Results for the year ending 31 December 2020
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Rights and Issues Investment Trust PLC (RIII)
RIGHTS AND ISSUES INVESTMENT TRUST PLC Annual Report & Accounts for the full year to 31st December 2020 A copy of the Company's Annual Report for the year ended 31st December 2020 will shortly be available to view and download from the Company's website https://www.maitlandgroup.com/investment-trusts/rights-and-issues-investment-trust-plc/. Printed copies of the Annual Report will be sent to those shareholders electing to receive hard copies shortly. Additional copies may be obtained from the Company Secretary - Maitland Administration Services Limited, Hamilton Centre, Rodney Way, Chelmsford, Essex CM1 3BY. The Annual General Meeting of the Company will be held electronically on 24th March 2021 at 11am GMT and unfortunately, due to ongoing COVID-19 restrictions, the meeting will be closed to shareholders. A presentation from the Company's Investment Director will be made available via the Company's website from 10th March 2021 and shareholders are also invited to submit any questions in advance of the meeting, by 17th March 2021 at the latest. The Directors have proposed the payment of a final dividend of 21.5p per Ordinary share which, if approved by shareholders at the forthcoming Annual General Meeting, will be payable on 1st April 2021 to shareholders whose names appear on the register at the close of business on 5th March 2021 (ex-dividend 4th March 2021). The following text is copied from the Annual Report & Accounts for the year ended 31st December 2020.
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. In January 2021 the Board reviewed the performance of the Company in the context of the investment objective, the investment policy and the continuation of the Company. The Directors unanimously supported the continuation for a minimum period of five years to 2026. CAPITAL STRUCTURE ISSUED SHARE CAPITAL (at 31st December 2020) 7,540,321 Ordinary 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) DIVIDEND YIELD
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 to 31st December 2020, the Company did not buy back any shares for cancellation and therefore paid nil consideration. The Directors have paused the buyback programme as a reflection of both the discount being in the target range required under the discount management policy and also market uncertainty caused by the COVID-19 pandemic. DISCOUNT (at 31st December 2020) 6.8%. RIGHTS AND ISSUES INVESTMENT TRUST PLC ("THE TRUST" or "THE COMPANY") MAY BE Note: The above is a summary of rights. For full information shareholders should refer to the Articles of Association. HISTORIC RECORD
* 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 Ordinary shares for each Capital share). Thereafter, performance is based on the Ordinary shares, formerly named 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 SHORE CAPITAL Cassini House 57 St James's Street BANKERS/CUSTODIAN NORTHERN TRUST COMPANY 50 Bank Street Canary Wharf London E14 5NT 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-eighth Annual General Meeting of the members of Rights and Issues Investment Trust Public Limited Company will be held electronically on Wednesday 24th March 2021, at 11:00am, for the following purposes: ORDINARY BUSINESS
SPECIAL BUSINESS To consider and, if thought fit, pass resolutions 11 and 12 as Special Resolutions as follows:
11.1 the maximum aggregate number of Ordinary shares hereby authorised to be purchased shall be 1,130,294 (representing approximately 14.99% of the Ordinary shares in issue on 15th February 2021); 11.2 the minimum price (exclusive of expenses) which may be paid for an Ordinary share is 25 pence; 11.3 the maximum price (exclusive of expenses) which may be paid for an Ordinary share is not more than the higher of (i) an amount equal to 105% of the average market value of the Ordinary shares for the five business days immediately preceding the day on which the Ordinary 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; 11.4 the authority hereby conferred will expire at the conclusion of the next Annual General Meeting of the Company unless such authority is renewed prior to such time; and 11.5 the Company may make a contract to purchase Ordinary 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 Ordinary shares pursuant to any such contract; provided that all Ordinary shares purchased pursuant to this authority shall be cancelled or transferred into treasury immediately upon completion of the purchases. 12. THAT the Articles of Association of the Company produced to the meeting and initialled by the Chairman for the purposes of identification be approved and adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the existing Articles of Association with effect from conclusion of the meeting. By Order of the Board, MAITLAND ADMINISTRATION SERVICES LIMITED Secretary, 16th February 2021 Notes:
8. 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:
9. 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. 10. 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:
11. In order to vote at this meeting you must comply with the procedures set out in notes 1 to 3 by the time specified in note 3. 12. A copy of the proposed new Articles of Association of the Company, together with a copy showing all of the proposed changes to the existing articles of association, will be available for inspection on the Company's website at https://www.maitlandgroup.com/ investment-data/rights-and-issues-investment-trust-plc/. 13. The right of shareholders to vote at the meeting by appointing the Chairman as their proxy 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 22nd March 2021 in order to be entitled to vote at the meeting by appointing the Chairman as their proxy. 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. 14. The total number of Ordinary shares of 25p in issue as at 15th February 2021, the last practicable day before printing this document, was 7,540,321 Shares and the total level of voting rights was therefore also 7,540,321. CHAIRMAN'S STATEMENT At long last the EU and the UK government have signed a BREXIT agreement, although the operational details will take some time to impact on industry throughout the new trading block. Nevertheless, the effect on market sentiment has been positive if for no other reason than it has brought to an end several years of uncertainty. The Board will continue to closely monitor related developments to inform decision making on behalf of the Company. Due to the COVID-19 pandemic it has been a year involving multiple forms of international and national restrictions and 'lock downs' which have adversely affected global trading. During the first wave supply chains were disrupted, export and import transportation slowed, and the movement of people was severely restricted. April was the nadir for market sentiment but subsequently there has been a slow but reasonably constant recovery as companies have adapted to the 'new normal'. Restrictions of various types are likely to continue well into 2021, however, I believe the pandemic has perversely presented business and commerce throughout the world with a new range of opportunities to think and act in more imaginative ways than they have before. Increased use of IT in communications, remote management of supply chains and significant changes to office/home working will significantly and probably permanently alter the industrial and commercial landscape. The FTSE All-Share Index fell by 12.5% during the year (down 18.7% in the first six months) but the Company's portfolio held firm with net asset value only slightly down from 2275.2p to 2258.9 per share (0.7%). This reflects a strong recovery in the second half after a 20.9% reduction in net assets in the first six months. The share buy-back programme remains paused for the foreseeable future, subject to operation of the discount management policy when necessary. A final dividend of 21.5p is proposed, making 32.25p for the year, reflecting the Directors' awareness of the importance of dividend income to the Company's investors and its robust underlying financial position. The directors are closely monitoring the implications of the continuing market volatility and global response to the pandemic for the Company's net asset position and future income streams, and will make changes to the Company's dividend policy when deemed appropriate to do so. Environmental, Social and Governance risks continue to be recognised as significant matters of global concern and the Board is committed to ensuring that the Company, through the Investment Director, appropriately manages and mitigates these risks through the investment strategy. I am pleased to confirm that the composition of your Board continues to remain stable and I and my board colleagues look forward to overseeing implementation of the Company's investment strategy and improving returns for shareholders in the future. In the medium term, the economic outlook is still uncertain but, with the imminent international roll-out of COVID-19 immunisation programmes, 2021 should prove to be a better year than the one everyone has had to endure in 2020. Dr D. M. BRAMWELL Chairman 16th February 2021 PORTFOLIO STATEMENT Details of the investments held within the portfolio as at 31st December 2020 are given below by market value:
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. STRATEGIC REPORT The Strategic Report is designed to provide information primarily about the Company's business and results for the year ended 31st December 2020 and should be read in conjunction with the Chairman's Statement on page 7.
*These are Alternative Performance Measures. EXPLANATION OF ALTERNATIVE PERFORMANCE MEASURES (APMS) An alternative performance measure is a financial measure of historical or future financial performance, financial position or cash flow that is not prescribed by the relevant accounting standards. The APMs are the dividend yield, ongoing charges and NAV return as defined below. Dividend Yield The dividend yield is a financial ratio which indicates how much the Company pays out in dividends each year relative to its share price. The figure is calculated by dividing the aggregate value of dividends per share in a given year by the closing share price and is represented as a percentage.
Ongoing Charges Ongoing charges are expenses charged to revenue or capital that relate to the operation of the Company as an investment trust and are deemed likely to recur in the foreseeable future. They do not include the costs of acquisition or disposal of investments, financing costs and gains or losses arising on investments. Ongoing charges are calculated on the basis of the annualised ongoing charge as a percentage of the average net asset value in the period. The calculation methodology for ongoing charges is set out by the Association of Investment Companies ("AIC") and was calculated as follows:
NAV Return NAV return is the percentage change in closing NAV per share compared with opening NAV per share.
