolio,
the portfolio risk of a smaller company portfolio is only slightly greater
than the portfolio risk of a large company portfolio. The Company manages a
diversified portfolio. Additionally, the Company invests overwhelmingly in
smaller UK listed and AIM traded companies and has no exposure to derivatives.
The principal risks are therefore market price risk and liquidity risk.
Further details on these risks and how they are managed may be found in Note
18 to the financial statements on page 45.
Additional key risks identified by the Company, together with the Board's
approach in dealing with them are as follows:
Investment performance - The performance of the investment portfolio will
deviate from the performance of the benchmark index. The Board's objective is
to exceed the benchmark index over the long term whilst managing risk. The
Board ensures that the Investment Director is managing the portfolio within
the scope of the investment policy; the Board monitors the Company's
performance against the benchmark; and the Board also receives detailed
portfolio attribution analysis. The Board has a clearly defined investment
philosophy and operates a diversified portfolio.
Share price discount - Investment trust shares often trade at discounts to
their underlying net asset values. The Board monitors the level of the
discount of the Income shares. On 7th December 2016, the Company implemented
share buy-back arrangements to mitigate the risk of the discount increasing.
Loss of key personnel - The Investment Director is crucial to performance and
the loss of the Investment Director could adversely affect performance in the
medium term. The Board reviews its strategy for this risk annually.
Regulatory risk - The Company must abide by section 1158 of the Corporation
Tax Act 2010 to maintain its investment trust status. This is achieved by the
consistent investment policy and is monitored by the Board. The Board seeks
assurance from the Administrator that the investment trust status is being
maintained. The Board also reviews a schedule of regulatory risk items at its
Board meetings in order to monitor and take action to address any regulatory
changes.
Protection of assets - The Company's assets are protected by the use of an
independent custodian, HSBC Bank plc, and the Board monitors the custodian to
ensure assets remain protected. In addition, the Company operates clear
internal controls to safeguard all assets.
Brexit - The risk associated with the decision of a majority of the UK
electorate to leave EU membership ("Brexit") could be considerable for the UK
and also for continental European countries. The links between the UK and the
EU are wide-ranging and the future relationship remains unclear, creating
conditions that could mean that markets react unpredictably to the uncertainty
created. This risk is challenging to mitigate but the Investment Director is
considering the Brexit risk for each investment in the portfolio based on its
individual circumstances.
These and other risks facing the Company are reviewed regularly by the Audit
and Compliance Committee and the Board.
VIABILITY
The Board reviews the performance and progress of the Company over five-year
periods and uses these assessments, regular investment performance updates
from the Investment Director and a continuing programme of monitoring risk to
assess the future viability of the Company. The Directors consider that a
period of five years is a reasonable time horizon to consider the viability of
the Company. The Company also uses this period for its strategic planning. The
following facts support the Directors' view of the viability of the Company:
? The Company has a liquid investment portfolio invested predominantly in
readily realisable smaller UK-listed and AIM traded securities and has some
short-term cash on deposit.
? The Company does not use gearing.
? Expenses of the Company are covered greater than four times by investment
income.
In order to maintain viability, the Company has a robust risk control
framework for the identification and mitigation of risk which is reviewed
regularly by Board. The Directors also seek reassurance from suppliers that
their operations are well managed and that they are taking appropriate action
to monitor and mitigate risk.
CORPORATE AND SOCIAL RESPONSIBILITY
When investments are made, the primary objective is to achieve the best
investment return while allowing for an acceptable degree of risk. In pursuing
this objective, various factors that may impact on the performance are
considered and these may include socially responsible investment issues.
As an investment trust, the Company has a limited impact on either environment
or social and community issues. All printed material, wherever possible, is on
recycled material. The Investment Director attempts to minimise the Company's
carbon footprint.
The Company has no greenhouse gas emissions to report from its operations for
the year to 31st December 2018 (2017: same). The Company does not purchase
electricity, heat, steam or cooling for its own use nor does it have
responsibility for any other emissions producing sources.
Of more importance is the conduct of the companies in the investment
portfolio. The Company does not invest in companies which have significant
adverse effect on the global environment and encourages those companies in
which it has an investment to pursue responsible environmental policies.
As an investment vehicle the Company does not provide goods or services in the
normal course of business, and does not have customers. Accordingly, the
Directors consider that the Company is not within the scope of the Modern
Slavery Act 2015.
COMPANY'S DIRECTORS AND EMPLOYEES
The number of directors and employees during the year was 5 (2017: 5).
*2018* 2017
Male Female Male Female
Directors (non-executive) 4 0 4 0
Directors (executive) 1 0 1 0
Employees 0 0 0 0
The Directors have considered the Strategic Report and believe that taken as a
whole it is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's performance and strategy.
The Strategic Report was approved by the Board and signed on its behalf by:
S. J. B. Knott, Director
25th February 2019
REPORT OF THE DIRECTORS
The Directors have pleasure in submitting their fifty-sixth Annual Report,
together with audited financial statements in respect of the year ended 31st
December 2018.
DIRECTORS
The Directors who served during the year were as follows:
Dr D. M. Chairman 71 Years He was Chairman
Bramwell of Intelek PLC.
D. M. Best Chairman of Audit 60 Years He is a former
Committee Managing
Director of YFM
Group and
former Group
Financial
Director of
Peterhouse
Group PLC.
Dr A. J. Hosty Director 54 Years He is a
Director of
Consort Medical
PLC, RHI
Magnesita N.V.
and James
Cropper PLC.
S. J. B. Knott Investment Director 60 Years He has been
investment
manager for
more than 30
years.
J. B. Roper Chairman of Nominations 68 years He is a
and Remuneration solicitor and
Committee former partner
of Eversheds
LLP
specialising in
corporate
transactions.
The Company purchases liability insurance covering the Directors and Officers
of the Company.
DIVIDS
The Board is recommending a final dividend of 21.0p per Income share (2017:
20.50p). If approved, taken together with the interim dividend of 10.50p per
Income share (2017: 10.25p) this will result in a total dividend to the
holders of Income shares for the year of 31.50p per Income share (2017:
30.75p).
SUBSTANTIAL SHAREHOLDINGS
The Company has received notification to 21st February 2019, in accordance
with Chapter 5 of the Disclosure and Transparency Rules, of the following
voting rights:
Income shares % of voting
rights*
Dartmoor Investment Trust 742,892 8.24%
Henderson Global Investors 702,000 7.78%
Rathbone Brothers PLC 553,433 6.13%
S. J. B. Knott 488,111 6.03%
J. Knott 482,185 5.35%
CG Asset Management Ltd 441,200 4.89%
H. J. D. Knott 428,589 4.75%
P & J Allen 323,511 3.99%
* The percentage of voting rights is
as at the time of the notification.
DISCLOSURE OF SECTION 414C (11) SCHEDULE 7 INFORMATION
The Company has chosen to set out in the Strategic Report all information
relating to the above.
SECTION 992 COMPANIES ACT 2006 DISCLOSURES
Details of the Company's capital structure and voting rights are given on page
1 of this document and in Note 14 on page 43 of the financial statements.
CORPORATE GOVERNANCE
Full details are given in the Corporate Governance Statement on pages 14 to
17. The Corporate Governance Statement forms part of this Directors' Report.
SPECIAL BUSINESS AT THE ANNUAL GENERAL MEETING
The Notice of the Annual General Meeting to be held on 2nd April 2019 is set
out on pages 4 to 6.
Share Buy Back Facility (resolution 10): The Board is seeking to renew the
authority granted at the Annual General Meeting held on 26th March 2018 that
authorises the Company to make market purchases of Income shares for
cancellation. At the forthcoming Annual General Meeting the Directors will
seek to renew this authority to buy back for cancellation up to 14.99% of
Income shares in issue, representing 1,196,769 Income shares as at 21st
February 2019. The authority will expire at the conclusion of the next Annual
General Meeting of the Company in 2020 unless the authority is renewed. The
Board considers this authority an important part of the Company's discount
management policy. Stockdale, the Company's brokers, will be asked to continue
the facilitation of these buy backs on the Company's behalf and in accordance
with the relevant provisions of the Companies Act 2006 and Listing Rules.
Changing the name of Income shares to Ordinary shares and updating the
Articles of Association (resolution 11): The Board is seeking approval to
change the name of the Company's Income shares to call them Ordinary shares.
As the Company only has one class of share and the investment strategy does
not focus on income, the Board believes it would be clearer and good practice
to change the name. It is also proposed that the shareholders adopt new
articles of association, this is to update the references within the articles
to reference Ordinary shares rather than Income shares. There are no changes
to shareholders' underlying rights in respect of the shares and no other
changes to the articles of association to bring to the attention of
shareholders.
