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Annual Financial Report

Released 07:00 27-Feb-2018

Annual Financial Report


Annual Report & Accounts for the full year to 31 December 2017

A copy of the Company's Annual Report for the year ended 31st December 2017 will shortly be available to view and download from the Company’s website

Printed copies of the Annual Report will be sent to shareholders shortly. Additional copies may be obtained from the Corporate Secretary - Maitland Administration Services Limited, Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW.

The Annual General Meeting of the Company will be held at The GridIron Building, 8th Floor, 1 Pancras Square, Pancras Road, King’s Cross, London N1C 4AG on Monday 26th March 2018 at 12 noon.

The Directors have proposed the payment of a final dividend of 20.5p per Income share  which, if approved by shareholders at the forthcoming Annual General Meeting, will be payable on 4th April 2018 to shareholders whose names appear on the register at the close of business on 16th March 2018 (ex-dividend 15th March 2018).

The following text is copied from the Annual Report & Accounts.


The Board’s objective is to exceed the benchmark index over the long term whilst managing risk.

The Company invests in equities with an emphasis on smaller companies. UK smaller companies will normally constitute at least 80% of the investment portfolio. UK smaller companies include both listed securities and those quoted on the Alternative Investment Market (“AIM”).

The investment portfolio will normally lie in the range of 80% to 100% of shareholders’ funds and therefore gearing will normally be between –20% and 0%. As a result of the Alternative Investment Fund Managers Regulations 2013 it has been decided that the Company will not use gearing.


ISSUED SHARE CAPITAL (at 31st December 2017)

8,375,258 Income shares of 25p each.


Equal entitlement to dividends and other distributions.


Equal entitlement to the surplus assets.


One vote per share.


(at 31st December 2017) 2155.00p.



On 7th December 2016, the Company implemented share buy-back arrangements to encourage the level of discount to be not more than 10%.


During the year, the Company has bought back for cancellation a total of 590,097 Income shares for a total consideration of £11,835,000, representing 6.6% of the share capital of the Company at 31st December 2016.




Note: The above is a summary of rights. For full information shareholders should refer to the Articles of Association.


Year to
31st December
Net asset value per share Net asset value per share
(Index 1984 = 100)
dividend per
Income share
FTSE All Share
FTSE All Share Index (Rebased 1984 = 100)
1984 29.0p 100 3.80p 592.94 100
1990 75.4p 260 7.50p 1032.60 174
1995 175.0p 602 10.50p 1802.56 304
2000 473.9p 1631 25.50p 2983.81 503
2005 732.0p 2520 40.50p 2847.00 480
2010 776.4p 2673 25.50p 3094.41 522
2011 751.2p 2586 25.50p 2857.88 482
2012 962.0p 3312 26.75p 3093.41 522
2013 1382.5p 4759 40.00p* 3609.63 609
2014 1297.1p 4465 36.00p 3532.74 596
2015** 1595.6p 5492 36.00p 3444.26 581
2016 2002.2p 6892 52.50p* 3873.22 653
2017 2372.3p 8166 30.75p 4221.82 712

* Includes Special Dividend

** From 2015 onwards the historic record is for the Company only and not the Group.

Note: Until 2016 net asset value per share is based on the Capital shares adjusted for the reconstruction (four Income shares for each Capital share). Thereafter, performance is based on the Income shares (the only remaining share class).



Dr D. M. BRAMWELL (Chairman)






Springfield Lodge

Colchester Road

Chelmsford CM2 5PW




Springfield Lodge Colchester Road

Chelmsford CM2 5PW



One Wood Street

London EC2V 7WS



9 Bonhill Street

London EC2A 4DJ



The Registry

34 Beckenham Road


Kent BR3 4TU



100 Wood Street

London EC2V 7AN



London EC2P 2BX


Company Registration Number: 00736898 (Registered in England)

SEDOL number: 0739207

ISIN number: GB0007392078

London Stock Exchange (EPIC) Code: RIII

Global Intermediary Identification Number (GIIN): I2ZVNY.99999.SL.826

Legal Entity Identifier (LEI): 2138002AWAM93Z6BP574


Notice is hereby given that the fifty-fifth Annual General Meeting of the members of Rights and Issues Investment Trust Public Limited Company will be held in The GridIron Building, 8th Floor, 1 Pancras Square, Pancras Road, King’s Cross, London N1C 4AG, on 26th March 2018, at 12 noon, for the following purposes:


  1. To receive the audited financial statements and Reports of the Directors and Auditor for the year ended 31st December 2017.

  2. To approve the Annual Report on Directors’ Remuneration, set out on pages 21 to 26 (excluding the restated Remuneration Policy on pages 24 and 25), for the financial year ended 31st December 2017.

  3. To approve the payment of a final dividend of 20.50 pence per Income share for the financial year ended 31st December 2017.

  4. To re-elect Dr D. Bramwell as a Director.

  5. To re-elect D. M. Best as a Director.

  6. To elect Dr A. J. Hosty as a Director.

  7. To re-elect S. J. B. Knott as a Director.

  8. To re-elect J. B. Roper as a Director.

  9. To reappoint Begbies as Auditor and authorise the Directors to determine the Auditor’s remuneration.


    To consider and, if thought fit, pass resolution 10 as a Special Resolution:

  10. THAT the Company be and is hereby generally and unconditionally authorised in accordance with section 701 of the Companies Act 2006 to make market purchases (within the meaning of section 693 of the Companies Act 2006) of Income shares, provided that:

    10.1 the maximum aggregate number of Income shares hereby authorised to be purchased shall be 1,240,844 (representing approximately 14.99 per cent of the Income shares in issue on 22nd February 2018);

    10.2 the minimum price (exclusive of expenses) which may be paid for an Income share is 25 pence;

    10.3 the maximum price (exclusive of expenses) which may be paid for an Income share is not more than the higher of (i) an amount equal to 105 per cent of the average market value of the Income shares for the five business days immediately preceding the day on which the Income share is purchased; and (ii) the higher of the last independent bid and the highest current independent bid on the London Stock Exchange when the purchase is carried out, or such other amount as may be specified by the FCA from time to time;

    10.4 the authority hereby conferred will expire at the conclusion of the Annual General Meeting of the Company in 2019 unless such authority is renewed prior to such time; and

    10.5 the Company may make a contract to purchase Income shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of Income shares pursuant to any such contract; provided that all Income shares purchased pursuant to this authority shall be cancelled or transferred into treasury immediately upon completion of the purchases.

    By Order of the Board,

    MAITLAND ADMINISTRATION SERVICES LTD Secretary, 26th February 2018


    1.  Any shareholder entitled to attend and vote at the above meeting is entitled to appoint one or more proxies (who need not be a shareholder of the Company) to attend and to vote instead of the shareholder. To appoint more than one proxy, additional proxy forms may be obtained by contacting the Company’s registrars. Please also indicate by ticking the box provided if the proxy instructions are one of multiple instructions being given. All forms must be signed and should be returned together in the same envelope. Completion and return of a form of proxy will not preclude a shareholder from attending and voting at the meeting in person, should he subsequently decide to do so.

