Annual Financial Report
RIGHTS AND ISSUES INVESTMENT TRUST P.L.C
Annual Report & Accounts for the full year to 31 December 2014
A copy of the Company's Annual Report for the year ended 31
December 2014 will shortly be available to view and download from the
Company's website www.rightsandissues.co.uk. Neither the contents of this
website nor the contents of any website accessible from hyperlinks on this
website (or any other website) is incorporated into or forms part of this
announcement.
Printed copies of the Annual Report will be sent to shareholders
shortly. Additional copies may be obtained from the Corporate Secretary -
Phoenix Administration Services Limited, Springfield Lodge, Colchester Road,
Chelmsford, Essex CM2 5PW.
The Annual General Meeting of the Company will be held on Thursday
19 March 2015 at 12 noon. The Directors have proposed the payment of a final
dividend of 25.5p per income share and 1.8p per capital share which, if
approved by shareholders at the forthcoming Annual General Meeting, will be
payable on 31 March 2015 to shareholders whose names appear on the register at
the close of business on 6 March 2015 (ex-dividend 5 March 2015).
The following text is copied from the Annual Report & Accounts.
RIGHTS AND ISSUES INVESTMENT TRUST P.L.C
Annual Report & Accounts for the full year to 31 December 2014
CAPITAL STRUCTURE
CAPITAL
ISSUE
1,640,000 shares of 25p each.
INCOME ENTITLEMENT
A supplementary dividend payment of 2.75% net on the capital
reserves in complete units of £160,000 in excess of £382,536 and 1/31st of the
distribution of all profits after the payment of supplementary capital
dividends.
CAPITAL ENTITLEMENT
36.1p per share and 75% of the surplus assets on liquidation.
VOTING
One and a half votes per share on ordinary business and ten votes on a motion
to liquidate.
PRICE (at 31st December 2014):
3942.5p
GROSS YIELD
2.50%.
DISCOUNT
24.0%.
DESCRIPTION
Capital shares are of interest to capital orientated investors
wishing some income.
INCOME
ISSUE
2,460,000 shares of 25p each.
INCOME ENTITLEMENT
30/31st of the distribution of all profits after the payment of supplementary
capital dividends.
CAPITAL ENTITLEMENT
25.0p per share and 25% of the surplus assets on liquidation.
VOTING
One vote per share.
PRICE (at 31st December 2014):
1062.5p
GROSS YIELD
3.80%.
DISCOUNT
15.9%.
DESCRIPTION
Income shares are of interest to income orientated investors
wishing some participation in capital growth.
RIGHTS AND ISSUES INVESTMENT TRUST P.L.C. ("THE TRUST" or "THE COMPANY") MAY
BE LIQUIDATED AT ANY TIME, BUT THE BOARD OF DIRECTORS HAS INDICATED THAT IT IS
NOT ITS PRESENT INTENTION TO DO SO PRIOR TO 25TH JULY 2016.
Note: The above is a summary of rights. For full information shareholders
should refer to the Articles of Association
HISTORIC RECORD
Year to Net asset Net asset Net Net asset Net FT All FT All
31st value per value dividend value per dividend Share Share
December Capital per Capital per Income per Income Index Index
Share Share Capital share Share (Rebased
(Index Share 1984 =
1984 = 100) 100)
1984 116.2p 100 2.0275p 48.5p 3.8p 592.94 100
1990 301.7p 260 6.9375p 90.3p 7.5p 1032.6 174
1995 699.8p 602 12.0616p 182.7p 10.5p 1802.56 304
2000 1895.4p 1631 31.3238p 467.9p 25.5p 2983.81 503
2001 1858.4p 1599 41.2323p 465.8p 30.5p 2523.88 426
2002 1640.6p 1412 48.6012p 417.1p 33.0p 1893.70 319
2003 2194.5p 1889 50.8226p 542.9p 34.5p 2207.40 372
2004 2573.1p 2214 50.9226p 633.3p 36.5p 2410.80 407
2005 2928.1p 2520 58.0982p 751.8p 40.5p 2847.00 480
2006 3669.8p 3158 68.1750p 920.3p 43.5p 3221.40 543
2007 3342.1p 2876 70.9829p 851.4p 46.0p 3286.70 554
2008 1643.3p 1414 70.3329p 459.0p 33.0p 2209.29 373
2009 2158.5p 1858 69.9579p 549.3p 25.5p 2760.80 466
2010 3105.7p 2673 69.9579p 752.9p 25.5p 3094.41 522
2011 3004.6p 2586 69.9579p 735.2p 25.5p 2857.88 482
2012 3848.1p 3312 70.8253p 935.0p 26.75p 3093.41 522
2013 5529.9p 4759 83.8293p* 1334.0p 40.00p* 3609.63 609
2014 5188.4p 4465 88.1902p 1263.6p 36.00p 3532.74 596
* Includes special dividend
DIRECTORS AND ADVISERS
DIRECTORS
Dr D. M. BRAMWELL Chairman
D. M. BEST
S. J. B. KNOTT
J. B. ROPER
REGISTERED OFFICE
Springfield Lodge
Colchester Road
Chelmsford CM2 5PW
Company registration number 736898
Registered in England
SECRETARY
PHOENIX ADMINISTRATION SERVICES LIMITED
Springfield Lodge Colchester Road
Chelmsford CM2 5PW
SOLICITORS
EVERSHEDS LLP
One Wood Street London EC2V 7WS
AUDITOR
BEGBIES
9 Bonhill Street London EC2A 4DJ
REGISTRARS
CAPITA REGISTRARS LTD
The Registry
34 Beckenham Road
Beckenham Kent BR3 4TU
BROKERS
WESTHOUSE SECURITIES LTD
Heron Tower 110 Bishopsgate London EC2N 4AY
BANKERS
HSBC BANK PLC
London EC2P 2BX
An investment Company under Section 833 of the Companies Act 2006
NOTICE OF MEETING
NOTICE IS HEREBY GIVEN that the FIFTY SECOND ANNUAL GENERAL MEETING of the
members of RIGHTS AND ISSUES INVESTMENT TRUST PUBLIC LIMITED COMPANY will be
held at No. 1 Poultry, London EC2R 8JR, on 19th March 2015, at 12 noon, for
the following purposes:
1. To receive the audited Financial Statements and Report of the Directors and
Auditor for the year ended 31st December 2014.
2. To approve the Annual Report on Directors' Remuneration, set out on pages
20 to 25, for the financial year ended 31st December 2014.
3. To approve the payment of a final dividend of 25.5p per income share and to
approve the payment of a final dividend of 1.8p per capital share for the
financial year ended 31st December 2014.
4. To re-elect Dr D. Bramwell as a Director.
5. To re-elect D. M. Best as a Director.
6. To re-elect S. J. B. Knott as a Director.
7. To re-elect J. B. Roper as a Director.
8. To reappoint the Auditor and authorise the Directors to determine its
remuneration.
By Order of the Board,
PHOENIX ADMINISTRATION SERVICES LIMITED, Secretary
19th February 2015
Notes:
1. Any shareholder who is entitled to attend and vote may appoint
one or more proxies to attend and vote instead of him. A proxy need not be a
shareholder. To appoint more than one proxy, additional proxy forms may be
obtained by contacting the registrars. Please indicate in the box under the
resolutions the number of shares in relation to which they are authorised to
act as your proxy. Please also indicate by ticking the box provided if the
proxy instructions are part of multiple instructions being given. All forms
must be signed by the named shareholder and returned together in the same
envelope.
2. The right to appoint a proxy does not apply to persons whose
shares in the Company (the "Shares") are held on their behalf by another
person and who have been nominated to receive communications from the Company
in accordance with section 146 of the 2006 Act ("nominated persons").
Nominated persons may have a right under an agreement with the registered
shareholder who holds the Shares on their behalf to be appointed (or to have
someone else appointed) as a proxy. Alternatively, if nominated persons do not
have such a right, or do not wish to exercise it, they may have a right under
such an agreement to give instructions to the person holding the Shares as to
the exercise of voting rights.
3. In order to be valid, a form of proxy, which is provided with
this notice, and a power of attorney or other authority under which it is
signed, or a notarially certified or office copy of such power or authority,
must reach the Company's registrars, Capita Registrars Ltd, The Registry, 34
Beckenham Road, Beckenham BR3 4TU, not less than 48 hours (excluding any part
of a day which is a non-working day) before the time of the meeting or of any
adjournment of the meeting. A form of proxy is enclosed with this notice.
4. CREST members who wish to appoint a proxy or proxies by
utilising the CREST electronic proxy appointment service may do so by
utilising the procedures described in the CREST Manual. CREST Personal Members
or other CREST sponsored members, and those CREST members who have appointed a
voting service provider(s), should refer to their CREST sponsor or voting
service provider(s), who will be able to take the appropriate action on their
behalf.
5. In order for a proxy appointment made by means of CREST to be
valid, the appropriate CREST message must be transmitted so as to be received
by the Company's agent, Capita Registrars (whose CREST ID is RA10) by the
specified latest time(s) for receipt of proxy appointments. For this purpose,
the time of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Applications Host) from which
the Company's agent is able to retrieve the message by enquiry to CREST in the
manner prescribed.
6. The Company may treat as invalid a CREST Proxy Instruction in
the circumstances set out in Regulation 35(5) (a) of the Uncertificated
Securities Regulations 2001.
7. A register showing the transactions of each Director and so far
as he is aware the transactions of his family in the Company's Income and
Capital Shares will be available for inspection at the offices of the
Secretary, Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW,
during normal business hours every weekday except Saturdays, from the above
date to the day preceding that of the Annual General Meeting. It will also be
available for inspection at the place of the meeting for 15 minutes prior to
the Annual General Meeting and during the meeting. Letters of appointment and
memoranda in respect of Directors are also available for inspection.