Recommendation: The Directors recommend that shareholders vote in favour of
the resolutions to be proposed at the Annual General Meeting, as they intend
to do in respect of their own beneficial holdings; all resolutions are
considered to be in the best interests of the Company and its members.
DIRECTORS' REMUNERATION REPORT
The Annual Report on Directors' Remuneration on pages 21 to 26 provides
information on the Directors' remuneration and their interests in the share
capital of the Company, together with details of their letters of appointment
and memoranda of service.
ADMINISTRATION & SECRETARIAL AGREEMENT
The accounting, company secretarial and administrative services are provided
by Maitland Administration Services Limited ("Maitland") under an agreement
terminable by either party on not less than six months' notice. The services
provided by Maitland are reviewed regularly by the Board.
DISCLOSURE OF INFORMATION TO AUDITOR
So far as each Director at the date of approval of this report is aware:
· there is no relevant audit information of which the Company's Auditor is
unaware; and
· the Directors have taken all steps that they ought to have taken to make
themselves aware of any relevant audit information and to establish that the
Auditor is aware of that information.
GOING CONCERN
The Company's assets comprise mainly readily realisable equity securities and
cash and the value of its assets is greater than its liabilities.
Additionally, after reviewing the Company's budget including the current
financial resources and projected expenses for the next 12 months and its
medium-term plans, the Directors believe that the Company's resources are
adequate for continuing in business for the foreseeable future. Accordingly,
it is appropriate to continue to prepare the financial statements on a going
concern basis.
GENERAL
No political contributions have been made during the year.
In accordance with section 489 of the Companies Act 2006, a resolution
proposing the reappointment of Begbies as Auditor of the Company will be put
to the Annual General Meeting.
The Directors' Report was approved by the Board and signed on its behalf by:
Dr D. M. Bramwell,
Chairman
25th February 2019
CORPORATE GOVERNANCE STATEMENT
AIC CODE & AIC GUIDE
The Board has considered the principles and recommendations of the AIC Code of
Corporate Governance ("AIC Code") by reference to the AIC Corporate Governance
Guide for Investment Companies ("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 and by reference to the AIC Guide will provide better
information to shareholders. However, as a self-managed investment trust
company, not all of the provisions of the AIC Code are directly applicable to
the Company. Full consideration has been given by the Board to the principles
of good governance. In so far as they are applicable to a smaller self-managed
investment trust, the Directors believe that they comply with the principles
other than the following matter:
· The Board had elected not to designate a senior independent non-executive
Director, as it considers that each Director has different strengths and
qualities on which they may provide leadership.
OPERATION OF THE BOARD OF DIRECTORS
The Directors of the Company, as shown on page 12, are Dr D. M. Bramwell, Mr
D. M. Best, Dr A. J. Hosty, Mr S. J. B. Knott and Mr J. B. Roper. All
directors served throughout the year under review. Their biographical details,
also set out on that page, demonstrate a breadth of investment, commercial and
professional experience.
The Board is collectively responsible for promoting the success of the
Company. It deals with the important aspects of the Company's affairs,
including the setting of parameters for, and the monitoring of investment
strategy and the review of, investment performance. It reviews the share price
and the discount or premium to net asset value. The Board sets limits on the
size and concentration of new investments. The application of these and other
restrictions, including those which govern the Company's tax status as an
investment trust, are reviewed regularly at meetings of the Board.
The Board delegates all investment matters to the Investment Director but
reserves to itself all decisions concerning unquoted investments. The
Investment Director takes decisions as to the purchase and sale of individual
investments and is responsible for effecting those decisions on the best
available terms in accordance with the investment policy as stated on page 1.
The Chairman leads the Board and ensures that it deals effectively with all
the aspects of its role. In particular, he ensures that the Administrator
provides the Directors, in a timely manner, with management, regulatory and
financial information that is clear, accurate and relevant. Representatives of
the Administrator attend each Board meeting, enabling the Directors to seek
clarification on specific issues or to probe further on matters of concern.
Matters specifically reserved for decision by the full Board have been defined
and there is an agreed procedure for Directors, in the furtherance of their
duties, to take independent professional advice, if necessary, at the
Company's expense.
The Directors, their roles and attendance records are as follows:
Directors Role Audit Nominations Board Committee
Committee and meetin meetings
Remuneratio gs attended
n Committee attend
ed
Dr D. M. Chairman, Yes Yes 8 5
Bramwell non-executive
S. J. B. Chief No No 8 0
Knott Executive and
Investment
Director
D. M. Best Non-executive Chairman Yes 8 5
Dr A. J. Non-executive Yes Yes 8 3*
Hosty
J. B. Non-executive Yes Chairman 8 5
Roper
* Dr A. J. Hosty has attended all three meetings since his appointment to the
Committees.
INDEPENCE OF THE DIRECTORS
The Board of Directors, which includes four non-executive Directors, all of
whom are considered to be independent, meets at least seven times a year to
review the affairs of the Company. The Directors have reviewed their
independence by reference to the AIC Code. The Directors have had no material
connection other than as Directors of the Company. The Board is of the opinion
that each of the non-executive Directors is independent in character and
judgment and that there are no relationships or circumstances that are likely
to affect their judgment. Dr D. M. Bramwell has now served on the Board for
more than nine years and (along with the other Directors) will stand for
election by the shareholders each year. The Board is firmly of the view,
however, that length of service does not of itself impair a director's ability
to act independently. As such, the Board considers Dr D. M. Bramwell to be
independent but, in accordance with the Code, his role and contribution will
be subject to particularly rigorous review.
CONFLICTS OF INTEREST
The Articles of Association reflect the codification of certain directors'
duties arising from the Companies Act 2006 and in particular the duty for
Directors to avoid conflicts of interest. The Board has put in place a
framework in order for Directors to report conflicts of interest or potential
conflicts of interest.
All Directors are required to notify the Company Secretary of any situations,
or potential situations, where they consider that they have or may have a
direct or indirect interest or duty that conflicts or may possibly conflict
with the interests of the Company. The Board has considered that the framework
worked effectively throughout the period since its adoption. Directors were
also made aware that there remains a continuing obligation to notify the
Company Secretary of any new situation that may arise, or any change to a
situation previously notified. It is the Board's intention to continue to
review all notified situations on a regular basis.
NOMINATIONS AND REMUNERATION COMMITTEE
The Committee oversees a formal review procedure and evaluates the overall
composition of the Board from time to time, taking into account the existing
balance of skills and knowledge. Its chairman is an independent non-executive
Director. There are procedures for a new Director to receive relevant
information on the Company together with appropriate induction. The Committee
is satisfied that the Board and its Committees function effectively, both
collectively and individually, and contain the appropriate balance of skills
and experience to provide effective management.
Further details of the work of the Committee are given on page 21.
BOARD AND DIRECTOR EVALUATION
The Board reviews its performance on an annual basis. The review covers an
assessment of how cohesively the Board, Audit Committee and Nominations and
Remuneration Committee work as a whole, as well as the performance of the
individuals within them.
The Chairman is responsible for performing this review. Mr D. M. Best, Dr A.
J. Hosty and Mr J. B. Roper perform a similar role in respect of the
performance of the Chairman. The evaluation confirmed that all Directors
continue to be effective on behalf of the Company and committed to the role.
The Nominations and Remuneration Committee conducts an annual review of the
Investment Director's performance. The review of the Investment Director's
performance in 2018 was output-based, but had regard to all other relevant
factors.
TENURE OF DIRECTORS
As in previous years, all Directors retire at each Annual General Meeting and,
if appropriate, seek re-election. Being eligible, all Directors offer
themselves for re-election. The Board considers that the Directors should be
re-elected because they bring wide, current and relevant business experience
that allows them to contribute effectively to the leadership of the Company.
Following performance evaluation their performance continues to be effective
and committed to the role.
Each non-executive Director has signed a letter of appointment to formalise
the terms of his engagement as a non-executive Director (or there is a
memorandum of such terms), copies of which are available on request and at the
Company's Annual General Meeting. No Director is or was materially interested
in any contract subsisting during or at the end of the year that was
significant in relation to the Company's business.
No Director, apart from the Investment Director, has, or during the financial
year had, a contract of service with the Company. The terms of the Investment
Director's current basis of remuneration are detailed in the Directors'
Remuneration Report on pages 21 to 26.
The Company is committed to ensuring that vacancies arising are filled by the
best qualified candidates and recognises the value of diversity in the
composition of the Board.
RISK MANAGEMENT AND INTERNAL CONTROL
The Board is fully aware of its duty to present a balanced and understandable
assessment of the Company's position. It acknowledges its responsibility for
the Company's system of internal financial controls and their effectiveness.
The Board meets regularly and reviews performance against approved plans and
forecasts. In addition, the day-to-day administration and accounting functions
are carried out by the Administrator and reports are submitted regularly to
the Board.