    2.  The right to appoint a proxy does not apply to persons whose Income shares in the Company (the “Shares”) are held on their behalf by another person and who have been nominated to receive communications from the Company in accordance with section 146 of the Companies Act 2006 (“nominated persons”). Nominated persons may have a right under an agreement with the registered shareholder who holds the Shares on their behalf to be appointed (or to have someone else appointed) as a proxy. Alternatively, if nominated persons do not have such a right, or do not wish to exercise it, they may have a right under such an agreement to give instructions to the person holding the Shares as to the exercise of voting rights.

    3.  In order to be valid, a form of proxy, which is provided with this notice, and a power of attorney or other authority under which it is signed, or certified by a notary or office copy of such power or authority, must reach the Company’s registrars, Link Asset Services, PXS, 34 Beckenham Road, Beckenham BR3 4TU not less than 48 hours (excluding any part of a day which is a non-working day) before the time of the meeting or of any adjournment of the meeting. A form of proxy is enclosed with this notice.

    4.  CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the procedures described in the CREST manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

    5.  In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message must be transmitted so as to be received by the Company’s agent, Link Market Services (whose CREST ID is RA10) by the specified latest time(s) for receipt of proxy appointments. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST applications host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed.

    6.  The Company may treat as invalid a CREST proxy instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. A register showing the interests of each Director and their connected persons, so far as they are aware, in the Income shares will be available for inspection at the offices of the Company Secretary, Maitland Administration Services Limited, 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 general meeting. It will also be available for inspection at the place of the meeting for 15 minutes prior to the general meeting and during the meeting. Apart from the Investment Director, there are no contracts of service existing between the Company and any of the Directors.

    7.  Any shareholder attending the general meeting is entitled, pursuant to section 319A of the Companies Act 2006 to ask any question relating to the business being dealt with at the meeting. The Company will answer any such questions unless:

10.  In order to attend and vote at this meeting you must comply with the procedures set out in notes 1 to 3 by the time specified in note 3.

11.  The right of shareholders to vote at the meeting is determined by reference to the register of shareholders. As permitted by section 360B(3) of the Companies Act 2006 and Regulation 41 of the Uncertificated Securities Regulations 2001, shareholders (including those who hold Shares in uncertificated form) must be entered on the Company’s share register at close of business on 22nd March 2018 in order to be entitled to attend and vote at the meeting. Such shareholders may only cast votes in respect of Shares held at such time. Changes to entries on the relevant register after that time shall be disregarded in determining the rights of any person to attend or vote at the meeting.

12.  The total number of Income shares of 25p in issue as at 22nd February 2018, the last practicable day before printing this document, was 8,272,300 Shares and the total level of voting rights was 8,272,300.


Developments late in the year around cuts to US rates of corporation tax resulted in a strong finish to 2017 and the FTSE All-Share Index rose by 9.0%.

The UK smaller company market performed well with FTSE Small Cap Index increasing by 14.9%.

Your Company’s portfolio fully participated in this strong market with the net asset value of the Income shares rising by 18.5% to 2372.3p. Total equity again achieved a new record of £198m and would have exceeded £200m but for the expense of share buy-backs.

The final income dividend proposed is 20.50p making 30.75p for the year, a 2.5% increase.

The share buy-back programme has utilised £11.8m during the year and a total of £13.9m worth of shares have been repurchased in its first fourteen months to January 2018. The programme is being extended for a further twelve months to February 2019.

Progress on Brexit has been slow in coming. The proposed transition period is to be welcomed as it will allow time to adapt but the final trading relationship with EU remains frustratingly obscure. Irrespective of the eventual outcome, quality companies will continue to make progress.

Dr D. M. BRAMWELL Chairman

26th February 2018


The Strategic Report is designed to provide information primarily about the Company’s business and results for the year ended 31st December 2017 and should be read in conjunction with the Chairman’s Statement on page 7.


The Company is a self-managed investment trust. The Company is registered as an investment company as defined in section 833 of the Companies Act 2006 and operates as such. The Company is not a close company within the meaning of the provisions of the Corporation Tax Act 2010.

The Board has been approved by the Financial Conduct Authority to be a Small Registered Alternative Investment Fund Manager (“AIFM”).

In the opinion of the Directors, the Company has conducted its affairs during the year under review, so as to qualify as an investment trust for the purposes of Chapter 4 of Part 24 of the Corporation Tax Act 2010 and continues to meet the eligibility conditions set out in section 1158 of the Corporation Tax Act 2010.

The Financial Conduct Authority rules in relation to non-mainstream pooled investments do not apply to the Company.


The Board’s objective is to exceed the benchmark index over the long term whilst managing risk.

To achieve this objective, the Board continues with its long-term strategy of seeking out undervalued investments that have characteristics consistent with a matrix of criteria developed by the Investment Director. This is supported by the five-yearly review that addresses the above objective. The latest review was conducted in November 2015, which concluded that the continuation of the Company for the period until July 2021 was in the best interests of shareholders.

In pursuing its strategy, close attention is paid to the control of costs. Further information on this is contained in the Key Performance Indicators on page 9.


There is a rigorous process of risk analysis at the level of the individual investment, based on the characteristics of the investee company. This controls the overall risk profile of the investment portfolio, allowing a higher level of concentration in the investment portfolio.

The investment portfolio is then managed on a medium-term basis with a low level of investment turnover. This minimises transaction costs and ensures medium-term consistency of the investment approach.

The Company’s investment activities are subject to the following limitations and restrictions:

The policy does not envisage hedging either against price or currency fluctuations. Whilst performance is compared against major UK indices, the composition of indices has no influence on investment decisions or the construction of the portfolio. As a result, it is expected that the Company’s investment portfolio and performance will deviate from the comparator indices.


A review of the year and commentary on the future outlook is provided in the Chairman’s Statement on page 7.

During the year under review, the assets of the Company were invested in accordance with the Company’s investment policy.

Company assets have increased from £179,503,000 to £198,690,000 and at 31st December 2017 the net asset value was 2,372.3p per Income share.


The Board is provided with detailed information on the Company’s performance at every Board meeting. Key Performance Indicators are:

  1. Shareholders’ funds equity return compared to the FTSE All-Share Index (the Company’s benchmark index).

  2. Dividends per Income share.

  3. Ongoing Charge (formerly titled the Total Expense Ratio).

    Shareholders’ funds equity return

    In reviewing the performance of the Company, the Board monitors shareholders’ funds in relation to the FTSE All-Share Index. During the year shareholders’ funds increased by 10.7% compared to an increase of 9.0% by the FTSE All-Share Index. Over the five years ended 31st December 2017 shareholders’ funds increased by 130.2% compared with a rise of 36.5% by the FTSE All-Share Index.

    Dividends per Income share

    The total dividend per Income share paid and proposed is 30.75p (2016: 52.50p). During 2016 the share capital reorganisation took place and consequently the total dividend paid during 2016 is not directly comparable to the current year on a like for like basis.

    Ongoing Charge

    The Ongoing Charge shows the efficiency of control of management costs. The Ongoing Charge for the year ended 31st December 2017 was 0.41% (2016: 0.45%).


    The Board of Directors has a process for identifying, evaluating and managing the key risks of the Company. This process operated during the year and has continued to the date of this report. The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The Directors describe below those risks and how they are being managed or mitigated.