8. Any shareholder attending the general meeting is entitled,
pursuant to section 319A of the 2006 Act to ask any question relating to the
business being dealt with at the meeting. The Company will answer any such
questions unless: (i) to do so would interfere unduly with the preparation for
the meeting or involve the disclosure of confidential information; (ii) the
answer has already been given on a website in the form of an answer to a
question; or (iii) it is undesirable in the interests of the Company or the
good order of the meeting that the question be answered.
9. 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.rightsandissues.co.uk: (i) the matters set out in this notice
of general meeting; (ii) the total numbers of Shares and shares of each class,
in respect of which shareholders are entitled to exercise voting rights at the
meeting; and (iii) the totals of the voting rights that shareholders are
entitled to exercise at the meeting in respect of the shares of each class.
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.rightsandissues.co.uk:
(i) the date of the general meeting; (ii) the text of the resolution
or, as the case may be, a description of the subject matter of the poll; (iii)
the number of votes validly cast; (iv) the proportion of the Company's issued
share capital represented by those votes; (v) the number of votes cast in
favour; (vi) the number of votes cast against; and (vii) the number of
abstentions (if counted).
11. In order to attend and vote at this meeting by proxy you must
comply with the procedures set out in Notes 1 to 3 by the date specified in
Note 3.
12. The right of shareholders to vote at the meeting is determined
by reference to the register of shareholders. As permitted by section 360B(3)
of the 2006 Act 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 18.00 on 17th March 2015 in
order to be entitled to attend and vote at the meeting. Such shareholders may
only cast votes in respect of shares held at such time. Changes to entries on
the relevant register after that time shall be disregarded in determining the
rights of any person to attend or vote at the meeting.
13. The total number of Capital Shares of 25p each and Income
Shares of 25p in issue as at 12th February 2015, the last practicable day
before printing this document was 1,640,000 Capital Shares and 2,460,000
Income Shares and the total level of voting rights was 4,920,000.
CHAIRMAN'S STATEMENT
The second half of 2014 proved more difficult than the opening six
months. After a five year bull market in smaller company stocks, it was always
likely that there would be a period of profit taking.
There was however more consistency in the year between the
performance of large and small companies. The FTSE All-Share Index dropped by
2.1% and the FTSE Small Cap Index declined by 1.5%.
The Trust did not match indices this year and the net asset value
of the capital shares fell from 5529.9p to 5188.4p and that of the income
shares from 1334.0p to 1263.6p, reductions of 6.2% and 5.3% respectively.
Discretionary Unit Fund Managers saw profits of almost £200,000 despite modest
dealing losses.
Your Directors have increased dividends by 20% to 36.0p per income
share and 1.8p per capital share. Investment income exceeded £3,000,000 for
the first time and this reflects the strong capital performance of recent
years. The supplementary capital dividend of 86.3902p per capital share was
paid on 2nd January 2015 and, barring unforeseen circumstances, will be raised
to 86.6585p per capital share payable on 2nd January 2016.
The Trust has appointed Phoenix Administration Services Limited as
its administrators commencing on 1st February 2015. In the face of ever
growing and more complex regulation, the balance of advantage has swung back
to external administration. The Trust was historically externally administered
until 1988 and the change is expected to be cost neutral.
The future holds many contradictions: Geopolitical risks have
undoubtedly increased. Currency volatility has reared its head again partly in
response to the weakening world economy and the sudden decline in commodity
prices. The Euro area remains anaemic. There is the small matter of a General
Election in May. The silver lining is the continued good profit performance of
the corporate sector and this is reflected in the Trust's portfolio.
Dr D. M. BRAMWELL Chairman
STRATEGIC REPORT
The Strategic Report is designed to provide information primarily
about the Group's business and results for the year ended 31st December 2014
and should be read in conjunction with the Chairman's Statement on page 5.
STATUS
The Company is a self-managed split capital 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.
In the opinion of the Directors, the Company has conducted its
affairs during the year under review, and subsequently, so as to qualify as an
investment trust for the purposes of Chapter 4 of Part 24 of the Corporation
Tax Act 2010 and has been approved by HM Revenue & Customs under Regulation 5
of the Investment Trust (Approved Company) (Tax) Regulations 2011. The Company
continues to meet the eligibility conditions set out in section 1158 of the
Corporation Tax Act 2010 and the ongoing requirements for approved companies
in Chapter 3 of Part 2 Investment Trust (Approved Company) (Tax) Regulations
2011.
INVESTMENT OBJECTIVE AND POLICY
The Board's objective is to exceed the benchmark index over the long-term
whilst managing risk.
The Trust 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 the Company will not use gearing.
STRATEGY FOR MEETING THE OBJECTIVES
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 5
yearly review that addresses the above objective, the next being due in July
2016.
In pursuing its strategy there is a close attention to the control
of costs and further information is contained in the Key Performance
Indicators.
BUSINESS MODEL
There is a rigorous process of risk analysis at the level of the
individual investment based on the characteristics of the investee company.
This controls the overall risk profile of the investment portfolio allowing a
higher level of concentration in the investment portfolio.
The investment portfolio is then managed on a medium-term basis
with a low level of turnover of investments. This minimises transaction costs
and ensures a 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.
Additionally, there is a small unit trust management subsidiary,
Discretionary Unit Fund Managers Ltd, which shares costs and thereby minimises
the Company's Total Expense Ratio.
REVIEW OF THE BUSINESS
A review of the year and commentary on the future outlook is
provided in the Chairman's Statement on page 5.
During the year under review, the assets of the Company were
invested in accordance with the Company's investment policy.
Group assets have decreased from £123,705,974 to £116,173,397 and
at 31st December 2014, the net asset values of the income and capital shares
were 1263.6p and 5188.4p respectively.
The Board sought and has been given approval by the Financial
Conduct Authority to be a Small Registered Alternative Investment Fund Manager
(`AIFM').
The Financial Conduct Authority rules in relation to non-mainstream
investment products do not apply to the Company.
KEY PERFORMANCE INDICATORS
Management provides the Board with detailed information on the
Company's performance at every Board meeting.
Key Performance Indicators are:
- Shareholders' funds equity return compared to the FTSE All-Share Index
- Dividends per income share
- Total Expense Ratio
Shareholders' funds equity return
In reviewing the performance of the Company, the Board monitors
shareholders' funds in relation to the FTSE All-Share Index. During the year
shareholders' funds decreased by 6.1% compared with 2.1% by the FTSE All-Share
Index. Over the five years ended 31st December 2014 shareholders' funds
increased by 140.2% compared with a rise of 28.0% by the FTSE All-Share Index.
Dividends per income share
The total dividend per income share paid and proposed is 36.0p. The
total dividend per income share paid in 2013 was 40.0p per income share
(including a special dividend of 10.0p per share).
Total Expense Ratio ("TER")
The TER shows the efficiency of control of management costs. The
TER for the year ended 31st December 2014 was 0.42%. The TER for the year
ended 31st December 2013 was 0.42%.
PRINCIPAL RISKS
The Board of Directors has set up a process for identifying,
evaluating and managing the key risks of the Group. This process operated
during the year and has continued to the date of this report.
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 19 to these Financial Statements.
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 has a clearly defined investment philosophy and
operates a diversified portfolio. The Board monitors the Company's performance
against the benchmark and receives detailed portfolio attribution analysis.
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 both income and capital shares.
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 CTA to
maintain its investment trust status. This is achieved by the consistent
investment policy and is monitored by the Board.
Protection of assets - The Company's assets are protected by the
use of an independent custodian, HSBC Bank plc. In addition, the Company
operates clear internal controls to safeguard all assets.
These and other risks facing the Company are reviewed regularly by
the Audit Committee and the Board. Further information is given in Note 19 to
the Financial Statements on pages 43 and 44.
CORPORATE AND SOCIAL RESPONSIBILITY
When investments are made, the primary objective is to achieve the
best investment return while allowing for an acceptable degree of risk. In
pursuing this objective, various factors that may impact on the performance
are considered and these may include socially responsible investment issues.
As an investment trust, the Company has a limited impact on either
environment or social and community issues. All printed material, wherever
possible, is on recycled material. The Investment Director attempts to
minimise his carbon footprint.
In relation to greenhouse gas emissions, the Company does not
purchase electricity, heat, steam or cooling for its own use. It is located in
serviced offices and it would not be practical for the Company to obtain this
information.
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.
GROUP'S DIRECTORS AND EMPLOYEES
The number of directors and employees during the year were 6 (2013:6).
2014 2013
Male Female Male Female
Directors 3 0 3 0
(Non-Executive)
Directors 1 0 1 0
(Executive)
Employees 1 1 1 1
Given the specific objectives of the Company, the involvement of employees in
the affairs, policy and performance of the Company is limited to matters of an
administrative nature.
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 Group's performance and strategy.
The Strategic Report was approved by the Board and signed on its behalf by:
S. J. B. Knott,
Director
19th February 2015
REPORT OF THE DIRECTORS
The Directors have pleasure in submitting their fifty second Annual Report,
together with audited Financial Statements in respect of the year ended 31st
December 2014.
DIRECTORS
The Directors who served during the year were as follows:
Dr D. M. Chairman 67 Years He was Chairman of Intelek PLC
Bramwell
D. M. Best Chairman of Audit 56 Years He is a former Managing Director of
Committee YFM Group and former Group Financial
Director of Peterhouse Group Plc
S. J. B. Knott Investment 56 Years He has been investment manager for 30
Director years
J. B. Roper Chairman of 64 years He is a solicitor and former partner
Nominations and of Eversheds LLP specialising in
Remuneration corporate transactions until his
Committee retirement from the firm in 2011.
The Annual Report on Directors' Remuneration on pages 20 to 25
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. All Directors served throughout the
year.