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 Company 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 Board is directly accountable to its shareholders. The Company is listed on the London Stock Exchange and is subject to the Listing Rules, Prospectus Rules and Disclosure Guidance and Transparency Rules published by the Financial Conduct Authority ("FCA"). The Company is governed by its articles of association, amendments to which must be approved by shareholders by special resolution. The Company is a member of the Association of Investment Companies ("AIC"). The FCA 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 January 2021, which concluded that the continuation of the Company for the period until July 2026 was in the best interests of shareholders. The Board fulfils its investment objective and policy by operating as an investment company, enabling it to delegate operational matters to specialised third-party service providers. The close-ended nature of the Company allows a longer-term view on investments and means liquidity issues as a result of redemptions are less likely to arise. In pursuing its strategy, close attention is also paid to the control of costs. Further information on this is contained in the Key Performance Indicators on page 13. INVESTMENT SELECTION 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. In January 2021, the Board reviewed the levels of concentration within the investment portfolio and agreed with the Investment Manager that the portfolio would be refocused in 2021 to balance risk and improve performance. The investment portfolio is 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. Full details of the Company's portfolio are set out on page 8 and further information is set out in Notes 8 to 11 inclusive. SUSTAINABILITY OF BUSINESS MODEL AND PROMOTING THE SUCCESS THE COMPANY'S SUCCESS The Board is responsible for the overall strategy of the Company and decisions regarding corporate governance, asset allocation, risk and control. The day-to-day management of the investments is delegated to the Investment Director and the management of the operations to specialist third-party suppliers. The Directors are conscious of their duties under section 172 of the Companies Act 2006 and, in particular, the overarching duty to promote the success of the Company for the benefit of the shareholders, with careful attention paid to wider stakeholders' interests. The Board is aware of the importance of ensuring that the Company has a sustainable, well-governed business model to achieve its strategy and objectives. As part of discharging its section 172 duties, the Company, through the Investment Director, uses its influence, where possible, as a shareholder to encourage the companies in which it invests to adopt best practice on environmental, social and corporate governance ("ESG") matters. The Investment Director, during the coming year, will also actively seek to invest in companies that adopt good ESG practice. The third-party service providers are a key element of ensuring the success of the business model. The Board monitors the chosen service providers closely to ensure that they continue to deliver the expected level of service. The Board also receives regular reporting from them, evaluates the control environment and governing contract in place at each service provider and formally assesses their appointment annually. The Board notes that the coronavirus pandemic has affected the operations of all its third-party service providers which have been working remotely for the majority of 2020, but is satisfied that all have been able to adjust their business practices to accommodate the disruption and continue to function efficiently, resulting in no noticeable variations in either service levels or the Company's ability to operate effectively. CULTURE & VALUES All the Directors seek to discharge their responsibilities and meet shareholder expectations in an open and transparent manner. The Board seeks to recruit Directors who have diverse working experience including managing the types of companies in which the Company invests. The industry experience on the Board ensures there is detailed knowledge and constructive challenge in the decision-making process. This helps the Company achieve its overarching aim of enhancing shareholder value. The Directors are mindful of costs and seek to ensure that the best value money is achieved in managing the Company. The Company's values of skill, knowledge and integrity are aligned to the delivery of its investment objective and are monitored closely by the Board. The Board seeks to employ third-party providers who share the Company's culture and importantly will work with the Directors openly and transparently to achieve the Company's aims. As detailed in the Business Ethics section below, the Board expects and seeks assurance that the companies with which it works adopt working practices that are of a very high standard. The Responsibilities as an Institutional Shareholder section below describes the Company's approach to managing its investments, including ESG matters. BUSINESS ETHICS The Company maintains a zero-tolerance policy towards the provision of illegal services, bribery and corruption in its business activities, including the facilitation of tax evasion. As the Company has no employees other than the Investment Director and the Company's operations are delegated to third-party service providers, the Board seeks assurances, at least annually, from its suppliers that they comply with the provisions of the Modern Slavery Act 2015 and maintain adequate safeguards in keeping with the provisions of the Bribery Act 2010 and Criminal Finances Act 2017. 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.