    Investment in an individual smaller company inherently carries a higher risk than investment in an individual large company. In a diversified portfolio, the portfolio risk of a smaller company portfolio is only slightly greater than the portfolio risk of a large company portfolio. The Company manages a diversified portfolio. Additionally, the Company invests overwhelmingly in smaller UK listed and AIM traded companies and has no exposure to derivatives. The principal risks are therefore market price risk and liquidity risk. Further details on these risks and how they are managed may be found in Note 18 to the financial statements on page 45.

    Additional key risks identified by the Company, together with the Board’s approach in dealing with them are as follows:

    Investment performance – The performance of the investment portfolio will deviate from the performance of the benchmark index. The Board’s objective is to exceed the benchmark index over the long term whilst managing risk. The Board ensures that the Investment Director is managing the portfolio within the scope of the investment policy; the Board monitors the Company’s performance against the benchmark; and the Board also receives detailed portfolio attribution analysis. The Board has a clearly defined investment philosophy and operates a diversified portfolio.

    Share price discount – Investment trust shares often trade at discounts to their underlying net asset values. The Board monitors the level of the discount of the Income shares. On 7th December 2016, the Company implemented share buy-back arrangements to mitigate the risk of the discount increasing.

    Loss of key personnel – The Investment Director is crucial to performance and the loss of the Investment Director could adversely affect performance in the medium term. The Board reviews its strategy for this risk annually.

    Regulatory risk – The Company must abide by section 1158 of the Corporation Tax Act 2010 to maintain its investment trust status. This is achieved by the consistent investment policy and is monitored by the Board. The Board seeks assurance from the Administrator that the investment trust status is being maintained. The Board also reviews a schedule of regulatory risk items at its Board meetings in order to monitor and take action to address any regulatory changes.

    Protection of assets – The Company’s assets are protected by the use of an independent custodian, HSBC Bank plc, and the Board monitors the custodian to ensure assets remain protected. In addition, the Company operates clear internal controls to safeguard all assets.

    Brexit – The risk associated with the decision of a majority of the UK electorate to leave EU membership (“Brexit”) could be considerable for the UK and also for continental European countries. The links between the UK and the EU are wide-ranging and the future relationship remains unclear, creating conditions that could mean that markets react unpredictably to the uncertainty created. This risk is challenging to mitigate but the Investment Director is considering the Brexit risk for each investment in the portfolio based on its individual circumstances.

    These and other risks facing the Company are reviewed regularly by the Audit and Compliance Committee and the Board.


    The Board reviews the performance and progress of the Company over five-year periods and uses these assessments, regular investment performance updates from the Investment Director and a continuing programme of monitoring risk to assess the future viability of the Company. The Directors consider that a period of five years is a reasonable time horizon to consider the viability of the Company. The Company also uses this period for its strategic planning. The following facts support the Directors’ view of the viability of the Company:

2017 2016
Male Female Male Female
Directors (non-executive) 4 0 3 0
Directors (Executive) 1 0 1 0
Employees 0 0 0 0

The Directors have considered the Strategic Report and believe that taken as a whole it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance and strategy.

The Strategic Report was approved by the Board and signed on its behalf by:

S. J. B. Knott, Director 26th February 2018


The Directors have pleasure in submitting their fifty-fifth Annual Report, together with audited financial statements in respect of the year ended 31st December 2017.


The Directors who served during the year were as follows:

Dr D. M. Bramwell Chairman 70 Years He was Chairman of Intelek PLC.
D. M. Best Chairman of Audit Committee 59 Years He is a former Managing Director of YFM Group and former Group Financial Director of Peterhouse Group PLC.
Dr A. J. Hosty* Director 53 Years He is a Chief Executure of the Sir Henry Royce Institute and a Director of Consort Medical PLC and RHI Magnesita N.V.
S. J. B. Knott Investment Director 59 Years He has been investment manager for more than 30 years.
J. B. Roper Chairman of Nominations and Remuneration Committee 67 years He is a solicitor and former partner of Eversheds LLP specialising in corporate transactions.

* Dr A. J. Hosty was appointed on 1st July 2017.

The Company purchases liability insurance covering the Directors and Officers of the Company.


The Board is recommending a final dividend of 20.50p per Income share (2016: 20.00p). If approved, taken together with the interim dividend of 10.25p per Income share (2016: 10.00p) this will result in a total dividend to the holders of Income shares for the year of 30.75p per Income share (2016: 52.50p). In 2016 a special dividend payment relating to the capital reorganisation of 22.50p per Income share was paid.


The Company has received notification to 22nd February 2018, in accordance with Chapter 5 of the Disclosure and Transparency Rules, of the following voting rights:

Income shares % of voting
Dartmoor Investment Trust 742,892 8.24%
Henderson Global Investors 702,000 7.78%
Rathbone Brothers PLC 553,433 6.13%
J. Knott 482,185 5.35%
S. J. B. Knott 477,000 5.29%
P & J Allen 447,958 4.97%
CG Asset Management Ltd 441,200 4.89%
H. J. D. Knott 428,589 4.75%
* The percentage of voting rights is as at the time of the notification.


The Company has chosen to set out in the Strategic Report all information relating to the above.


Details of the Company’s capital structure and voting rights are given on page 1 of this document and in Note 14 on page 43 of the financial statements.


Full details are given in the Corporate Governance Statement on pages 14 to 17. The Corporate Governance Statement forms part of this Directors’ Report.


The Notice of the Annual General Meeting to be held on 26th March 2018 is set out on pages 4 to 6.

Share Buy Back Facility (resolution 10): The Board is seeking to renew the authority granted at the Annual General Meeting held on 30th March 2017 that authorises the Company to make market purchases of Income shares for cancellation. At the forthcoming Annual General Meeting the Directors will seek to renew this authority to buy back for cancellation up to 14.99% of Income shares in issue, representing 1,240,844 Income shares as at 22nd February 2018. The authority will expire at the conclusion of the next Annual General Meeting of the Company in 2019 unless the authority is renewed. The Board considers this authority an important part of the Company’s discount management policy. Stockdale, the Company’s brokers, will be asked to continue the facilitation of these buy backs on the Company’s behalf and in accordance with the relevant provisions of the Companies Act 2006 and Listing Rules.

Recommendation: The Directors recommend that shareholders vote in favour of the resolutions to be proposed at the Annual General Meeting, as they intend to do in respect of their own beneficial holdings; all resolutions are considered to be in the best interests of the Company and its members.


The Annual Report on Directors’ Remuneration on pages 21 to 26 provides information on the Directors’ remuneration and their interests in the share capital of the Company, together with details of their letters of appointment and memoranda of service. All Directors served throughout the year, with the exception of Dr A. J. Hosty.


The accounting, company secretarial and administrative services are provided by Maitland Administration Services Limited (“Maitland”) under an agreement terminable by either party on not less than six months’ notice. The services provided by Maitland are reviewed regularly by the Board.


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.


The Company’s assets comprise mainly readily realisable equity securities and cash and the value of its assets is greater than its liabilities. Additionally, after reviewing the Company’s budget including the current financial resources and projected expenses for the next 12 months and its medium-term plans, the Directors believe that the Company’s resources are adequate for continuing in business for the foreseeable future. Accordingly, it is appropriate to continue to prepare the financial statements on a going concern basis.


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

26th February 2018



The Board has considered the principles and recommendations of the AIC Code of Corporate Governance (“AIC Code”) by reference to the AIC Corporate Governance Guide for Investment Companies (“AIC Guide”). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.