As part of the system of internal control, there is a process to identify,
evaluate and manage the significant risks faced by the Company, which has been
in place during the year under review and up to the date of approval of the
financial statements. This has been reviewed by the Board, is in accordance
with the guidelines in the AIC Code and is considered by the Board to be
effective and fit for purpose. The system of risk analysis adopted by the
Board is designed to manage rather than eliminate the risk of failure to
achieve the investment objectives of the Company. It must be stressed that
undertaking an acceptable degree of controlled risk is always necessary in the
conduct of any investment trust if above average performance is to be
achieved. For this reason, the process can only provide reasonable and not
absolute assurance against loss.
AUDIT COMMITTEE
The Audit Committee is a formally constituted committee of the Board with
defined terms of reference, which include its role and the authority delegated
to it by the Board, and which are available at the Company's registered office
and on the Company's website. Its specific responsibilities include reviewing
the Company's annual and half yearly results, together with the supporting
documentation.
Further details are given in the Report of the Audit Committee on pages 18 to
20.
REMUNERATION
The remuneration of the Investment Director is decided by the Nominations and
Remuneration Committee. The Board considers that the interests of the
Investment Director, who is himself a shareholder (see page 21), are aligned
with those of other shareholders.
RELATIONS WITH SHAREHOLDERS
It is the Chairman's role to ensure effective communication with the Company's
shareholders and it is the responsibility of the Board to ensure that
satisfactory dialogue takes place, based on the mutual understanding of
objectives.
The Investment Director maintains a regular dialogue with major shareholders
and reports to the Board.
The Board considers that the Annual General Meeting should provide an
effective forum for individual investors to communicate with the Directors.
The Annual General Meeting is chaired by the Chairman of the Board. All the
other Directors, including the Chairman of the Audit Committee, expect to be
present at the meeting and the Investment Director will present a review of
the significant investment positions.
RESPONSIBILITIES AS AN INSTITUTIONAL SHAREHOLDER
The Board has delegated authority to the Investment Director for monitoring
the corporate governance of investee companies. The Board has delegated to the
Investment Director responsibility for selecting the portfolio of investments
within investment guidelines established by the Board and for monitoring the
performance and activities of investee companies. On behalf of the Company the
Investment Director carries out detailed research on investee companies and
possible future investee companies through internally generated research. The
research includes an evaluation of fundamental details such as financial
strength, quality of management, market position and product differentiation.
Other aspects of research include an appraisal of social, ethical and
environmentally responsible investment policies.
The Board has delegated authority to the Investment Director to vote on behalf
of the Company in accordance with the Company's best interests. The primary
aim of the use of voting rights is to address any issues which might impinge
on the creation of a satisfactory return from investments. The Company's
policy is, where appropriate, to enter into engagement with an investee
company in order to communicate its views and allow the investee company an
opportunity to respond.
In such circumstances the Company would not normally vote against investee
company management but would seek, through engagement, to achieve its aim. The
Company would vote, however, against resolutions it considers would damage its
shareholder rights or economic interests.
The Company has a procedure in place that where the Investment Director, on
behalf of the Company, has voted against an investee company resolution, it is
reported to the Board.
The Board considers that it is not appropriate for the Company, as a small
self-managed investment trust, formally to adopt the UK Stewardship Code.
However, many of the UK Stewardship Code's principles on good practice on
engagement with investee companies are used by the Company, as described
above.
STATEMENT OF COMPLIANCE
The Directors consider that during the year ended 31st December 2018 the
Company has complied with all the relevant provisions set out in the AIC Code.
This Corporate Governance Statement was approved by the Board and signed on
its behalf:
Dr D. M. Bramwell
Chairman
25th February 2019
REPORT OF THE AUDIT COMMITTEE
ROLE OF THE AUDIT COMMITTEE
The Audit Committee's main functions are as follows:
* To monitor the internal financial control and risk management systems on
which the Company is reliant.
* To monitor the integrity of the half-year and annual financial statements of
the Company by reviewing and challenging, where necessary, the actions and
judgements of the Investment Director.
* To meet the Auditor to review its proposed audit programme and the
subsequent Audit Report, to review the effectiveness of the audit process and
the levels of fees paid in respect of both audit and non-audit work.
* To make recommendations to the Board in relation to the appointment,
reappointment or removal of the Auditor and to negotiate its remuneration and
terms of engagement on audit and non-audit work.
* To monitor and review annually the Auditor's independence, objectivity,
effectiveness, resources and qualification.
The Audit Committee meets at least twice each year and operates within defined
terms of reference which are available at the Company's registered office and
on the Company's website.
COMPOSITION OF THE AUDIT COMMITTEE
The Audit Committee comprises four independent non-executive Directors, at
least one of whom has recent and relevant financial experience.
SIGNIFICANT ISSUES AND RISKS
In planning its own work and reviewing the audit plan of the Auditor, the
Audit Committee takes account of the most significant issues and risks, both
operational and financial, likely to impact upon the Company's Financial
Statements.
The valuation of the investment portfolio is a significant risk factor;
however, all investments can be verified against daily market prices.
A further significant risk control issue is to ensure that the investment
portfolio accounted for in the financial statements reflects physical
ownership of the relevant securities. The Company uses the services of an
independent custodian, HSBC Bank PLC, to hold the assets of the Company. The
investment portfolio is regularly reconciled to the custodian's records and
that reconciliation is also reviewed by the Auditor.
The incomplete or inaccurate recognition of income in the financial statements
are risks. Internal control systems, including frequent reconciliations, are
in place to ensure income is fully accounted for. The Board is provided with
information on the Company's income account at each meeting.
Financial statements issued by the Company need to be fair, balanced and
understandable. The Audit Committee reviews the Annual Report as a whole and
makes suitable recommendations to the Board.
The Company's half-yearly report is approved by the Audit Committee prior to
publication and is also reviewed by the Auditor.
The Audit Committee assesses whether it is appropriate to prepare the
Company's financial statements on a going concern basis and makes
recommendations to the Board. The Board's conclusions are set out in the
Report of the Directors.
INTERNAL CONTROLS
The Audit Committee is responsible for ensuring that suitable internal control
systems to prevent and detect fraud and error are designed and implemented and
is also responsible for reviewing the effectiveness of such controls. The
Board confirms that there is an ongoing process for identifying, evaluating
and managing the significant risks faced by the Company. This process has been
in place for the year under review and up to the date of approval of this
Report and is regularly reviewed. In particular it has reviewed and updated
the process for identifying and evaluating the significant risks affecting the
Company and the policies by which these are managed. The risks of failure of
any such controls are identified in a risk assessment which identifies the
likelihood and severity of the impact of such risks and the controls in place
to minimise the probability of such risks occurring; the risk management
process and systems of internal control are designed to manage rather than
eliminate the risk of failure to achieve the Company's objectives. It should
be recognised that such systems can only provide reasonable, but not absolute,
assurance against material misstatement or loss. Equally, it must be stressed
that undertaking an acceptable degree of controlled risk is always necessary
in the conduct of any investment trust if above average performance is to be
achieved.
The following are the key components which the Company has in place to provide
effective internal control:
? The Board has agreed clearly defined investment criteria; reports on
compliance therewith are regularly reviewed by the Board.
? The Board has a procedure to ensure that the Company can continue to be
approved as an investment company by complying with section 1158 of the
Corporation Tax Act 2010.
? The Administrator prepares forecasts and management accounts which allow the
Board to assess the Company's activities and review its performance.
? The performance of the Investment Director and any contractual agreements
with other third party service providers, and adherence to them, are regularly
reviewed.
? The Company does not itself have a whistleblowing policy in place. The
Company delegates its administration to third party providers who have such
policies in place.
The Audit Committee has reviewed the need for an internal audit function, but
has concluded that, given the size of the organisation and the clear
segregation of investment management and control of the assets, there is no
need for such a function at the current time. The Audit Committee has also
agreed to keep such a requirement under review.
EXTERNAL AUDIT PROCESS
The Audit Committee meets at least twice a year with the Auditor. The Auditor
provides a planning report in advance of the annual audit, a report on the
annual audit, and a report of its review of the half-year financial
statements. The Committee has an opportunity to question and challenge the
Auditor in respect of each of these reports; it also agrees the level and
scope of materiality to be adopted in respect of the annual audit.
In addition, at least once a year, the Audit Committee has an opportunity to
discuss any aspect of the Auditor's work with the Auditor in the absence of
the Investment Director.
After each audit, the Audit Committee will review the audit process and
consider its effectiveness.
AUDITOR ASSESSMENT AND INDEPENCE
The Company's Auditor is Begbies, which has been the Company's Auditor since
2006. Rotation of the Audit Partner takes place in accordance with Ethical
Standard 3; "Long Association with the Audit Engagement" of the Auditing
Practices Board ("APB").
