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.
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