The Board considers that reporting against the principles and recommendations of the AIC Code and by reference to the AIC Guide will provide better information to shareholders. However, as a self-managed investment trust company, not all of the provisions of the AIC Code are directly applicable to the Company. Full consideration has been given by the Board to the principles of good governance. In so far as they are applicable to a smaller self-managed investment trust, the Directors believe that they comply with the principles other than the following matter:

> The Board had elected not to designate a senior independent non-executive Director, as it considers that each Director has different strengths and qualities on which they may provide leadership.


The Directors of the Company, as shown on page 12, are Dr D. M. Bramwell, Mr D. M. Best, Dr A. J. Hosty, Mr S. J. B. Knott and Mr J. B. Roper. With exception of Dr A. J. Hosty, who was appointed on 1st July 2017, all served throughout the year under review. Their biographical details, also set out on that page, demonstrate a breadth of investment, commercial and professional experience.

The Board is collectively responsible for promoting the success of the Company. It deals with the important aspects of the Company’s affairs, including the setting of parameters for, and the monitoring of investment strategy and the review of, investment performance. It reviews the share price and the discount or premium to net asset value. The Board sets limits on the size and concentration of new investments. The application of these and other restrictions, including those which govern the Company’s tax status as an investment trust, are reviewed regularly at meetings of the Board.

The Board delegates all investment matters to the Investment Director but reserves to itself all decisions concerning unquoted investments. The Investment Director takes decisions as to the purchase and sale of individual investments and is responsible for effecting those decisions on the best available terms in accordance with the investment policy as stated on page 1.

The Chairman leads the Board and ensures that it deals effectively with all the aspects of its role. In particular, he ensures that the Administrator provides the Directors, in a timely manner, with management, regulatory and financial information that is clear, accurate and relevant. Representatives of the Administrator attend each Board meeting, enabling the Directors to seek clarification on specific issues or to probe further on matters of concern. Matters specifically reserved for decision by the full Board have been defined and there is an agreed procedure for Directors, in the furtherance of their duties, to take independent professional advice, if necessary, at the Company’s expense.

The Directors, their roles and attendance records are as follows:

Directors Role Audit Committee Nominations and Remuneration Committee Board meetings attended Committee meetings attended
Dr D. M. Bramwell Chairman, non-executive Yes Yes 8 7
S. J. B. Knott Chief Executive and Investment Director No No 8 0
D. M. Best Non-executive Chairman Yes 8 7
Dr A. J. Hosty* Non-executive No No 4 0
J. B. Roper Non-executive Yes Chairman 8 7

* Dr A. J. Hosty was appointed on 1st July 2017.


The Board of Directors, which includes four non-executive Directors, all of whom are considered to be independent, meets at least seven times a year to review the affairs of the Company. The Directors have reviewed their independence by reference to the AIC Code. The Directors have had no material connection other than as Directors of the Company. The Board is of the opinion that each of the non-executive Directors is independent in character and judgment and that there are no relationships or circumstances that are likely to affect their judgment. Dr D. M. Bramwell has now served on the Board for more than nine years and (along with the other Directors) will stand for election by the shareholders each year. The Board is firmly of the view, however, that length of service does not of itself impair a director’s ability to act independently. As such, the Board considers Dr D. M. Bramwell to be independent but, in accordance with the Code, his role and contribution will be subject to particularly rigorous review.


The Articles of Association reflect the codification of certain directors’ duties arising from the Companies Act 2006 and in particular the duty for Directors to avoid conflicts of interest. The Board has put in place a framework in order for Directors to report conflicts of interest or potential conflicts of interest.

All Directors are required to notify the Company Secretary of any situations, or potential situations, where they consider that they have or may have a direct or indirect interest or duty that conflicts or may possibly conflict with the interests of the Company. The Board has considered that the framework worked effectively throughout the period since its adoption. Directors were also made aware that there remains a continuing obligation to notify the Company Secretary of any new situation that may arise, or any change to a situation previously notified. It is the Board’s intention to continue to review all notified situations on a regular basis.


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. The Committee managed, with assistance from Trust Associates, the selection and appointment of Dr A. J. Hosty during the year. There are procedures for a new Director to receive relevant information on the Company together with appropriate induction. The Committee is satisfied that the Board and its Committees function effectively, both collectively and individually, and contain the appropriate balance of skills and experience to provide effective management.

Further details of the work of the Committee are given on page 21.


The Board reviews its performance on an annual basis. The review covers an assessment of how cohesively the Board, Audit Committee and Nominations and Remuneration Committee work as a whole, as well as the performance of the individuals within them.

The Chairman is responsible for performing this review. Mr D. M. Best 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 2017 was output-based, but had regard to all other relevant factors.


As in previous years, all Directors retire at each Annual General Meeting and, if appropriate, seek re-election. Being eligible, all Directors offer themselves for re-election. The Board considers that the Directors should be re-elected because they bring wide, current and relevant business experience that allows them to contribute effectively to the leadership of the Company. Following performance evaluation their performance continues to be effective and committed to the role.

Each non-executive Director has signed a letter of appointment to formalise the terms of his engagement as a non-executive Director (or there is a memorandum of such terms), copies of which are available on request and at the Company’s Annual General Meeting. No Director is or was materially interested in any contract subsisting during or at the end of the year that was significant in relation to the Company’s business.

No Director, apart from the Investment Director, has, or during the financial year had, a contract of service with the Company. The terms of the Investment Director’s current basis of remuneration are detailed in the Directors’ Remuneration Report on pages 21 to 26.

The Company is committed to ensuring that vacancies arising are filled by the best qualified candidates and recognises the value of diversity in the composition of the Board.


The Board is fully aware of its duty to present a balanced and understandable assessment of the Company’s position. It acknowledges its responsibility for the Company’s system of internal financial controls and their effectiveness. The Board meets regularly and reviews performance against approved plans and forecasts. In addition, the day-to-day administration and accounting functions are carried out by the Administrator and reports are submitted regularly to the Board.

As part of the system of internal control, there is a process to identify, evaluate and manage the significant risks faced by the Company, which has been in place during the year under review and up to the date of approval of the financial statements. This has been reviewed by the Board, is in accordance with the guidelines in the AIC Code and is considered by the Board to be effective and fit for purpose. The system of risk analysis adopted by the Board is designed to manage rather than eliminate the risk of failure to achieve the investment objectives of the Company. It must be stressed that undertaking an acceptable degree of controlled risk is always necessary in the conduct of any investment trust if above average performance is to be achieved. For this reason, the process can only provide reasonable and not absolute assurance against loss.


The Audit Committee is a formally constituted committee of the Board with defined terms of reference, which include its role and the authority delegated to it by the Board, and which are available at the Company’s registered office and on the Company’s website. Its specific responsibilities include reviewing the Company’s annual and half yearly results, together with the supporting documentation.

Further details are given in the Report of the Audit Committee on pages 18 to 20.


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.


It is the Chairman’s role to ensure effective communication with the Company’s shareholders and it is the responsibility of the Board to ensure that satisfactory dialogue takes place, based on the mutual understanding of objectives.

The Investment Director maintains a regular dialogue with major shareholders and reports to the Board.

The Board considers that the Annual General Meeting should provide an effective forum for individual investors to communicate with the Directors. The Annual General Meeting is chaired by the Chairman of the Board. All the other Directors, including the Chairman of the Audit Committee, expect to be present at the meeting and the Investment Director will present a review of the significant investment positions.