The fees for audit purposes were GBP16,500 (2017: GBP15,000).
The Audit Committee has approved and implemented a policy on the engagement of
the Auditor to supply non-audit services, taking into account the
recommendations of the APB, and does not believe there is any impediment to
the Auditor's objectivity and independence. All non-audit work to be carried
out by the Auditor must be approved by the Audit Committee in advance.
The cost of non-audit services provided by the Auditor for the financial year
ended 31st December 2018 was GBP5,400 (2017: GBP5,400). These non-audit services
are related to the review of the interim accounts and tax compliance. The
Committee believes Begbies is best placed to provide them on a cost-effective
basis. The fees for non-audit services are not considered material in the
context of the financial statements as a whole.
INDEPENCE
During the year the Committee reviewed the independence policies and
procedures of Begbies, including quality assurance procedures. It was
considered that those policies and procedures remained fit for purpose.
DISCLOSURE OF INFORMATION TO THE AUDITOR
It is the Company's policy to allow the Auditor unlimited access to its
records. The Directors confirm that, so far as each of them is aware, there is
no relevant audit information of which the Company's Auditor is unaware and
they have taken all the steps which they should have taken as Directors in
order to make themselves aware of any relevant audit information and to
establish that the Auditor is aware of that information. This confirmation is
given and should be interpreted in accordance with the provisions of section
418 of the Companies Act 2006.
CONCLUSION
The Audit Committee has reviewed the matters within its terms of reference and
reports as follows:
? it has approved the financial statements for the year ended 31st December
2018;
? it has reviewed the effectiveness of the Company's internal controls and
risk management;
? it has reviewed the need for a separate internal audit function;
? it has recommended to the Board that a resolution be proposed at the Annual
General Meeting for the reappointment of the Auditor and it has considered the
proposed terms of its engagement;
? it has satisfied itself as to the independence of the Auditor; and
? it has satisfied itself that the contents of the Annual Report are
consistent with the financial statements.
D. M. Best, Director
Chairman, Audit Committee
25th February 2019
DIRECTORS' ANNUAL REMUNERATION REPORT
INTRODUCTION
This Report is submitted in accordance with the requirements of sections 420
to 422 of the Companies Act 2006 in respect of the year ended 31st December
2018. An ordinary resolution to approve this Report will be put to members at
the forthcoming Annual General Meeting, but the Directors' remuneration is not
conditional upon the resolution being passed.
The Company has a Nominations and Remuneration Committee, the terms of
reference of which include annually reviewing and recommending to the Board
the level of Directors' fees and remuneration. The full terms of reference are
available at the Company's registered office and on the Company's website. The
Committee is chaired by J. B. Roper and the other members are Dr D. M.
Bramwell, D. M. Best and Dr A. J. Hosty.
DIRECTORS' REMUNERATION AS A SINGLE FIGURE (AUDITED)
Director Salary Annual Salary Annual Total for
and fees bonuses and bonuses
2018 2018 fees 2017
2017
Total for 2017
GBP GBP
GBP
2018 GBP
GBP
D. M. Best 21,000 - 21,000 20,000 - 20,000
Dr D. M. 27,000 - 27,000 26,000 - 26,000
Bramwell
(Chairman)
Dr A. J. 21,000 - 21,000 10,000 - 10,000
Hosty
S. J. B. 319,500 - 319,500 268,500 45,000 313,500
Knott
(Executive
)
J. B. 21,000 - 21,000 20,000 - 20,000
Roper
Total 409,500 - 409,500 344,500 45,000 389,500
No payments of other types prescribed in the relevant regulations such as
Long-term Incentive Plans ("LTIPs") or pensions and pension-related benefits
were made.
No other remuneration or compensation was paid or payable by the Company
during the year to any current or former Directors.
With effect from 1st January 2019 the fees payable to the Directors are as
follows (previous rates are shown in brackets): Chairman GBP28,000 (GBP27,000),
other non-executive Directors GBP22,000 (GBP21,000) and Investment Director/CEO
(base salary excluding discretionary bonus) GBP319,500 (GBP319,500).
STATEMENT OF DIRECTORS' SHAREHOLDINGS AND SHARE INTERESTS (AUDITED)
The Company has not set any requirements or guidelines for the Directors to
own Income shares in the Company. The beneficial interests of the Directors
and their connected persons in the Income shares of the Company are shown in
the table below.
Income shares
31st December 31st December 2017
2018
D. M. Best - -
Dr D. M. Bramwell 22,625 22,625
(Chairman)
Dr A. J. Hosty - -
S. J. B. Knott (Executive) 488,111 477,000
J. B. Roper -
No changes in the Directors' interests shown above have occurred since 31st
December 2018.
PERFORMANCE GRAPH AND CEO REMUNERATION TABLE
The graph below illustrates the total shareholder return for the Income Shares
relative to the FTSE All-Share Index. This has been used as the appropriate
index as it is the Company's benchmark index.
CEO REMUNERATION TABLE
CEO Single Figure of Total Annual Bonus Paid
Remuneration Out
GBP GBP
2014 184,000 -
2015 184,000 30,000
2016 213,000 40,000
2017 268,500 45,000
2018 319,500 -
Total 1,169,000 115,000
The above bonuses were of a discretionary nature and so no percentage against
a maximum payable has been shown.
The table below shows the percentage change in the remuneration of the
Director undertaking the role of CEO (the Investment Director) between the
years 2017 and 2018. During the same period the Company had no other
employees.
Percentage Change in Salary Percentage change in
annual bonus
CEO 19% -100%
Workforce N/A N/A
SIGNIFICANCE OF SP ON PAY
Directors' Shareholder
remuneration Distribution
GBP GBP
2018 409,500 2,537,000
2017 389,500 2,645,000
Difference 20,000 (108,000)
% Change 5.1% (4.1%)
SERVICE CONTRACTS AND LETTERS OF APPOINTMENT
Except as set out below, there are no written service contracts or contract
for services in respect of any Director. There are no share options, LTIPs,
pension or profit-related pay arrangements with any of the Directors.
There are letters of appointment for four non-executive Directors:
Director Date
Dr D. M. Bramwell (Chairman) 5th April 2016
D. M. Best 5th April 2016
Dr A. J. Hosty 1st July 2017
J. B. Roper 5th April 2016
There is a written memorandum setting out the terms of the contract of service
for S. J. B. Knott; there are also subsequent memoranda varying the letters of
appointment and this memorandum.
No terms or notice periods are set out in any terms of appointment of any of
the Directors; all Directors are subject to annual re-election at the
Company's Annual General Meeting.
There are no provisions for the payment of compensation for loss of office,
early termination or wrongful termination by the Company. Any payment on
termination of their appointments would be calculated in accordance with their
strict legal entitlements.
THE COMPANY'S POLICY ON DIRECTORS' REMUNERATION
The following is the Company's policy for Directors' remuneration which was
approved by shareholders at the Annual General Meeting held on 30th March
2017.
INTRODUCTION
The Company's policy as regards non-executive Directors is that fees payable
to them should reflect their expertise, responsibilities and time spent on
Company matters. In determining the level of non-executive remuneration,
market equivalents should be considered with regard being had to the overall
activities and size of the Company.
The maximum aggregate level of fees payable to the Directors is fixed by the
Company's Articles of Association, amendment of which is by way of an ordinary
resolution. The level aggregate fees should not exceed is GBP150,000 per annum.
The Investment Director is not paid a fee for acting as a Director of the
Company but is remunerated separately in respect of his executive roles.
The Company's policy as regards S. J. B. Knott, the Investment Director and
only executive Director of the Company, is to align his remuneration to the
principal investment benchmark of the Company. However, it also has regard to
his executive duties as effective chief executive officer of the Company and
the time required of him for the effective fulfilment of his duties, but with
provision for discretionary bonuses to recognise significant outperformance of
the Company's investment portfolio. As noted on page 21, he is a significant
shareholder in the Company.
The Company does not confer any share options, long-term incentives or
retirement benefits on any Director, nor does it make a contribution to any
pension scheme on behalf of the Directors. The Company has not included any
performance-related elements in the remuneration package of the Executive
Director except as noted above. The Company also provides Directors' liability
insurance.
FUTURE POLICY TABLE
The tables below summarise the various elements of the remuneration packages
of the Directors.
Investment Director
Element Purpose and link to strategy
Base salary The Investment Director is paid an annual
salary linked to the net assets of the
Company at the end of the previous year to
reflect the aim of long-term growth which
is the principal benchmark measurement
criterion of the Company and, in addition,
to have regard to his other executive
duties.
Discretionary bonus To motivate the Investment Director to
achieve measured outperformance.
Chairman and non-executive Directors' fees
Element Purpose and link to strategy
Chairman and non-executive The fees paid to the Chairman
Directors' fees and the other non-executive
Directors aim to be competitive
with other investment trusts of
equivalent size and complexity.