BOARD DIVERSITY The Company's affairs are overseen by a Board currently comprising four non-executive Directors and one executive Director - all of whom are male. In terms of progress in achieving diversity, 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. When the Board goes through its next recruitment process, improving the Board's gender and ethnic diversity will be important criteria. The Directors have broad experience, bringing knowledge of investment markets, business, financial services, accounting and regulatory expertise to discussions on the Company's business. The Directors regularly consider the leadership needs and specific skills required to achieve the Company's investment objective. Whilst appointments are based on skills and experience, the Board is conscious of diversity of gender, social and ethnic backgrounds, cognitive and personal strengths and experience. All appointments are based on objective criteria and merit, and are made following a formal, rigorous and transparent process. 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. 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's own direct environmental impact is minimal. The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions-producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013 for the year to 31st December 2020 (2019: same). All printed material, wherever possible, is on recycled material. The Investment Director attempts to minimise the Company's carbon footprint. The Company's indirect impact occurs through the investments it makes. 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. ENVIRONMENTAL, SOCIAL & GOVERNANCE ('ESG') REPORTING 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. The Company contributes to wider society by generating returns to shareholders whose ownership in shares in the Company affects their savings and by investing in companies which provide employment and innovation. No investments are made in tobacco or fossil fuel producing companies. The Board now monitors ESG reporting in the Company's investments and, where appropriate, the Investment Director seeks further information to understand the ESG philosophy and conduct of individual investments. STREAMLINED ENERGY AND CARBON REPORTING The Company is categorised as a lower energy user under the HMRC Environmental Reporting Guidelines March 2019 and is therefore not required to make the detailed disclosures of energy and carbon information set out within the guidelines. The Company's energy and carbon information is therefore not disclosed in this Report. 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 net assets have decreased from £171.6m to £170.3m and at 31st December 2020 the net asset value per Ordinary share was 2258.9p. 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 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 0.7% compared to a decrease of 12.5% by the FTSE All-Share Index. Over the five years ended 31st December 2020 shareholders' funds increased by 19.4% compared with a rise of 6.7% by the FTSE All-Share Index. Dividends per Ordinary share The total dividend per Ordinary share paid and proposed is 32.25p (2019: 32.25p). Ongoing Charge Ongoing charges are expenses charged to revenue or capital that relate to the operation of the Company as an investment trust and are deemed likely to recur in the foreseeable future. They do not include the costs of acquisition or disposal of investments, financing costs and gains or losses arising on investments. Ongoing charges are calculated on the basis of the annualised ongoing charge as a percentage of the average net asset value in the period. The Ongoing Charge for the year ended 31st December 2020 was 0.5% (2019: 0.5%). 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 53. 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 Ordinary 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, Northern Trust Company, and the Board monitors the custodian to ensure assets remain protected. In addition, the Company operates clear internal controls to safeguard all assets. Political risk - Changes in the political landscape could substantially affect the Company's prospects and the value of its investment portfolio. Climate change risk - Climate change will bring fundamental shifts to economic activity and human behaviour across the planet. The Board and Investment Manager regularly consider how climate change could affect the Company's investment portfolio and shareholder returns. Pandemic risk - The recent emergence of SARS-Coronavirus-2 and its variants in global human populations has had a dramatic economic and social impact worldwide in 2020. Even with the availability of various vaccines in 2021, COVID-19 is likely to continue to affect economic activity this year and beyond. Significant structural changes within economies which had already been occurring before the pandemic have been accelerated and it is already apparent that there are major sectoral winners and losers.
Economic conditions - Changes in economic conditions, including but not limited to, interest rates, rates of inflation, competition and tax legislation, could have a substantial effect on the Company's prospects and the value of its investment portfolio. The Board has reviewed the risks arising from the impact of the COVID-19 pandemic. The pandemic has affected, and will continue to affect, the value of the portfolio companies and has created uncertainty around levels of future revenue from dividends. The investment objective and policy has not changed. The Company's service providers have implemented business continuity plans to ensure their services remain as unaffected as possible and, as such, the Board does not expect there to be changes in the level of service provided. These and other risks facing the Company are reviewed regularly by the Audit and Compliance Committee and the Board. SECTION 172 STATEMENT The Board seeks to promote the success of the Company for the benefit of its shareholders, giving consideration to the likely long term consequences of any decision with regard to the interests of its business relationships and the environment in which it operates. The Company has one employee, the Investment Director.
Factoring Stakeholders into Principal Decisions The Board defines principal decisions as both those that are material to the Company but also those that are significant to any of the Company's key stakeholders as identified above. In making the following principal decisions, the Board considered the outcome from its stakeholder engagement as well as the need to maintain a reputation for high standards of business conduct and the need to act fairly between the members of the Company.