The Board has delegated authority to the Investment Director for monitoring the corporate governance of investee companies. The Board has delegated to the Investment Director responsibility for selecting the portfolio of investments within investment guidelines established by the Board and for monitoring the performance and activities of investee companies. On behalf of the Company the Investment Director carries out detailed research on investee companies and possible future investee companies through internally generated research. The research includes an evaluation of fundamental details such as financial strength, quality of management, market position and product differentiation. Other aspects of research include an appraisal of social, ethical and environmentally responsible investment policies.

The Board has delegated authority to the Investment Director to vote on behalf of the Company in accordance with the Company’s best interests. The primary aim of the use of voting rights is to address any issues which might impinge on the creation of a satisfactory return from investments. The Company’s policy is, where appropriate, to enter into engagement with an investee company in order to communicate its views and allow the investee company an opportunity to respond.

In such circumstances the Company would not normally vote against investee company management but would seek, through engagement, to achieve its aim. The Company would vote, however, against resolutions it considers would damage its shareholder rights or economic interests.

The Company has a procedure in place that where the Investment Director, on behalf of the Company, has voted against an investee company resolution, it is reported to the Board.

The Board considers that it is not appropriate for the Company, as a small self-managed investment trust, formally to adopt the UK Stewardship Code. However, many of the UK Stewardship Code’s principles on good practice on engagement with investee companies are used by the Company, as described above.


The Directors consider that during the year ended 31st December 2017 the Company has complied with all the relevant provisions set out in the AIC Code.

This Corporate Governance Statement was approved by the Board and signed on its behalf:

Dr D. M. Bramwell, Chairman 26th February 2018



The Audit Committee’s main functions are as follows:

Director Salary and fees 2017 £ Annual bonuses 2017 £ Total for
Salary and fees 2016 £ Annual bonuses 2016 £ Total for
D. M. Best 20,000 20,000 18,500 18,500
Dr D. M. Bramwell (Chairman) 26,000 26,000 24,000 24,000
Dr A. J. Hosty 10,000 10,000
S. J. B. Knott (Executive) 268,500 45,000 313,500 213,000 40,000 253,000
J. B. Roper 20,000 20,000 18,500 18,500
Total 344,500 45,000 389,500 274,000 40,000 314,000

Note: Dr A. J. Hosty was appointed on 1st July 2017.

No payments of other types prescribed in the relevant regulations such as Long-term Incentive Plans (“LTIPs”) or pensions and pension-related benefits were made.

No other remuneration or compensation was paid or payable by the Company during the year to any current or former Directors.

With effect from 1st January 2018 the fees payable to the Directors are as follows (previous rates are shown in brackets): Chairman £27,000 (£26,000), other non-executive Directors £21,000 (£20,000) and Investment Director/CEO (base salary excluding discretionary bonus) £297,000 (£268,500).


The Company has not set any requirements or guidelines for the Directors to own Income shares in the Company. The beneficial interests of the Directors and their connected persons in the Income shares of the Company are shown in the table below.

Income shares
31 December
31 December
D. M. Best
Dr D. M. Bramwell (Chairman) 22,625 22,625
Dr A. J. Hosty
S. J. B. Knott (Executive) 477,000 477,000
J. B. Roper

No changes in the Directors’ interests shown above have occurred since 31st December 2017.


The graph below illustrates the total shareholder return for the Income Shares relative to the FTSE All-Share Index. This has been used as the appropriate index as it is the Company’s benchmark index.


CEO Single Figure of Total Remuneration
Annual Bonus Paid Out
2013 140,000 25,000
2014 184,000
2015 184,000 30,000
2016 213,000 40,000
2017 268,500 45,000
Total 989,500 140,000

The above bonuses were of a discretionary nature and so no percentage against a maximum payable has been shown.

The table below shows the percentage change in the remuneration of the Director undertaking the role of CEO (the Investment Director) between the years 2016 and 2017. During the same period the Company had no employees.

Percentage change in salary Percentage change in annual bonus
CEO 15.8% 33.3%
Workforce N/A N/A


Directors’ remuneration Shareholder distribution
£ £
2017 389,500 2,645,030
2016 314,000 2,481,320
Difference 75,500 163,710
% Change 24% 7%


Except as set out below, there are no written service contracts or contract for services in respect of any Director. There are no share options, LTIPs, pension or profit-related pay arrangements with any of the Directors.

There are letters of appointment for four non-executive Directors:

Director Date
Dr D. M. Bramwell (Chairman) 5th April 2017
D. M. Best 5th April 2017
Dr A. J. Hosty 1st July 2017
J. B. Roper 5th April 2017

There is a written memorandum setting out the terms of the contract of service for S. J. B. Knott; there are also subsequent memoranda varying the letters of appointment and this memorandum.

No terms or notice periods are set out in any terms of appointment of any of the Directors; all Directors are subject to annual re-election at the Company’s Annual General Meeting.

There are no provisions for the payment of compensation for loss of office, early termination or wrongful termination by the Company. Any payment on termination of their appointments would be calculated in accordance with their strict legal entitlements.


The following is the Company’s policy for Directors’ remuneration which was approved by shareholders at the Annual General Meeting held on 30th March 2017.


The Company’s policy as regards non-executive Directors is that fees payable to them should reflect their expertise, responsibilities and time spent on Company matters. In determining the level of non-executive remuneration, market equivalents should be considered with regard being had to the overall activities and size of the Company.

The maximum aggregate level of fees payable to the Directors is fixed by the Company’s Articles of Association, amendment of which is by way of an ordinary resolution. The level aggregate fees should not exceed is £150,000 per annum. The Investment Director is not paid a fee for acting as a Director of the Company but is remunerated separately in respect of his executive roles.

The Company’s policy as regards S. J. B. Knott, the Investment Director and only executive director of the Company, is to align his remuneration to the principal investment benchmark of the Company. However, it also has regard to his executive duties as effective chief executive officer of the Company and the time required of him for the effective fulfilment of his duties, but with provision for discretionary bonuses to recognise significant outperformance of the Company’s investment portfolio. As noted on page 21, he is a significant shareholder in the Company.

The Company does not confer any share options, long-term incentives or retirement benefits on any Director, nor does it make a contribution to any pension scheme on behalf of the Directors. The Company has not included any performance-related elements in the remuneration package of the Executive Director except as noted above. The Company also provides Directors’ liability insurance.


The tables below summarise the various elements of the remuneration packages of the Directors.

Investment Director

Element Purpose and link to strategy
Base salary The Investment Director is paid an annual salary linked to the net assets of the Company at the end of the previous year to reflect the aim of long-term growth which is the principal benchmark measurement criterion of the Company and, in addition, to have regard to his other executive duties.
Discretionary bonus To motivate the Investment Director to achieve measured outperformance.

Chairman and non-executive Directors’ fees

Element Purpose and link to strategy
Chairman and non-executive Directors’ fees The fees paid to the Chairman and the other non-executive Directors aim to be competitive with other investment trusts of equivalent size and complexity. Fees are fixed annual sums and reviewed periodically by the Board (for non-executive Directors) and the Committee (for the Chairman). Neither the Chairman nor the other non-executive Directors receive any incentive payment.