Dr D. M. Bramwell, D. M. Best, S. J. B. Knott and J. B. Roper are
retiring. All being eligible, offer themselves for re-election.
The Company purchases liability insurance covering the Directors and Officers
of the Company.
The Company is committed to ensuring that any vacancies arising are
filled by the most qualified candidates and recognises the value of diversity
in the composition of the Board.
CONFLICTS OF INTEREST
The Articles 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 conflict 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.
SUBSTANTIAL SHAREHOLDINGS
The Company has received notification to 12th February 2015 in
accordance with Chapter 5 of the Disclosure and Transparency Rules of the
following voting rights:
Capital Income % of
Shares Shares Voting
Rights
Dartmoor Investment 71,773 332,750 9.0
Trust
Rathbone Brothers plc 94,340 176,073 6.5
J. Knott 69,670 203,505 6.3
P&J Allen 45,017 236,740 6.18
Henderson Global 175,500 - 5.3
Investors
V. M. Barr 72,540 96,829 4.2
H. J. D. Knott 93,200 55,789 4.0
S. J. B. Knott 118,000 5,000 3.7
DISCLOSURE OF SECTION 414C (11) SCHEDULE 7 INFORMATION
The Group 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 the inside cover of this document and in Note 15 of the Financial
Statements.
DIVIDENDS
The Board is recommending a final dividend on the income shares of
25.50p per share (2013: 20.50p). If approved, taken together with the interim
dividend of 10.50p per share (2013: 9.50p), this will result in an increase in
the total dividend for the year to 36.00p per share (2013: 30.00p).
In addition the Board is recommending a final dividend on the
capital shares of 1.80p per share (2013: 1.50p). If approved, taken together
with the supplementary capital dividend of 86.3902p per share (2013:
81.8293p), this will result in an increase in the total dividend for the year
to 88.1902p per share (2013: 83.3293p).
GLOBAL GREENHOUSE GAS EMISSIONS
As an investment company, the Company has no greenhouse gas
emissions to report from its operations for the year to 31st December 2014
(2013: same), nor does it have responsibility for any other emissions
producing sources.
CORPORATE GOVERNANCE
Full details are given in the Corporate Governance Statement on
pages 13 to 16. The Corporate Governance Statement forms part of this
Directors' Report.
DIRECTORS' REMUNERATION REPORT
The Directors' Remuneration Report is set out on pages 20 to 25.
The Company's Policy on Directors' Remuneration provided on pages 23 to 25 was
approved at the AGM held on 20th March 2014. There have been no changes to
Policy since it was last approved by shareholders.
ADMINISTRATION & SECRETARIAL AGREEMENT
During the year to 31st December 2014 the Company and its affairs
were administered on an agreed cost sharing basis by Discretionary Unit Fund
Managers Limited. Pursuant to an agreement dated 19th December 2014,
accounting, company secretarial and administrative services from 1st February
2015 are provided by Phoenix Administration Services Limited ("Phoenix"). The
agreement is terminable by either party on not less than six months' notice.
The Board considers the appointment of Phoenix to be in the best interest of
shareholders and going forward the services provided by Phoenix will be
reviewed regularly by the Board.
DISCLOSURE OF INFORMATION TO AUDITOR
So far as each Director at the date of approval of this report is aware:
- there is no relevant audit information of which the Company's Auditor is
unaware; and
- the Directors have taken all steps that they ought to have taken
to make themselves aware of any relevant audit information and to establish
that the Auditor is aware of that information.
GOING CONCERN
The Group'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 for 2015 and
its medium-term plans, the Directors believe that it is appropriate to
continue to prepare the accounts on a going concern basis and that it has
adequate resources to continue its operations for the foreseeable future.
GENERAL
No political contributions have been made during the year.
In accordance with Section 489 of the Companies Act 2006, a
resolution proposing the reappointment of Begbies as Auditor of the Company
will be put to the Annual General Meeting.
The Directors' Report was approved by the Board and signed on its behalf by:
Dr D. M. Bramwell,
Chairman
19th February 2015
CORPORATE GOVERNANCE STATEMENT
The Board has considered the principles and recommendations of the
AIC Code of Corporate Governance (`AIC Code'), which was re-issued in February
2013, by reference to the AIC Corporate Governance Guide for Investment
Companies (AIC Guide). The AIC Code, as explained by the AIC Guide, addresses
all the principles set out in the UK Corporate Governance Code, as well as
setting out additional principles and recommendations on issues that are of
specific relevance to the Company. The AIC Code is available on the AIC's
website: www.theaic.co.uk.
The Board considers that reporting against the principles and
recommendations of the AIC Code and by reference to the AIC guide (which
incorporates the UK Corporate Governance Code) will provide better information
to shareholders. However, as a self-managed investment trust company, not all
of the provisions of the AIC Code are directly applicable to the Company. Full
consideration has been given by the Board to the principles of good
governance. In so far as they are applicable to a smaller self-managed
investment trust, the Directors believe that they comply with the principles
other than the following matters:
- The Board had elected not to designate a senior independent
non-executive Director, as it considers that each Director has different
strengths and qualities on which they may provide leadership.
- Owing to the short timeframe between the Company's financial year
end and the publication of this Report, the Company is not able to meet the UK
Code's provision [E.2.4] that the Notice of the AGM and related papers be sent
to shareholders at least 20 working days before the meeting.
OPERATION OF THE BOARD OF DIRECTORS
The Directors of the Company, as shown on page 10, are Dr D. M.
Bramwell, Mr D. M. Best, Mr S. J. B. Knott and Mr J. B. Roper. All served
throughout the year under review. Their biographical details, set out on page
10, demonstrate a breadth of investment, commercial and professional
experience.
The Board is collectively responsible for 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 in the
Strategic Report on page 6.
The Chairman leads the Board and ensures that it deals effectively
with all the aspects of its role. In particular, he ensures that the Company
Secretary provides the Directors, in a timely manner, with management,
regulatory and financial information that is clear, accurate and relevant.
Representatives of the Company Secretary attend each Board meeting, enabling
the Directors to seek clarification on specific issues or to probe further on
matters of concern. Matters specifically reserved for decision by the full
Board have been defined and there is an agreed procedure for Directors, in the
furtherance of their duties, to take independent professional advice, if
necessary, at the Company's expense.
The Directors, their roles and attendance records are as follows:
Directors Role Audit Remuneration Board Committee
Committee Committee meetings meetings
attended attended
Dr D. M. Chairman, Non Executive Yes Yes 7 4
Bramwell
S. J. B. Knott Chief Executive and 7
Investment Director
D. M. Best Non Executive Chairman Yes 7 4
J. B. Roper Non Executive Yes Chairman 7 4
Directors' and officers' liability insurance cover is in place in respect of
the Directors.
INDEPENDENCE OF THE DIRECTORS
The Board of Directors, which includes three non-executive
Directors, all of whom are considered to be independent, meets about seven
times a year to review the affairs of the Trust. 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 Directors is independent in character and
judgment and that there are no relationships or circumstances that are likely
to affect their judgment. Dr D. M. Bramwell has now served on the Board for
more than nine years and (along with the other Directors) will therefore stand
for election by the shareholders each year. The Board is firmly of the view,
however, that length of service does not of itself impair a director's ability
to act independently. As such, the Board considers Dr D. M. Bramwell to be
independent but, in accordance with the Code, his role and contribution will
be subject to particularly rigorous review every year.
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. No new directors were appointed during the year. There
are procedures for a new director to receive relevant information on the
Company together with appropriate induction.
Further details of the work of the Committee are given on page 20.
BOARD AND DIRECTOR EVALUATION
On an annual basis the Board reviews its performance. The review
covers an assessment of how cohesively the Board, Audit Committee and
Nominations and Remuneration Committee work as a whole as well as the
performance of the individuals within them.
The Chairman is responsible for performing this review. Mr D. M.
Best 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 2014 was output-based, but had regard to all other
relevant factors.
TENURE OF DIRECTORS
As in previous years, all Directors retire at each Annual General
Meeting and, if appropriate, seek re-election. Being eligible, all Directors
offer themselves for re-election. The Board considers that the Directors
should be re-elected because they bring wide, current and relevant business
experience that allows them to contribute effectively to the leadership of the
Company. Following performance evaluation their performance continues to be
effective and committed to the role.
Each non-executive Director has signed a letter of appointment to
formalise the terms of his engagement as a non-executive Director (or there is
a memorandum of such terms), copies of which are available on request and at
the Company's Annual General Meeting. No Director is or was materially
interested in any contract subsisting during or at the end of the year that
was significant in relation to the Company's business.
No Director, apart from the Investment Director, has, or during the
financial year had, a contract of service with the Company. The terms of his
current basis of remuneration are detailed in the Director's Remuneration
Report on pages 22 and 23.
RISK MANAGEMENT AND INTERNAL CONTROL
The Board is fully aware of its duty to present a balanced and
understandable assessment of the Group's position. It acknowledges its
responsibility for the Group'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 Company Secretary which reports
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 Group, 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 Trust. It must be stressed that
undertaking an acceptable degree of controlled risk is always necessary in the
conduct of any investment trust if above average performance is to be
achieved. For this reason, the process can only provide reasonable and not
absolute assurance against loss.
AUDIT COMMITTEE
The Audit Committee is a formally constituted committee of the
Board with defined terms of reference, which include its role and the
authority delegated to it by the Board, and which are available for inspection
at the Company's registered office. It meets three times a year and among its
specific responsibilities are the review of the Company's annual and half
yearly results together with supporting documentation.
Further details are given in the Report of the Audit Committee on pages 17 to
19.
REMUNERATION
The remuneration of the Investment Director is decided by the
Nominations and Remuneration Committee. The Board considers that the interests
of the Investment Director, who is himself a shareholder (see page 21), are
aligned with those of other shareholders.