Fees are fixed annual sums and
reviewed periodically by the
Board (for non-executive
Directors) and the Committee
(for the Chairman). Neither the
Chairman nor the other
non-executive Directors receive
any incentive payment.
Notes:
No Director is entitled to receive any pension provision.
There is no maximum or minimum applicable to either element of the Investment
Director's remuneration package.
The policy on remuneration for employees generally is to incentivise them to
perform effectively and to recognise market comparators, but remuneration
packages are structurally different from that of the only executive director,
the Investment Director. The Company currently has no other employees.
APPROACH TO RECRUITMENT REMUNERATION
The principles the Company would apply in setting remuneration for new Board
members would be in line with the Remuneration Policy. Fees and salary for new
appointees would therefore be commensurate with existing Board members and
their relevant peer group.
STATEMENT OF CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN THE COMPANY
As the Company has no employees, other than the Investment Director, there was
no consultation when setting the Directors' Remuneration Policy and no
remuneration comparison measurement with employees was used.
It is intended that the Directors' Remuneration Policy will continue until the
Annual General Meeting of the Company to be held in 2020.
ILLUSTRATION OF APPLICATION OF REMUNERATION POLICY
Minimum In line with expectations Maximum
Bonus 0% 0% 17%
Salary 100% 100% 83%
It is expected that no bonus will be payable for performance in line with
expectations and a maximum bonus of 20% of salary would be payable.
VOTING AT ANNUAL GENERAL MEETING
A binding Ordinary Resolution approving the Directors' Remuneration Policy was
approved on 30th March 2017. The votes cast were as follows:
Remuneration Policy
For - % of votes cast 99.65%
Against - % of votes cast 0.15%
At Chairman's discretion - % of votes cast 0.20%
Total votes cast 2,435,109
Number of votes withheld 3,180
A non-binding Ordinary Resolution adopting the Annual Report on Directors'
Remuneration for the year ended 31st December 2017 was approved by
shareholders at the Annual General Meeting held on 26th March 2018. The votes
cast by proxy were as follows:
Annual Report on Directors' Remuneration
For - % of votes cast 99.74%
Against - % of votes cast 0.20%
At Chairman's discretion - % of votes cast 0.06%
Total votes cast 1,007,280
Number of votes withheld 0
ANNUAL STATEMENT
On behalf of the Board and in accordance with Part 2 of Schedule 8 to the
Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013, I confirm that the above Report (which has been agreed by
the Board) summarises, as applicable, for the year ended 31st December 2018:
? the major decisions on Directors' remuneration;
? any substantial changes relating to Directors' remuneration made during the
year; and
? the context in which the changes occurred and decisions that have been
taken.
J. B. Roper, Director
Chairman, Nominations and Remuneration Committee
25th February 2019
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and financial
statements in accordance with applicable United Kingdom law and International
Financial Reporting Standards ("IFRS") as adopted by the European Union.
The Directors are required to prepare the financial statements for each
financial year which present fairly the financial position, the financial
performance and cash flows of the Company for that period. In preparing those
financial statements the Directors are required to:
? select suitable accounting policies and then apply them consistently;
? make judgements and estimates that are reasonable and prudent;
? 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 of IFRS is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Company's
financial position and financial performance;
? state that the Company has complied with IFRS subject to any material
departures disclosed and explained in the financial statements; and
? prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with
the Companies Act 2006 and Article 4 of the IAS Regulation. 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.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report, Strategic Report and Directors' Remuneration
Report that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Visitors to the website need to be aware that legislation in the UK governing
the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors consider that the Annual Report and financial statements taken
as a whole are fair, balanced and understandable and provide shareholders with
the information necessary to assess the Company's performance, business model
and strategy.
The Directors confirm that to the best of their knowledge:
? the financial statements, prepared in accordance with applicable accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
? the Annual Report includes a fair review of the development and performance
of the business and the position of the Company, together with a description
of the principal risks and uncertainties.
Dr D. M. Bramwell, Director
S. J. B. Knott, Director
25th February 2019
INDEPENT AUDITOR'S REPORT
To the Members of Rights and Issues Investment Trust PLC
OPINION
We have audited the financial statements of Rights and Issues Investment Trust
PLC for the year ended 31st December 2018 which comprise the Statement of
Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity,
the Statement of Cash Flows and notes to the financial statements, including a
summary of significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and International
Financial Reporting Standards ("IFRSs") as adopted by the European Union.
In our opinion the financial statements:
? give a true and fair view of the state of the Company's affairs as at 31st
December 2018 and of its loss for the year then ended;
? have been properly prepared in accordance with IFRSs as adopted by the
European Union; and
? have been prepared in accordance with the requirements of the Companies Act
2006 and Article 4 of the IAS Regulation.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing
(UK) ("ISAs (UK)") and applicable law. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the
audit of the financial statements section of our report. We are independent of
the Company in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the Financial
Reporting Council's ("FRC") Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion. Our audit opinion is
consistent with our report to the Audit Committee.
CONCLUSIONS RELATING TO PRINCIPAL RISKS, GOING CONCERN AND VIABILITY STATEMENT
We have nothing to report in respect of the following information in the
Annual Report, in relation to which the ISAs (UK) require us to report to you whether we have anything material to add or draw attention to: ? the disclosures in the Annual Report set out on pages 9 and 10 that describe the principal risks and explain how they are being managed or mitigated; ? the Directors' confirmation set out on page 9 in the Annual Report that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity; ? the Directors' statement set out on page 13 in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the Directors' identification of any material uncertainties to the Company's ability to continue to do so over a period of at least 12 months from the date of approval of the financial statements; ? whether the Directors' statement relating to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or ? the Directors' explanation set out on page 10 in the Annual Report as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The purpose of the Company is to invest in equities with a view to achieving capital appreciation and a dividend income stream. Consequently we have identified the following risks of material misstatements that have the greatest effect on the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team: ? the incorrect valuation of the investment portfolio held by the Company; ? the ownership of the investments and the risk of the misappropriation of those assets; ? the incomplete or inaccurate recognition of the Company's investment income. The risks we have identified are consistent with those risks that were identified in the prior year. Therefore particular emphasis was placed in examining and testing the processes of measuring and recognising investments including ownership of those investments together with the testing of its income. We obtained confirmation of investments held at the year end from the custodian, testing this to the records maintained by the Company. We tested a selection of investment additions and disposals shown in the Company's records to supporting documentation and agreed the valuation of quoted investments. We also tested dividends receivable and confirmed that the income was recorded in accordance with the Company's accounting policy. Based on the work we performed, we had no matters to report to the Audit Committee. AN OVERVIEW OF THE SCOPE OF OUR AUDIT Our assessment of audit risk and our evaluation of materiality determine our audit scope for the Company. This enables us to form an opinion on the financial statements. We take into account size, risk profile, the organisation of the Company and effectiveness of controls, including controls and changes in the business environment, when assessing the level of work to be performed. There are no significant changes in our approach from the previous year. OUR APPLICATION OF MATERIALITY We determined our planning materiality to be GBP1.69 million which is 1% of net assets. Given the importance of the distinction between revenue and capital for the company, we also decided on a separate testing materiality of GBP280,000 for the revenue column of the Income Statement which is 10% of the net return. The Audit Committee requested our materiality to be set at the lower level of GBP1 million for the financial statements as a whole. Due to the significance of the Company's net assets compared with the amounts in the revenue column of the Income Statement, they asked us to set a separate materiality level for the revenue column of GBP200,000. We have also agreed with the Audit Committee that we would report to them all audit differences in excess of GBP50,000 as well as any other differences below that threshold which in our view should be reported to them because of their nature, relevance and prominence in the Financial Statements. To the Members of Rights and Issues Investment Trust PLC OTHER INFORMATION The Directors are responsible for the other information. The other information comprises the information included in the annual report (including the Strategic Report and the Directors' Report), other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions: ? Fair, balanced and understandable set out on page 27 - the statement given by the Directors that they consider the Annual Report and financial statements 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, is materially inconsistent with our knowledge obtained in the audit; or ? Audit Committee reporting - the section describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee; or ? Directors' statement of compliance with the UK Corporate Governance Code set out on page 14 - the parts of the directors' statement required under the Listing Rules relating to the Company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code. OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion, based on the work undertaken in the course of the audit: ? the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and ? the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: ? adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or ? the financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or ? certain disclosures of directors' remuneration specified by law are not made; or ? we have not received all the information and explanations we require for our audit. RESPONSIBILITIES OF DIRECTORS As explained more fully in the Statement of Directors' Responsibilities set out on page 27, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Company or
to cease operations, or have no realistic alternative but to do so.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
In respect of fraud the objectives of our audit were to identify and assess
the risks of material misstatement of the financial statements due to fraud
and to obtain appropriate and sufficient audit evidence regarding those
assessed risks of material misstatement due to fraud. However, the primary
responsibility for the prevention and detection of fraud rests with those
charged with the governance and management of the entity.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsreposibilities [3]. This description forms part of our
auditor's report.