No Director is entitled to receive any pension provision.

There is no maximum or minimum applicable to either element of the Investment Director’s remuneration package.

The policy on remuneration for employees generally is to incentivise them to perform effectively and to recognise market comparators, but remuneration packages are structurally different from that of the only executive director, the Investment Director. The Company currently has no other employees.


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.


As the Company has no employees, other than the Investment Director, there was no consultation when setting the Directors’ Remuneration Policy and no remuneration comparison measurement with employees was used.

It is intended that the Directors’ Remuneration Policy will continue until the Annual General Meeting of the Company to be held in 2020.


Minimum In line with Expectations Maximum
Bonus 0% 0% 17%
Salary 100% 100% 83%

It is expected that no bonus will be payable for performance in line with expectations and a maximum bonus of 20% of salary would be payable.

A binding Ordinary Resolution approving the Directors’ Remuneration Policy was approved on 30th March 2017. The votes cast were as follows:

Remuneration Policy

For – % of votes cast 99.65%
Against – % of votes cast 0.15%
At Chairman’s discretion – % of votes cast 0.20%
Total votes cast 2,435,109
Number of votes withheld 3,180

A non-binding Ordinary Resolution adopting the Annual Report on Directors’ Remuneration for the year ended 31st December 2016 was approved by shareholders at the Annual General Meeting held on 30th March 2017. The votes cast by proxy were as follows:

Annual Report on Directors’ Remuneration

For – % of votes cast 99.78%
Against – % of votes cast 0.14%
At Chairman’s discretion – % of votes cast 0.08%
Total votes cast 2,436,209
Number of votes withheld 2,080


On behalf of the Board and in accordance with Part 2 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, I confirm that the above Report (which has been agreed by the Board) summarises, as applicable, for the year ended 31st December 2017:

Year ended 31st December 2017 Year ended 31st December 2016
Notes Revenue
Investment income 2 3,329 3,329 3,311 3,311
Other operating income 2 3 3 4 4
Total income 3,332 3,332 3,315 3,315
Gains on
fair value through profit or loss assets
9 31,083 31,083 37,774 37,774
Gains/(losses) on subsidiary holding 9 151 151 (68) (68)
3,332 31,234 34,566 3,315 37,706 41,021
Investment management fee
Other expenses 3 810 89 899 688 7 695
810 89 899 688 7 695
Profit before tax 2,522 31,145 33,667 2,627 37,699 40,326
Tax 5
Profit for the period 2,522 31,145 33,667 2,627 37,699 40,326
Earnings per share
Return per Income share 7 29.1p 359.5p 388.6p 29.1p 418.1p 447.2p

The total column of this statement represents the Statement of Comprehensive Income prepared in accordance with International Financial Reporting Standards as adopted by the EU. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies.

The profit for the year disclosed above represents the Company’s total Comprehensive Income. The Company does not have any other Comprehensive Income.

All items in the above statement are those of the single entity and derive from continuing operations. No operations were acquired or discontinued during the year.

The notes on pages 36 to 46 form part of these financial statements.


as at 31st December 2017

Non-current assets
Notes 2017
Investments – fair value through profit or loss 9 179,144 159,821
179,144 159,821
Current assets
Trade and other receivables 12 579 517
Amounts due from Group undertakings 78 294
Cash and cash equivalents 19,069 19,071
19,726 19,882
Total assets 198,870 179,703
Current liabilities
Trade and other payables 13 180 200
180 200
Total assets less current liabilities 198,690 179,503
Net assets 198,690 179,503
Called up share capital 14 2,094 2,241
Capital redemption reserve 15 161 14
Retained reserves:
Capital reserve 15 65,434 62,695
Revaluation reserve 15 128,151 111,580
Revenue reserve 15 2,850 2,973
Total equity 198,690 179,503
Net asset value per share
Income shares 16 2372.3p 2002.2p

The notes on pages 36 to 46 form part of these financial statements.

The financial statements were approved by the Board and authorised for issue on 26th February 2018. They were signed on its behalf by:

Dr D. M. Bramwell, Director

S. J. B. Knott, Director

Company Registration Number: 00736898


for the year ended 31st December 2017

Notes Share
Premium account
Dividend Equalization
Balance at 31st December 2015 1,025 225 63,709 74,883 2,827 142,669
Changes in equity for 2016
Profit for the year 1,002 36,697 2,627 40,326
Total recognised income and expense 1,025 225 64,711 111,580 5,454 182,995
Bonus issue of Income shares 1,230 (225) (1,005)
Cost of bonus issue (73) (73)
Income shares bought back and cancelled (14) 14 (938) (938)
Dividends 6 (2,481) (2,481)
Balance at 31st December 2016 2,241 14 62,695 111,580 2,973 179,503


Notes Share
Premium account
Dividend Equalization
Balance at 31st December 2016 2,241 14 62,695 111,580 2,973 179,503
Changes in equity for 2017
Profit for the year 14,574 16,571 2,522 33,667
Total recognised income and expense 2,241 14 77,269 128,151 5,495 213,170
Income shares bought back and cancelled (147) 147 (11,835) (11,835)
Dividends 6 (2,645) (2,645)
Balance at 31st December 2017 2,094 161 65,434 128,151 2,850 198,690

The notes on pages 36 to 46 form part of these financial statements.


for the year ended 31st December 2017

Cashflows from operating activities Notes 2017
Profit before tax 33,667 40,326
Adjustments for:
Gains on investments (31,083) (37,774)
(Gains)/losses on revaluation of subsidiary (151) 68
Purchases of investments 9 (8,338) (2,721)
Proceeds on disposal of investments 9 20,249 3,862
Operating cash flows before movements in working capital 14,344 3,761
Decrease/(increase) in receivables 154 (230)
Decrease in payables 7 123
Net cash from operating activities before income taxes 14,505 3,654
Net cash from operating activities 14,505 3,654
Cash flows from financing activities
Expenses from bonus issue (73)
Income shares bought back and cancelled (11,862) (938)
Dividends paid (2,645) (2,481)
Net cash used in financing activities (14,507) (3,492)
Net (decrease)/increase in cash and cash equivalents (2) 162
Cash and cash equivalents at beginning of year 19,071 18,909
Cash and cash equivalents at end of year 19,069 19,071

The notes on pages 36 to 46 form part of these financial statements.


for the year ended 31st December 2017


Basis of Accounting

The financial statements of the Company have been prepared in accordance with the International Financial Reporting Standards (“IFRS”), which comprise standards and interpretations approved by the International Accounting Standards Board (“IASB”), and International Accounting Standards (“IAS”) and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee (“IASC”) that remain in effect, and to the extent that they have been adopted by the European Union (“EU”).

The financial statements have been prepared on a going concern basis under the historical cost convention to include the revaluation of investments. The principal accounting policies are set out below. Where presentational guidance set out in the Statement of Recommended Practice (“SORP”) for “financial statements of Investment Trust Companies and Venture Capital Trusts” issued by the Association of Investment Companies (“AIC”) in January 2017 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

In accordance with IFRS 10 (Investment Entities Amendments), the Company measures its subsidiary at fair value through profit and loss and does not consolidate it.

The following amendments to standards effective this year, being relevant and applicable to the Company, have been adopted, although they have no impact on the financial statements.