RELATIONS WITH SHAREHOLDERS
It is the Chairman's role to ensure effective communication with
the Company's shareholders and it is the responsibility of the Board to ensure
that satisfactory dialogue takes place, based on the mutual understanding of
objectives.
The Investment Director maintains a regular dialogue with major shareholders
and reports to the Board.
The Board considers that the Annual General Meeting should provide
an effective forum for individual investors to communicate with the Directors.
The Annual General Meeting is chaired by the Chairman of the Board. All the
other Directors, including the Chairman of the Audit Committee, expect to be
present. The Investment Director presents a review of the significant
holdings.
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 UK Stewardship Code was implemented by the Financial Reporting
Council, on a voluntary basis, in July 2010.
The Board considers that it is not appropriate for the Company, as
a small self-managed investment trust, formally to adopt the UK Stewardship
Code.
However, many of the UK Stewardship Code's principles on good
practice on engagement with investee companies are used by the Company, as
described above.
STATEMENT OF COMPLIANCE
The Directors consider that the Company has complied during the
year ended 31st December 2014 with all the relevant provisions set out in the
AIC Code.
The Corporate Governance Statement was approved by the Board and
signed on its behalf:
Dr D. M. Bramwell,
Chairman
19th February 2015
REPORT OF THE AUDIT COMMITTEE
ROLE OF THE AUDIT COMMITTEE
The Audit Committee's main functions are:
- To monitor the internal financial control and risk management systems on
which the Group is reliant
- To monitor the integrity of the half-year and annual financial
statements of the Group by reviewing and challenging, where necessary, the
actions and judgements of the Investment Director
- To meet the Auditor to review its proposed audit programme and
the subsequent Audit Report, to review the effectiveness of the audit process
and the levels of fees paid in respect of both audit and non-audit work
- To make recommendations to the Board in relation to the
appointment, reappointment or removal of the Auditor and to negotiate their
remuneration and terms of engagement on audit and non-audit work
- To monitor and review annually the Auditor's independence,
objectivity, effectiveness, resources and qualification
The Audit Committee meets at least twice each year and operates
within defined terms of reference which are available for inspection on the
Company's website.
COMPOSITION OF THE AUDIT COMMITTEE
The Audit Committee comprises three independent non-executive
Directors, at least one of whom has recent and relevant financial experience.
SIGNIFICANT ISSUES AND RISKS
In planning its own work and reviewing the audit plan of the
Auditor, the Audit Committee takes account of the most significant issues and
risks, both operational and financial, likely to impact upon the Company's
financial statements.
The valuation of the investment portfolio is a significant risk
factor; however all investments can be verified against daily market prices.
A further significant risk control issue is to ensure that the
investment portfolio accounted for in the financial statements reflects
physical ownership of the relevant securities. The Company uses the services
of an independent custodian, HSBC Bank plc, to hold the assets of the Company.
The investment portfolio is regularly reconciled to the custodian's records
and that reconciliation is also reviewed by the Auditor.
The incomplete or inaccurate recognition of income in the financial
statements are risks. Internal control systems, including frequent
reconciliations, are in place to ensure income is fully accounted for. The
Board is provided with information on the Company's income account at each
meeting.
Financial statements issued by the Company need to be fair,
balanced and understandable. The Audit Committee reviews the Annual Report as
a whole and makes suitable recommendations to the Board.
The Company's half-yearly report is approved by the Audit Committee
prior to publication and is also reviewed by the Auditor.
The Audit Committee assesses whether it is appropriate to prepare
the Group's financial statements on a going concern basis and makes
recommendations to the Board. The Board's conclusions are set out in the
Report of the Directors.
INTERNAL CONTROLS
The Audit Committee is responsible for ensuring that suitable
internal control systems to prevent and detect fraud and error are designed
and implemented and is also responsible for reviewing the effectiveness of
such controls. The Board confirms that there is an ongoing process for
identifying, evaluating and managing the significant risks faced by the
Company. This process has been in place for the year under review and up to
the date of approval of this report and is regularly reviewed. In particular
it has reviewed and updated the process for identifying and evaluating the
significant risks affecting the Company and the policies by which these are
managed. The risks of failure of any such controls are identified in a risk
assessment which identifies the likelihood and severity of the impact of such
risks and the controls in place to minimise the probability of such risks
occurring; the risk management process and systems of internal control are
designed to manage rather than eliminate the risk of failure to achieve the
Company's objectives. It should be recognised that such systems can only
provide reasonable, but not absolute, assurance against material misstatement
or loss. Equally, it must be stressed that undertaking an acceptable degree of
controlled risk is always necessary in the conduct of any investment trust if
above average performance is to be achieved.
The following are the key components which the Company has in place
to provide effective internal control:
- The Board has agreed clearly defined investment criteria; reports
on compliance therewith are regularly reviewed by the Board
- The Board has a procedure to ensure that the Company can continue
to be approved as an investment company by complying with Section 1158 of the
Corporation Tax Act 2010
- The Administrator prepares forecasts and management accounts
which allow the Board to assess the Company's activities and review its
performance
- The performance of the Investment Director and any contractual
agreements with other third party service providers, and adherence to them,
are regularly reviewed
- An appropriate "whistle-blowing" policy is in place to enable
employees and sub-contractors to raise concerns, in confidence, about possible
wrongdoing in financial reporting or all other matters.
The Audit Committee has reviewed the need for an internal audit
function, but has concluded that given the size of the organisation and the
clear segregation of investment management and control of the assets, there is
no need for such a function at the current time, but has also agreed to keep
such a requirement under review.
EXTERNAL AUDIT PROCESS
The Audit Committee meets at least twice a year with the Auditor.
The Auditor provides a planning report in advance of the annual audit, a
report on the annual audit, and a report of its review of the half-year
financial statements. The Committee has an opportunity to question and
challenge the Auditor in respect of each of these reports; it also agrees the
level and scope of materiality to be adopted in respect of the annual audit.
In addition, at least once a year, the Audit Committee has an
opportunity to discuss any aspect of the Auditor's work with the Auditor in
the absence of the Investment Director.
After each audit, the Audit Committee will review the audit process and
consider its effectiveness.
AUDITOR ASSESSMENT AND INDEPENDENCE
The Group's auditor is Begbies. Begbies has been the Group's
auditor since 2006. Rotation of the Audit Partner takes place in accordance
with Ethical Standard 3; `Long Association with the Audit Engagement' of the
Auditing Practices Board ("APB").
The fees for audit purposes were £15,960 (2013: £17,750).
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 2014 was £4,850 (2013: £3,984). These
non-audit services are assurance and tax compliance related. 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
accounts 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:
- it has approved the financial statements for the year ended 31st December
2014;
- it has reviewed the effectiveness of the Group's internal controls and risk
management;
- it has reviewed the need for a separate internal audit function;
- it has recommended to the Board that a resolution be proposed at
the Annual General Meeting for the reappointment of the Auditor and it has
considered the proposed terms of its engagement;
- it has satisfied itself as to the independence of the Auditor;
and
- it has satisfied itself that the contents of the Annual Report
are consistent with the Financial Statements.
D. M. Best,
Director
Chairman, Audit Committee
19th February 2015
DIRECTORS' 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 2014. 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.
NOMINATIONS AND REMUNERATION COMMITTEE CHAIRMAN'S STATEMENT
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
posted on the Company's website. The Committee is chaired by J. B. Roper and
the other members are Dr D. M. Bramwell and D. M. Best. No other person
provided the Committee with advice or services that materially assisted the
Committee in their consideration.
The Committee has met once during the relevant year and considered the
following matters:
Chairman's Remuneration - it was resolved that he be paid a fixed
annual fee (with no bonus) to reflect a market rate for a chairman of a
self-managed investment trust having regard also to, inter alia, the size of
the Company, the Chairman's expertise, his responsibilities within the Group
and the time required to be spent in fulfilling his responsibilities. It was
determined, having had regard to all these factors, that his remuneration be
fixed at £22,000 for 2015 (2014: £20,000).
Investment Director/CEO Bonus - the Committee decided not to pay
the Investment Director a bonus in respect of the year ended 31st December
2014 (2013: £25,000).
Board Evaluation - the Committee is satisfied that the Board and
its Committees function effectively, both collectively and individually and
contains the appropriate balance of skills and experience to provide effective
management. In 2015, an evaluation of the Board is planned to be undertaken as
part of the 5-year review.
J. B. Roper
Chairman, Nominations and Remuneration Committee
19th February 2015
ANNUAL REPORT ON REMUNERATION
DIRECTORS' REMUNERATION AS A SINGLE FIGURE (AUDITED)
Salary Annual Total for Salary Annual
and fees Bonuses 2014 and fees bonuses Total for
2014 2014 2013 2013 2013
Director £ £ £ £ £ £
D. M. Best 15,000 - 15,000 12,000 - 12,000
Dr D. M. Bramwell 20,000 - 20,000 16,800 - 16,800
S. J. B. Knott 184,000 - 184,000 115,000 25,000 140,000
(Executive)
J. B. Roper 15,000 - 15,000 12,000 - 12,000
Total 234,000 - 234,000 155,800 25,000 180,800
The tables above omit other columns because no payments of other types
prescribed in the relevant regulations such as 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.
Included in the above were amounts paid to third parties of £0 (2013: £4,800)
with respect to Dr D. M. Bramwell.
STATEMENT OF DIRECTORS' SHAREHOLDINGS AND SHARE INTERESTS (AUDITED)
The Company has not set any requirements or guidelines for the Directors to
own shares in the Company. The beneficial interests of the Directors and their
connected persons in the shares of the Company are shown in the table below.