USE OF THIS REPORT
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. 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.
OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
We were appointed by the Board of Directors in 2005 to audit the financial
statements for the year ended 31st December 2006. The period of total
uninterrupted engagement including previous renewals and reappointments of the
firm is 13 years.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Company and we remain independent of the Company in conducting
our audit.
Jeremy Staines (Senior Statutory Auditor)
For and on behalf of Begbies
Chartered Accountants and Statutory Auditor
9 Bonhill Street
London
25th February 2019
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31st December 2018
Year ended 31st Year ended
December 2018 31st December
2017
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment 2 3,599 - 3,599 3,329 - 3,329
income
Other 2 20 - 20 3 - 3
operating
income
Total income 3,619 - 3,619 3,332 - 3,332
(Losses)/gains 9 - (21,459) (21,459) - 31,083 31,083
on fair value
through profit
or loss assets
Gains on 9 - - - - 151 151
subsidiary
holding
3,619 (21,459) (17,840) 3,332 31,234 34,566
Expenses
Investment - - - - - -
management fee
Other expenses 3 813 59 872 810 89 899
813 59 872 810 89 899
(Loss)/profit 2,806 (21,518) (18,712) 2,522 31,145 33,667
before tax
Tax 5 - - - - - -
(Loss)/profit 2,806 (21,518) (18,712) 2,522 31,145 33,667
for the year
Earnings per
share
Return per 7 34.5p (264.8)p (230.3)p 29.1p 359.5p 388.6p
Income share
The total column of this statement represents the Statement of Comprehensive
Income prepared in accordance with International Financial Reporting Standards
as adopted by the EU. The supplementary revenue return and capital return
columns are both prepared under guidance published by the Association of
Investment Companies.
The loss for the year disclosed above represents the Company's total
Comprehensive Income. The Company does not have any other Comprehensive
Income.
All items in the above statement are those of the single entity and derive
from continuing operations. No operations were acquired or discontinued during
the year.
The notes on pages 36 to 46 form part of these financial statements.
BALANCE SHEET
as at 31st December 2018
Non-current assets Notes 2018 2017
Investments - fair value through profit GBP'000 GBP'000
or loss 9 155,647 179,144
155,647 179,144
Current assets
Trade and other receivables 12 621 579
Amounts due from Group undertakings 78 78
Cash and cash equivalents 13,310 19,069
14,009 19,726
Total assets 169,656 198,870
Current liabilities
Trade and other payables 13 81 180
81 180
Total assets less current liabilities 169,575 198,690
Net assets 169,575 198,690
Equity
Called up share capital 14 2,002 2,094
Capital redemption reserve 15 253 161
Retained reserves:
Capital reserve 15 61,984 65,434
Revaluation reserve 15 102,217 128,151
Revenue reserve 15 3,119 2,850
Total equity 169,575 198,690
Net asset value per share
Income shares 16 2118.1p 2372.3p
The notes on pages 36 to 46 form part of these financial statements.
The financial statements were approved by the Board and authorised for issue
on 25th February 2019. They were signed on its behalf by:
Dr D. M. Bramwell, Director
S. J. B. Knott, Director
Company Registration Number: 00736898
STATEMENT OF CHANGES IN EQUITY
for the year ended 31st December 2018
Notes Share Capital Capital Revaluation Revenue Total
Reserve
Capital Redemption Reserve Reserve GBP'000
GBP'000
GBP'000 Reserve GBP'000 GBP'000
GBP'000
Balance 2,241 14 62,695 111,580 2,973 179,5
at 31st 03
December
2016
Changes
in equity
for 2017
Profit - - 14,574 16,571 2,522 33,66
for the 7
year
Total 2,241 14 77,269 128,151 5,495 213,1
recognise 70
d income
and
expense
Income (147) 147 (11,835 - - (11,8
shares ) 35)
bought
back and
cancelled
Dividends 6 - - - - (2,645) (2,64
5)
Balance 2,094 161 65,434 128,151 2,850 198,6
at 31st 90
December
2017
Notes Share Capital Capital Revaluation Revenue Total
Reserve
Capital Redemption Reserve Reserve GBP'000
GBP'000
GBP'000 Reserve GBP'000 GBP'000
GBP'000
Balance 2,094 161 65,434 128,151 2,850 198,6
at 31st 90
December
2017
Changes
in equity
for 2018
Profit - - 4,416 (25,934) 2,806 (18,7
for the 12)
year
Total 2,094 161 69,850 102,217 5,656 179,9
recognise 78
d income
and
expense
Income (92) 92 (7,866) - - (7,86
shares 6)
bought
back and
cancelled
Dividends 6 - - - - (2,537) (2,53
7)
Balance 2,002 253 61,984 102,217 3,119 169,5
at 31st 75
December
2018
The notes on pages 36 to 46 form part of these financial statements.
STATEMENT OF CASH FLOWS
for the year ended 31st December 2018
Cashflows from operating activities Notes 2018 2017
GBP'000 GBP'000
(Loss)/profit before tax (18,712) 33,667
Adjustments for:
Losses/(gains) on investments 21,460 (31,083)
(Gains)/losses on revaluation of - (151)
subsidiary
Purchases of investments 9 (4,018) (8,338)
Proceeds on disposal of investments 9 6,055 20,249
Operating cash flows before movements in 4,785 14,344
working capital
(Increase)/decrease in receivables (42) 154
Increase/(decrease) in payables (17) 7
Net cash from operating activities 4,726 14,505
before income taxes
Net cash from operating activities 4,726 14,505
Cash flows from financing activities
Expenses from bonus issue - -
Income shares bought back and cancelled (7,948) (11,862)
Dividends paid (2,537) (2,645)
Net cash used in financing activities (10,485) (14,507)
Net decrease in cash and cash (5,759) (2)
equivalents
Cash and cash equivalents at beginning 19,069 19,071
of year
Cash and cash equivalents at end of year 13,310 19,069
The notes on pages 36 to 46 form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2018
1. ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Company have been prepared in accordance with
the International Financial Reporting Standards ("IFRS"), which comprise
standards and interpretations approved by the International Accounting
Standards Board ("IASB"), and International Accounting Standards ("IAS") and
Standing Interpretations Committee interpretations approved by the
International Accounting Standards Committee ("IASC") that remain in effect,
and to the extent that they have been adopted by the European Union ("EU").
The financial statements have been prepared on a going concern basis under the
historical cost convention to include the revaluation of investments. The
principal accounting policies are set out below. Where presentational guidance
set out in the Statement of Recommended Practice ("SORP") for "financial
statements of Investment Trust Companies and Venture Capital Trusts" issued by
the Association of Investment Companies ("AIC") in January 2017 is consistent
with the requirements of IFRS, the Directors have sought to prepare the
financial statements on a basis compliant with the recommendations of the
SORP.
In accordance with IFRS 10 (Investment Entities Amendments), the Company
measures its subsidiary at fair value through profit and loss and does not
consolidate it.
The following new and amended standards are effective this year and have been
adopted although they have no material impact on the financial statements.
IFRS 15 - Revenue from Contracts with Customers (effective 1st January 2018)
specifies how and when an entity should recognise revenue and enhances the
nature of revenue disclosures. The Company's business is that of investing in
financial instruments and investment income is outside the scope of this
standard.
IFRS 9 - Financial Instruments (effective 1st January 2018) replaces IAS 39
and simplifies accounting for financial assets, replacing the current multiple
measurement categories with a single principle-based approach to
classification. The standard requires that all financial assets are to be
measured at either amortised cost or fair value. The Company continues to
classify and account for all of its investment assets at fair value though
profit and loss and all its other financial assets and liabilities at
amortised cost and consequently the standard has had no material impact on the
financial statements.
IFRS 16 - Leasing and the IAS amendment Long Term Interests in Associates and
Joint Ventures are effective for annual periods beginning on or after 1st
January 2019 and are not expected to have any material impact on the financial
statements.
Income
Dividend income is included in the financial statements on the ex-dividend
date. All other income is included on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue account except as follows:
? Expenses which are incidental to the acquisition of an investment are
included within the cost of the investment.
? Expenses which are incidental to the disposal of an investment are deducted
from the disposal proceeds of the investment.
Taxation
The charge for taxation is based on the net revenue for the year. Deferred
taxation is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date. Investment trusts which
have approval under section 1158 of the Corporation Tax Act 2010 are not
liable for taxation on capital gains.
RIGHTS AND ISSUES INVESTMENT TRUST PUBLIC LIMITED COMPANY
Dividends
Dividends payable to shareholders are recognised when they are paid.