Amendments to IAS 7 – Disclosure initiative - Statement of Cash Flows. Amendments to IAS 12 – Recognition of deferred tax assets for unrealised losses.

The following standards are effective for annual periods beginning on or after 1st January 2018 and have not been adopted early by the Company.

IFRS 15 – Revenue from Contracts with Customers (effective 1st January 2018) specifies how and when an entity should recognise revenue and enhances the nature of revenue disclosures. Given the nature of the Company’s revenue streams from financial instruments, the provisions of this standard are not expected to have a material impact.

IFRS 9 – Financial Instruments (effective 1st January 2018) replaces IAS 39 and simplifies accounting for financial assets, replacing the current multiple measurement categories with a single principle-based approach to classification. The standard requires that all financial assets are to be measured at either amortised cost or fair value. The Directors do not anticipate that the adoption of this standard will have a material impact in the period of initial application.


Dividend income is included in the financial statements on the ex-dividend date. All other income is included on an accruals basis.


All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account except as follows:

Income from investments 2017
Franked investment income 3,329 3,311
Other operating income
Deposit interest 3 4
Total income 3,332 3,315
Income from investments
UK equity listed 3,006 2,912
AIM traded 294 274
Delisted stock 29
Dividend from subsidiary 125
3,329 3,311


2017 2016
£’000 £’000
Staff costs (note 4) 359 288
Non-executive Directors’ fees 76 61
Administration fees 139 109
Auditor’s remuneration
– Audit 15 15
– Review of the half yearly report 4 4
– Other services to the Company and its subsidiaries 1 1
Secretarial services 42 42
Other 174 168
810 688
Capital expenses 89 7
899 695

Auditor’s other services are comprised of tax compliance services and the Directors do not consider that the provision of this non-audit work affects the independence of the Auditor.

4.         STAFF COSTS

Wages and salaries 314 253
Social security costs 45 35
359 288
Number Number
The average number of staff employed by the Company was 1 1
£’000 £’000
Directors’ emoluments 390 314
390 314
The highest paid Director received total emoluments of £314,000 (2016: £253,000).


UK Corporation Tax at 20% (2016: 20%)
Tax receivable
Profit before tax 2,522 2,627
Tax on profit at standard rate 485 525
Factors affecting the recovery/charge for the year:
Income not taxable
(640) (662)
Unutilised losses carried forward 155 137

No provision for deferred taxation has been made in the current year or in the prior year. The Company has not provided for deferred tax on capital gains or losses arising on the revaluation or disposal of investments as it is exempt from tax on these items because of its status as an investment trust company.

Factors that may affect future tax charges

The Company has not recognised any deferred tax asset arising as a result of having unutilised management expenses. These expenses will only be utilised if the tax treatment of the Company’s income and capital gains changes or if the Company’s investment profile changes.


Amounts recognised as distributions to equity holders in the year:

Income (Paid)
Final dividend for the year ended 31st December 2016 of 20.00p per share(year ended 31st December 2015: 25.50p) 1,766 627
Interim dividend for the year ended 31st December 2017 of 10.25p per share (year ended 31st December 2016: 10.00p) 879 902
Special dividend for the year ended 31st December 2017 of nil p per share (year ended 31st December 2016: 22.50p) 553
Capital (Paid)
Final dividend for the year ended 31st December 2016 of nil p per share (year ended 31st December 2015:1.80p) 30
Special dividend for the year ended 31st December 2017 of nil p per share (year ended 31st December 2016: 22.50p) 369
2,645 2,481


Income shares 2017
Proposed Final dividend payable for the year ended 31st December 2017 of 20.50pper share (year ended 31st December 2016: 20.00p) 1,696 1,774

The final dividends payable are subject to approval by shareholders at the Annual General Meeting and have not been included as a liability in these financial statements.

Set out below is the total dividend paid and payable in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered.

Revenue available for distribution by way of dividend for the year 2,522 2,627
Interim dividend for the year ended 31st December 2017 of 10.25p per share (year ended 31st December 2016: 10.00p) (879) (902)
Special dividend for the year ended 31st December 2017 of nil p per share (year ended 31st December 2016: 22.50p) (553)
Proposed Final dividend for the year ended 31st December 2017 of 20.50p per share (year ended 31st December 2016: 20.00p) (1,696) (1,774)
Special dividend for the year ended 31st December 2017 of nil p per share (year ended 31st December 2016: 22.50p) (369)
Net reduction to Revenue reserve (53) (971)


2017 2016
Income Income
£’000 £’000
Return attributable to equity shareholders:
Revenue return 2,522 2,627
Capital return 31,145 37,699
33,667 40,326
p p
Revenue return 29.1 29.1
Capital return 359.5 418.1
388.6 447.2

Return per share is calculated using the weighted average number of Income shares in issue during the year of 8,662,424.

8.         INVESTMENTS

Analysis of the investments

The number of companies or institutions in which equities, convertibles or fixed interest securities were held was 27 (2016: 26).

EQUITY GROUPS Basic Materials 2017 2016
£’000 % £’000 %
Chemicals 21,577 12.04 14,438 9.03
Construction & Materials 1,923 1.07 4,233 2.65
General Industrials 37,654 21.02 34,088 21.33
Electronic & Electrical Equipment 1,310 0.73 1,881 1.18
Industrial Engineering 39,389 21.99 31,397 19.64
Support Services 29,643 16.55 29,265 18.31
Pharmaceuticals & Biotechnology 923 0.52 1,092 0.68
Gas, Water & Multiutilities 1,202 0.67 1,425 0.89
AIM Traded Stocks 44,050 24.59 40,814 25.54
Subsidiary 706 0.39 555 0.35
Fixed Interest
Preference 767 0.43 633 0.40
Total UK 179,144 100.00 159,821 100.00


Investments listed on a recognised investment exchange 2017
UK equity listed investments at fair value 134,367 118,452
AIM traded stocks 44,050 40,814
Delisted stock 21
Subsidiary undertakings (note 10) 706 555
179,144 159,821


Subsidiary undertakings
Opening book cost 41,347 6,483 411 48,241
Opening unrealised appreciation 77,105 34,331 144 111,580
Opening valuation 118,452 40,814 555 159,821
Movements in the year
Purchases at cost 6,688 1,650 8,338
Sales – proceeds (13,202) (7,047) (20,249)
Sales – realised gains on sales 8,120 6,543 14,663
Increase in unrealised appreciation 14,309 2,111 151 16,571
Closing valuation 134,367 44,071 706 179,144
Closing book cost 42,953 7,629 411 50,993
Closing unrealised appreciation 91,414 36,442 295 128,151
134,367 44,071 706 179,144
Realised gains on sales 8,120 6,543 14,663
Increase in unrealised appreciation 14,309 2,111 151 16,571
Gains on investments 22,429 8,654 151 31,234

With the exception of the subsidiary and the delisted stocks, the Company’s investments are Level 1 assets under the definition of IFRS 7 and comprise equity listed and AIM traded investments classified as held at fair value through profit or loss.

During the year transaction costs of £27,671 were incurred on the acquisition of investments (2016: £2,489). Costs relating to disposals of investments during the year amounted to £51,106 (2016: £nil). All transaction costs have been included within the capital column of the Income Statement.