Capital Income
31st 31st 31st 31st
December December December December
Director 2014 2013 2014 2013
Dr D. M. Bramwell - - 22,625 22,625
S. J. B. Knott 118,000 118,000 5,000 5,000
(Executive)
D. M. Best - - - -
J. B. Roper - - - -
No changes in the Directors' interests shown above have occurred since 31st
December 2014.
PERFORMANCE GRAPH AND CEO REMUNERATION TABLE
The graph below illustrates the total shareholder return for each class of
share relative to the FTSE All-Share index. This has been used as the
appropriate index as it is the Company's benchmark index.
[Please note this graph can be viewed on the Report & Accounts available at
www.rightandissues.co.uk]
CEO REMUNERATION TABLE
CEO Single Annual Bonus
Figure of Paid Out
Total
Remuneration
2010 110,000 10,000
2011 110,000 10,000
2012 115,000 10,000
2013 140,000 25,000
2014 184,000 -
Total 659,000 55,000
The above bonuses were of a discretionary nature and so no percentage against
a maximum payable has been shown.
The table below shows the percentage change in the remuneration of the
Director undertaking the role of CEO (the Investment Director) and the Group's
employees as a whole between the year 2013 and 2014.
Percentage Percentage change in
change in salary annual bonus
CEO 60.00% -100.00%
Workforce 30.77% -59.53%
SIGNIFICANCE OF SPEND ON PAY
Employee Shareholder
remuneration £ distribution £
2014 427,090 2,458,200
2013 383,675 2,057,586
Difference 43,415 400,614
% Change 11.32% 19.47%
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, long-term
investment schemes, pension, or profit related pay arrangements with any of
the Directors.
There are letters of appointment for two non-executive directors:
Director Date
D. M. Best 31.5.2011
J. B. Roper 31.5.2011
There are written memoranda setting out the terms of the contract
of service for S. J. B. Knott and the terms of the contract for services for
Dr D. M. Bramwell, together with memoranda varying the provisions of the above
letters of appointment.
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 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 current level (effective from 21st March 2013)
is that aggregate fees should not exceed £100,000 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 (as noted
above in the Nominations and Remuneration Committee Chairman's Statement), but
also to have regard to his executive duties as effective chief executive
officer of the Group and the time required of him for the effective
fulfillment of his duties, but with provision for discretionary bonuses to
recognise significant outperformance of the Company's investment portfolio. As
noted on page 21 he is a significant shareholder in the Company.
The Company does not confer any share options, long term incentives
or retirement benefits on any Director, nor does it make a contribution to any
pension scheme on behalf of the Directors. The Company has not included any
performance-related elements in the remuneration package of the executive
director except as noted in the Nomination and Remuneration Committee
Chairman's statement. 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 Group 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 To motivate the Investment Director to achieve measured
Bonus outperformance.
Chairman and other Non-Executive Directors
Element Purpose and link to strategy
Chairman and The fees paid to the Chairman and the other Non-Executive
Non-Executive Directors aim to be competitive with other investment
Directors' fees trusts of equivalent size and complexity. Fees are fixed
annual sums and reviewed periodically by the Board (for
Non-Executive Directors) and the Committee (for the
Chairman). Neither the Chairman nor the other
Non-Executive Directors receive any incentive payment.
Notes:No Director is entitled to receive any pension provision.
There is no maximum or minimum applicable to either element of the
Investment Director's remuneration package.
The policy on remuneration for employees generally is to
incentivise them to perform effectively and to recognise market comparators
but remuneration packages are structurally different from that of the only
executive Director, the Investment Director.
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
The employees were not consulted when setting the Directors' remuneration
policy and no remuneration comparison measurement with employees was used.
It is intended that the Directors' Remuneration Policy will
continue until the Annual General Meeting of the Company to be held in 2017.
ILLUSTRATION OF APPLICATION OF REMUNERATION POLICY
[Please note the graph illustrating the Remuneration Policy can be viewed on
the Report & Accounts available at www.rightandissues.co.uk]
Minimum In Line with Maximum
expectations
Bonus 0% 0% 17%
Salary 100% 100% 100%
It is expected that no bonus will be payable for performance in
line with expectations and a maximum bonus of 20% of salary would be payable.
VOTING AT ANNUAL GENERAL MEETING
A binding Ordinary Resolution approving the Directors' Remuneration
Policy and a non-binding Ordinary Resolution adopting the Annual Report on
Directors' Remuneration for the year ended 31st December 2013 were approved by
shareholders at the Annual General Meeting held on 20th March 2014. The votes
cast by proxy were as follows:
Remuneration Policy
For - % of votes cast 99.61%
Against - % of votes cast 0.00%
At Chairman's discretion - % of 0.39%
votes cast
Total votes cast 1,303,664.5
Number of votes withheld 0
Annual Report on Directors'
Remuneration
For - % of votes cast 99.61%
Against - % of votes cast 0.00%
At Chairman's discretion - % of 0.39%
votes cast
Total votes cast 1,303,664.5
Number of votes withheld 0
The Directors' Remuneration Report 2014 was approved by the Board and signed
on its behalf by:
J. B. Roper, Director
Chairman, Nominations and Remuneration Committee
19th February 2015
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 of the Group
and the financial performance and cashflows of the Company and the Group for
that period. In preparing those Financial Statements the Directors are
required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable information;
- provide additional disclosures when compliance with the specific
requirements of IFRS is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Group's
financial position and financial performance;
- state that the Company has complied with IFRS subject to any
material departures disclosed and explained in the accounts; and
- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Group will continue in
business.
The Directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial position of
the Company and to enable them to ensure that the Financial Statements comply
with the Companies Act 2006 and Article 4 of the IAS regulation. They are also
responsible for safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors' Report, Strategic Report and Directors'
Remuneration Report that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company's website.
Visitors to the website need to be aware that legislation in the UK governing
the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors consider that the Annual Report and Financial
Statements taken as a whole, are fair, balanced and understandable and provide
Shareholders with the information necessary to assess the Company's
performance, business model and strategy.
The Directors confirm that to the best of their knowledge that:
- the Financial Statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group; and
- the Annual Report includes a fair review of the development and
performance of the business and the position of the Group, together with a
description of the principal risks and uncertainties that they face.
Dr D. M. Bramwell, Director
S. J. B. Knott, Director
19th February 2015
INDEPENDENT AUDITOR'S REPORT
To the Members of Rights and Issues Investment Trust PLC
We have audited the Financial Statements of Rights and Issues
Investment Trust PLC for the year ended 31st December 2014 which comprise the
Consolidated Statement of Comprehensive Income, the Group and Parent Balance
Sheets, the Group and Parent Statements of Changes in Equity, the Group and
Parent Cash Flow Statements and the related notes 1 to 20. The reporting
framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European
Union and, as regards to the parent Company's Financial Statements, as applied
in accordance with provisions of the Companies Act 2006.
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.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As explained more fully in the Directors' Responsibilities
Statement set out on page 26, the Directors are responsible for preparing the
Financial Statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit the Financial Statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board (APB's)
Ethical Standards for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and
disclosures in the Financial Statements sufficient to give reasonable
assurance that the Financial Statements are free from material misstatement,
whether caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the Group and parent Company's
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the Directors; and
the overall presentation of the Financial Statements. In addition, we read all
the financial and non-financial information in the Annual Report and Financial
Statements to identify material inconsistencies with the audited Financial
Statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by
us in the course of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our
report.
OPINION ON FINANCIAL STATEMENTS In our opinion:
- the Financial Statements give a true and fair view of the state
of the Group and parent Company's affairs as at 31st December 2014 and of the
Group's profit for the year then ended;
- the Group Financial Statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
- the parent Company Financial Statements have been properly
prepared in accordance with IFRSs as adopted by the European Union and as
applied in accordance with the provisions of the Companies Act 2006; and
- the Financial Statements have been prepared in accordance with
the Companies Act 2006 and as regards the Group Financial Statements, Article
4 of IAS Regulation.
- To the Members of Rights and Issues Investment Trust PLC
OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENTS
The purpose of the Group is to invest in equities with a view to
achieve 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 and allocation of resources in
the audit:
- the valuation of the investment portfolio held by the Group;
- the ownership of investments risk and misappropriation of assets;
- the recognition and completeness of its investment income.
OUR APPLICATION OF MATERIALITY
We have been asked by the Audit Committee for our materiality level
to be set at £500,000 for the Financial Statements as a whole. Due to the
significance of the Group's net assets compared with the amounts in the
revenue column of the Income Statement, they have asked us to set a separate
materiality level for the revenue column of £100,000.
We have agreed with the Audit Committee that we would report to
them all audit differences in excess of £50,000 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 accounts.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The scope of our audit is discussed in other parts of our audit
report. However because of the nature of investment trusts and the
significance of their investments and the related income, additional
importance was placed on these areas without compromising other aspects of the
audit.
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.
The Company's accounting policy on the valuation of quoted
investments is included in note 1 and its disclosures about investments held
at the year end are included in note 10.
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion:
- the part of the Directors' Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act 2006; and
- the information given in the Strategic Report and the Directors' Report for
the financial year for which the Financial Statements are prepared is
consistent with the Financial Statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION We have nothing to
report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to you
if, in our opinion, information in the annual report is:
- materially inconsistent with the information in the audited Financial
Statements; or
- apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group acquired in the course of
performing our audit; or
- is otherwise misleading.
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired during the audit
and the Directors' statement that they consider the Annual Report is fair,
balanced and understandable and whether the Annual Report appropriately
discloses those matters that we communicated to the Audit Committee which we
consider should have been disclosed.