VIABILITY STATEMENT 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:
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. Consideration was also given to the principal risks and uncertainties faced by the Company, as detailed on page 14. The Directors seek reassurance from suppliers that their operations are well managed and that they are taking appropriate action to monitor and mitigate risk. The Board also considered the implications of the pandemic and resultant economic uncertainty in relation to the Company's investment position, its future income streams and its ability to continue trading. Based on the above, the Directors confirm that 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. SHAREHOLDER COMMUNICATION The Board is committed to maintaining open channels of communication with shareholders in a manner which they find most meaningful. 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 Board remains cognisant of the importance of clear communications with shareholders whilst restrictions associated to the COVID-19 pandemic are in force and will respond to all reasonable requests for information or meetings. The Investment Director maintains a regular dialogue with major shareholders and reports to the Board. In the event shareholders wish to raise issues or concerns with the Directors, they are welcome to do so at any time via the Company Secretary at cosec@maitlandgroup.com. The Annual Report and half-year results are circulated to shareholders wishing to receive them and made available on the Company's website. These provide shareholders with a clear understanding of the Company's portfolio and financial position. This information is supplemented by the daily calculation and publication of the NAV per share. A presentation on the Company's performance made by the Investment Director will be made available on the Company's website (https://www.maitlandgroup.com/investment-trusts/rights-and-issues-investment-trust-plc/) prior to the 2021 AGM. Shareholders are encouraged to ask questions via the Company Secretary. COMPANY'S DIRECTORS AND EMPLOYEES The number of directors and employees during the year was 5 (2019: 5). 2020 2019
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 REPORT OF THE DIRECTORS The Directors have pleasure in submitting their fifty-eighth Annual Report, together with audited financial statements in respect of the year ended 31st December 2020. DIRECTORS The Directors who served during the year were as follows: Dr David Bramwell David is a Chartered Engineer and during his career has worked in a wide range of industries in senior executive and management consultancy roles. He was appointed Chief Executive of Peterhouse Group PLC in 1997 and thereafter Chairman of Intelek PLC. During his career he has represented several private equity and investment institutions as chairman and independent non-executive director of many private companies operating in wide range of industries. His prime role was the strategic and tactical development in order to achieve growth in stakeholder value. David Best David is a Chartered Accountant and is a director of a number of private companies. He was previously Group Finance Director of Peterhouse Group PLC and a Managing Director of YFM Group, a private equity business. He has over 30 years of investment experience across a number of businesses; since 2011 he has been involved with Mercia Asset Management PLC and its predecessor operations advising on a number of portfolio companies. His involvement in operating companies allows him to share insights with the Board on the issues businesses face across a number of varied sectors. Dr Andrew Hosty Andrew is a Chartered Engineer and Fellow of the Royal Academy of Engineers. He is an international business leader with over 15 years of Non-executive board experience and 30 years of executive and management experience, spanning private equity, UK Plc and global blue-chip corporates. From 2016 to 2018 Andrew was the CEO of the Sir Henry Royce Institute, the UK's home of advanced materials research and innovation. Andrew was Chief Operating Officer of Morgan Advanced Materials, and served on the Plc Board as an Executive Director from 2010 to 2016. These experiences and his current work with other operating companies mean that Andrew can contribute to a range of business matters over a wide spectrum of end markets. Jonathan Roper Jonathan is a solicitor and until his retirement from practice was a partner in Eversheds Sutherland (formerly Eversheds LLP.) He has more than 35 years' experience of commercial practice in the City, advising primarily on public and private company mergers and acquisitions, joint ventures and equity and other financing arrangements for UK and overseas clients, including many in the financial services sector, and often at a strategic board level. Until recently, he has been a member of the Council of the London School of Hygiene & Tropical Medicine and chair of its Audit & Risk Committee. Simon Knott Simon has served as Investment Manager of the Company since 1983 focusing on UK smaller companies. DIVIDENDS The Board is recommending a final dividend of 21.5p per Ordinary share (2019: 21.5p). If approved, taken together with the interim dividend of 10.75p per Ordinary share (2019: 10.75p), this will result in a total dividend to the holders of Ordinary shares for the year of 32.25p per Ordinary share (2019: 32.25p). SUBSTANTIAL SHAREHOLDINGS The Company has received notification to 15th February 2021, in accordance with Chapter 5 of the Disclosure and Transparency Rules, of the following voting rights:
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 50 of the financial statements. CORPORATE GOVERNANCE Full details are given in the Corporate Governance Statement on pages 21 to 23. The Corporate Governance Statement forms part of this Directors' Report. Whilst the Company has no employees or customers, the Directors give regular consideration to the need to foster the Company's business relationships with its stakeholders, including, but not limited to, its shareholders and service providers. The effect of this consideration upon the principal decisions taken by the Company during the year to 31st December 2020 is set out in further detail in the Strategic Report on pages 9 to 17. STAKEHOLDER CONSIDERATIONS The Notice of the Annual General Meeting to be held on 24th March 2021 is set out on pages 4 to 6. Share Buy Back Facility (resolution 11): The Board is seeking to renew the authority granted at the Annual General Meeting held on 24th June 2020 that authorises the Company to make market purchases of Ordinary 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 Ordinary shares in issue, representing 1,130,294 Ordinary shares as at 15th February 2021. The authority will expire at the conclusion of the next Annual General Meeting of the Company in 2022 unless the authority is renewed. The share buy back programme was paused by the Directors in 2020 for the reasons discussed on pages 1 and 7. However, Shore Capital, 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 when the Board decides to restart the programme. Adoption of Revised Articles of Association (resolution 12): The Board proposes certain amendments be made to the Articles of Association of the Company to reduce the quorum for shareholder meetings from three to two and permit the use of digital shareholder meetings to provide the Board with flexibility in the context of the ongoing COVID-19 pandemic and for the future. 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 27 to 29 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
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. The Directors have closely monitored the implications of the COVID-19 pandemic for both the Company's operations and performance, and are comfortable that associated risks have been appropriately mitigated. 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. The Company purchases liability insurance covering the Directors and Officers of the Company. 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 CORPORATE GOVERNANCE STATEMENT AIC CODE The Board has considered the Principles and Provisions of the AIC Code of Corporate Governance, published in February 2019 (AIC Code). The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code (the UK Code), as well as setting out additional provisions on issues that are of specific relevance to investment companies. The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council provides more relevant information to shareholders. The Company has complied with the Principles and Provisions of the AIC Code but the Board has not elected 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. The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the Principles and Provisions set out in the UK Code to make them relevant for investment companies. OPERATION OF THE BOARD OF DIRECTORS The Directors of the Company, as shown on page 3, 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 page 18, 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:
In the year, there were 6 board meetings and 2 board committee meetings. Mr Knott is not a member of either committee but does attend meetings when appropriate.