The Company has one wholly owned subsidiary undertaking:

Name Principal activity Country of incorporation and operation Description of shares held Proportion of nominal value of issued shares and voting rights held
Discretionary Unit Fund Managers Limited Fund management England Ordinary 100%

Discretionary Unit Fund Managers Limited had capital and reserves of £732,909 and profits of £126,573 for the year ended 31st December 2017.


The Company has a holding of 3% or more that is material in the context of the financial statements in the following investments as at 31st December 2017:

Colefax Group 23.90%
Titon Holdings 11.60%
Macfarlane Group 11.00%
Treatt 8.30%
Elecosoft 5.80%
Renold 5.50%
LPA Group 5.30%
Scapa Group 4.10%


Prepayments and accrued income 579 517
579 517


£’000 2017
Accruals 98 91
Outstanding share buybacks 82 109
180 200

14.        SHARE CAPITAL

2017 2016
Allotted, Called Up and Fully Paid % £’000 £’000
8,375,258 Income shares of 25p each (2016: 8,965,355) 100.0 2,094 2,241


Number of Income shares 2017
Balance at beginning of year 8,965,355
Income shares bought back and cancelled (590,097)
Balance at end of year 8,375,258

15.       RESERVES

Capital redemption reserve £’000 Capital

Revaluation reserve

Beginning of year 14 62,695 111,580 2,973
Income shares bought back and cancelled 147 (11,835)
Increase in unrealised appreciation 16,571
Net gains on realisation of investments 14,663
Capital expenses (89)
Profit for year 2,522
Dividends (2,645)
End of year 161 65,434 128,151 2,850

The capital reserve represents those realised profits and losses arising on the disposal of investments. The revaluation reserve represents unrealised profits and losses arising on the revaluation of investments held.


The net asset value per Income share calculated in accordance with the Articles of Association was as follows:

Net asset value per share attributable Net asset value per share attributable
Income shares 2372.3 2002.2 198,690 179,503
198,690 179,503


Income shares
Total net assets attributable at beginning of year 179,503
Income shares bought back and cancelled (11,835)
Total recognised gains for the year 31,145
Transfer to reserves (123)
Total net assets attributable at end of year 198,690
No. of shares in issue 8,375,258


During the year the Company had the following transactions with Discretionary Unit Fund Managers Limited, its subsidiary undertaking:

£’000 2017
Dividends received 125
Amounts owed by subsidiary undertaking 78 294


The Company’s financial instruments comprise securities, cash balances and debtors and creditors that arise from its operations, for example, in respect of sales and purchases awaiting settlement and debtors for accrued income.

The investment policy and objectives of the Company is stated on page 1.

As an investment trust, the Company invests in securities for the long term. Accordingly it is, and has been, throughout the year under review, the Company’s policy that no short-term trading in investments or other financial instruments shall be undertaken.

The main risks arising from the Company’s financial instruments are market price risk, liquidity risk and credit risk. The Board’s policy for managing these risks is summarised below. These policies have remained unchanged since the beginning of the year to which these financial statements relate.

Market price risk

Market risk arises from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. The Board meets at least quarterly to consider the asset allocation of the portfolio in order to minimise the risk associated with industry sectors. The Investment Director has responsibility for monitoring the existing portfolio selected in accordance with the Company’s investment objectives and seeks to ensure that individual stocks meet an acceptable risk-reward profile.

The Company’s exposure to changes in market prices at 31st December 2017 on its quoted equity investments was £178,417,000 (2016: £159,266,000).

Liquidity risk

Liquidity risk is the possibility of the Company having difficulties in realising sufficient assets to meet its financial obligations. All investments are made in quoted securities, which are normally listed on the London Stock Exchange or AIM. Transactions in these securities may be subject to some short-term liquidity constraint, in common with other smaller and medium sized listed securities, but subject to that they are considered to be reasonably realisable.

Credit risk

Credit risk is the failure of the counterparty to a transaction to discharge its obligations which could result in the Company suffering a loss. At the year end the Company’s maximum exposure to credit risk was as follows:

Trade and other receivables 579 517
Cash and cash equivalents 19,069 19,071
19,648 19,588

The risk is managed by dealing only with brokers and banks who have satisfactory credit ratings and are approved by the Audit Committee.

Financial assets and liabilities

All assets and liabilities are included at fair value.

Valuation of financial instruments

IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note 1 Investments, as set out in the Company’s Annual Report and Financial Statements for the year ended 31st December 2017.

The fair value hierarchy has the following levels:

Level 1 – Unadjusted prices quoted in active markets for identical assets and liabilities.

Level 2 – Having inputs other than quoted prices included within Level 1 that are observable for the asset or

liability, either directly (ie as prices) or indirectly (ie derived from prices).

Level 3 – Having inputs for the asset or liability that are not based on observable data.

31st December 2017
Financial assets at fair value through profit or loss
Level 1
Level 2
Level 3
UK Equity Listed 134,367 134,367
AIM traded stocks 44,050 44,050
Delisted stock 21 21
Investment in subsidiary 706 706
Net fair value 178,417 21 706 179,144
31st December 2016 Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Financial assets at fair value through profit or loss
UK Equity Listed 118,452 –                            – 118,452
AIM traded stocks 40,814 –                            – 40,814
Investment in subsidiary –                        555 555
Net fair value 159,266 –                        555 159,821


There were no transfers between Level 1 and Level 2 during the period.
A reconciliation of fair value measurements in Level 3 is set out in the following table.
2017 2016
£’000 £’000
Opening Balance 555 623
Total gains or losses included in gains on investments in the income statement:
– on assets sold
– on assets held at year end 151 (68)
Closing Balance 706 555

The Level 3 investment relates to the Company's subsidiary, Discretionary Unit Fund Managers Limited, which has been valued based of the most recent estimated NAV.


Between the year end and 22nd February 2018, the latest practicable date before the publication of these financial statements, the Company has bought back and cancelled 102,958 Income shares for a cost of £2,110,000.


Details of the 20 largest investments as at 31st December 2017 are given below by market value:

UK Investments Holdings Market Value
2017 2016 2017
Scapa Group 6,350,000 8,000,000 27,765 26,800
Treatt 4,750,000 5,775,000 21,577 14,437
RPC Group 2,400,000 2,259,672 21,156 24,043
Hill & Smith Holdings 1,434,230 1,434,230 19,204 17,182
Vp 1,800,000 1,800,000 15,570 13,410
Macfarlane Group 17,250,000 16,741,368 13,283 10,045
Colefax Group 2,436,979 2,050,000 12,429 10,455
Electrocomponents 1,300,000 1,300,000 8,132 6,196
Spirax-Sarco Engineering 120,714 120,714 6,784 5,051
Menzies (John) 882,142 882,142 5,941 5,205
Renold 12,300,000 9,425,207 5,719 4,124
Vitec Group 400,000 400,000 4,520 2,572
Low & Bonar 6,000,000 4,440,000 3,195 2,842
Titon Holdings 1,265,000 1,265,000 1,923 1,391
Elecosoft 4,520,781 4,520,781 1,854 1,311
Castings 400,000 400,000 1,763 1,644
Fenner 350,000 350,000 1,398 825
Dialight 238,095 238,095 1,310 1,881
National Grid 137,500 150,000 1,202 1,425
LPA 650,000 650,000 1,007 1,137
175,732 151,976
Balance held in other investments 3,412 7,845
179,144 159,821

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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Annual Financial Report - RNS