Under the Companies Act 2006 we are required to report to you if, in our
opinion
- adequate accounting records have not been kept; or
- the parent Company's Financial Statements and the part of the
Directors' Remuneration Report to be audited are not in agreement with the
accounting records or returns; or
- certain disclosures of Directors' remuneration specified by law
are not made; or
- we have not received all the information and explanations we
require for our audit.
Under the Listing Rules we are required to review:
- the Directors' statement, set out on page 12, in relation to going concern;
and
- the part of the Corporate Governance Statement relating to the
Company's compliance with the nine provisions of the UK Corporate Governance
Code specified for our review.
Colin Wain (Senior Statutory Auditor)
For and on behalf of Begbies
Chartered Accountants and Statutory Auditor
9 Bonhill Street, London
19th February 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31st December 2014
Notes Year ended 31st Year ended 31st
December 2014 December 2013
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Investment income 2 3,020,835 - 3,020,835 2,869,243 - 2,869,243
Other operating 2 384,927 - 384,927 340,063 - 340,063
income
Total income 3,405,762 - 3,405,762 3,209,306 - 3,209,306
Gains/(losses) on
fair value through
profit or loss
assets 10 (6,317) (7,543,772) (7,550,089) 237,002 36,746,082 36,983,084
3,399,445 (7,543,772) (4,144,327) 3,446,308 36,746,082 40,192,390
Expenses
Investment - - - - - -
management fee
Other expenses 3 680,050 - 680,050 738,842 - 738,842
680,050 - 680,050 738,842 - 738,842
Profit before tax 2,719,395 (7,543,772) (4,824,377) 2,707,466 36,746,082 39,453,548
Tax 5 - - - - - -
Profit for the 2,719,395 (7,543,772) (4,824,377) 2,707,466 36,746,082 39,453,548
period
Earnings per share
Return per income
share (p) 7 49.3p (78.7p) (29.4p) 53.3p 373.4p 426.7p
Return per capital 7 88.9p (342.0p) (253.1p) 84.5p 1680.5p 1765.0p
share (p)
The total column of this statement represents the Consolidated
Statement of Comprehensive Income, prepared in accordance with IFRS. The
supplementary revenue return and capital return columns are both prepared
under guidance published by the Association of Investment Companies. All items
in the above statement derive from continuing operations.
All income is attributable to the equity holders of the parent Company. There
are no minority interests.
CONSOLIDATED BALANCE SHEET
as at 31st December 2014
Non-current assets Notes Company Group
2014 2013 2014 2013
£ £ £ £
Goodwill 8 - - 65,191 65,191
Investments - Fair value
through profit or loss 10 111,739,003 118,216,321 111,307,531 117,784,849
111,739,003 118,216,321 111,372,722 117,850,040
Current assets
Trading investments - - 394,017 772,828
Trade and other receivables 13 421,236 381,850 470,403 617,202
Current tax receivable 38,780 81,214 - -
Amounts due from Group 717,525 1,204,259 - -
undertakings
Cash and cash equivalents 3,415,125 4,005,343 4,059,299 4,564,412
4,592,666 5,672,666 4,923,719 5,954,442
Total assets 116,331,669 123,888,987 116,296,441 123,804,482
Current liabilities
Trade and other payables 14 37,176 61,917 123,044 98,508
Current tax payable - - - -
37,176 61,917 123,044 98,508
Total assets less current 116,294,493 123,827,070 116,173,397 123,705,974
liabilities
Net assets 116,294,493 123,827,070 116,173,397 123,705,974
Equity
Called up share capital 15 1,025,000 1,225,000 1,025,000 1,225,000
Share premium account 16 225,326 225,326 225,326 225,326
Retained reserves:
Capital reserve 16 51,973,014 51,796,430 51,973,014 51,796,430
Revaluation reserve 16 60,532,116 68,252,472 60,532,116 68,252,472
Dividend equalisation 16 2,539,037 2,327,842 2,417,941 2,206,746
reserve
Total equity 116,294,493 123,827,070 116,173,397 123,705,974
Net asset value per share
Income shares 17 1263.6p 1334.0p
Capital shares 17 5188.4p 5529.9p
The financial statements were approved by the Board and authorised for issue
on 19th February 2015. They were signed on its behalf by:
Dr D. M. Bramwell, Director
S. J. B. Knott, Director
Company Registration Number: 736898
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31st December 2014
Share Share Capital Revaluation Dividend Total
capital premium reserve reserve equalisation £
£ account £ £ reserve
Balance at £ £
31st December 2012 1,225,000 225,326 49,005,514 34,297,306 1,556,866 86,310,012
Changes in equity
for 2013
Profit/(loss) for - - 2,790,916 33,955,166 2,707,466 39,453,548
the period
Total recognised
income and expense 1,225,000 225,326 51,796,430 68,252,472 4,264,332 125,763,560
Dividends - - - - (2,057,586) (2,057,586)
Balance at
31st December 2013 1,225,000 225,326 51,796,430 68,252,472 2,206,746 123,705,974
Changes in equity
for 2014
Profit/(loss) for - - 176,584 (7,720,356) 2,719,395 (4,824,377)
the period
Total recognised
income and expense 1,225,000 225,326 51,973,014 60,532,116 4,926,141 118,881,597
Redemption of
preference shares (200,000) - - - (50,000) (250,000)
Dividends - - - - (2,458,200) (2,458,200)
Balance at 1,025,000 225,326 51,973,014 60,532,116 2,417,941 116,173,397
31st December 2014
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31st December 2014
Share Share Capital Revaluation Dividend Total
capital premium reserve reserve equalisation £
£ account £ £ reserve
Balance at £ £
31st December 2012 1,225,000 225,326 49,005,514 34,297,306 1,677,962 86,431,108
Changes in equity
for 2013
Profit/(loss) for - - 2,790,916 33,955,166 2,707,466 39,453,548
the period
Total recognised
income and expense 1,225,000 225,326 51,796,430 68,252,472 4,385,428 125,884,656
Dividends - - - - (2,057,586) (2,057,586)
Balance at 1,225,000 225,326 51,796,430 68,252,472 2,327,842 123,827,070
31st December 2013
Changes in equity
for 2014
Profit/(loss) for - - 176,584 (7,720,356) 2,719,395 (4,824,377)
the period
Total recognised
income and expense 1,225,000 225,326 51,973,014 60,532,116 5,047,237 119,002,693
Redemption of
preference shares (200,000) - - - (50,000) (250,000)
Dividends - - - - (2,458,200) (2,458,200)
Balance at 1,025,000 225,326 51,973,014 60,532,116 2,539,037 116,294,493
31st December 2014
CASH FLOW STATEMENTS
for the year ended 31st December 2014
Cashflows from operating Notes
activities Company Group
2014 2013 2014 2013
£ £ £ £
(Loss)/profit before tax (4,863,157) 39,372,334 (4,824,377) 39,453,548
Adjustments for:
Losses/(gains) on 7,543,772 (36,746,082) 7,543,772 (36,746,082)
investments
Purchases of investments 10 (2,261,759) (9,151,687) (2,261,759) (9,151,687)
Proceeds on disposal of 10 1,195,305 5,164,545 1,195,305 5,164,545
investments
Movement in trading - - 378,811 (126,244)
investments
Operating cash flows before
movements in working capital 1,614,161 (1,360,890) 2,031,752 (1,405,920)
Decrease/(increase) in 447,348 (390,899) 146,799 (236,187)
receivables
Increase/(decrease) in (24,741) (3,640) 24,536 (212,210)
payables
Net cash from operating
activities before income
taxes 2,036,768 (1,755,429) 2,203,087 (1,854,317)
Income taxes received/(paid) 81,214 51,197 - -
Net cash from operating 2,117,982 (1,704,232) 2,203,087 (1,854,317)
activities
Cash flows from financing
activities
Preference shares redeemed (250,000) - (250,000) -
Dividends paid (2,458,200) (2,057,586) (2,458,200) (2,057,586)
Net cash (used in)/from
financing activities (2,708,200) (2,057,586) (2,708,200) (2,057,586)
Net increase/(decrease) in (3,761,818) (3,911,903)
cash and cash equivalents (590,218) (505,113)
Cash and cash equivalents at 7,767,161 8,476,315
beginning of year 4,005,343 4,564,412
Cash and cash equivalents at 3,415,125 4,005,343 4,059,299 4,564,412
end of year
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2014
1. ACCOUNTING POLICIES
Basis of Accounting
The Financial Statements of the Group have been prepared in
accordance with the International Financial Reporting Standards (IFRS), which
comprise standards and interpretations approved by the International
Accounting Standards Board (IASB), and International Accounting Standards 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.
The Financial Statements have been prepared on a going concern
basis under the historical cost convention to include the revaluation of
investments. The principal accounting policies are set out below. Where
presentational guidance set out in the Statement of Recommended Practice
(SORP) for investment trusts (AIC) issued in January 2009 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.
IFRS 10, `Consolidated financial statements' is effective for
annual periods starting on or after 1 January 2014. This standard builds on
existing principles by identifying the concept of control as the determining
factor in whether an entity should be included within the consolidated
financial statements including special purpose entities. The standard provides
additional guidance to assist in determining control where this is difficult
to assess. The Group complies with this standard and so there has been no
material impact on how it consolidates its subsidiaries.
There are a number of other new standards, amendments to standards
and interpretations that are effective after 1 January 2014 but none of these
is expected to have an impact or a significant effect on the measurement of
the amounts recognised in the Financial Statements of the Group.
Basis of Consolidation
The Group Financial Statements consolidate the Financial Statements
of the Company and of its wholly owned subsidiary undertakings from the
effective date of acquisition. Consistent accounting policies have been used
across the Group. All intra-group balances, transactions, income and expenses
and profits and losses resulting from intra-group transactions are eliminated
on consolidation. No revenue account is presented for the Company, as provided
by Section 408 of the Companies Act 2006.