INDEPENDENCE OF THE DIRECTORS The Board of Directors, which includes four non-executive Directors, all of whom are considered to be independent, normally meets six 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, Mr D. M. Best and Mr. J. B. Roper have 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, Mr. D. M. Best and Mr. J. B. Roper to be independent but, in accordance with the Code, their roles 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. The Board uses a skills matrix in order to identify any gaps in the current Board's knowledge and experience which will be used to support future evaluations and succession planning. The remuneration of the Investment Director is recommended to the Board by the Nomination and Remuneration Committee. The Board considers that the interests of the Investment Director, who is himself a shareholder (see page 27), are aligned with those of other shareholders. This Committee also reviews the composition of the Board and manages the recruitment process for new Directors. Further details of the work of the Committee are given on page 27. The Board reviews its performance on an annual basis; the review was not externally facilitated by a third party in 2020. The review covers an assessment of how cohesively the Board, Audit and Compliance 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 2020 was output-based, but had regard to all other relevant factors. In order to prevent "overboarding", any significant external commitments require the prior consent of the Board. 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' Annual Remuneration Report on pages 27 to 32. 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 AND COMPLIANCE COMMITTEE The Audit and Compliance 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. This Committee also reviews the performance of key suppliers and therefore the Board has decided not to establish a separate Management Engagement Committee. Further details are given in the Report of the Audit and Compliance Committee on pages 24 to 26. STATEMENT OF COMPLIANCE The Directors consider that during the year ended 31st December 2020 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 REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE ROLE OF THE AUDIT AND COMPLIANCE COMMITTEE The Audit and Compliance Committee's main functions are as follows: * To monitor the internal financial control and risk management systems on which the Company is reliant.
The Audit and Compliance 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 AND COMPLIANCE COMMITTEE The Audit and Compliance Committee comprises four independent non-executive Directors, at least one of whom has recent and relevant financial experience. The Company's Chairman, David Bramwell is a member of the Audit and Compliance Committee. This is considered to be appropriate given his financial and markets' experience and the fact that he was independent on appointment. SIGNIFICANT ISSUES AND RISKS In planning its own work and reviewing the audit plan of the Auditor, the Audit and Compliance 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. The Audit and Compliance Committee notes that the coronavirus pandemic has affected economies and stock markets worldwide and that the valuations of all its investments have been impacted. The Audit and Compliance Committee has reviewed the procedures in place for ensuring the accuracy of the values and is content that these procedures remain robust. 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, Northern Trust Company, 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 and Compliance 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 and Compliance Committee prior to publication and is also reviewed by the Auditor. The Audit and Compliance 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 and Compliance 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 Audit and Compliance 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 and Compliance Committee has also agreed to keep such a requirement under review. EXTERNAL AUDIT PROCESS The Audit and Compliance 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 and Compliance 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 and Compliance Committee will review the audit process and consider its effectiveness. AUDITOR ASSESSMENT AND INDEPENDENCE 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 Board is committed to conducting a tender of the Company's audit engagement in accordance with applicable regulations, but in the short term continues to value the continuity and objectivity that Begbies offer through the uncertainty caused by the COVID-19 pandemic. Any decision to conduct an audit tender will therefore be reconsidered once this has passed. The fees for audit purposes were £16,800 (2019: £16,500). 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 2020 was £5,520 (2019: £5,400). These non-audit services are related to the review of the half year 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. INDEPENDENCE 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:
D. M. Best, Director Chairman, Audit and Compliance Committee 16th February 2021
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 2020. 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)
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 2021 the fees payable to the Directors are as follows (previous rates are shown in brackets): Chairman £28,000 (£28,000), other non-executive Directors £22,000 (£22,000) and Investment Director/CEO (base salary excluding any discretionary bonus) £255,000 (£319,500). STATEMENT OF DIRECTORS' SHAREHOLDINGS AND SHARE INTERESTS (AUDITED) The Company has not set any requirements or guidelines for the Directors to own Ordinary shares in the Company. The beneficial interests of the Directors and their connected persons in the Ordinary shares of the Company are shown in the table below.