Cash and cash equivalents
Cash comprises cash in hand and deposits payable on demand. Cash equivalents
are short-term highly liquid investments that are readily convertible to known
amounts of cash.
Investments
Investments are classified as fair value through profit or loss as the
Company's business is investing in financial assets with a view to profiting
from their total return in the form of interest, dividends or capital growth.
Changes in the value of investments held at fair value through profit or loss
and gains and losses on disposal are recognised in the Income Statement as
"Gains or losses of investments held at fair value through profit or loss".
Also included within this heading are transaction costs in relation to the
purchase or sale of investments.
All investments, classified as fair value through profit or loss, are further
categorised into the following fair value hierarchy:
Level 1 - Unadjusted prices quoted in active markets for identical assets and
liabilities.
Level 2 - Having inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (ie as prices) or
indirectly (ie derived from prices).
Level 3 - Having inputs for the asset or liability that are not based on
observable data.
Investments traded in organised markets are valued at their fair value, which
is determined by the quoted market bid price at the close of business at the
Balance Sheet date. Where trading in a security is suspended, the investment
is valued at the Board's estimate of its fair value.
Unquoted investments are valued by the Board at fair value using the
International Private Equity and Venture Capital Valuation Guidelines.
2. INCOME
Income from investments
2018 2017
GBP'000 GBP'000
Franked investment income 3,599 3,329
Other operating income
Deposit interest 20 3
Total income 3,619 3,332
Income from investments
UK equity listed 3,226 3,006
AIM traded 373 294
Delisted stock - 29
Dividend from subsidiary - -
3,599 3,329
3. OTHER EXPENSES
2018 2017
GBP'000 GBP'000
Staff costs (note 4) 374 359
Non-executive Directors' fees 90 76
Administration fees 136 139
Auditor's remuneration
- Audit 17 15
- Review of the half yearly report 4 4
- Other services to the Company and its subsidiaries 1 1
Secretarial services 42 42
Other 149 174
813 810
Capital expenses 59 89
872 899
Auditor's other services are comprised of tax compliance services and the
Directors do not consider that the provision of this non-audit work affects
the independence of the Auditor.
4. STAFF COSTS
2018 2017
GBP'000 GBP'000
Wages and salaries 320 314
Social security costs 54 45
Total 374 359
Number Number
The average number of staff employed by the 1 1
Company was
GBP'000 Number
Directors' emoluments 410 390
The highest paid Director received total emoluments of GBP320,000 (2017:
GBP314,000).
5. TAX ON ORDINARY ACTIVITIES
2018 2017
GBP'000 GBP'000
UK Corporation Tax at 19.00% (2017: 19.25%) - -
Tax receivable - -
- -
Profit before tax 2,806 2,522
Tax on profit at standard rate 533 485
Factors affecting the recovery/charge for the year:
Income not taxable (684) (640)
Unutilised losses carried forward 151 155
- -
No provision for deferred taxation has been made in the current year or in the
prior year. The Company has not provided for deferred tax on capital gains or
losses arising on the revaluation or disposal of investments as it is exempt
from tax on these items because of its status as an investment trust company.
Factors that may affect future tax charges
The Company has not recognised any deferred tax asset arising as a result of
having unutilised management expenses. These expenses will only be utilised if
the tax treatment of the Company's income and capital gains changes or if the
Company's investment profile changes.
6. DIVIDS
Amounts recognised as distributions to equity holders in the year:
2018 2017
GBP'000 GBP'000
Income (Paid) 1,694 1,766
Final dividend for the year ended 31st December 2017
of 20.50p per share (year ended 31st December 2016:
20.00p)
Interim dividend for the year ended 31st December 843 879
2018 of 10.50p per share (year ended 31st December
2017: 10.25p)
2,537 2,645
2018 2017
GBP'000 GBP'000
Income 1,677 1,696
Proposed Final dividend payable for the year ended
31st December 2018 of 21.0p
The final dividends payable are subject to approval by shareholders at the
Annual General Meeting and have not been included as a liability in these
financial statements.
Set out below is the total dividend paid and payable in respect of the
financial year, which is the basis on which the requirements of section 1158
of the Corporation Tax Act 2010 are considered.
2018 2017
GBP'000 GBP'000
Revenue available for distribution by way of 2,806 2,522
dividend for the year
Income
Interim dividend for the year ended 31st (843) (879)
December 2018 of 10.50p per share (year ended
31st December 2017: 10.25p)
Proposed Final dividend for the year ended 31st (1,677) (1,696)
December 2018 of 21.00p per share (year ended
31st December 2017: 20.50p)
Net addition/(reduction) to Revenue reserve 286 (53)
7. RETURN PER SHARE
2018 2017
Income Income
GBP'000 GBP'000
Return attributable to equity shareholders:
Revenue return 2,806 2,522
Capital return (21,518) 31,145
(18,712) 33,667
p p
Revenue return 34.5 29.1
Capital return (264.8) 359.5
(230.3) 388.6
Return per share is calculated using the weighted average number of Income
shares in issue during the year of 8,125,931.
8. INVESTMENTS
Analysis of the investments
The number of companies or institutions in which equities, convertibles or
fixed interest securities were held was 26 (2017: 27).
EQUITY GROUPS Basic Materials 2018 2017
GBP'000 % GBP'000 %
Chemicals 17,680 11.36 21,577 12.04
Industrials
Construction & Materials - - 1,923 1.07
General Industrials 28,699 18.44 37,654 21.02
Electronic & Electrical Equipment 952 0.61 1,310 0.73
Industrial Engineering 38,511 24.74 39,389 21.99
Support Services 28,005 17.99 29,643 16.55
Healthcare
Pharmaceuticals & Biotechnology 1,044 0.67 923 0.52
Utilities
Gas, Water & Multiutilities 1,051 0.68 1,202 0.67
AIM Traded Stocks 38,395 24.67 44,050 24.59
Subsidiary 706 0.45 706 0.39
Fixed Interest
Preference 604 0.39 767 0.43
Total UK 155,647 100.00 179,144 100.00
9. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
Investments listed on a recognised investment 2018 2017
exchange
GBP'000 GBP'000
UK equity listed investments at fair value 116,544 134,367
AIM traded stocks 38,395 44,050
Delisted stock 2 21
Subsidiary undertakings (note 10) 706 706
155,647 179,144
Listed Unlisted Subsidiary Total
undertakings
2018 2018 2018
2018
GBP'000 GBP'000 GBP'000
GBP'000
Opening book cost 42,953 7,629 411 50,993
Opening unrealised 91,414 36,442 295 128,151
appreciation
Opening valuation 134,367 44,071 706 179,144
Movements in the
year
Transfer stock (1,168) 1,168 - -
from listed to
unlisted
Purchases at cost 4,018 - - 4,018
Sales - proceeds (4,577) (1,479) - (6,056)
Sales - realised 3,286 1,189 - 4,475
gains on sales
Increase in (19,382) (6,552) - (25,934
unrealised )
appreciation
Closing valuation 116,544 38,397 706 155,647
Closing book cost 44,513 8,506 411 53,430
Closing unrealised 72,031 29,891 295 102,217
appreciation
116,544 38,397 706 155,647
Realised gains on 3,286 1,189 - 4,475
sales
Increase in (19,382) (6,552) - (25,934
unrealised )
appreciation
Gains on (16,096) (5,363) - (21,459
investments )
With the exception of the subsidiary and the delisted stocks, the Company's
investments are Level 1 assets under the definition of IFRS 7 and comprise
equity listed and AIM traded investments classified as held at fair value
through profit or loss.
During the year transaction costs of GBP32,888 were incurred on the acquisition
of investments (2017: GBP27,671). Costs relating to disposals of investments
during the year amounted to GBP12,794 (2017: GBP51,106). All transaction costs
have been included within the capital column of the Income Statement.
10. SUBSIDIARY UNDERTAKINGS
The Company has one wholly owned subsidiary undertaking:
Name Activity Country of Description Proportion
incorporat of shares of nominal
ion held value of
issued
shares and
voting
rights held
Discretionary Fund England Ordinary 100%
Unit Fund management
Managers
Limited
Discretionary Unit Fund Managers Limited had capital and reserves of GBP758,645
and profits of GBP25,736 for the year ended 31st December 2018.