Presentation of income statement
In order to better reflect the activities of an investment trust
company and in accordance with the guidance issued by the AIC, supplementary
information which analyses the income statement between items of a revenue and
capital nature has been presented alongside the income statement. In
accordance with the Company's status as a UK investment company under Section
833 of the Companies Act 2006, net capital returns may not be distributed by
way of dividend. Additionally, the net revenue is the measure the Directors
believe appropriate in assessing the Group's compliance with the requirements
set out in Section 1158 CTA.
Income
Dividend income is included in the accounts on the ex-dividend
date. All other income is included on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis. Expenses are
charged through the revenue account except as follows:
- expenses which are incidental to the acquisition of an investment
are included within the cost of the investment.
- expenses which are incidental to the disposal of an investment
are deducted from the disposal proceeds of the investment.
Taxation
The charge for taxation is based on the net revenue for the year.
Deferred taxation is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date. Investment trusts which
have approval under S1158 CTA are not liable for taxation on capital gains.
Dividends
Dividends payable to equity shareholders are recognised when the
Company's obligation to make a payment is established.
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' 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 the
profit or loss and gains and losses on disposal are recognised in the
Consolidated Statement of Comprehensive Income as "Gains or losses of
investments held at fair value through profit or loss". Also included within
this heading are transactions 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.
Trading investments are valued at fair value.
Goodwill
Goodwill represents the excess of cost of acquisition over the fair
value of the separable net assets of business acquired. Goodwill is not
amortised but an annual impairment review is carried out.
2. INCOME
Group
2014 2013
£ £
Income from investments
Franked investment 3,020,835 2,869,243
income
UK unfranked investment - -
income
Scrip dividends - -
Other - -
3,020,835 2,869,243
Group
2014 2013
£ £
Other operating income
Deposit interest 1,352 1,520
Underwriting commission - -
Stock lending fees - -
Other 383,575 338,543
384,927 340,063
Total Income 3,405,762 3,209,306
Total income comprises
Dividends 3,020,835 2,869,243
Interest 1,352 1,520
Other Income 383,575 338,543
Other 383,575 338,543
3,405,762 3,209,306
Income from investments
UK equity listed 2,801,159 2,691,877
AIM traded 219,676 177,366
3,020,835 2,869,243
3. OTHER EXPENSES
2014 2013
£ £
Staff costs (note 4) 427,090 383,675
Auditors' remuneration
- Audit 15,960 17,750
- Other services to the Company and 4,850 3,984
its subsidiaries
Goodwill amortisation - -
Operating Leases - other - -
Other 232,150 333,433
680,050 738,842
Auditors' 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 Auditors.
4. STAFF COSTS
2014 2013
£ £
Wages and 365,940 329,996
salaries
Social security 42,850 35,679
costs
Pensions 18,300 18,000
427,090 383,675
Number Number
The average number of 3 3
staff employed by the
Group was
£ £
Directors' emoluments 234,000 180,800
234,000 180,800
5. TAX ON ORDINARY ACTIVITIES
2014 2013
£ £
UK Corporation Tax at 20.47% (2013: - -
22.44%)
Adjustments to prior years - -
- -
Profit before tax 2,719,395 2,707,466
Tax on profit at standard rate 556,660 607,628
Factors affecting the
recovery/charge for the year:
Expenses not taxed - -
Income not taxable (616,586) (643,936)
Adjustment to prior year - -
Unutilised losses carried forward 59,926 36,308
Marginal relief - -
Losses utilised in period - -
- -
No provision for deferred taxation has been made in the current
year or in the prior period. The Company has not provided for deferred tax on
capital gains or losses arising on the revaluation or disposal of investments
as it is exempt from tax on these items because of its status as an investment
trust company.
Factors that may affect future tax charges
The Company has not recognised any deferred tax asset arising as a
result of having unutilised management expenses. These expenses will only be
utilised if the tax treatment of the Company's income and capital gains
changes or if the Company's investment profile changes.
6. DIVIDENDS AND OTHER APPROPRIATIONS
Amounts recognised as distributions to equity holders in the
period:
2014 2013 2014 2013
Income p p £ £
Final dividend for the year ended 31st 20.50 18.25 504,300 448,950
December 2013
Special dividend for the year ended 31st 10.00 - 246,000 -
December 2013
Interim dividend for the year ended 31st 10.50 9.50 258,300 233,700
December 2014
Capital
Final dividend for the year ended 31st 1.5000 1.3375 24,600 21,935
December 2013
Special dividend for the year ended 31st 0.5000 - 8,200 -
December 2013
Supp cap dividend for the year ended 31st 86.3902 81.8293 1,416,800 1,342,001
December 2014
2,458,200 2,046,586
Dividends on non-equity shares:
Cumulative preference 5.5% 5.5% - 11,000
The Articles provide for a supplementary Dividend to Capital Shareholders to
be paid.
2014 2013 2014 2013
Income p p £ £
Proposed final dividend for the year 25.50 20.50 627,300 504,300
ended 31st December 2014
Proposed special dividend for the year - 10.00 - 246,000
ended 31st December 2014
Capital
Proposed final dividend for the year 1.8000 1.5000 29,520 24,600
ended 31st December 2014
Proposed special dividend for the year - 0.5000 - 8,200
ended 31st December 2014
The proposed final dividends are subject to approval by shareholders at the
Annual General Meeting and have not been included as a liability in these
financial statements.
We also set out below the total dividend payable in respect of the financial
year, which is the basis on which the requirements of Section 842 Income and
Corporation Taxes Act 1988 are considered.
2014 2013 2014 2013
Dividend on equity shares p p £ £
Income
Interim dividend for the year ended 31st December 10.50 9.50 258,300 233,700
2014
Proposed final and special dividend for the year 25.50 30.50 627,300 750,300
ended 31st December 2014
36.00 40.00
Capital
Supp cap dividend for the year ended 31st 86.3902 81.8293 1,416,800 1,342,201
December 2014
Proposed final and special dividend for the year 1.8000 2.0000 29,520 32,800
ended 31st December 2014
88.1902 83.8293 2,331,920 2,358,801
7. RETURN PER SHARE
2014 2013
Income Capital Total Income Capital Total
£ £ £ £ £ £
Return attributable to
equity shareholders:
Revenue return 1,212,189 1,457,206 2,669,395 1,310,772 1,385,694 2,696,466
Capital return (1,935,943) (5,607,829) (7,543,772) 9,186,521 27,559,561 36,746,082
(723,754) (4,150,623) (4,874,377) 10,497,293 28,945,255 39,442,548
p p p p
Revenue return 49.3 88.9 53.3 84.5
Capital return (78.7) (342.0) 373.4 1,680.5
(29.4) (253.1) 426.7 1,765.0
8. GOODWILL
2014 2013
£ £
Cost
At beginning and end 65,191 65,191
of year
Impairment losses
At beginning and end - -
of year
Net Book value
At 31st December 65,191 65,191
2014
At 31st December 65,191 65,191
2013
9. INVESTMENTS
Analysis of the investments
The number of companies or institutions in which equities,
convertibles or fixed interest securities were held was 31 (2013: 32).
EQUITY GROUPS Oil & Gas 2014 2013
£ % £ %
Oil & Gas Producers 891,600 0.80 910,400 0.77
Basic Materials
Chemicals 7,854,000 7.06 8,893,500 7.55
Industrials
Construction & Materials 3,045,350 2.74 3,860,800 3.28
General Industrials 19,888,871 17.86 19,736,953 16.76
Electronic & Electrical 5,208,332 4.68 5,851,308 4.97
Equipment
Industrial Engineering 19,052,007 17.12 18,716,550 15.89
Support Services 27,769,275 24.95 32,960,300 27.98
Healthcare
Pharmaceuticals & Biotechnology 962,850 0.86 1,129,450 0.96
Consumer Services
Food & Drug Retailers 734,400 0.66 1,098,300 0.93
Utilities
Electricity 1,378,500 1.24 957,600 0.81
Gas, Water & Multiutilities - - 1,184,250 1.00
Technology
Software & Computer Services 168,750 0.15 235,000 0.20
AIM Traded Stocks 23,793,596 21.38 21,750,438 18.47
Fixed Interest
Preference 560,000 0.50 500,000 0.43
Total UK 111,307,531 100.00 117,784,849 100.00
10 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
Investments listed on a recognised investment Company
exchange Group
2014 2013 2014 2013
£ £ £ £
UK equity listed investments at fair value 87,513,935 96,034,411 87,513,935 96,034,411
AIM traded stocks 23,793,596 21,750,438 23,793,596 21,750,438
Subsidiary undertakings (Note 11) 431,472 431,472 - -
Other investments - - - -
111,739,003 118,216,321 111,307,531 117,784,849
Group: Listed Unlisted Total
Opening book cost 42,565,524 6,966,853 49,532,377
Opening unrealised appreciation 53,468,887 14,783,585 68,252,472
Opening provision against impairments in value - - -
Opening valuation 96,034,411 21,750,438 117,784,849
Movements in the year
From Listed to Unlisted - - -
Purchases at cost 1,961,759 300,000 2,261,759
Sales - proceeds (995,305) (200,000) (1,195,305)
Sales - realised gains on sales 18,734 157,850 176,584
Permanent impairment in value of investments - - -
Increase/(decrease) in unrealised appreciation (9,505,664) 1,785,308 (7,720,356)
Closing valuation 87,513,935 23,793,596 111,307,531
Closing book cost 43,550,712 7,224,703 50,775,415
Closing unrealised appreciation 43,963,223 16,568,893 60,532,116
Closing provision against impairments in value - - -
87,513,935 23,793,596 111,307,531
Realised gains/losses on sales 18,734 157,850 176,584
Increase/(decrease) in unrealised appreciation (9,505,664) 1,785,308 (7,720,356)
Gains/(losses) on investments (9,486,930) 1,943,158 (7,543,772)
The Group investments are Level 1 assets under the definition of IFRS 7 and
comprise of equity listed and AIM traded investments classified as held at
fair value through profit or loss.