No changes in the Directors' interests shown above have occurred since 31st December 2020. PERFORMANCE GRAPH AND CEO REMUNERATION TABLE The graph below illustrates the total shareholder return for the Ordinary 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
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 2020 and 2021. During the same period the Company had no other employees. Percentage Percentage change change in in salary annual bonus CEO -20.2% 0% Workforce N/A N/A SIGNIFICANCE OF SPEND ON PAY Directors' Shareholder remuneration distribution £ £ 2020 413,500 2,432,000 2019 413,500 2,446,000 Difference - -14,000 % Change 0% -0.6%
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. Following detailed review of performance in the context of the ongoing global pandemic, it was agreed to amend the terms for the Investment Director as further discussed on page 16. 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 last approved by shareholders at the Annual General Meeting held on 24th June 2020. 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 £150,000 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 19, 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 The fees paid to the Chairman and the other non-executive Directors aim to be non-executive competitive with other investment trusts of equivalent size and complexity. Fees are Directors' fees 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 to apply from its approval at the 2020 Annual General Meeting until the Annual General Meeting in 2023. ILLUSTRATION OF APPLICATION OF REMUNERATION POLICY TO INVESTMENT DIRECTOR'S PAY 2020 Financial Year 2021 Financial Year
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 in the event of outperformance. VOTING AT ANNUAL GENERAL MEETING A binding Ordinary Resolution approving the Directors' Remuneration Policy was approved on 24th June 2020. The votes cast were as follows: Remuneration Policy
A non-binding Ordinary Resolution adopting the Annual Report on Directors' Remuneration for the year ended 31st December 2019 was approved by shareholders at the Annual General Meeting held on 24th June 2020. The votes cast by proxy were as follows: Annual Report on Directors' Remuneration
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 2020:
J. B. Roper, Director Chairman, Nominations and Remuneration Committee 16th February 2021 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:
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:
Dr D. M. Bramwell, Director 16th February 2021
INDEPENDENT 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 2020 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:
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 and Compliance 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:
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:
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 and Compliance Committee. In 2020 the COVID-19 viral infection became a global pandemic. It has caused disruption to supply chains, slowed world growth and caused considerable volatility in global markets. This new uncertainty has had an impact on our risk assessment and as a result on our audit of the financial statements. There is increased risk due to the degree of uncertainty in the assumptions underlying the appropriateness of the Directors preparing the financial statements on a going concern basis and their consideration of the Company's future prospects. We obtained and reviewed the Directors' assessment of going concern. This included reviewing the Directors' consideration of the Company's financial position, the revenue and the cashflow forecasts which take into account the impact that COVID-19 may have on the Company and which support the Directors' assessment of going concern. We assessed the disclosures presented in the Annual Report in relation to COVID-19 by reading the Going Concern Statement and other information, including the Principal Risks and Viability Statements set out in the Strategic Report and assessed its consistency with the financial statements and the evidence we obtained in our audit. Based on the work we performed, we are satisfied that the Directors have appropriately considered the impact of COVID-19 on the financial statements of the Company and its financial outlook and that appropriate disclosures have been made. 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 £1.7 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 £85,000 for the revenue column of the Income Statement which is 10% of the net return. The Audit and Compliance Committee requested our materiality to be set at the lower level of £1 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 £20,000. We have also agreed with the Audit and Compliance Committee that we would report to them all audit differences in excess of £20,000 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. 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:
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
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:
RESPONSIBILITIES OF DIRECTORS As explained more fully in the Statement of Directors' Responsibilities set out on page 33, 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. EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES INCLUDING FRAUD The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. Our approach was as follows:
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. 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 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 15 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) 9 Bonhill Street For and on behalf of Begbies London Chartered Accountants and Statutory Auditor 16th February 2021
STATEMENT OF COMPREHENSIVE INCOME for the year ended 31st December 2020
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 profit 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 43 to 53 form part of these financial statements. BALANCE SHEET as at 31st December 2020
The notes on pages 43 to 53 form part of these financial statements. The financial statements were approved by the Board and authorised for issue on 16th February 2021. 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 2020