11. SIGNIFICANT INTERESTS
The Company has a holding of 3% or more that is material in the context of the
financial statements in the following investments as at 31st December 2018:
Name
Colefax Group 23.90%
Titon Holdings 11.60%
Macfarlane Group 11.00%
Treatt 8.30%
Elecosoft 5.80%
Renold 5.50%
LPA Group 5.30%
Scapa Group 4.10%
12. TRADE AND OTHER RECEIVABLES
2018 2017
GBP'000 GBP'000
Prepayments and accrued income 621 579
621 579
13. TRADE AND OTHER PAYABLES
2018 2017
GBP'000 GBP'000
Accruals 81 98
Prepayments and accrued income - 82
81 180
14. SHARE CAPITAL
2018 2017
Allotted, Called Up and Fully Paid % GBP'000 GBP'000
8,006,179 Income shares of 25p each (2017: 100.0 2,002 2,094
8,375,258)
Number of Income shares
2018
Balance at beginning of year 8,375,258
Income shares bought back and (369,079)
cancelled
Balance at end of year 8,006,179
15. RESERVES
Capital Capital Revaluation Revenue
redemption reserve reserve reserve
reserve GBP'000
GBP'000 GBP'000 GBP'000
Beginning of 161 65,434 128,151 2,850
year
Income shares 92 (7,866) - -
bought back and
cancelled
Increase in - - (25,934) -
unrealised
appreciation
Net gains on - 4,475 - -
realisation of
investments
Capital expenses - (59) - -
Profit for year - - - 2,806
Dividends - - - (2,537)
End of year 253 61,984 102,217 3,119
The capital reserve represents those realised profits and losses arising on
the disposal of investments. The revaluation reserve represents unrealised
profits and losses arising on the revaluation of investments held.
16. NET ASSET VALUE PER SHARE
The net asset value per Income share calculated in accordance with the
Articles of Association was as follows:
Net asset value per share Net asset value per share
attributable attributable
2018 2017 2018 2017
p p GBP'000 GBP'000
Income 2118.1 2372.3 169,575 198,690
shares
Income shares
GBP'000
Total net assets attributable at beginning of year 198,690
Income shares bought back and cancelled (7,866)
Total recognised gains for the year (21,518)
Transfer to reserves 269
Total net assets attributable at end of year 198,690
No. of shares in issue 8,006,179
17. RELATED PARTY TRANSACTIONS
During the year the Company had the following transactions with Discretionary
Unit Fund Managers Limited, its subsidiary undertaking:
GBP'000 2018 2017
GBP'000 GBP'000
Dividends received - -
- -
Amounts owed by subsidiary undertaking 78 78
18. FINANCIAL ASSETS AND LIABILITIES
The Company's financial instruments comprise securities, cash balances and
debtors and creditors that arise from its operations, for example, in respect
of sales and purchases awaiting settlement and debtors for accrued income.
The investment policy and objectives of the Company is stated on page 1.
As an investment trust, the Company invests in securities for the long term.
Accordingly it is, and has been, throughout the year under review, the
Company's policy that no short-term trading in investments or other financial
instruments shall be undertaken.
The main risks arising from the Company's financial instruments are market
price risk, liquidity risk and credit risk. The Board's policy for managing
these risks is summarised below. These policies have remained unchanged since
the beginning of the year to which these financial statements relate.
Market price risk
Market risk arises from uncertainty about future prices of financial
instruments held. It represents the potential loss the Company might suffer
through holding market positions in the face of price movements. The Board
meets at least quarterly to consider the asset allocation of the portfolio in
order to minimise the risk associated with industry sectors. The Investment
Director has responsibility for monitoring the existing portfolio selected in
accordance with the Company's investment objectives and seeks to ensure that
individual stocks meet an acceptable risk-reward profile.
The Company's exposure to changes in market prices at 31st December 2018 on
its quoted equity investments was GBP154,939,000 (2017: GBP178,417,000).
Liquidity risk
Liquidity risk is the possibility of the Company having difficulties in
realising sufficient assets to meet its financial obligations. All investments
are made in quoted securities, which are normally listed on the London Stock
Exchange or AIM. Transactions in these securities may be subject to some
short-term liquidity constraint, in common with other smaller and medium sized
listed securities, but subject to that they are considered to be reasonably
realisable.
Credit risk
Credit risk is the failure of the counterparty to a transaction to discharge
its obligations which could result in the Company suffering a loss. At the
year end the Company's maximum exposure to credit risk was as follows:
2018 2017
GBP'000 GBP'000
Trade and other receivables 621 579
Cash and cash equivalents 13,310 19,069
13,931 19,648
The risk is managed by dealing only with brokers and banks who have
satisfactory credit ratings and are approved by the Audit Committee.
Financial assets and liabilities
All assets and liabilities are included at fair value.
Valuation of financial instruments
IFRS 13 requires the Company to classify fair value measurements using a fair
value hierarchy that reflects the significance of inputs used in making the
measurements. The valuation techniques used by the Company are explained in
the accounting policies note 1 Investments, as set out in the Company's Annual
Report and Financial Statements for the year ended 31st December 2018.
The fair value hierarchy has the following levels:
Level 1 - Unadjusted prices quoted in active markets for identical assets and
liabilities.
Level 2 - Having inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (ie as prices) or
indirectly (ie derived from prices).
Level 3 - Having inputs for the asset or liability that are not based on
observable data.
31st Level 1 Level 2 Level 3 Total
December
2018
GBP'000 GBP'000 GBP'000 GBP'000
Financial
assets at
fair value
through
profit or
loss
UK Equity 116,544 - - 116,544
Listed
AIM traded 38,395 - - 38,395
stocks
Delisted - 2 - 2
stock
Investment - - 706 706
in
subsidiary
Net fair 154,939 2 706 155,647
value
31st Level 1 Level 2 Level 3 Total
December
2017
GBP'000 GBP'000 GBP'000 GBP'000
Financial
assets at
fair value
through
profit or
loss
UK Equity 134,367 - - 134,367
Listed
AIM traded 44,050 - - 44,050
stocks
Delisted - 21 - 21
stock
Investment - - 706 706
in
subsidiary
Net fair 178,417 21 706 179,144
value
There were no transfers between Level 1 and Level 2
during the period.
A reconciliation of fair value measurements in Level
3 is set out in the following table.
2018 2017
GBP'000 GBP'000
Opening Balance 706 555
Purchases - -
Sales - -
Total gains or losses included in gains on
investments in the income statement:
- on assets sold - -
- on assets held at year end - 151
Closing Balance 706 706
The Level 3 investment relates to the Company's subsidiary, Discretionary Unit
Fund Managers Limited, which has been valued based of the most recent
estimated NAV.
POST BALANCE SHEET EVENTS
Between the year end and 21st February 2019, the latest practicable date
before the publication of these financial statements, the Company has bought
back and cancelled 22,394 Income shares for a cost of GBP450,510.
APPIX - PORTFOLIO STATEMENT
Details of the 20 largest investments as at 31st December 2018 are given below
by market value:
UK Investments Holdings Market Value
2018 2017 2018 2017
GBP'000 GBP'000
Scapa Group 6,250,000 6,350,000 19,150 27,765
Treatt 4,250,000 4,750,000 17,680 21,577
Hill & Smith Holdings 1,434,230 1,434,230 17,196 19,204
Vp 1,800,000 1,800,000 16,920 15,570
RPC Group 2,400,000 2,400,000 15,634 21,156
Colefax Group 2,250,000 2,436,979 12,375 12,429
Macfarlane Group 17,250,000 17,250,000 12,248 13,283
Renold 27,000,000 12,300,000 7,560 5,719
Spirax-Sarco 120,714 120,714 7,514 6,784
Engineering
Electrocomponents 1,300,000 1,300,000 6,586 8,132
Vitec Group 400,000 400,000 4,740 4,520
Menzies (John) 882,142 882,142 4,499 5,941
Elecosoft 4,520,781 4,520,781 3,029 1,854
Titon Holdings 1,265,000 1,265,000 2,277 1,923
Castings 400,000 400,000 1,500 1,763
National Grid 137,500 137,500 1,051 1,202
GlaxoSmithKline 70,000 70,000 1,044 923
Dialight 238,095 238,095 952 1,310
Low & Bonar 6,000,000 6,000,000 816 3,195
Chamberlin 1,000,000 1,000,000 720 750
153,491 175,000
Balance held in other 2,156 4,144
investments
155,647 179,144
Unless otherwise specified, the actual holdings are, in each case, of ordinary
shares or stock units and of the nominal value for which listing has been
granted.
ISIN: GB0007392078
Category Code: ACS
TIDM: RIII
LEI Code: 2138002AWAM93Z6BP574 OAM Categories: 1.1. Annual financial and audit reports Sequence No.: 7616 EQS News ID: 780947 End of Announcement EQS News Service 1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=dcf67e2212e6e0184a3b611390636426&application_id=780947&site_id=vwd_london&application_name=news 2: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=88e406e29b9751b1378f879ec90cf43d&application_id=780947&site_id=vwd_london&application_name=news 3: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=2a8b2b2dde1a303e74ceee7106f45d38&application_id=780947&site_id=vwd_london&application_name=news
(END) Dow Jones Newswires
February 26, 2019 02:02 ET (07:02 GMT)
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