During the year transaction costs of £14,008 were incurred on the acquisition
of investments (2013: £68,659). Costs relating to disposals of investments
during the year amounted to £2,496 (2013: £14,086). All transaction costs have
been included within the capital column of the Consolidated Statement of
Comprehensive Income.
The profit/(loss) on fair value through profit or loss assets of £(6,317)
(2013: £237,002) as shown on the Consolidated Statement of Comprehensive
Income represents that sum made on the subsidiary's current asset investments.
11. SUBSIDIARY UNDERTAKINGS
The Company had investments in the following subsidiary undertakings all of
which are included in the consolidated financial statements:
Proportion
of nominal
value of
issued
Country of Description shares and
incorporation of shares voting
Name Principal activity and operation held rights held
Rights Securities Ltd. Investment dealing England Ordinary 100%
Discretionary Unit Fund Fund management and England Ordinary 100%
Managers Ltd. secretarial services
The Company owns all the share capital of its two subsidiaries.
Rights Securities Limited is dormant and Discretionary Unit Fund Managers
Limited had net assets of £225,186 at the year end and its profit for the year
after tax amounted to £160,574. There are no non-controlling interests and no
significant restrictions on its ability to access or use assets, and settle
liabilities, of the Group. A change in the ownership interest in a subsidiary
that did not result in a loss of control would reduce the results consolidated
in the Financial Statements by the proportion of shares disposed of, while a
loss of control would result the subsidiary being no longer consolidated in
the accounts.
12. SIGNIFICANT INTERESTS
The Company or Group 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 2014:
Name
Chamberlin 12.60%
Colefax Group 18.80%
Coral Products 3.50%
DRS Data 4.30%
Services
Eleco 6.00%
LPA 5.50%
Macfarlane 14.20%
Group
Renold 3.80%
Scapa Group 7.10%
Titon 12.00%
Treatt 11.00%
VP Group 4.50%
13. TRADE AND OTHER RECEIVABLES
Company Group
2014 2013 2014 2013
£ £ £ £
Amounts due from - -
brokers
Trade debtors - -
Prepayments and 421,236 381,850 470,403 617,202
accrued income
Other debtors - - - -
421,236 381,850 470,403 617,202
14. TRADE AND OTHER PAYABLES
Company Group
2014 2013 2014 2013
£ £ £ £
Amounts due to - - - -
brokers
Trade payables - - - -
Accruals 37,176 61,917 123,044 98,508
37,176 61,917 123,044 98,508
15. SHARE CAPITAL
2014 2013
£ £
Authorised - 200,000
200,000 5.5% (Net) Cumulative
Preference Shares of £1 each
2,400,000 Capital Shares of 25p each 600,000 600,000
3,600,000 Income Shares of 25p each 900,000 900,000
1,500,000 1,700,000
Allotted, Called Up and Fully Paid %
200,000 5.5% (Net) Cumulative - - 200,000
Preference Shares of £1 each
1,640,000 Capital Shares of 25p each 40.0 410,000 410,000
2,460,000 Income Shares of 25p each 60.0 615,000 615,000
1,025,000 1,225,000
16. RESERVES
Share Capital Revaluation Dividend
premium reserve reserve equalisation
account reserve
£ £ £ £
Group
Beginning of year 225,326 51,796,430 68,252,472 2,206,746
Net gain/(loss) on realisation of investments - 176,584 - -
Permanent impairments in value of investments - - - -
Increase/(decrease) in unrealised appreciation - - (7,720,356) -
Retained net revenue for the year - - - 261,195
Premium on redemption of Preference shares - - - (50,000)
End of year 225,326 51,973,014 60,532,116 2,417,941
Company
Beginning of year 225,326 51,796,430 68,252,472 2,327,842
Net gain/(loss) on realisation of investments - 176,584 - -
Permanent impairments in value of investments - - - -
Increase/(decrease) in unrealised appreciation - - (7,720,356) -
Retained net revenue for the year - - - 261,195
Premium on redemption of Preference shares - - - (50,000)
End of year 225,326 51,973,014 60,532,116 2,539,037
The capital reserve represents those realised profits and losses
arising on the disposal of investments. The revaluation reserve represents
those realised and unrealised profits and losses arising on the revaluation of
investments held.
According to guidance issued by the Institute of Chartered
Accountants in England and Wales (TECH 02/10) changes in the fair value of
investments held that are readily convertible into cash can be treated as
realised.
At the year end, all of the Company's portfolio was considered to
be sufficiently liquid to be regarded as readily convertible into cash.
Consequently the capital and revaluation reserves may be treated as realised
and therefore distributable. However, the Company is precluded by its Articles
of Association from distributing such sums as dividends.
17. NET ASSET VALUE PER SHARE
The net asset value per share and the net asset values attributable
to each class of share calculated in accordance with the Articles of
Association were as follows:
Net asset value Net asset value
Per share attributable attributable
2014 2013 2014 2013
p p £ £
Preference - 100 - 200,000
shares
Income shares 1263.6 1334.0 31,083,591 32,815,945
Capital shares 5188.4 5529.9 85,089,806 90,690,029
116,173,397 123,705,974
The movements during the year attributable to each class of share were as
follows:
Preference Income Capital Total
shares shares shares
Total net assets attributable at 200,000 32,815,945 90,690,029 123,705,974
beginning
of year
Redemption of Preference shares (200,000) - - (200,000)
Total recognised gains/(losses) for the - (1,935,943) (5,607,829) (7,543,772)
year
Transfer to reserves - 203,589 7,606 211,195
Total net assets attributable at end of - 31,083,591 85,089,806 116,173,397
year
No. of shares in issue - 2,460,000 1,640,000
18. RELATED PARTY TRANSACTION
Group
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation.
Company
The Group's subsidiary company Discretionary Unit Fund Managers
Limited manages the Discretionary Unit Fund and acts as principal in respect
of all transactions of units in the Fund.
The management fee for the year amounted to £383,575 (2013:
£338,543) and the amount owed to the Company at the year end was £32,717
(2013: £27,477).
During the year the Company had the following transactions with
Discretionary Unit Fund Managers Limited, one of its subsidiary undertakings:
2014 2013
£ £
Rent recharged 29,128 27,660
Dividends received 160,574 294,098
189,702 321,758
Amounts owed by subsidiary 737,525 1,224,259
undertaking
19. FINANCIAL ASSETS AND LIABILITIES
The Group's financial instruments comprise securities, cash
balances and debtors and creditors that arise from its operations, for
example, in respect of sales and purchases awaiting settlement and debtors for
accrued income.
The investment policy and objectives of the Company is stated on page 6.
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
2014 on its equity investments was £111,307,531 (2013: £117,784,849).
Liquidity risk
Liquidity risk is the possibility of the Group 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 Group suffering a loss. At
the year end the Group's maximum exposure to credit risk was as follows:
2014 2013
£ £
Trade and other 470,403 617,202
receivables
Cash and cash 4,059,299 4,564,412
equivalents
4,529,702 5,181,614
The risk is managed by dealing only with brokers and banks who have
satisfactory credit ratings and are approved by the Audit Committee.
Financial assets and liabilities
All assets and liabilities are included at fair value.
20. REDEMPTION OF PREFERENCE SHARES
Following the Court's confirmation of the reduction of capital
under Section 648 of the Companies Act 2006, the Preference Shares were
suspended from the Official List of the UK Listing Authority and to trading on
the London Stock Exchange on 16th January 2014.
The Court Order and associated statement of capital was registered
with the Registrar of Companies on 16th January 2014. The repayment of the
Preference Shares became effective on Registration and the Preference Shares
were immediately cancelled following the repayment.
The Company announced that the listing of the Preference Shares on
the Official List and to Trading on the London Stock Exchange has been
cancelled.
The effect of the above is shown on the Consolidated Statement of Changes in
Equity on page 32.
APPENDIX
Details of the principal investments as at 31st December 2014 are given below
by market value
Holdings Market
UK Investments Value
2014 2013 2014 2013
£ £
Scapa Group 10,425,000 10,425,000 13,787,063 11,832,375
VP 1,800,000 1,800,000 11,160,000 11,970,000
Brammer 2,700,000 2,700,000 9,173,250 12,028,500
Hill & Smith Holdings 1,434,230 1,434,230 8,289,849 8,893,500
RPC Group* 1,625,000 1,625,000 8,053,500 7,875,000
Treatt 5,775,000 1,625,000 7,854,000 7,386,285
Colefax Group 2,050,000 2,100,000 7,380,000 9,595,625
Macfarlane Group 16,325,851 15,659,184 5,877,306 5,245,827
British Polythene Ind 764,325 764,325 5,010,150 4,895,502
Renold 8,480,000 8,480,000 4,833,600 4,197,600
Spirax Sarco Eng 125,185 125,185 3,591,558 3,733,017
Domino Printing Sciences 500,000 500,000 3,300,000 3,827,500
Electrocomponents 1,300,000 1,300,000 2,798,900 3,621,800
Vitec Group 400,000 400,000 2,354,000 2,508,000
Menzies, (John) 650,000 400,000 2,283,125 2,832,000
Low & Bonar 4,440,000 4,440,000 2,197,800 3,152,400
Dialight 238,095 238,095 1,908,331 2,023,808
Castings 400,000 400,000 1,581,000 1,706,000
National Grid 150,000 150,000 1,378,500 1,000,000
Chamberlin 1,000,000 1,000,000 1,000,000 650,000
Note: * this does not include the nil paid rights in RPC Group.
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.