The notes on pages 43 to 53 form part of these financial statements. STATEMENT OF CASH FLOWS for the year ended 31st December 2020
The notes on pages 43 to 53 form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS for the year ended 31st December 2020 1. ACCOUNTING POLICIES Basis of Accounting The financial statements of the Company have been prepared under the historical cost basis as modified by the revaluation of certain financial assets and liabilities held at fair value through profit or loss and 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 Company's assets consist mainly of equity shares in companies listed on recognised stock exchanges and in most circumstances, including in the current market environment, are considered to be realisable within a short timescale and, accordingly, the Board believes that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. The Board has considered the impact of COVID-19 and believes this will have a limited impact on the Company's operational resources and existence. Having assessed these factors, the principal risks and other matters discussed in connection with the viability statement, the Board considers it appropriate to continue to adopt the going concern basis in the preparation of the financial statements. 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 October 2019 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. Amendments to References to the Conceptual Framework in IFRS Standards, amendments to IAS 1 and IAS 8 (definition of material) and amendments to IFRS9, IAS 39 and IFRS 7 (interest rate benchmark reform) were effective for annual periods beginning on or after 1st January 2020 and have not had any material impact on the accounts. Other IAS 1 amendments (classification of liabilities as current or non-current) and IFRS 3 (definition of a business) are effective for annual periods beginning on or after 1st January 2022 and are not anticipated to have any material impact on the accounts. 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:
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. 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.
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.
- - - - - -
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.
Amounts recognised as distributions to equity holders in the year:
2020 2019 £'000 £'000 Ordinary Proposed final dividend payable for the year ended 31st December 2020 of 21.5p per share (year ended 31st December 2019: 21.5p) 1,621 1,621 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. 2020 2019 £'000 £'000 Revenue available for distribution by way of dividend for the year 857 2,356 Ordinary Interim dividend for the year ended 31st December 2020 of 10.75p per share (year ended 31st December 2019: 10.75p) (811) (825) (year ended 31st December 2019: 21.5p) (1,621) (1,621) Net addition to Revenue reserve (1,575) (90)
8. INVESTMENTS Analysis of the investments The number of companies or institutions in which equities, convertibles or fixed interest securities were held was 28 (2019: 28).
9. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
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 £49,241 were incurred on the acquisition of investments (2019: £53,483). Costs relating to disposals of investments during the year amounted to £12,434 (2019: £nil). All transaction costs have been included within investments at fair value.
The Company has one wholly owned subsidiary undertaking: Proportion of nominal value Country of of issued shares Principal incorporation Description of and voting Name activity and operation shares held rights held Discretionary Unit Fund Fund management England Ordinary 100% Managers Limited Discretionary Unit Fund Managers Limited had capital and reserves of £758,399 and a loss of £57 for the year ended 31st December 2020.
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 2020:
Number of Ordinary shares 2020 Balance at beginning of year 7,540,321 Ordinary shares bought back and cancelled - Balance at end of year 7,540,321 15. RESERVES
The capital reserve represents those realised profits and losses arising on the disposal of investments. The
16. NET ASSET VALUE PER SHARE The net asset value per Ordinary share calculated in accordance with the Articles of Association was as follows: Net asset value per Net asset value Ordinary share attributable attributable
The Company may repurchase its own shares and then cancel them, reducing the freely traded shares ranking for dividends and enhancing returns and earnings per Ordinary Share to the remaining Shareholders. When the Company repurchases its shares, it does so at a total cost below the prevailing NAV per share. The estimated percentage added to the NAV per share from buybacks of 0% (2019: 0.6%) is derived from the repurchase of shares in the market at a discount to the prevailing NAV at the point of repurchase. The shares were bought back at a weighted average discount of 0% (2019: 9.4%).
17. RELATED PARTY TRANSACTIONS During the year the Company had the following transactions with Discretionary Unit Fund Managers Limited, its subsidiary undertaking: 2020 2019 £'000 £'000 Dividends received -- Amounts (due to)/owed by subsidiary undertaking (758) 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 are 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 2020 on its quoted equity investments was £157,245,000 (2019: £154,941,000). 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:
The risk is managed by dealing only with brokers and banks who have satisfactory credit ratings and are approved by the Audit and Compliance 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. 18. FINANCIAL ASSETS AND LIABILITIES continued 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.
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.
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| ISIN: | GB0007392078 |
| Category Code: | FR |
| TIDM: | RIII |
| Sequence No.: | 93689 |
| EQS News ID: | 1168794 |
| End of Announcement | EQS News Service |
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